Filed Pursuant to Rule 424(b)(5)
Registration No. 333-182440
The information in this preliminary prospectus
supplement is not complete and may be changed. This preliminary prospectus supplement and the accompanying prospectus are not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted.
Subject to completion
Preliminary Prospectus Supplement dated March 2, 2015
P R O S P E C T U S S U P P L E M E N T
(To Prospectus dated June 29, 2012)
$
% Senior Notes due
We are offering
$ million aggregate principal amount of % Notes due . We will pay interest on the notes
on and of each year,
beginning , . The notes will mature on
, . We may redeem the notes at any time on or after
, (three months prior to the maturity date of the notes), in whole or in part, at the redemption price
described in Description of the Notes Optional Redemption by Us beginning on page S-12 of this prospectus supplement.
The notes will be our senior unsecured obligations and will rank equally in right of payment with our other existing and future senior
unsecured indebtedness. The notes will be effectively subordinated to our existing and future secured indebtedness to the extent of the assets securing that indebtedness and will be structurally subordinated to all existing and future obligations of
our subsidiaries. The notes will be issued only in registered form in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
Investing in the notes involves risks that are described in the Risk Factors section beginning on
page S-5 of this prospectus supplement, in addition to the risk factors that are incorporated by reference into this prospectus supplement and the accompanying prospectus.
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Per Note |
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Total |
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Public offering price (1) |
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% |
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$ |
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Underwriting discount |
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% |
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$ |
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Proceeds, before expenses, to us (1) |
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% |
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$ |
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(1) Plus accrued interest
from , 2015, if settlement occurs after that date
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The notes are not savings accounts, deposits or other obligations of a bank and are not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency or instrumentality.
We do not intend to list the notes on any securities exchange or include
the notes in any automated quotation system. Currently, there is no public market for the notes.
The notes will be ready for
delivery in book-entry form only through the facilities of The Depository Trust Company for the accounts of its participants, including Euroclear Bank S.A./N.V., as operator of the Euroclear System, and Clearstream Banking, société
anonyme, on or about , 2015.
Joint
Book-Running Managers
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Barclays |
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Credit Suisse |
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Deutsche Bank Securities |
The date of this
prospectus supplement is , 2015.
Table of contents
Prospectus supplement
i
About this Prospectus Supplement
This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of notes and also adds to and
updates information contained in the accompanying prospectus and the documents incorporated by reference in this prospectus supplement and the accompanying prospectus. The second part is the accompanying prospectus, which gives more general
information, some of which does not apply to this offering.
If the description of this offering varies between this prospectus supplement and the
accompanying prospectus, you should rely on the information contained in this prospectus supplement.
You should rely only on the information contained
or incorporated by reference in this prospectus supplement and the accompanying prospectus or any free writing prospectus filed with the Securities and Exchange Commission, or SEC. We have not, and the underwriters have not, authorized any other
person to provide you with different or additional information. This document may only be used where it is legal to sell these securities. We are not, and the underwriters are not, making an offer of these securities in any state or jurisdiction
where the offer is not permitted. You should assume that the information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus is accurate only as of their respective dates. Our business, financial
condition, results of operations and prospects may have changed since those dates.
Unless the context requires otherwise, each reference in this
prospectus supplement to we, us, our, Discover, DFS or the Company means Discover Financial Services and its consolidated subsidiaries and each reference to Discover
Bank means Discover Bank.
You should not consider any information contained or incorporated by reference in this prospectus supplement or the
accompanying prospectus to be investment, legal or tax advice. You should consult your own counsel, accountant and other advisors for legal, tax, business, financial and related advice regarding the purchase of the notes. We are not making any
representation to you regarding the legality of an investment in the notes by you under applicable investment or similar laws.
You should read and
consider all information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus before making your investment decision.
S-1
Summary
The following summary includes basic information about our company and this offering. It may not contain all of the information that is important to
you. For a more complete understanding of our company and this offering, we encourage you to read this entire prospectus supplement and the accompanying prospectus carefully, including the documents incorporated by reference in the
accompanying prospectus.
Discover Financial Services
Discover Financial Services (DFS) is a direct banking and payment services company. DFS is a bank holding company under the Bank
Holding Company Act of 1956 as well as a financial holding company under the Gramm-Leach-Bliley Act and therefore is subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System. DFS provides direct
banking products and services and payment services through our subsidiaries. DFS offers customers credit card loans, private student loans, personal loans, home loans, home equity loans and deposit products. DFS had $70.0 billion in loan receivables
and $28.8 billion in deposits issued through direct-to-consumer channels and affinity relationships at December 31, 2014. DFS operates the Discover Network, the PULSE network (PULSE), and Diners Club International (Diners
Club). The Discover Network processes transactions for Discover-branded credit cards and provides payment transaction processing and settlement services. PULSE operates an electronic funds transfer network, providing financial institutions
issuing debit cards on the PULSE network with access to ATMs domestically and internationally, as well as point-of-sale terminals at retail locations throughout the U.S. for debit card transactions. Diners Club is a global payments network of
licensees, which are generally financial institutions, that issue Diners Club branded charge cards and/or provide card acceptance services.
DFS manages its business activities in two segments: Direct Banking and Payment Services. Its Direct Banking segment includes consumer banking
and lending products, specifically Discover-branded credit cards issued to individuals on the Discover Network and other consumer banking products and services, including private student loans, personal loans, home loans, home equity loans, prepaid
cards and other consumer lending and deposit products. DFS Payment Services segment includes PULSE, Diners Club and its Network Partners business, which provides payment transaction processing and settlement services on the Discover Network.
This segment also includes the business operations of Diners Club Italia S.r.l., which primarily consist of issuing Diners Club charge cards.
DFS was incorporated in Delaware in 1960. DFS principal executive offices are located at 2500 Lake Cook Road, Riverwoods, Illinois
60015. DFS main telephone number is (224) 405-0900.
S-2
The Offering
The following summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this prospectus supplement and the
accompanying prospectus. For more information concerning the notes, see Description of the Notes.
Issuer |
Discover Financial Services. |
Notes Offered |
$ aggregate principal amount of % Senior Notes due .
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Maturity Date |
The notes will mature on , .
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Interest Payment Dates |
The notes will bear interest at the rate of % per year from the original issuance date. We will pay interest on the notes semi annually in arrears
each and . We will make the first interest
payment on , . |
Use of Proceeds |
We estimate that our net proceeds from this offering will be approximately $ million (after deducting underwriting discounts and commissions and estimated offering
expenses). We intend to use the net proceeds from this offering for general corporate purposes. For more information, see Use of Proceeds in this prospectus supplement. |
Ranking |
The notes will be our senior unsecured obligations. They will rank equally in right of payment with our existing and future senior unsecured indebtedness. The notes will be effectively subordinated to any of our existing and future secured debt,
to the extent of the value of the collateral securing such debt, and will be structurally subordinated to all existing and future obligations of our subsidiaries. See Description of the NotesRanking in this prospectus supplement.
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As of December 31, 2014, at the parent holding company level, DFS had $1.6 billion of senior indebtedness, without giving effect to this offering, and no secured indebtedness. As of
December 31, 2014, excluding intercompany amounts, our subsidiaries had $70.2 billion of total indebtedness and other liabilities, including deposits. |
Optional Redemption |
We may redeem the notes at any time on or after , (three months prior to the maturity date of the notes), in whole or in part, at a redemption
price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest thereon to the redemption date. See Description of the NotesOptional Redemption by Us in this prospectus supplement.
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Future Issuances |
We may from time to time, without notice to or consent of the holders of the notes, issue additional notes with the same terms as the notes, (except for the issue date, public offering price, the date upon which interest begins to accrue and, in
some cases, the first interest payment date) and such additional notes shall be consolidated with the notes issued in this offering and form a single series. |
S-3
Covenants |
There are no covenants or other provisions in the indenture that would afford holders of notes additional protection in the event of a recapitalization transaction, a change of control of our company or a highly leveraged transaction. See
Description of Debt SecuritiesCertain CovenantsRestrictions on Consolidations, Mergers and Sales of Assets in the accompanying prospectus. In addition, the indenture includes a restriction on our ability to secure
indebtedness with the voting stock of Discover Bank or any subsidiary succeeding to any substantial part of the business now conducted by Discover Bank. See Description of Debt SecuritiesCertain Covenants Negative Pledge in
the accompanying prospectus. |
Denominations |
The notes will be issued only in denominations of $2,000 and integral multiples of $1,000 in excess of $2,000. |
Form of Note |
We will issue the notes in the form of one or more fully registered global notes registered in the name of the nominee of The Depository Trust Company, or DTC. |
Trustee |
U.S. Bank National Association. |
U.S. Federal Income Tax
Consequences |
You should consult with your tax advisor with respect to the U.S. federal income tax considerations of the acquisition, ownership and disposition of the notes in light of your own particular situation and with respect to any tax considerations
arising under the laws of any state, local, foreign or other taxing jurisdiction. See Material United States Federal Income Tax Consequences. |
Governing Law |
The laws of the State of New York govern the indenture and the notes. |
Listing |
We do not intend to list the notes on any exchange or to include the notes in any automated quotation system. |
S-4
Risk Factors
Investing in the notes involves risks. You should consider carefully the risks described below and all of the information contained in or
incorporated by reference into this prospectus supplement and the accompanying prospectus before deciding whether to purchase the notes. In addition, you should carefully consider, among other things, the matters discussed under Risk
Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which is incorporated by reference into this prospectus supplement and the accompanying prospectus. Our business, financial condition or
results of operations could be materially adversely affected by any of these risks. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these
forward-looking statements. See Special Note Regarding Forward-Looking Statements. The trading price of the notes may also be affected by the effects of these risks, macroeconomic trends and our financial results, as well as
differences between our actual results and expectations.
Your decision to purchase the notes should be made only after carefully considering the
suitability of the investment for you, in consultation with your own financial, legal, tax and other professional advisors. The notes are not an appropriate investment for you if you are not knowledgeable about the significant features of the notes
or financial matters in general.
We are a holding company that conducts all of our business through subsidiaries. The debt and other
liabilities of our subsidiaries will be effectively senior to the notes.
We conduct all of our business through our subsidiaries including
Discover Bank, which represented 98% of our assets as of December 31, 2014. Our cash flow and, consequently, our ability to pay interest in cash and to service our debt, including the notes, are dependent to a certain extent upon the cash flow
of our subsidiaries and the payment of funds to us by those subsidiaries in the form of loans, dividends or otherwise. Our subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to pay any amounts due
on the notes or to make cash available for that purpose. In addition, Discover Bank and many of our operating subsidiaries are highly regulated and may be subject to restrictions on their ability to pay dividends to us. These subsidiaries may use
the earnings they generate, as well as their existing assets, to fulfill their own direct debt service requirements.
The notes will be our senior
unsecured obligations and will rank equally with all of our existing and future senior unsecured indebtedness. To the extent that any of our subsidiaries have outstanding indebtedness, the notes will effectively rank junior to such indebtedness and
other liabilities, including deposits. As of December 31, 2014, excluding intercompany amounts, our subsidiaries had $70.2 billion of total indebtedness and other liabilities, including deposits. See Description of the
NotesRanking in this prospectus supplement.
The notes will be effectively subordinated to all of our existing and future secured debt
and to the existing and future secured debt of our subsidiaries.
The notes are not secured by any of our assets or the assets of our
subsidiaries. As a result, the indebtedness represented by the notes will effectively be subordinated to any secured indebtedness we or our subsidiaries may incur, to the extent of the value of the assets securing such indebtedness. As of
December 31, 2014, we had no secured indebtedness and our subsidiaries had $17.4 billion of long-term secured indebtedness. In the event of any distribution or payment of our assets in any foreclosure, dissolution, winding up, liquidation
or reorganization, or other bankruptcy proceeding, any secured creditors would have a superior claim to the extent of their collateral. In the event of the dissolution, a winding up, liquidation or reorganization, or other bankruptcy proceeding of a
subsidiary, creditors of that subsidiary would generally have the right to be paid in full before any distribution is made to us or the holders of the notes. If any of the foregoing occur, we cannot assure you that there will be sufficient assets to
pay amounts due on the notes.
S-5
There are no covenants in the indenture governing the notes relating to our ability to incur future
indebtedness or pay dividends and limited restrictions on our ability to engage in other activities, which could adversely affect our ability to pay our obligations under the notes.
The indenture governing the notes does not contain any financial covenants. The indenture permits us and our subsidiaries to incur additional debt, including
secured debt. Because the notes will be unsecured, in the event of any liquidation, dissolution, reorganization, bankruptcy or other similar proceeding regarding us, whether voluntary or involuntary, the holders of our secured debt will be entitled
to receive payment to the extent of the assets securing that debt before we can make any payment with respect to the notes. If any of the foregoing events occurs, we cannot assure you that we will have sufficient assets to pay amounts due on our
debt and the notes. As a result, you may receive less than you are entitled to receive or recover nothing if any liquidation, dissolution, reorganization, bankruptcy or other similar proceeding occurs.
The indenture does not limit our subsidiaries ability to issue or repurchase securities, pay dividends or engage in transactions with affiliates. Our
ability to use our funds for numerous purposes may limit the funds available to pay our obligations under the notes.
There may not be a public
market for the notes and an active trading market for the notes may not develop.
The notes constitute a new issue of securities with no
established trading market. We do not currently intend to apply for listing of the notes on any securities exchange or to include the notes in any automated quotation system. We have been advised by the underwriters that they presently intend to
make a market in the notes after completion of the offering. However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. Accordingly, no liquid market for the notes may develop, and
any market that develops may not last. If the notes are traded, they may trade at a discount from their offering price, depending on prevailing interest rates, the market for similar securities, our performance and other factors. To the extent that
an active trading market does not develop, you may not be able to resell your notes at their fair market value or at all.
Interest rate risks may
affect the value of the notes.
An investment in fixed-rate notes involves the risk that subsequent changes in market interest rates may adversely
affect the value of the fixed rate notes.
The notes will initially be rated below investment grade by one rating agency.
We are currently rated below investment grade by Moodys Investor Services (Moodys), and the notes will initially be rated below
investment grade by Moodys. Our credit rating and the credit rating of the notes is investment grade by both Standard & Poors and Fitch Ratings. There is no assurance that our credit rating, or the credit rating of the notes,
will be upgraded or, in the case of Moodys, become investment grade in the future. Consequently, the notes may be subject to a higher risk of price volatility than similar, higher-rated securities, particularly in volatile markets.
Additionally, any real or anticipated changes in the credit ratings assigned to the notes, or to our credit ratings generally, could adversely affect the trading price of the notes.
Ratings only reflect the views of the issuing rating agency or agencies and such ratings could at any time be revised downward or withdrawn entirely at the
discretion of the issuing rating agency. Further, a rating is not a recommendation to purchase, sell or hold any particular security, including the notes. In addition, ratings do not reflect market prices or suitability of a security for a
particular investor, and any rating of the notes may not reflect all risks related to our business, or the structure or market value of the notes.
S-6
Special Note Regarding Forward-Looking Statements
This prospectus supplement, the accompanying prospectus and the documents that we incorporate by reference into this prospectus supplement and the
accompanying prospectus contain or will contain certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from those expressed in, or implied by, our forward-looking statements. Words such as expects, anticipates,
believes, estimates and other similar expressions or future or conditional verbs such as will, should, would and could are intended to identify such forward-looking statements.
You should not rely solely on the forward-looking statements, which are qualified in their entirety by reference to, and are accompanied by, the important factors described in our Annual Report on Form 10-K for the year ended December 31,
2014 filed with the SEC on February 25, 2015, including under the headings Risk Factors and Special Note Regarding Forward-Looking Statements. You should consider all uncertainties and risks contained in or incorporated
by reference into this prospectus supplement and accompanying prospectus. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking
statement.
Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements
include the following:
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changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment, the levels of consumer
confidence and consumer debt, and investor sentiment; |
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the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including, but not limited to those related to financial regulatory reform, consumer financial
services practices, anti-corruption and funding, capital and liquidity; |
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the actions and initiatives of current and potential competitors; |
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our ability to manage our expenses; |
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our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants; |
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our ability to sustain and grow our private student loan and mortgage loan products; |
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losses as a result of mortgage loan repurchase and indemnification obligations to secondary market purchasers; |
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difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; |
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our ability to manage our credit risk, market risk, liquidity risk, operational risk, compliance and legal risk, and strategic risk; |
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the availability and cost of funding and capital; |
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access to deposit, securitization, equity, debt and credit markets; |
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the impact of rating agency actions; |
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the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; |
S-7
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losses in our investment portfolio; |
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limits on our ability to pay dividends and repurchase our common stock; |
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limits on our ability to receive payments from our subsidiaries; |
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fraudulent activities or material security breaches of key systems; |
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our ability to remain organizationally effective; |
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our ability to increase or sustain Discover card usage or attract new customers; |
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our ability to maintain relationships with merchants; |
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the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; |
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our ability to introduce new products or services; |
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our ability to manage our relationships with third-party vendors; |
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our ability to maintain current technology and integrate new and acquired systems; |
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our ability to collect amounts for disputed transactions from merchants and merchant acquirers; |
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our ability to attract and retain employees; |
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our ability to protect our reputation and our intellectual property; and |
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new lawsuits, investigations or similar matters or unanticipated developments related to current matters. |
In
addition, we routinely evaluate and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our debt or equity securities.
The foregoing review of important factors should not be construed as exclusive and should be read in conjunction with the other cautionary statements that are
included in or incorporated by reference into this prospectus supplement and the accompanying prospectus. These factors expressly qualify all subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf.
New factors emerge from time to time, and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on our business or the extent to which any factor, or combination of factors, may cause our actual
results to differ materially from those contained in any forward-looking statements.
S-8
Use of Proceeds
We estimate that our net proceeds from this offering will be approximately $ million (after deducting
underwriting discounts and commissions and estimated offering expenses). We intend to use the net proceeds from this offering for general corporate purposes.
Ratio of Earnings to Fixed Charges
The following table sets forth our consolidated ratio of earnings to fixed charges for the periods indicated.
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Calendar Years Ended December 31, |
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Fiscal Years Ended November 30, |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 |
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Ratio of earnings to fixed charges |
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4.3 |
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4.4 |
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3.8 |
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3.4 |
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1.8 |
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S-9
Capitalization
The following table sets forth our unaudited capitalization as of December 31, 2014 on an actual basis and on an as adjusted basis to reflect the
issuance and sale of the notes, after deducting the underwriting discounts and commissions and before estimated offering expenses.
You should read this
table in conjunction with our historical consolidated financial statements and related notes thereto and Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2014 and in the other documents incorporated by reference into this prospectus supplement and the accompanying prospectus. See Where You Can Find More Information and
Documents Incorporated by Reference in this prospectus supplement and the accompanying prospectus.
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December 31, 2014
(Unaudited, dollars in millions, except per share amounts) |
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Actual |
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As adjusted |
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Deposits: |
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Interest bearing deposit accounts |
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$ |
45,792 |
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$ |
45,792 |
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Non-interest bearing deposit accounts |
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297 |
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297 |
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Total deposits |
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46,089 |
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46,089 |
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Short-term borrowings |
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113 |
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113 |
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Notes offered hereby |
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Long-term borrowings |
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22,544 |
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22,544 |
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Accrued expenses and other liabilities |
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3,246 |
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3,246 |
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Total liabilities |
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$ |
71,992 |
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$ |
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Stockholders Equity: |
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Preferred Stock, par value $0.01 per share; 200,000,000 shares authorized; 575,000 issued and outstanding and aggregate liquidation
preference of $575 |
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$ |
560 |
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$ |
560 |
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Common Stock, par value $0.01 per share; 2,000,000,000 shares authorized; 558,194,324 shares issued |
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5 |
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5 |
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Additional paid-in capital |
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3,790 |
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3,790 |
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Retained earnings |
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11,467 |
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11,467 |
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Accumulated other comprehensive income |
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(138 |
) |
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(138) |
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Treasury Stock, at cost; 109,006,038 shares |
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(4,550 |
) |
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(4,550) |
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Total stockholders equity |
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11,134 |
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11,134 |
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Total liabilities and stockholders equity |
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$ |
83,126 |
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$ |
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S-10
Description of the Notes
The following summary sets forth certain terms and provisions of the notes and the Indenture (as defined herein), does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the terms and provisions of the notes and the Indenture, including the definitions therein, copies of which are available for inspection at the office of the Trustee (as defined herein)
at 100 Wall Street, Suite 1600, New York, New York 10005. A copy of the Indenture has also been filed as an exhibit to the registration statement of which this prospectus supplement is apart, and is incorporated herein by reference.
Capitalized terms not otherwise defined herein shall have the meanings given to them in the notes and in the Indenture. Because the following is only a summary, it does not contain all of the information that you may find useful in
evaluating an investment in the notes. We urge you to read the Indenture and the notes because they, and not this description, define your rights as holders of the notes.
The following discussion of the terms of the notes supplements the description of the general terms and provisions of the debt securities contained in the
accompanying prospectus. You should read the accompanying prospectus and this prospectus supplement together for a more complete description of the Indenture and the notes. To the extent this summary differs from the summary in the accompanying
prospectus, you should rely on the description of the notes in this prospectus supplement.
General
We will issue the notes under the senior indenture, dated June 12, 2007, between us and U.S. Bank National Association, as trustee (the
Trustee). We refer to the indenture, as supplemented by or pursuant to the officers certificate establishing the terms of the notes pursuant to Section 2.03 of the Indenture, as the Indenture.
Certain defined terms used in this Description of the notes but not defined have the meanings assigned to them in the notes and in the Indenture.
In this section, we, us, our and similar words refer to Discover Financial Services and not any of our subsidiaries.
The Indenture is by its terms subject to and governed by the Trust Indenture Act of 1939, as amended. You may obtain a copy of the Indenture and the form of
the notes from us upon request, as set forth under Where You Can Find Additional Information in the accompanying prospectus.
The Notes
Notes in an initial aggregate principal amount of $ will be issued in this offering. The
aggregate principal amount of debt securities issuable under the Indenture is unlimited. We may from time to time, without notice to or consent of the holders of the notes, issue additional notes with the same terms as the notes (except for the
issue date, public offering price, the date upon which interest begins to accrue and, in some cases, the first interest payment date) and such additional notes shall be consolidated with the notes issued in this offering and form a single series.
The notes to be issued in this offering will form their own series of notes for voting purposes and will not be part of the same class or series of any other notes previously issued by us. References herein to the notes shall include the notes and
any further notes issued as described in this paragraph. We may purchase notes at any price in the open market or otherwise. Notes so purchased by us may, at our discretion, be held or resold or surrendered to the Trustee for cancellation.
The notes do not have the benefit of a sinking fund.
The notes
will be issued only in fully registered form, without interest coupons, in denominations of $2,000 and integral multiples of $1,000 in excess thereof. The notes will be issued in the form of one or more global notes deposited with a custodian for
and registered in the name of a nominee of DTC, but in certain circumstances, may be represented by notes in certificated form. The notes are not issuable in bearer form.
S-11
Interest
The notes will bear interest at % per annum computed on the basis of a year of 360 days consisting
of twelve 30 day months. The notes will accrue interest on their stated principal amount from and including , 2015, or from the most recent
interest payment date to which interest has been paid or duly provided for. Accrued and unpaid interest on the notes will be payable semi-annually in arrears
on and of each year, commencing on , 2015.
We will pay interest to the persons in whose names the notes are registered at the close of business on the and immediately preceding each
interest payment date (whether or not a business day).
If any date on which interest, principal or premium is payable on the notes is not a business day,
then payment of such amounts payable on such date will be made on the next succeeding day that is a business day (and without any interest or other payment in respect of any such delay) with the same force and effect as if made on such interest
payment date, redemption date or maturity date, as the case may be.
Ranking
The notes:
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will be our general unsecured obligations; |
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will be effectively subordinated to all of our existing and future secured indebtedness to the extent of the assets securing such indebtedness; |
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will be structurally subordinated to the existing and future claims of creditors of our subsidiaries; |
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will rank equally in right of payment with our existing and future unsecured and unsubordinated indebtedness; and |
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will be senior in right of payment to any of our existing and future subordinated indebtedness. |
None of our
subsidiaries will guarantee the notes. As noted above, the notes will be structurally subordinated to all of our subsidiaries existing and future obligations. See Risks FactorsWe are a holding company that conducts all of our
business through subsidiaries. The debt and other liabilities of our subsidiaries will be effectively senior to the notes. As of December 31, 2014, at the parent holding company level, Discover Financial Services had $1.6 billion of
senior indebtedness, without giving effect to this offering, and no secured indebtedness. As of December 31, 2014, excluding intercompany amounts, our subsidiaries had $70.2 billion of total indebtedness and other liabilities, including
deposits.
Maturity
Unless earlier redeemed or
repurchased, the notes will mature and be payable at par
on , .
Optional Redemption by Us
We may, at our option, at any
time on or after , (three months prior to the maturity date), redeem the notes in whole or in part on no less than 10 nor more than
60 days prior notice delivered to the holders of the notes. The notes will be redeemable at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest. If fewer than all of the
notes are to be redeemed, the Trustee will select the notes for redemption on a pro rata basis, by lot or by such other method in accordance with DTCs procedures. The notes will be redeemed in denominations of $2,000 and integral
multiples of $1,000 in excess thereof. If any notes are to be redeemed in part only, the notice of redemption that relates to such notes will state the portion of such notes to be redeemed. Unless we default in payment of the redemption price, on
and after the redemption date, interest will cease to accrue on the notes or the portions of the notes called for redemption.
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Payment and Transfer
Principal of, premium (if any) and interest on the notes will be payable, and the notes may be exchanged or transferred, at the office or agency maintained by
us for such purpose (which initially will be the corporate trust office of the Trustee). Payment of principal of, premium (if any) and interest on notes in global form will be made in immediately available funds to DTCs nominee as the
registered holder of such global notes. If the notes are no longer represented by global notes, payment of interest on the notes in certificated form may, at our option, be made by check mailed directly to holders at their registered addresses.
So long as the notes are represented by one or more global notes, transfers of beneficial interests in such global notes will be effected under DTCs
procedures and will be settled in same-day funds. If the notes are no longer represented by global notes, a holder may transfer or exchange notes in certificated form at the same location given in the preceding paragraph. We are not required to
transfer or exchange any note selected for redemption or for a period of 15 days before a selection of notes to be redeemed.
The registered holder
of a note will be treated as the owner of it for all purposes. We will not be required to:
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register the transfer of or exchange any note if the holder has exercised the holders right, if any, to require us to repurchase the note, in whole or in part, except the portion of the note not required to be
repurchased; |
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register the transfer of or exchange notes to be redeemed for a period of fifteen calendar days preceding the mailing of the relevant notice of redemption; or |
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register the transfer of or exchange any registered note selected for redemption in whole or in part, except the unredeemed or unpaid portion of that registered note being redeemed in part. |
No service charge will be made for any registration of transfer or exchange of notes, but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the registration of transfer or exchange of notes.
DTC or DTCs nominee will be the holder of the
notes and therefore will be the only entity that can exercise a right to repayment. In order to ensure that DTCs nominee will timely exercise a right to repayment with respect to a particular note, the beneficial owner of the note must
instruct the broker or other direct or indirect participant through which it holds an interest in the note to notify DTC of its desire to exercise a right to repayment. Different firms have different cut-off times for accepting instructions from
their customers and, accordingly, each beneficial owner should consult the broker or other direct or indirect participant through which it holds an interest in a note in order to ascertain the cut-off time by which an instruction must be given in
order for timely notice to be delivered to DTC.
Book-entry, Delivery and Form
Except as set forth below, the notes will be issued in fully registered, global form in minimum denominations of $2,000 and integral multiples of $1,000 in
excess of $2,000. Notes initially will be represented by one or more notes in registered global form without interest coupons (the Global Notes). The Global Notes will be deposited with, or on behalf of, DTC and registered in the name of
Cede & Co., as nominee of DTC, for the accounts of participants in DTC. Unless and until exchanged, in whole or in part, for notes in definitive registered form, a Global Note may not be transferred except as a whole by the depositary for
such Global Note to a nominee of such depositary, by a nominee of such depositary to such depositary or another nominee of such depositary or by such depositary or any such nominee to a successor of such depositary or a nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to persons, called participants, that have accounts with the depositary (currently
DTC) or persons that may hold interests through participants in DTC.
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Investors may hold their interests in a Global Note directly through Euroclear Bank S.A./N.V., as operator of the Euroclear System (Euroclear) and Clearstream Banking,
société anonyme (Clearstream), if they are participants in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold interests in a Global Note on behalf of
their participants through their respective depositaries, which in turn will hold such interests in the Global Note in customers securities accounts in the depositaries names on the books of DTC.
Upon the issuance of a Global Note, the depositary will credit, on its book-entry registration and transfer system, the participants accounts with the
respective principal or face amounts of the notes beneficially owned by the participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of ownership interests will be effected only through, records maintained
by DTC, with respect to interests of participants, and on the records of participants, with respect to interests of persons holding through participants.
So long as DTC, or its nominee, is the registered owner of the Global Note, DTC or its nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the Global Note for all purposes under the Indenture and the Notes. Except as described below, owners of beneficial interests in a Global Note will not be entitled to have the notes represented by the Global Note
registered in their names, will not receive or be entitled to receive physical delivery of the notes in definitive form and will not be considered the owners or holders of the notes under the Indenture. Accordingly, each person owning a beneficial
interest in a Global Note must rely on the procedures of the depositary for that Global Note and, if that person is not a participant, on the procedures of the participant through which the person owns its interest, to exercise any rights of a
holder under the Indenture. The laws of some states may require that some purchasers of notes take physical delivery of these notes in definitive form. Such laws may impair the ability to transfer beneficial interests in a Global Note.
To facilitate subsequent transfers, all notes deposited by participants with DTC are registered in the name of DTCs nominee, Cede & Co. The
deposit of the notes with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual beneficial owners of the notes. DTCs records reflect only the identity of the
direct participants to whose accounts such notes are credited, which may or may not be the beneficial owners. The participants will remain responsible for keeping account of their holdings on behalf of their customers.
We will make payments due on the notes to Cede & Co., as nominee of DTC, in immediately available funds. DTCs practice upon receipt of any
payment of principal, premium, interest or other distribution of underlying securities or other property to holders on that Global Note, is to immediately credit participants accounts in amounts proportionate to their respective beneficial
interests in that Global Note as shown on the records of the depositary. Payments by participants or indirect participants to owners of beneficial interests in a Global Note held through such participants or indirect participants will be governed by
standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of those participants or
indirect participants. Payment to Cede & Co. is our responsibility. Disbursement of such payments to direct participants is the responsibility of Cede & Co. Disbursement of such payments to the beneficial owners is the
responsibility of direct and indirect participants. Neither we nor the Trustee nor any other agent of ours or any agent of the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of
beneficial ownership interests in the Global Note or for maintaining, supervising or reviewing any records relating to those beneficial ownership interests or for any other aspect of the relationship between DTC and its participants or indirect
participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the Global Notes.
Transfers
between participants in DTC will be effected under DTCs procedures and will be settled in same day funds. Transfers between participants in Euroclear and Clearstream will be effected in the ordinary way in accordance with their respective
rules and operating procedures. If a holder requires physical delivery of a definitive note for any reason, including to sell notes to persons in jurisdictions that require such delivery of such
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notes or to pledge such notes, such holder must transfer its interest in the relevant Global Note in accordance with the normal procedures of DTC and the procedures set forth in the Indenture.
Cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be
effected by DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the
case may be, by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the Global Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
Because of the time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the Global Note from a DTC
participant will be credited during the securities settlement processing day (which must be a business day for Euroclear or Clearstream, as the case may be) immediately following the DTC settlement date, and such credit of any transactions
interests in the Global Note settled during such processing day will be reported to the relevant Euroclear or Clearstream participant on such day. Cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or
through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement
in DTC.
We expect that DTC will take any action permitted to be taken by a holder of notes (including the presentation of notes for exchange as described
below) only at the direction of one or more participants to whose account the DTC interests in a Global Note are credited and only in respect of such portion of the aggregate principal amount of the notes as to which such participant or participants
has or have given such direction. However, if DTC no longer is willing to act as depositary, ceases to be a clearing agency or if there is an Event of Default under the notes, DTC will exchange each Global Note for definitive notes, which it will
distribute to its participants. These definitive notes will be subject to certain restrictions on registration of transfers and will bear certain legends.
Although we expect that DTC, Euroclear and Clearstream will follow the foregoing procedures in order to facilitate transfers of interests in each Global Note
among participants of DTC, Euroclear and Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither we nor the trustee will have
any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
DTC is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions, such as transfers and pledges, among its participants in such securities through electronic computerized
book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTCs participants include securities brokers and dealers, banks, trust companies, clearing corporations and
certain other organizations, some of whom own DTC. Access to DTCs book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC.
Euroclear and Clearstream hold securities for participating organizations. They also facilitate the clearance and settlement of securities transactions
between their respective participants through electronic book-entry changes
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in the accounts of such participants. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance, settlement, lending and
borrowing of internationally traded securities. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks,
trust companies and certain other organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or
Clearstream participant, either directly or indirectly.
The information in this section concerning DTC and DTCs book-entry system, as well as
information regarding Euroclear and Clearstream, has been obtained from sources that we believe to be reliable, but we do not take any responsibility for its accuracy or completeness. We assume no responsibility for the performance by DTC,
Euroclear, Clearstream or their respective participants of their respective obligations, including obligations that they have under the rules and procedures that govern their operations.
Certificated Notes
If (i) DTC notifies us that it
is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of such notice or cessation or (ii) upon the
occurrence of certain other events as provided in the Indenture, then, upon surrender by DTC of the Global Notes, notes in certificated form will be issued to each person that DTC identifies as the beneficial owner of the notes represented by the
Global Notes. Upon any such issuance, the Trustee is required to register such certificated notes in the name of such person or persons (or the nominee of any thereof) and cause the same to be delivered thereto.
Neither we nor the Trustee shall be liable for any delay by DTC or any participant or indirect participant in DTC in identifying the beneficial owners of the
related notes and each of those persons may conclusively rely on, and will be protected in relying on, instructions from DTC for all purposes, including with respect to the registration and delivery, and the respective principal amounts, of the
notes to be issued.
Notices
The Trustee will cause
all notices to the holders of the notes to be mailed by first class mail, postage prepaid to the address of each holder as it appears in the register of notes (or while notes are held through DTC, by electronic delivery to DTC). Any notice so mailed
will be conclusively presumed to have been received by the holders of the notes. Prospective purchasers should note that under normal circumstances DTC will be the only holder of the notes as that term is used herein and in the
Indenture. See Book-Entry, Delivery and Form above.
Concerning Our Relationship With the Trustee
U.S. Bank National Association is the trustee of the Discover Card Execution Note Trust and the Discover Card Master Trust I under Discover Banks
amended and restated pooling and servicing agreement, as amended, and the trustee of The Student Loan Corporations three securitization trusts.
Governing Law
The Indenture and the notes are governed
by, and construed in accordance with, the laws of the State of New York.
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Material United States Federal Income Tax Consequences
The following is a general discussion of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of the notes to
beneficial owners of the notes. This discussion is based upon the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), the U.S. Treasury regulations promulgated thereunder, administrative pronouncements and
judicial decisions, all as of the date hereof and all of which are subject to change, possibly on a retroactive basis.
This discussion applies only to
beneficial owners that acquire the notes in connection with their initial issuance, at their issue price (i.e., the first price at which a substantial amount of the notes is sold for cash other than to bond houses, brokers or similar persons or
organizations acting in the capacity of underwriters, placement agents or wholesalers) and hold the notes as capital assets within the meaning of section 1221 of the Internal Revenue Code. This discussion does not address all aspects of
U.S. federal income taxation that might be important to particular investors in light of their individual circumstances or the U.S. federal income tax consequences applicable to special classes of taxpayers, such as banks and other
financial institutions, insurance companies, real estate investment trusts, regulated investment companies, tax-exempt organizations, partnerships (or entities properly classified as partnerships for U.S. federal income tax purposes) or other
pass-through entities, dealers in securities or currencies, traders in securities that elect to use a mark-to-market method of accounting, U.S. Holders (as defined below) whose functional currency is not the U.S. dollar, former citizens or
residents of the United States, and persons holding the notes as part of a hedging or conversion transaction or a straddle. In addition, this discussion does not address alternative minimum tax considerations, the Medicare tax on net investment
income or any foreign, state, local or non-income tax consequences of the acquisition, ownership or disposition of the notes to beneficial owners of the notes.
As used in this prospectus supplement, the term U.S. Holder means a beneficial owner of a note who or that is for U.S. federal income tax
purposes:
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a citizen or individual resident of the United States; |
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a corporation (or other entity properly classified as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any State within the United States, or the
District of Columbia; |
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
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a trust, if a U.S. court is able to exercise primary supervision over the trusts administration and one or more United States persons (as defined in the Internal Revenue Code) have the authority
to control all substantial decisions of the trust. |
The term Non-U.S. Holder means any beneficial owner of a note who or that is
not a U.S. Holder and is not a partnership or other entity properly classified as a partnership for U.S. federal income tax purposes. For the purposes of this prospectus supplement, U.S. Holders and Non-U.S. Holders are referred to
collectively as Holders.
If a partnership or other entity properly classified as a partnership for U.S. federal income tax purposes is a
beneficial owner of a note, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Such entities and partners of such entities should consult their own tax
advisors about the U.S. federal income and other tax consequences of the acquisition, ownership, and disposition of a note.
This discussion is for
general purposes only. Holders should consult their own tax advisors regarding the application of the U.S. federal income tax laws to their particular situations and the consequences under federal estate or gift tax laws, as well as foreign,
state, or local laws and tax treaties, and the possible effects of changes in tax laws.
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U.S. Holders
Interest
A U.S. Holder generally must
include interest paid on the notes as ordinary income at the time it is received or accrued, in accordance with the U.S. Holders regular method of accounting for U.S. federal income tax purposes. If, however, the stated principal amount
of the notes exceeds the issue price by at least a statutory de minimis amount (as set forth in the applicable Treasury regulations), a U.S. Holder (regardless of its method of tax accounting) will be required to include such excess in
income as original issue discount as it accrues in accordance with a constant yield method based on a compounding of interest before the receipt of cash payments attributable to this income. It is not expected that the stated principal amount of the
notes will exceed the issue price by more than a de minimis amount. The discussion below assumes that the stated principal amount of the notes will not exceed the issue price by more than a de minimis amount.
Sale, exchange or redemption of the notes
Upon
the sale, exchange, redemption or other taxable disposition of the notes, a U.S. Holder generally will recognize gain or loss equal to the difference, if any, between (i) the amount realized upon the sale, exchange, redemption or other
taxable disposition of the notes, other than amounts attributable to accrued interest which would be treated as interest and taxed as described above in Interest to the extent such interest has not been previously included in
income, and (ii) the U.S. Holders adjusted tax basis in the notes. The amount realized by a U.S. Holder is the sum of cash plus the fair market value of all other property received on such sale, exchange, redemption or other
taxable disposition. A U.S. Holders adjusted tax basis in the notes generally will be its cost for the notes.
The gain or loss a
U.S. Holder recognizes on the sale, exchange, redemption or other taxable disposition of the notes generally will be capital gain or loss. Such gain or loss generally will be long-term capital gain or loss if a U.S. Holder has held the
notes for more than 12 consecutive months. For individuals, long-term capital gains are currently taxed at lower rates than ordinary income. The deductibility of capital losses is subject to limitations. A U.S. Holder should consult its own tax
advisor regarding the deductibility of capital losses in its particular circumstances.
Backup withholding and information reporting
In general, a U.S. Holder that is not an exempt recipient will be subject to U.S. federal backup withholding tax at the applicable rate
(currently 28%) with respect to payments on the notes and the proceeds of a sale, exchange, redemption or other taxable disposition of the notes, unless the U.S. Holder provides its taxpayer identification number to the paying agent and
certifies, under penalties of perjury, that it is not subject to backup withholding on an Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification) and otherwise complies with the applicable requirements
of the backup withholding rules. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder may be allowed as a credit against such U.S. Holders U.S. federal income tax
liability and may entitle such U.S. Holder to a refund, provided the required information is furnished to the Internal Revenue Service in a timely manner. In addition, payments on the notes made to, and the proceeds of a sale or other taxable
disposition by, a U.S. Holder that is not an exempt recipient generally will be subject to information reporting requirements.
Non-U.S. Holders
Payments of interest
Subject to the
discussions below under Backup Withholding and Information Reporting and FATCA a Non-U.S. Holder generally will not be subject to U.S. federal withholding tax on interest paid on the notes so long as:
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the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all of our stock entitled to vote; |
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the Non-U.S. Holder is not a controlled foreign corporation that is related to us, actually or by attribution, through stock ownership; |
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the Non-U.S. Holder is not a bank receiving the interest pursuant to a loan agreement entered into in the ordinary course of the Non-U.S. Holders trade or business; and either |
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(i) the Non-U.S. Holder certifies under penalties of perjury on an applicable Internal Revenue Service Form W-8 that it is not a United States person (as defined in the Internal Revenue Code), and provides its name
and address, and U.S. taxpayer identification number, if any, or (ii) a securities clearing organization, bank or other financial institution that holds customers securities in the ordinary course of its trade or business and holds
the notes on behalf of the Non-U.S. Holder certifies under penalties of perjury that the certification referred to in clause (i) has been received from the Non-U.S. Holder and furnishes to the applicable withholding agent a copy thereof.
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A Non-U.S. Holder that does not qualify for exemption from withholding as described above generally will be subject to withholding of
U.S. federal income tax at a rate of 30% on payments of interest on the notes. A Non-U.S. Holder may be entitled to the benefits of an income tax treaty under which interest on the notes is subject to a reduced rate of U.S. withholding tax
or is exempt from U.S. withholding tax, provided the Non-U.S. Holder furnishes the applicable withholding agent a properly completed and executed applicable Internal Revenue Service Form W-8 claiming the reduction or exemption and the
Non-U.S. Holder complies with any other applicable procedures.
Special rules regarding exemption from, or reduced rates of, U.S. withholding tax may
apply in the case of notes held by partnerships or certain types of trusts. Partnerships and trusts that are prospective purchasers should consult their tax advisors regarding special rules that may be applicable in their particular circumstances.
Sale, exchange or redemption of the notes
Generally, subject to the discussion below under FATCA, any gain recognized by a Non-U.S. Holder on the sale, exchange, redemption or other
taxable disposition of a note (other than amounts attributable to accrued and unpaid interest, which will be treated as interest and may be subject to the rules described under Payments of interest above) will be exempt from
U.S. federal income and withholding tax, unless:
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the gain is effectively connected with the Non-U.S. Holders conduct of a trade or business within the United States (or, if a treaty applies, is attributable to a permanent establishment maintained by the Non-U.S.
Holder in the United States); or |
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the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year, and certain other conditions are met. |
Gain described in the first bullet point above generally will be subject to U.S. federal income as described below under Effectively
connected income.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower
rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely
filed U.S. federal income tax returns with respect to such losses.
Effectively connected income
If interest, gain or other income recognized by a Non-U.S. Holder on a note is effectively connected with the Non-U.S. Holders conduct of a
trade or business within the United States (and, if a treaty applies, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder will not be subject to the withholding tax discussed
above if the Non-U.S. Holder provides the applicable withholding
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agent with a properly completed and executed Internal Revenue Service Form W-8ECI (Certificate of Foreign Persons Claim That Income Is Effectively Connected With the Conduct of a Trade
or Business in the United States), but the Non-U.S. Holder generally will be subject to U.S. federal income tax on such interest, gain or other income as if it were a United States person (as defined in the Internal Revenue Code). In
addition to such U.S. federal income tax, if the Non-U.S. Holder is a corporation, it may be subject to an additional branch profits tax.
Backup withholding and information reporting
We
must report annually to the Internal Revenue Service and to a Non-U.S. Holder the amount of interest paid to the Non-U.S. Holder and the tax withheld from those payments. These reporting requirements apply regardless of whether U.S. withholding
tax on such payments was reduced or eliminated by any applicable tax treaty or otherwise. Copies of the information returns reporting those payments and the amounts withheld may also be made available to the tax authorities in the country where a
Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement.
Under some circumstances, U.S. Treasury
regulations require backup withholding and additional information reporting on payments of interest and other reportable payments. Such backup withholding and additional information reporting will not apply to payments on the notes made
by us or our paying agent to a Non-U.S. Holder if the certification described above under Payments of interest is received from the Non-U.S. Holder.
Backup withholding and information reporting generally will not apply to payments of proceeds from the sale or other disposition of a note made to a Non-U.S.
Holder by or through the foreign office of a broker. However, information reporting requirements, and possibly backup withholding, will apply if such broker is, for U.S. federal income tax purposes, a United States person (as defined in the
Internal Revenue Code) or has certain other enumerated connections with the United States, unless such broker has documentary evidence in its records that the Non-U.S. Holder is not a United States person (as defined in the Internal Revenue Code)
and certain other conditions are met, or the Non-U.S. Holder otherwise establishes an exemption. Payments of proceeds from the sale or other disposition of a note made to a Non-U.S. Holder by or through the U.S. office of a broker are subject
to information reporting and backup withholding at the applicable rate unless the Non-U.S. Holder certifies, under penalties of perjury, that it is not a United States person (as defined in the Internal Revenue Code) and it satisfies certain other
conditions or otherwise establishes an exemption. Backup withholding is not an additional tax. A Non-U.S. Holder may obtain a refund or credit against its U.S. federal income tax liability of any amounts withheld under the backup withholding
rules, provided the required information is furnished to the Internal Revenue Service in a timely matter.
Non-U.S. Holders should consult their tax
advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption therefrom, and the procedures for obtaining such an exemption, if available.
FATCA
Sections 1471-1474 of the Code and
the Treasury regulations thereunder (FATCA) impose withholding taxes on certain types of payments made to foreign financial institutions, as specially defined under FATCA, and certain other non-U.S. entities. FATCA imposes a
30% withholding tax on payments of interest on, and gross proceeds from the sale or other disposition of, the notes paid to a foreign financial institution unless the foreign financial institution is deemed to be compliant with FATCA or enters into
an agreement with the Internal Revenue Service to, among other things, undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on
payments to account holders whose actions prevent it from complying with these reporting and other requirements. In addition, FATCA imposes a 30% withholding tax on the same types of payments to a non-financial foreign entity of a certain type
unless the entity certifies that it does not have any substantial U.S. owners or furnishes identifying information to the Internal Revenue Service or to the withholding agent regarding each substantial
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U.S. owner. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States with respect to these rules may be subject to different
rules. These rules currently apply to payments of interest and are expected to apply to payments of gross proceeds from the sale or other disposition of the notes after December 31, 2016. Prospective investors should consult their tax advisors
regarding the application of FATCA to the acquisition, ownership or disposition of the notes.
The U.S. federal income tax discussion set forth
above is included for general information only and may not be applicable depending upon a Holders particular situation. Prospective purchasers of the notes should consult their own tax advisors with respect to the tax consequences to them of
the acquisition, ownership and disposition of the notes, including the tax consequences under state, local, estate, foreign and other tax laws and tax treaties and the possible effects of changes in U.S. or other tax laws.
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Underwriting
Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are acting as representatives of each of the
underwriters named below. Subject to the terms and conditions set forth in a firm commitment underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not
jointly, to purchase from us, the principal amount of notes set forth opposite its name below.
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Underwriters |
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Principal amount of notes |
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Barclays Capital Inc. |
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$ |
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|
Credit Suisse Securities (USA) LLC |
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Deutsche Bank Securities Inc. |
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Total |
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$ |
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Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed,
severally and not jointly, to purchase all of the notes sold under the underwriting agreement if any of these notes are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting
underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters and their
controlling persons against certain liabilities in connection with this offering, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal
matters by their counsel, including the validity of the notes, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers certificates and legal opinions. The underwriters reserve the
right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
It is
expected that delivery of the notes will be made against payment therefor on or about the closing date specified on the cover page of this prospectus supplement, which will be the second business day following the
date of pricing of the notes (this settlement cycle being referred to as T+2). Purchasers of notes should be aware that the ability to settle secondary market trades of the notes effected on the
date of pricing and the next succeeding business day may be affected by the T+2 settlement and should consult their advisor.
Commissions and Discounts
The
representatives have advised us that the underwriters propose initially to offer the notes to the public at the public offering price set forth on the cover page of this prospectus supplement and to certain dealers at such price less a concession
not in excess of % of the principal amount of the notes. Any underwriter may allow, and any such dealer may reallow, a concession not in excess of % of
the principal amount of the notes to certain other dealers. After the initial offering, the underwriters may from time to time vary the offering price and other selling terms.
The expenses of the offering, not including the underwriting discount, are estimated at
$ and are payable by us.
New Issue of Notes
The notes are a new issue of securities with no established trading market. We do not intend to apply for listing of the notes on any national
securities exchange or for inclusion of the notes on any automated dealer
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quotation system. We have been advised by the underwriters that they presently intend to make a market in the notes after completion of the offering. However, they are under no obligation to do
so and may discontinue any market-making activities at any time without any notice. We cannot assure the liquidity of the trading market for the notes or that an active public market for the notes will develop. If an active public trading market for
the notes does not develop, the market price and liquidity of the notes may be adversely affected. If the notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for
similar securities, our operating performance and financial condition, general economic conditions and other factors.
No Sales of Similar Securities
We have agreed that we will not, for the period from the date of this prospectus supplement through and including the closing date,
without first obtaining the prior written consent of Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc., directly or indirectly, issue, sell, offer to contract or grant any option to sell, pledge, transfer or
otherwise dispose of, any debt securities or securities exchangeable for or convertible into debt securities, except for the notes sold to the underwriters pursuant to the underwriting agreement.
Short Positions
In connection with the
offering, the underwriters may purchase and sell the notes in the open market. These transactions may include short sales and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of
a greater principal amount of notes than they are required to purchase in the offering. The underwriters must close out any short position by purchasing notes in the open market. A short position is more likely to be created if the underwriters are
concerned that there may be downward pressure on the price of the notes in the open market after pricing that could adversely affect investors who purchase in the offering.
Similar to other purchase transactions, the underwriters purchases to cover the syndicate short sales may have the effect of raising or
maintaining the market price of the notes or preventing or retarding a decline in the market price of the notes. As a result, the price of the notes may be higher than the price that might otherwise exist in the open market.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the notes. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial
dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have,
from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and
expenses.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a
broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their
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customers. Such investments and securities activities may involve securities and/or instruments of ours or our affiliates. Certain of the underwriters or their affiliates that have a lending
relationship with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of
either the purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the
notes offered hereby. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients
that they acquire, long and/or short positions in such securities and instruments.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each, a Relevant Member State), no offer of notes may be
made to the public in that Relevant Member State other than:
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A |
to any legal entity which is a qualified investor as defined in the Prospectus Directive; |
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B |
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus
Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or |
|
C |
in any other circumstances falling within Article 3(2) of the Prospectus Directive, |
provided that no such offer of notes shall require the Company or the representatives to publish a prospectus pursuant to Article 3 of
the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
This prospectus has been
prepared on the basis that any offer of notes in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of notes. Accordingly any person making or
intending to make an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the Company or any of the underwriters to
publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the Company nor the underwriters have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an
obligation arises for the Company or the underwriters to publish a prospectus for such offer.
For the purpose of the above provisions,
the expression an offer to the public in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to
enable an investor to decide to purchase or subscribe the notes, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression Prospectus
Directive means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression 2010
PD Amending Directive means Directive 2010/73/EU.
Notice to Prospective Investors in the United Kingdom
In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may
only be directed at persons who are qualified investors (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully
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communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). This document must not be acted on or
relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.
Notice to Prospective Investors in Hong Kong
The notes may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the
public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to professional investors within the meaning of the Securities and Futures Ordinance (Cap.571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a prospectus within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32,
Laws of Hong Kong), and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong
or only to professional investors within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as
amended) (the FIEA) and, accordingly, each Underwriter has agreed that it will not offer or sell any notes, directly or indirectly, in Japan or to, or for the account or the benefit of, any Japanese person, or to others for reoffering or
resale, directly or indirectly, in Japan or to, or for the account or the benefit of, any Japanese person except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and all other applicable
Japanese laws; regulations and guidelines promulgated by the relevant Japanese governmental and regulatory authorities and in effect at the relevant time. For the purposes of this paragraph, Japanese person means any person who is a
resident of Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in Singapore
This prospectus supplement and the accompanying prospectus have not been registered as a prospectus under the Securities and Futures Act,
Chapter 289 of Singapore (SFA) by the Monetary Authority of Singapore. Accordingly, the notes may not be offered or sold, or made the subject of an invitation for subscription or purchase, nor may this prospectus supplement or the
accompanying prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes be circulated or distributed, whether directly or indirectly, to any person in Singapore other
than: (a) to an institutional investor as defined in Section 4A of the SFA (an Institutional Investor) pursuant to Section 274 of the SFA; (b) to an accredited investor as defined in Section 4A of the SFA (an
Accredited Investor) or other relevant person as defined in Section 275(2) of the SFA (a Relevant Person) pursuant to Section 275(1) of the SFA, or to any person pursuant to an offer referred to in
Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or (c) otherwise pursuant to, and in accordance with, the conditions of any other applicable exemption or provision of the SFA.
It is a condition of the offer that where the notes are subscribed for or acquired pursuant to an offer made in reliance on
Section 275 of the SFA by a Relevant Person which is:
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(a) |
a corporation (which is not an Accredited Investor), the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an Accredited Investor;
or |
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(b) |
a trust (where the trustee is not an Accredited Investor), the sole purpose of which is to hold investments and each beneficiary of the trust is an individual who is an Accredited Investor, |
securities (as defined in Section 239(1) of the SFA) of that corporation, and the beneficiaries rights and interest (howsoever described) in that
trust, shall not be transferred within 6 months after that corporation or that trust has subscribed for or acquired the notes pursuant to an offer made under Section 275 of the SFA except:
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(a) |
i. to an Institutional Investor, or an Accredited Investor or other Relevant Person, or to any person arising from an offer referred to in Section 275(1A) of the SFA (in the case of that corporation) or
Section 276(4)(i)(B) of the SFA (in the case of that trust); |
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(b) |
ii. where no consideration is or will be given for the transfer; or |
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(c) |
iii. where the transfer is by operation of law. |
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Legal Matters
The validity of the notes offered by this prospectus supplement will be passed upon for us by Sidley Austin LLP, New York, New
York. Certain legal matters in connection with the offering of the notes will be passed upon for the underwriters by Latham & Watkins LLP, Los Angeles, California.
Experts
The consolidated financial statements incorporated in this prospectus supplement by reference from DFS Annual Report on Form 10-K
for the calendar year ended December 31, 2014 and the effectiveness of DFS internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their
reports, which are incorporated herein by reference.
Where You Can Find More Information
We file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission
(SEC). Our SEC filings are available to the public over the Internet at the SECs web site at http://www.sec.gov and on the investor relations page of our website at http://www.discoverfinancial.com. The information available at our
website does not constitute a part of this prospectus. You may also read and copy any document we file with the SEC at the SECs public reference facilities at 100 F Street N.E., Washington, D.C. 20549. You can also obtain copies of the
documents upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also request a copy of our SEC filings, or the documents we
incorporate by reference herein, at no cost, by writing or telephoning us at:
Discover Financial Services
2500 Lake Cook Road
Riverwoods,
Illinois 60015
Attention: Investor Relations
Telephone: (224) 405-0900
This prospectus supplement and the accompanying prospectus omit some information contained in the registration statement in accordance with
SEC rules and regulations. You should review the information and exhibits included in the registration statement for further information about us and the securities we are offering. Statements in this prospectus concerning any document we filed as
an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to these filings. You should review the complete document to evaluate these statements.
You should rely only on the information incorporated by reference or provided in this prospectus supplement and the accompanying prospectus.
We have not authorized anyone else to provide you with different information or to make any representations other than as contained in this prospectus supplement and the accompanying prospectus. We are not making any offer of these securities in any
state or jurisdiction where the offer is not permitted.
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Documents Incorporated By Reference
The SEC allows us to incorporate by reference much of the information that we file with it, which means that we can disclose important
information to you by referring you to those publicly available documents. The information that we incorporate by reference is an important part of this prospectus supplement and the accompanying prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference into this prospectus supplement or the accompanying prospectus will be deemed to be modified or superseded for purposes of this prospectus supplement and the accompanying prospectus to the
extent that a statement contained in this prospectus supplement or the accompanying prospectus or any other subsequently filed document that is deemed to be incorporated by reference into this prospectus supplement or the accompanying prospectus
modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement or the accompanying prospectus.
This prospectus supplement and the accompanying prospectus incorporate by reference the documents listed below and any filings we make with
the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date hereof and until the termination of this offering; provided, however, that we are not incorporating by reference any document, portion of any document or other
information that is deemed to have been furnished and not filed with the SEC:
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our Annual Report on Form 10-K for the fiscal year ended December 31, 2014; |
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the portions of our Definitive Proxy Statement on Schedule 14A, filed on March 19, 2014 that are incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2013; and
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our Current Report on Form 8-K, filed on February 9, 2015. |
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PROSPECTUS
Senior Debt Securities
Subordinated Debt Securities
Common Stock
Preferred Stock
Depositary Shares
Stock Purchase Contracts
Stock Purchase Units
Warrants
Hybrid Securities Combining Elements of the Foregoing
This prospectus relates to senior debt securities, subordinated debt securities, common stock, preferred stock,
depositary shares, stock purchase contracts, stock purchase units, warrants and hybrid securities combining elements of the foregoing that we may sell from time to time in one or more transactions. This prospectus contains a general description of
the securities that we may offer for sale. The specific terms of the securities will be contained in one or more supplements to this prospectus. This prospectus may not be used to offer and sell the securities unless accompanied by a prospectus
supplement. A prospectus supplement may add, update or change information contained in this prospectus. Read this prospectus and the applicable prospectus supplement, as well as the documents incorporated by reference in this prospectus, carefully
before you invest.
Our common stock is listed on the New York Stock Exchange under the symbol DFS. On
June 28, 2012, the last reported sale price of our common stock on the New York Stock Exchange was $33.36 per share. You are urged to obtain current market quotations of the common stock. We have not yet determined whether any of the other
securities that may be offered by this prospectus will be listed on any exchange, inter-dealer quotation system or over-the-counter market.
Our securities may be offered directly, through agents designated from time to time by us, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of our securities, their names, and any applicable purchase price, fee, commission or discount arrangement between or among them, will be set forth or will be calculable in the applicable
prospectus supplement or other offering materials.
Investing
in the securities involves risk. See Risk Factors on page 1 of this prospectus and in the accompanying prospectus supplement, if any, in addition to the risk factors that are incorporated by reference into
this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of the securities offered hereby or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The securities offered hereby are not deposits or other obligations of a bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
The date of this prospectus is June 29, 2012
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS
This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission, or SEC, as a well-known seasoned issuer as defined in
Rule 405 under the Securities Act of 1933, as amended, or the Securities Act, utilizing a shelf registration process. Under this shelf process, we may from time to time offer and sell, in one or more offerings, the securities
described in this prospectus. This prospectus provides you with a general description of the securities we may offer. Each time we sell securities under this prospectus, we will provide a prospectus supplement or other offering materials that will
contain specific information about the terms of that offering. The prospectus supplement may add, update or change information contained in this prospectus. If the information in this prospectus is inconsistent with a prospectus supplement, you
should rely on the information in that prospectus supplement. Please carefully read this prospectus and any prospectus supplement together with the additional information described under the heading Where You Can Find More Information.
You should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying
prospectus supplement and issuer free writing prospectus. We have not authorized any other person to provide you with different information. This document may only be used where it is legal to sell these securities. We are not making an offer of
these securities in any state or jurisdiction where the offer is not permitted. You should only assume that the information in this prospectus or in any prospectus supplement or issuer free writing prospectus is accurate only as of their respective
dates. Our business, financial condition, results of operations and prospects may have changed since those dates.
Each
reference in this prospectus to we, us, our, Discover or the Company means Discover Financial Services and its consolidated subsidiaries, unless the context requires otherwise.
i
THE COMPANY
Discover Financial Services is a direct banking and payment services company. We are a bank holding company under the Bank Holding
Company Act of 1956 and a financial holding company under the Gramm-Leach-Bliley Act, subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the Federal Reserve). We offer credit cards,
student loans, personal loans and deposit products through our Discover Bank subsidiary and home loans through our Discover Home Loans, Inc. subsidiary. We had $57.1 billion in loan receivables and $27.6 billion in deposits issued through direct-to-consumer channels and affinity relationships at May 31, 2012. We operate the Discover Network, our credit card payments network; the PULSE network
(PULSE), our automated teller machine (ATM), debit and electronic funds transfer network; and Diners Club International (Diners Club), our global payments network.
Our principal executive offices are located at 2500 Lake Cook Road, Riverwoods, Illinois 60015, and our telephone number is
(224) 405-0900.
RISK FACTORS
Our business, and an investment in the securities, is subject to uncertainties and risks. You should carefully consider and evaluate all
of the information included and incorporated by reference in this prospectus, including the risk factors incorporated by reference from our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, as updated by other SEC filings filed after such reports, as well as any risks described in any applicable prospectus supplement. Our business, financial condition, results of operations and
prospects could be materially adversely affected by any of these risks. The occurrence of any of these risks may cause you to lose all or part of your investment.
SPECIAL NOTES CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference into this prospectus and any related prospectus supplement, contain or will contain certain statements that are forward-looking within
the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may
differ materially from those expressed in, or implied by, our forward-looking statements. Words such as expects, anticipates, believes, estimates and other similar expressions or future or conditional
verbs such as will, should, would and could are intended to identify such forward-looking statements. You should not rely solely on the forward-looking statements, which are qualified in their entirety
by reference to, and are accompanied by, the important factors described in our Annual Report on Form 10-K for the year ended November 30, 2011, including under the headings Risk Factors
and Special Note Regarding Forward-Looking Statements, as updated by our other SEC filings filed after such Annual Report, including our Quarterly Reports on Form 10-Q for the quarters ended
February 29, 2012 and May 31, 2012. You should consider all uncertainties and risks contained in or incorporated by reference into this prospectus and any related prospectus supplement. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update any forward-looking statement.
Possible events or factors that could
cause results or performance to differ materially from those expressed in our forward-looking statements include the following:
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changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal
bankruptcy filings, the rate of unemployment, the levels of consumer confidence and consumer debt, and investor sentiment; |
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the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including those related to
financial regulatory reform, consumer financial services practices, and funding, capital and liquidity; |
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the actions and initiatives of current and potential competitors; |
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our ability to manage our expenses; |
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our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants;
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our ability to sustain and grow our private student loan portfolio; |
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our ability to manage our credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, and strategic risk;
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the availability and cost of funding and capital; |
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access to deposit, securitization, equity, debt and credit markets; |
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the impact of rating agency actions; |
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the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other
market indices; |
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losses in our investment portfolio; |
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limits on our ability to pay dividends and repurchase our common stock; |
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fraudulent activities or material security breaches of key systems; |
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our ability to increase or sustain Discover card usage or attract new customers; |
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our ability to attract new merchants and maintain relationships with current merchants; |
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the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; |
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our ability to introduce new products or services; |
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our ability to manage our relationships with third-party vendors; |
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our ability to maintain current technology and integrate new and acquired systems; |
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our ability to collect amounts for disputed transactions from merchants and merchant acquirers; |
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our ability to attract and retain employees; |
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our ability to protect our reputation and our intellectual property; |
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difficulty obtaining regulatory approval for, financing, closing, transitioning, integrating or managing the expenses of acquisitions of or investments
in new businesses, products or technologies; and |
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new lawsuits, investigations or similar matters or unanticipated developments related to current matters. |
We routinely evaluate and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits,
which may involve payment in cash or our debt or equity securities.
The foregoing review of important factors should not be
construed as exclusive and should be read in conjunction with the other cautionary statements that are included in or incorporated by reference into this prospectus and any related prospectus supplement. These factors expressly qualify all
subsequent oral and written forward-looking statements attributable to us or persons acting on our behalf. Except for any ongoing
2
obligations to disclose material information as required under U.S. federal securities laws, we do not have any intention or obligation to update forward-looking statements after we
distribute this prospectus and any related prospectus supplement, whether as a result of new information, future developments or otherwise.
USE OF PROCEEDS
Unless otherwise described in
the applicable prospectus supplement, we intend to use the net proceeds from the sale of the securities for general corporate purposes, which may include: working capital needs, investments in, or extensions of credit to, our subsidiaries, possible
repayment, repurchase or redemption of existing debt, expansion of existing businesses, possible acquisitions of businesses and possible investments in other business opportunities. Pending such use, we intend to invest the net proceeds in
interest-bearing investment-grade securities.
SELECTED FINANCIAL DATA
Effective March 1, 2012, we adopted the Financial Accounting Standards Boards (FASB) Accounting Standards Update
(ASU) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, as amended by ASU 2011-12, Comprehensive Income
(Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.
These updates revise the manner in which entities present comprehensive income in their financial statements. The following selected financial information revises historical information to illustrate the new presentation required by this
pronouncement for the periods presented.
STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)
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For the Year Ended November 30, |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Net income |
|
$ |
2,226,708 |
|
|
$ |
764,788 |
|
|
$ |
1,276,185 |
|
Other comprehensive income, net of taxes |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities available for sale, net of tax |
|
|
46,967 |
|
|
|
(8,894 |
) |
|
|
(8,527 |
) |
Unrealized gain on cash flow hedges, net of tax |
|
|
4,480 |
|
|
|
2,525 |
|
|
|
|
|
Unrealized pension and post-retirement benefit gain(loss), net of tax |
|
|
(20,578 |
) |
|
|
78 |
|
|
|
(79,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
30,869 |
|
|
|
(6,291 |
) |
|
|
(88,480 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
2,257,577 |
|
|
$ |
758,497 |
|
|
$ |
1,187,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
Our historical ratios of earnings to fixed charges for the periods indicated are set forth in the table below. On March 13, 2009, we
issued preferred stock to the U.S. Treasury, which we redeemed on April 21, 2010. Prior to the issuance, no shares of our preferred stock were outstanding and, therefore, during periods prior to the quarter ending May 31, 2009, the
ratio of earnings to fixed charges and preferred stock dividends is the same as the ratio of earnings to fixed charges. The ratio of earnings to fixed charges is computed by dividing (1) income from continuing operations before income taxes,
fixed charges and losses from unconsolidated investees by (2) total fixed charges. For purposes of computing these ratios, fixed charges consist of interest expense and an estimated interest portion of rental expense.
3
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For the Six Months Ended |
|
For the Year Ended November 30, |
|
|
|
May 31, 2012 |
|
May 31, 2011 |
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
Ratio of Earnings to Fixed Charges |
|
3.7x |
|
3.2x |
|
|
3.4x |
|
|
|
1.8x |
|
|
|
2.7x |
|
|
|
2.3x |
|
|
|
2.2x |
|
Ratio of Earnings to Fixed Charges and Preferred Stock requirements |
|
3.7x |
|
3.2x |
|
|
3.4x |
|
|
|
1.8x |
|
|
|
2.6x |
|
|
|
2.3x |
|
|
|
2.2x |
|
GENERAL DESCRIPTION OF SECURITIES
We may offer under this prospectus: debt securities, common stock, preferred stock, depositary shares, stock purchase contracts, stock
purchase units, warrants to purchase debt securities, common stock or preferred stock; or any combination of the foregoing, either individually or as units consisting of two or more securities.
The following description of the terms of these securities sets forth some of the general terms and provisions of securities that we may
offer. The particular terms of securities offered by any prospectus supplement and the extent, if any, to which the general terms set forth below do not apply to those securities, will be described in the related prospectus supplement. In addition,
if we offer securities as units, the terms of the units will be described in the applicable prospectus supplement. If the information contained in the prospectus supplement differs from the following description, you should rely on the information
in the prospectus supplement.
DESCRIPTION OF DEBT SECURITIES
We may issue senior debt securities and subordinated debt securities under one of two separate indentures. Our senior debt securities are
to be issued under a senior indenture, dated as of June 12, 2007, by and between Discover Financial Services and U.S. Bank National Association, as trustee, a copy of which is incorporated by reference into the registration statement, to
which this prospectus forms a part, as an exhibit. Our subordinated debt securities are to be issued under a subordinated indenture, the form of which is attached to the registration statement, to which this prospectus forms a part, as an exhibit.
The senior debt securities and the subordinated debt securities are collectively referred to in this prospectus as the debt
securities. The senior indenture and the subordinated indenture are referred to in this prospectus individually as the Indenture and collectively as the Indentures. The Indentures may be supplemented from time to time.
The following section is a summary of certain provisions of the Indentures. This summary does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all the provisions of the Indentures, including the definitions in the Indentures of certain terms. We encourage you to read the Indentures and our debt securities for provisions that
may be important to you. Wherever this summary refers to particular sections or defined terms of an Indenture, it is intended that such sections or defined terms shall be incorporated into this prospectus by reference. All capitalized terms included
in this summary shall have the same meanings specifically set forth in the applicable Indenture. In this section, the Company, we, us, our and similar words refer to Discover Financial Services and not
any of its subsidiaries.
Our debt securities may be issued as part of a stock purchase unit. Stock purchase units are
summarized in this prospectus under the heading Description of Stock Purchase Contracts and Stock Purchase Units.
General
The Indentures provide that the debt securities issuable thereunder shall be issuable in series. The aggregate
principal amount of debt securities issuable under each Indenture is unlimited, and debt securities may be issued from time to time. The senior debt securities will be our direct unsecured obligations. The subordinated
4
debt securities will be our direct unsecured obligations and will be subordinated to all of our senior debt as described below under the heading Subordination. The debt securities
issued under the Indentures will be subordinate to all of our existing and future secured indebtedness and structurally subordinated to existing and future claims of creditors of our subsidiaries. Except as described below under the heading
Certain Covenants, the Indentures do not limit other indebtedness or securities which may be incurred or issued by us or any of our subsidiaries or contain financial or similar restrictions on us or our subsidiaries.
The terms of each series of debt securities will be established by or pursuant to resolutions of our board of directors (and to the
extent established other than in a board resolution, in an officers certificate detailing such establishment) or pursuant to a supplemental indenture. If we offer debt securities, we will prepare and distribute a prospectus supplement that
describes the specific terms of such debt securities. We do not have to issue all of the debt securities of one series at the same time and, unless otherwise specified in a prospectus supplement, we may reopen a series, without the consent of the
holders of the debt securities of that series, for issuances of additional debt securities of that series. The applicable prospectus supplement may provide the following terms of the debt securities being offered, if applicable:
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the designation of the offered securities; |
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the aggregate principal amount and any limit upon the aggregate principal amount of the offered securities; |
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if other than U.S. dollars, the currency or currencies in which the offered securities are denominated; |
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the date or dates on which principal of the offered securities is payable; |
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the rate or rates at which the offered securities shall bear interest, if any, the date or dates from which such interest shall accrue, on which
interest shall be payable and, in the case of registered securities, on which a record date shall be taken for determining holders to whom interest is payable and/or the method by which such rate or rates or date or dates shall be determined;
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if other than the offices of the applicable Trustee, the place where the principal of and interest on the offered securities will be payable;
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our right, if any, to redeem the offered securities, in whole or in part, at our option and the period or periods within which, the price or prices at
which and any terms and conditions, including the notice period, upon which the offered securities may be so redeemed, pursuant to any sinking fund or otherwise; |
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our obligation, if any, to redeem, purchase or repay the offered securities pursuant to any mandatory redemption, sinking fund or analogous provisions
or at the option of a holder thereof and the price or prices at which and the period or periods within which and any terms and conditions upon which the offered securities shall be redeemed, purchased or repaid, in whole or in part, pursuant to such
obligation; |
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if other than denominations of $2,000 and any integral multiple of $1,000 in excess thereof, the denominations in which the offered securities will be
issuable; |
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if other than the principal amount of such offered security, the portion of the principal amount payable upon declaration of acceleration of the
maturity thereof; |
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if other than the coin or currency in which the offered securities are denominated, the coin or currency in which payment of the principal of or
interest on the offered securities shall be payable; |
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if the principal of or interest on the offered securities are to be payable, at our election or a holder thereof, in a coin or currency other than that
in which the offered securities are denominated, the period or periods within which, and the terms and conditions upon which, such election may be made; |
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if the amount of payments of principal of and interest on the offered securities may be determined with reference to an index based on a coin or
currency other than that in which the offered securities are denominated, or with reference to any currencies, securities or baskets of securities, commodities or indices, the manner in which such amounts shall be determined;
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5
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if the holders of the offered securities may convert or exchange the offered securities into or for other of our or another entitys securities or
for other property (or the cash value thereof), the specific terms of and period during which such conversion or exchange may be made; |
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whether the offered securities shall be issued as registered securities, and if so whether such securities will be issuable in the form of a registered
global security, or unregistered (with or without coupons) or any combination thereof; |
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whether the offered securities are senior debt securities or subordinated debt securities and, if subordinated debt securities, the specific
subordination provisions applicable thereto; |
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in the case of subordinated debt securities, provisions specifying the relative degree, if any, to which such subordinated debt securities of the
series will be senior to or be subordinated in right of payment to other series of subordinated debt securities or other indebtedness of the Company, as the case may be, whether such other series of subordinated debt securities or other indebtedness
is outstanding or not; |
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any restrictions applicable to the offer, sale, transfer, exchange or delivery of unregistered or registered securities or the payment of interest
thereon and, if applicable, the terms upon which unregistered securities may be exchanged for registered securities and vice versa; |
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whether and under what circumstances we will pay additional amounts on the offered securities held by a
non-U.S. Person in respect of tax, assessment or governmental charge withheld or deducted and, if so, whether we will have the option to redeem such securities rather than pay such additional amounts;
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if the offered securities are to be issued in definitive form only upon the receipt of certain certificates or other documents or satisfaction of other
conditions, the form and terms of such certificates, documents or conditions; |
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the identity of any trustees, depositories, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the
offered securities; |
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any other events of default or covenants with respect to the offered securities, including any additions to or changes in the events of default,
covenants or acceleration provisions described in this prospectus or the Indentures; and |
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any other specific terms of the offered securities, including any which may modify, delete, supplement or add any provision of the Indentures as it
applies to that series. |
Certain Covenants
Negative Pledge. Unless otherwise provided in any series of debt securities, the senior indenture provides
that we will not, and will not permit any of our subsidiaries to, create, assume, incur or guarantee any indebtedness for borrowed money that is secured by a pledge, lien or other encumbrance (except for Permitted Liens, as defined below) on:
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the Voting Securities (defined below) of Discover Bank or any subsidiary succeeding to any substantial part of the business now conducted by Discover
Bank; or |
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the Voting Securities of a subsidiary that owns, directly or indirectly, the voting securities of Discover Bank or any subsidiary succeeding to any
substantial part of the business now conducted by Discover Bank, other than directors qualifying shares, |
in either
case without making effective provisions so that the debt securities issued under the senior indenture will be secured equally and ratably with (or, at our option, prior to) indebtedness so secured. For these purposes, subsidiary means
any corporation, partnership or other entity of which at the time of determination we own or control directly or indirectly more than 50% of the shares of the voting stock or equivalent interest, and Voting
6
Securities means the stock of any class or classes having general voting power under ordinary circumstances to elect a majority of the board of directors, managers or trustees of the
relevant subsidiary, other than stock that carries only the conditional right to vote upon the happening of an event, whether or not that event has happened. Permitted Liens means (i) liens for taxes or assessments or governmental
charges or levies not then due and delinquent or the validity of which is being contested in good faith or which are less than $1,000,000 in amount, (ii) liens created by or resulting from any litigation or legal proceeding which is currently
being contested in good faith by appropriate proceedings or which involves claims of less than $1,000,000, (iii) deposits to secure (or in lieu of) surety, stay, appeal or customs bonds and (iv) such other liens as our board of directors
determines do not materially detract from or interfere with the present value or control of the Voting Securities subject thereto or affected thereby.
The subordinated indenture does not contain any limitations on liens.
Restrictions on
Consolidations, Mergers and Sales of Assets
Unless otherwise provided in any series of debt securities, the Indentures
provide that we will not merge or consolidate with any other person and will not sell, lease or convey all or substantially all of our assets to any other person, unless:
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we will be the continuing corporation; or |
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the successor corporation or person that acquires all or substantially all of our assets: |
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will be a corporation organized under the laws of the United States, a state of the United States or the District of Columbia; and
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will expressly assume the due and punctual payment of the principal of and interest on all of our debt securities issued under the applicable Indenture
and the due and punctual performance and observance of all of the covenants and conditions of the Indentures to be performed or observed by us, by supplemental indenture satisfactory to the applicable Trustee, executed and delivered to the
applicable Trustee by such corporation; and |
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immediately after the merger, consolidation, sale, lease or conveyance, we, that person or that successor corporation will not be in default in the
performance of the covenants and conditions of the Indenture. |
Other than as described above or in any
prospectus supplement, there are no covenants or other provisions in the Indentures that would afford holders of our debt securities additional protection in the event of a recapitalization transaction, a change of control of our company or a highly
leveraged transaction. The merger covenant described above would only apply if the recapitalization transaction, change of control or highly leveraged transaction were structured to include our merger or consolidation or a sale, lease or conveyance
of all or substantially all of our assets.
Reports
We are required to file with each Trustee, within 15 days after we are required to file the same with the SEC, copies of the annual reports and of the information, documents, and other reports that
we may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act) or pursuant to Section 314 of the Trust Indenture Act of 1939, as
amended.
Events of Default
The Indentures provide holders of our debt securities with remedies if we fail to perform specific obligations or if we become bankrupt. You should review these provisions and the related provisions in
the
7
applicable prospectus supplement and understand which of our actions trigger an event of default and which actions do not.
Each of the following constitutes an event of default with respect to each series of senior debt securities:
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default in the payment of any installment of interest upon any of the debt securities of such series as and when the same shall become due and payable,
and continuance of such default for a period of 30 days; |
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default in payment of all or any principal of the debt securities of such series as and when the same shall become due and payable, either at maturity,
upon any redemption, by declaration or otherwise; |
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failure in the observance or performance of any of the other covenants or agreements in the debt securities of such series or contained in the
Indenture applicable to such series (other than a covenant or warranty with respect to the debt securities of such series the breach or nonperformance of which is otherwise included in the definition of event of default) for a period of
60 days after the date on which written notice specifying such failure, stating that such notice is a Notice of Default and demanding that we remedy the same, shall have been given by registered or certified mail, return receipt
requested, to (1) us by the applicable Trustee or (2) us and the applicable Trustee by the holders of at least 25% in principal amount of the outstanding debt securities of such series; |
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default under any mortgage, indenture or other instrument securing or evidencing any of our indebtedness or that of Discover Bank, or any subsidiary
succeeding to any substantial part of the business now conducted by Discover Bank, in an aggregate principal amount of $50 million or more and which default (i) constitutes a failure to make any scheduled principal or interest payment when
due after giving effect to any applicable grace period or (ii) accelerates the payment of such debt and such acceleration is not rescinded or annulled, or such debt is not discharged, within 15 days after written notice specifying such
default and demanding that we remedy the same by (1) the applicable Trustee or (2) the holders of at least 25% in principal amount of the outstanding debt securities of such series; |
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a court having jurisdiction in the premises shall enter a decree or order for relief in respect of us in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of us or for any substantial part of our property or ordering the winding
up or liquidation of our affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; |
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we shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry
of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of us or for any substantial part of our
property, or make any general assignment for the benefit of creditors; or |
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any other event of default provided with respect to the debt securities of such series pursuant to any supplemental indenture or in the form of such
debt securities. |
An event of default under the subordinated indenture with respect to subordinated debt
securities of any series will occur only upon the occurrence of certain events in bankruptcy, insolvency or reorganization involving us. There will be no event of default, and holders of the subordinated debt securities will not be
entitled to accelerate the maturity of the subordinated debt securities, in the case of a default in the performance of any covenant or obligation with respect to the subordinated debt securities, including a default in the payment of principal or
interest.
Acceleration of Debt Securities upon an Event of Default. The senior indenture
provides that if an event of default applicable to any series of senior debt securities occurs and is continuing, either the Trustee or
the
holders of not less than 25% in aggregate principal amount of the outstanding senior debt securities of such
8
series by notice in writing to us and to the Trustee, if given by security holders, may declare the principal of all the senior debt securities of such series and interest accrued thereon to be
due and payable immediately. The subordinated indenture provides that acceleration is automatic upon the occurrence of an event of default applicable to the subordinated debt securities.
Waiver of Defaults. The Indentures provide that the holders of a majority in aggregate principal amount of
outstanding debt securities of any series with respect to which an event of default has occurred and is continuing may on behalf of the holders of all such debt securities of such series waive any past default or event of default and its
consequences, other than a default in the payment of principal or interest (unless such default has been cured and an amount sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited
with the applicable Trustee) or a default in respect of a covenant or provision in the Indenture that cannot be modified or amended without the consent of the holder of each debt security affected. In the case of any such waiver, we, the applicable
Trustee, and the holders of all such debt securities shall be restored to their former positions and rights under the applicable Indenture, respectively; but no such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
Collection of Indebtedness. If a default in the payment of principal of, or
any interest on, debt securities of any series issued under the Indentures occurs and is continuing and we fail to pay the full amount then due and payable with respect to all debt securities of such series immediately upon the demand of the
applicable Trustee, such Trustee is entitled to institute an action or proceeding to collect the amount due and unpaid. If any default occurs and is continuing, the applicable Trustee may pursue legal action to enforce the performance of any
provision in the Indenture to protect the rights of such Trustee and the holders of the debt securities of such series issued under the Indenture.
Indemnification of Trustee for Actions Taken on Your Behalf. The Indentures contain a provision entitling the Trustees, subject to the duty of the Trustees during a default
to act with the required standard of care, to be indemnified by the holders of debt securities issued under the Indentures before proceeding to exercise any trust or power at the request of such holders. Subject to these provisions and some other
limitations, the holders of a majority in aggregate principal amount of outstanding debt securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the Trustees, or exercising any trust or
power conferred on the Trustees with respect to such series.
Limitation on Actions by You as an Individual
Holder. The Indentures provide that no individual holder of debt securities of any series may institute any action against us, except actions for payment of overdue principal and interest, unless the following actions have
occurred:
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the holder must have previously given written notice to the applicable Trustee of the continuing default; |
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the holders of not less than 25% in aggregate principal amount of the outstanding debt securities of such series must have (1) made a written
request upon the applicable Trustee to institute that action and (2) offered the Trustee reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby; |
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the Trustee must have failed to institute that action within 60 days after receipt of the request referred to above; and
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the holders of a majority in principal amount of the outstanding debt securities of such series must not have given directions to the Trustee
inconsistent with those of the holders referred to above. |
Annual
Certification. The Indentures contain a covenant that we will file annually with the Trustees a certificate of no default or a certificate specifying any default that exists.
9
Discharge, Defeasance and Covenant Defeasance
We have the ability to eliminate most or all of our obligations on debt securities of any series prior to maturity if we comply with the
following provisions.
Discharge of Indenture. If at any time we have:
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paid or caused to be paid the principal of and interest on all of the outstanding debt securities of any series as and when the same shall have become
due and payable; |
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delivered to the applicable Trustee for cancellation all of the outstanding debt securities of such series theretofore authenticated; or
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in the case of any series of debt securities where the exact amount (including currency of payment) of principal of and interest due can be determined
at the time of making the deposit referred to in clause (B) below, (A) all the debt securities of such series not theretofore delivered to the applicable Trustee for cancellation shall have become due and payable, or are by their terms to
become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the applicable Trustee for the giving of notice of redemption (or, in the case of debt securities that do not bear a fixed
interest rate, within the remaining term of the then current interest period) and (B) we shall have irrevocably deposited or caused to be deposited with the applicable Trustee as trust funds the entire amount in cash (other than moneys repaid
by the applicable Trustee or any paying agent to us), or, in the case of any series of debt securities the payment on which may only be made in dollars, direct obligations of the United States of America, maturing as to principal and interest at
such times and in such amounts as will insure the availability of cash, or a combination thereof, sufficient in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to
the applicable Trustee, to pay (1) the principal and interest on all debt securities of such series on each date that such principal or interest is due and payable and (2) any mandatory sinking fund payments on the dates on which such
payments are due and payable in accordance with the terms of the applicable Indenture and the debt securities of such series; |
and if, in any such case, we also pay or cause to be paid all other sums payable by us under the Indenture with respect to the debt securities of such
series, then the Indenture shall cease to be of further effect with respect to the debt securities of such series, except as to certain rights and with respect to the transfer and exchange of the debt securities of such series, rights of the holders
to receive payment and certain other rights and the applicable Trustee, on our demand accompanied by an officers certificate and opinion of counsel and at our cost and expense, shall execute proper instruments acknowledging such satisfaction
of and discharging the Indenture as to such series; provided that the rights of holders of the debt securities to receive amounts in respect of principal of and interest on the securities held by them shall not be delayed longer than required by
then-applicable mandatory rules or policies of any securities exchange upon which the debt securities are listed. We will reimburse the applicable Trustee for any costs or expenses thereafter reasonably and properly incurred and compensate the
applicable Trustee for any services thereafter reasonably and properly rendered by such Trustee in connection with the applicable Indenture or the debt securities of such series.
Defeasance at Any Time. We may elect (i) to be discharged from all of our obligations (other than as
to (1) transfers and exchanges of debt securities and our right of optional redemption, if any, (2) replacement of lost, mutilated, defaced, stolen or destroyed debt securities (3) rights of holders to receive payment of the principal
and interest on such debt securities at the dates when due, (4) rights, obligations and duties to the Trustee and (5) rights of holders thereof to the property deposited with the Trustee in furtherance of such defeasance and (6) our
obligations with respect to maintaining an office for payment) with respect to the outstanding debt securities of any series, which is referred to as defeasance or (ii) to be released from our obligation to comply with the
provisions of the Indentures described above under Certain Covenants with
10
respect to the outstanding debt securities of any series (and, if so specified, any other obligation or restrictive covenant added for the benefit of the holders of such series of debt
securities) which is referred to as covenant defeasance, in either case, if we satisfy each of the following conditions:
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We irrevocably deposit or cause to be deposited with the applicable Trustee in trust, specifically pledged as security for, and dedicated solely to,
the benefit of the holders of the debt securities, (A) cash in an amount, or (B) in the case of any series of debt securities the payments on which may only be made in dollars, U.S. government obligations maturing as to principal and
interest at such times and in such amounts as will insure the availability of cash or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification
thereof delivered to the applicable Trustee, to pay (1) the principal and interest on all debt securities of such series and (2) any mandatory sinking fund payments on the day on which such payments are due and payable in accordance with
the terms of the applicable Indenture and the outstanding debt securities of such series. |
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Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, the applicable Indenture or any
other agreement or instrument to which we are a party or by which we are bound. |
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We deliver to the applicable Trustee an officers certificate (only in the case of a covenant defeasance) and an opinion of counsel to the effect
that the holders of debt securities of such series will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to U.S. federal income tax on the
same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred. In the case of a defeasance, but not in the case of covenant defeasance, the opinion must be based on a
ruling of the Internal Revenue Service or a change in U.S. federal income tax law occurring after the date of the applicable Indenture, since that result would not occur under current tax law. |
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We deliver to the applicable Trustee an officers certificate and an opinion of counsel, each stating that all conditions precedent relating to
the defeasance or covenant defeasance have been complied with. |
Additionally, in the case of covenant
defeasance, we must satisfy the following additional conditions:
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No event of default or event which with notice or lapse of time or both would become an event of default with respect to the debt securities shall have
occurred and be continuing on the date of such deposit or, insofar as certain subsections of the Indenture pertaining to bankruptcy or insolvency provisions are concerned, at any time during the period ending on the 91st day after the date of such deposit.
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Such covenant defeasance does not cause the applicable Trustee to have a conflicting interest for purposes of the Trust Indenture Act of 1939, as
amended, with respect to any of our securities. |
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Such covenant defeasance does not cause any debt securities then listed on any registered national securities exchange under the Securities Exchange
Act of 1934, as amended, to be delisted. |
Modification and Waiver
Modification Without Consent of Holders. We and the applicable Trustee may, from time to time and at any
time, enter into supplemental indentures without the consent of the holders of debt securities of a series to:
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to convey, transfer, assign, mortgage or pledge to the applicable Trustee as security for the debt securities of one or more series any property or
assets; |
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evidence the assumption by a successor corporation of our obligations; |
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add covenants for the protection of the holders of such debt securities and to make the occurrence, or the occurrence and continuance, of a default in
any such additional covenants, restrictions, conditions or provisions an event of default permitting the enforcement of all or any of the several remedies provided in the Indentures; provided, that in respect of any such addition we may provide for
a different grace period after default, may provide for an immediate enforcement, or may limit the remedies available to the applicable Trustee or may limit the right of the holders of a majority in aggregate principal amount of the debt securities
of such series to waive such an event of default; |
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cure any ambiguity or correct or supplement any provision contained in the applicable Indenture or in any supplemental indenture which may be defective
or inconsistent with any other provision contained in the applicable Indenture or in any supplemental indenture, or to make any other provisions as we may deem necessary or desirable, provided that no action shall adversely affect the interests of
the holders of the debt securities; |
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establish the forms or terms of debt securities of any series as permitted by specific sections of the applicable Indenture; and
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evidence and provide for the acceptance of appointment under the applicable Indenture by a successor trustee with respect to the debt securities of one
or more series and to add to or change any of the provisions of the applicable Indenture as shall be necessary to provide for or facilitate the administration of the trusts by more than one trustee. |
Modification with Consent of Holders. We and the applicable Trustee, with the consent of the holders of not
less than a majority in aggregate principal amount of outstanding debt securities of any series, may, from time to time and at any time, enter into supplemental indentures for the purpose of adding any provisions to, or changing in any manner or
eliminating any of the provisions of, the applicable Indenture or modifying in any manner the rights of the holders of the debt securities of such series. However, we and the applicable Trustee may not make any of the following changes to any
outstanding debt securities without the consent of each holder that would be affected by such change:
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extend the final maturity of the principal; |
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reduce the principal amount; |
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reduce the rate or extend the time of payment of interest; |
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reduce any amount payable on redemption; |
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change the currency in which the principal, premium (if any) or interest thereon is payable; |
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impair the right of any holder to institute suit for the enforcement of any payment on any debt security when due or, if the debt securities provide
therefor, any right of repayment at the option of the holder; |
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reduce the percentage of debt securities the consent of whose holders is required for modification of the Indenture; or |
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in the case of the subordinated indenture, modify the provisions of the subordinated indenture with respect to the subordination provisions in a manner
adverse to the holders of the subordinated debt securities. |
Subordination
The subordinated indenture provides that the subordinated debt securities will be subordinated and junior in right of payment to the
prior payment in full of all of our senior indebtedness in accordance with the terms therein. In the event of any dissolution, winding-up, liquidation or reorganization of the Company, whether
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voluntarily or involuntary, or in bankruptcy, insolvency, receivership or other proceedings, then and in any such event the holders of senior indebtedness will be entitled to receive payment in
full of all amounts due or to become due on or in respect of all senior indebtedness, or provision will be made for such payment in cash, before the holders of our subordinated debt securities are entitled to receive or retain any payment on account
of principal of, or any premium or interest on, our subordinated debt securities. To that end the holders of senior indebtedness will be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or
character, which may be payable or deliverable in respect of the subordinated debt securities in any such case, proceeding, dissolution, liquidation or other winding up event, whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any of our other indebtedness being subordinated to the payment of our subordinated debt securities. By reason of such subordination, in the event of liquidation or
insolvency of the Company, holders of senior indebtedness and holders of our other obligations that are not subordinated to senior indebtedness may recover more, ratably, than the holders of our subordinated debt securities.
Subject to the payment in full of all senior indebtedness, the rights of the holders of our subordinated debt securities will be
subrogated to the rights of the holders of the senior indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such senior indebtedness by virtue of such subordination until the principal of, and
any premium and interest on, our subordinated debt securities have been paid in full.
No payment of principal (including
redemption and sinking fund payments) of, or any premium or interest on, our subordinated debt securities may be made (1) in the event and during the continuation of any default by us in the payment of principal, premium, interest or any other
amount due on any of our senior indebtedness or (2) if the maturity of any our senior indebtedness has been accelerated because of a default.
Our subordinated indenture does not limit or prohibit us from incurring additional senior indebtedness, which may include indebtedness that is senior to our subordinated debt securities, but subordinate
to our other obligations. Our senior debt securities will constitute senior indebtedness under our subordinated indenture.
The term senior indebtedness means:
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all of our obligations for borrowed or purchased money; |
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all of our obligations arising from off-balance sheet guarantees and direct credit substitutes; |
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all of our capital lease obligations; |
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all of our obligations issued or assumed as the deferred purchase price of property, all of our conditional sale obligations and all of our obligations under any
conditional sale or title retention agreement, but excluding trade accounts payable arising in the ordinary course of business; |
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all of our obligations, contingent or otherwise, in respect of any letters of credit, bankers acceptances, security purchase facilities or similar credit
transactions; |
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all of our obligations associated with derivative products such as interest rate and foreign exchange contracts, commodity contracts and similar arrangements;
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all of our obligations of the type referred to in clauses (1) through (6) above of other persons for the payment of which the Company is responsible or liable
as obligor, guarantor or otherwise; and |
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all of our obligations of the type referred to in clauses (1) through (7) above of other persons secured by any lien on any property or asset, whether or not
such obligation is assumed by the Company, |
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in each case, whether outstanding on the date the subordinated indenture became effective, or created,
assumed or incurred after that date, except for:
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the subordinated debt securities; and |
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any indebtedness or any guarantee that is by its terms subordinated to, or ranks equally with, the subordinated debt securities and the issuance of which (x) has
received the concurrence or approval of the staff of the Federal Reserve Bank of New York or the staff of the Board of Governors of the Federal Reserve System or (y) does not at the time of issuance prevent the subordinated debt securities from
qualifying for Tier 2 capital treatment (irrespective of any limits on the amount of the Companys Tier 2 capital) under the applicable capital adequacy guidelines, regulations, policies or published interpretations of the Board of
Governors of the Federal Reserve System. |
The subordinated indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of our subordinated debt securities, may be changed prior to such issuance. Any such change would be described in the related prospectus supplement.
Book Entry System, Delivery and Form
We may issue the debt securities in whole or in part in the form of one or more global securities that will be deposited with, or on behalf of, a depositary identified in the applicable prospectus
supplement. We may issue the global securities in either registered or bearer form and in either temporary or permanent form. Unless and until it is exchanged in whole or in part for individual certificates evidencing debt securities, a global debt
security may not be transferred except as a whole by the depositary to its nominee or by the nominee to the depositary, or by the depositary or its nominee to a successor depositary or to a nominee of the successor depositary.
We anticipate that global debt securities will be deposited with, or on behalf of, The Depository Trust Company and that global debt
securities will be registered in the name of DTCs nominee, Cede & Co. Holders may hold their interests in a global security directly through Euroclear Bank S.A./N.V., as operator of the Euroclear System (Euroclear) and
Clearstream Banking, société anonyme (Clearstream), if they are participants in such systems, or indirectly through organizations that are participants in such systems. Euroclear and Clearstream will hold interests in a
global security on behalf of their participants through their respective depositaries, which in turn will hold such interests in the global security in customers securities accounts in the depositaries names on the books of DTC. We also
anticipate that the following provisions will apply to the depository arrangements with respect to global debt securities. Additional or differing terms of the depository arrangements will be described in the applicable prospectus supplement.
DTC has advised us that it is:
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a limited purpose trust company organized under the laws of the State of New York; |
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a member of the Federal Reserve System; |
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a clearing corporation within the meaning of the New York Uniform Commercial Code; and |
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a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. |
DTC was created to hold securities of institutions that have accounts with DTC, referred to as participants, and to
facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities
certificates. DTCs participants include securities brokers and dealers, which may include banks, trust companies, clearing corporations and certain other organizations. Access to DTCs book-entry system is also available to others such as
banks, brokers, dealers and trust companies, referred to as the indirect participants, that clear through or maintain a custodial relationship with a participant, whether directly or indirectly.
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We expect that, pursuant to procedures established by DTC upon the deposit of a global
security with DTC, DTC will credit, on its book-entry registration and transfer system, the principal amount of securities represented by such global security to the accounts of participants. The accounts to be credited shall be designated by us.
Ownership of beneficial interests in the global security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global security will be shown on, and the transfer of those
beneficial interests will be effected only through, records maintained by DTC (with respect to participants interests), the participants and the indirect participants. The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. These limits and laws may impair the ability to transfer or pledge beneficial interests in the global security.
So long as DTC, or its nominee, is the registered owner or holder of a global security, DTC or its nominee, as the case may be, will be
considered the sole owner or holder of the debt securities represented by the global security for all purposes under the applicable Indenture and debt securities. In addition, no owner of a beneficial interest in a global security will be able to
transfer that interest except in accordance with the applicable procedures of DTC. Except as set forth below, as an owner of a beneficial interest in the global security, you will not be entitled to have the debt securities represented by the global
security registered in your name, will not receive or be entitled to receive physical delivery of certificated securities and will not be considered to be the owner or holder of any debt securities under the global security. We understand that under
existing industry practice, if an owner of a beneficial interest in the global security desires to take any action that DTC, as the holder of the global security, is entitled to take, DTC would authorize the participants to take such action, and the
participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them.
We will make payments of principal, premium or interest on the debt securities represented by a global security registered in the name of
and held by DTC or its nominee to DTC or its nominee, as the case may be, as the registered owner and holder of the global security. Neither we, the applicable Trustee nor any paying agent will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial interests in the global security or for maintaining, supervising or reviewing any records relating to such beneficial interests.
We expect that DTC or its nominee, upon receipt of any payment of principal of, and premium, if any, or any interest amounts on, a global
security, will credit participants accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global security as shown on the records of DTC or its nominee. We also expect that
payments by participants or indirect participants to owners of beneficial interests in the global security held through such participants or indirect participants will be governed by standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial interests in the global security for any note or for
maintaining, supervising or reviewing any records relating to such beneficial interests or for any other aspect of the relationship between DTC and its participants or indirect participants or the relationship between such participants or indirect
participants and the owners of beneficial interests in the global security owning through such participants.
Transfers
between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Clearstream will be effected
in the ordinary way in accordance with their respective rules and operating procedures. Cross-market transfers between DTC, on the one hand, and directly or indirectly through Euroclear or Clearstream participants, on the other, will be effected by
DTC in accordance with DTC rules on behalf of Euroclear or Clearstream, as the case may be, by its respective depositary; however, such cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be,
by the counterparty in such system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as
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the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in a global security in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly to the depositories for Euroclear or Clearstream.
Because of
the time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the global security from a DTC participant will be credited during the securities settlement processing day (which must be a
business day for Euroclear or Clearstream, as the case may be) immediately following the DTC settlement date, and such credit of any transactions interests in the global security settled during such processing day will be reported to the
relevant Euroclear or Clearstream participant on such day. Cash received in Euroclear or Clearstream as a result of sales of interests in a global security by or through a Euroclear or Clearstream participant to a DTC participant will be received
with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC.
Euroclear and Clearstream hold securities for participating organizations. They also facilitate the clearance and settlement of securities transactions between their respective participants through
electronic book-entry changes in the accounts of such participants. Euroclear and Clearstream provide various services to their participants, including the safekeeping, administration, clearance, settlement, lending and borrowing of internationally
traded securities. Euroclear and Clearstream interface with domestic securities markets. Euroclear and Clearstream participants are financial institutions such as underwriters, securities brokers and dealers, banks, trust companies and certain other
organizations. Indirect access to Euroclear or Clearstream is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Euroclear or Clearstream participant, either
directly or indirectly.
DTC has advised us that it will take any action permitted to be taken by a holder of debt securities
only at the direction of one or more participants to whose account the DTC interests in the global security is credited and only in respect of such portion of the aggregate principal amount of debt securities as to which such participant or
participants has or have given such direction. However, if DTC notifies us that it is unwilling to be a depository for a global security or ceases to be a clearing agency or there is an event of default under the debt securities relating to that
global security, DTC will exchange the global security for certificated securities which it will distribute to its participants.
Although we expect that DTC, Euroclear and Clearstream will follow the foregoing procedures in order to facilitate transfers of interests in the global security among participants of DTC, Euroclear and
Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the we nor the trustee will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their respective obligations under the rules and procedures governing their operations.
The information in this section concerning DTC and DTCs book-entry system, as well as information regarding Euroclear and
Clearstream, has been obtained from sources that we believe to be reliable, but we do not take any responsibility for its accuracy or completeness. We assume no responsibility for the performance by DTC, Euroclear, Clearstream or their respective
participants of their respective obligations, including obligations that they have under the rules and procedures that govern their operations.
Governing Law
Our senior indenture is, and our subordinated indenture and any debt securities issued under either Indenture will be, governed by, and
construed in accordance with, the laws of the State of New York, except as may otherwise be required by mandatory provisions of law.
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Concerning our Relationship with the Trustees
U.S. Bank National Association is the trustee of the Discover Card Execution Note Trust and the Discover Card Master Trust I under
Discover Banks amended and restated pooling and servicing agreement, and the trustee of The Student Loan Corporations three securitization trusts.
We will enter into our subordinated indenture with a trustee as permitted by the terms thereof. At all times, the subordinated trustee must be organized and doing business under the laws of the United
States, any state thereof or the District of Columbia, and must comply with all applicable requirements under the Trust Indenture Act of 1939.
DESCRIPTION OF CAPITAL STOCK
We have
provided below a summary description of our capital stock. This description is not complete, and is qualified in its entirety by reference to the full text of our amended and restated certificate of incorporation and bylaws. You should read the full
text of our amended and restated certificate of incorporation and bylaws, as well as the provisions of applicable Delaware law.
General
Under
our amended and restated certificate of incorporation, we have authority to issue 2,000,000,000 shares of common stock, par value $0.01 per share, and 200,000,000 shares of preferred stock, par value $0.01 per share. As of June 22, 2012,
514,911,832 shares of our common stock were outstanding and no shares of our preferred stock were outstanding.
Common Stock
General. The rights, preferences and privileges of holders of our common stock are
subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock.
Voting Rights. The holders of our common stock are entitled to one vote per share on all matters to be
voted on by stockholders. Holders of shares of common stock are not entitled to cumulate their votes in the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast
by the holders of common stock present in person or represented by proxy, voting together as a single class, subject to any voting rights granted to holders of any preferred stock.
Dividend Rights. Holders of common stock will share equally on a pro rata basis in any dividends as
may be declared by our board of directors out of funds legally available for that purpose, subject to any preferential rights of holders of any outstanding shares of preferred stock and any other class or series of stock having preference over the
common stock as to dividends.
Preemptive Rights. No shares of common stock are subject to
redemption or have preemptive rights to purchase additional shares of common stock or other securities of our company. There are no other subscription rights or conversion rights, and there are no sinking fund provisions applicable to our common
stock.
Other Rights. Upon voluntary or involuntary liquidation, dissolution or winding up of
our company, after payment in full of the amounts required to be paid to creditors and holders of any preferred stock that may be then outstanding, all holders of common stock are entitled to share equally on a pro rata basis in all remaining
assets.
Listing. Our shares of common stock are listed on the New York Stock Exchange under the
ticker DFS.
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Transfer Agent and Registrar. The transfer agent and registrar
for our common stock is Computershare.
Preferred Stock
Our board of directors has the authority, without action by our stockholders, to designate and issue our preferred stock in one or more
series and to designate the rights, preferences and privileges of each series, which may be greater than the rights of our common stock. It is not possible to state the actual effect of the issuance of any shares of our preferred stock upon the
rights of holders of our common stock until our board of directors determines the specific rights of the holders of our preferred stock. The material terms of any series of preferred stock that we offer through a prospectus supplement will be
described in that prospectus supplement. However, the effects might include, among other things:
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restricting dividends on our common stock; |
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diluting the voting power of our common stock; |
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impairing the liquidation rights of our common stock; or |
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delaying or preventing a change in control of our company without further action by our stockholders. |
Anti-Takeover Effects of Our Amended and Restated Certificate of Incorporation and Bylaws, Delaware Law and Federal Banking Law
Some provisions of Delaware law and our amended and restated certificate of incorporation and bylaws could make the following more
difficult:
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acquisition of us by means of a tender offer or merger; |
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acquisition of us by means of a proxy contest or otherwise; or |
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removal of our incumbent officers and directors. |
These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions also are designed to encourage persons seeking to acquire control
of us to first negotiate with our board of directors. We believe that the benefits of the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company outweigh the disadvantages of
discouraging those proposals because negotiation of them could result in an improvement of their terms.
Stockholder Action by Written
Consent
Subject to the rights of holders of any series of preferred stock or any other series or class of stock, any
action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and may not be effected by any consent in writing in lieu of a meeting.
Amendments to our Governing Documents
The amendment of any provision of our amended and restated certificate of incorporation requires approval by our board of directors and a majority vote of stockholders, other than any amendment to the
provisions requiring that amendments to our bylaws require the approval of either a majority of our board of directors or holders of at least 80% of the votes entitled to be cast by the outstanding capital stock in the election of our board of
directors, for which an amendment requires the approval by our board and holders of at least 80% of the votes entitled to be cast by the outstanding capital stock in the election of our board of directors. Any amendment to our bylaws requires the
approval of either a majority of our board of directors or holders of at least 80% of the votes entitled to be cast by the outstanding capital stock in the election of our board of directors.
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Stockholder Meetings
Our amended and restated bylaws provide that, subject to the rights of holders of any series of preferred stock or any other series or class of stock as set forth in our amended and restated certificate
of incorporation, special meetings of our stockholders may be called only by our secretary at the direction of and pursuant to a resolution of our board of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors.
Delaware Anti-Takeover Law
Our amended and restated certificate of incorporation does not exempt us from the application of Section 203 of the Delaware General Corporation Law, an anti-takeover law.
In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person became an interested stockholder, unless the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner.
Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an interested stockholder is a person that, together
with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporations voting stock. This may have an anti-takeover effect with respect to transactions
not approved in advance by our board of directors, including discouraging attempts that might result in a premium over the market price for the shares of our common stock.
No Cumulative Voting
Our amended and restated certificate of
incorporation and bylaws do not provide for cumulative voting in the election of directors.
Undesignated Preferred Stock
The authorization of our undesignated preferred stock makes it possible for our board of directors to issue our preferred stock with
voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes of control of our management.
Federal Banking Law
The Change in Bank Control Act of 1978, as amended, prohibits a person or group of persons from acquiring control of a bank
holding company unless:
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the Federal Reserve has been given 60 days prior written notice of such proposed acquisition containing the information requested by the
Federal Reserve; and |
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within that time period the Federal Reserve has not issued a notice disapproving the proposed acquisition or extending the period during which such a
disapproval may be issued. |
An acquisition may be made prior to the expiration of the disapproval period if
the Federal Reserve issues written notice of its intent not to disapprove the action. An acquirer is conclusively deemed to have acquired control if it owns, controls, or has the power to vote 25 percent or more of a class of voting securities. In
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addition, under a rebuttable presumption established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class of securities
registered under Section 12 of the Exchange Act, such as us, would, under the circumstances set forth in the presumption, constitute the acquisition of control. The receipt of revocable proxies in connection with a proxy solicitation for the
purposes of conducting business at a regular or special meeting of the institution, provided the proxies terminate within a reasonable time after the meeting to which they relate, is not included in determining percentages for change in control
purposes. In addition, any company would be required to obtain the approval of the Federal Reserve under the Bank Holding Company Act of 1956, as amended, before acquiring 25% (5% in the case of an acquiror that is, or is deemed to be, a
bank holding company) or more of any class of voting stock, or a lesser number of shares if the acquirer otherwise is deemed to have the power to exert a controlling influence over us, and may be subject to ongoing regulation and
supervision as a bank holding company.
DESCRIPTION OF DEPOSITARY SHARES
General
We may
offer depositary receipts for depositary shares, each of which will represent a fractional interest in a share of a particular series of a class of our preferred stock, as specified in the applicable prospectus supplement. Preferred stock of each
series of each class represented by depositary shares will be deposited under a separate deposit agreement among us, the preferred stock depositary named in the deposit agreement and the holders from time to time of our depositary receipts. Subject
to the terms of the deposit agreement, each owner of a depositary receipt will be entitled, in proportion to the fractional interest of a share of the particular series of a class of our preferred stock represented by the depositary shares evidenced
by such depositary receipt, to all the rights and preferences of the preferred stock represented by such depositary shares (including dividend, voting, conversion, redemption and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued pursuant to the applicable deposit agreement. Immediately following
our issuance and delivery of the preferred stock to the preferred stock depositary, we will cause the preferred stock depositary to issue, on our behalf, the depositary receipts. Copies of the applicable form of deposit agreement and depositary
receipt may be obtained from us upon request.
Dividends and Other Distributions
The preferred stock depositary will distribute all cash dividends or other cash distributions received in respect of the preferred stock
to the record holders of the depositary receipts evidencing the related depositary shares in proportion to the number of such depositary receipts owned by such holder, subject to certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the preferred stock depositary.
In the event of a distribution other
than in cash, the preferred stock depositary will distribute property received by it to the record holders of depositary receipts entitled to the property, subject to certain obligations of holders to file proofs, certificates and other information
and to pay certain charges and expenses to the preferred stock depositary, unless the preferred stock depositary determines that it is not feasible to make such distribution, in which case the preferred stock depositary may, with our approval, sell
such property and distribute the net proceeds from such sale to such holders.
Withdrawal of Shares
Upon surrender of the depositary receipts at the corporate trust office of the preferred stock depositary (unless the related depositary
shares have previously been called for redemption), the holders of the depositary receipts will be entitled to delivery at such office, to or upon such holders order, of the number of whole shares
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of preferred stock and any money or other property represented by the depositary shares evidenced by such depositary receipts. Holders of depositary receipts will be entitled to receive whole
shares of the related preferred stock on the basis of the proportion of preferred stock represented by each depositary share as specified in the applicable prospectus supplement, but holders of such preferred stock will not thereafter be entitled to
receive depositary shares. If the depositary receipts delivered by the holder evidence a number of depositary shares in excess of the number of depositary shares representing the number of shares of preferred stock to be withdrawn, the preferred
stock depositary will deliver to such holder at the same time a new depositary receipt evidencing such excess number of depositary shares.
Redemption of Depositary Shares
Whenever we redeem preferred stock held by the preferred stock depositary, the preferred stock depositary will redeem as of the same redemption date the number of depositary shares representing the
preferred stock so redeemed, provided we shall have paid in full to the preferred stock depositary the redemption price of the preferred stock to be redeemed plus an amount equal to any accrued and unpaid dividends (except, with respect to
noncumulative shares of preferred stock, dividends for the current dividend period only) of the preferred stock to the date fixed for redemption. The redemption price per depositary share will be equal to the redemption price and any other amounts
per share payable with respect to the preferred stock. If less than all the depositary shares are to be redeemed, the preferred stock depositary will select the depositary shares to be redeemed by lot.
After the date fixed for redemption, the depositary shares so called for redemption will no longer be deemed to be outstanding and all
rights of the holders of the depositary receipts evidencing the depositary shares so called for redemption will cease, except the right to receive any moneys payable upon such redemption and any money or other property to which the holders of such
depositary receipts were entitled upon such redemption upon surrender of the depositary receipts to the preferred stock depositary.
Voting of the Underlying Preferred Stock
Upon receipt of notice of any meeting at which the holders of our preferred stock are entitled to vote, the preferred stock depositary will mail the information contained in such notice of meeting to the
record holders of the depositary receipts evidencing the depositary shares which represent such preferred stock. Each record holder of depositary receipts evidencing depositary shares on the record date (which will be the same date as the record
date for the preferred stock) will be entitled to instruct the preferred stock depositary as to the exercise of the voting rights pertaining to the amount of preferred stock represented by such holders depositary shares. The preferred stock
depositary will vote the amount of preferred stock represented by such depositary shares in accordance with such instructions, and we will agree to take all reasonable action which may be deemed necessary by the preferred stock depositary in order
to enable the preferred stock depositary to do so. The preferred stock depositary will abstain from voting the amount of preferred stock represented by such depositary shares to the extent it does not receive specific instructions from holders of
our depositary receipts evidencing such depositary shares.
Liquidation Preference
In the event of our liquidation, dissolution or winding up, whether voluntary or involuntary, each holder of our depositary receipts will
be entitled to the fraction of the liquidation preference accorded each share of preferred stock represented by the depositary share evidenced by such depositary receipt, as set forth in the applicable prospectus supplement.
Conversion of Preferred Stock
The depositary shares, as such, are not convertible into our common stock or any of our securities or property. Nevertheless, if so specified in the applicable prospectus supplement relating to an
offering of depositary shares, the depositary receipts may be surrendered by depositary receipt holders to the preferred stock
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depositary with written instructions to the preferred stock depositary instructing us to cause conversion of our preferred stock represented by the depositary shares evidenced by such depositary
receipts into whole shares of common stock, other preferred stock or other shares of our capital stock, and we have agreed that upon receipt of such instructions and any amounts payable in respect of such instructions, we will cause the conversion
of the preferred stock represented by depositary shares utilizing the same procedures as those provided for delivery of preferred stock to effect such conversion. If the depositary shares evidenced by a depositary receipt are to be converted in part
only, one or more new depositary receipts will be issued for any depositary shares not to be converted. No fractional shares of our common stock will be issued upon conversion, and if such conversion will result in a fractional share being issued,
an amount will be paid in cash by us equal to the value of the fractional interest based upon the closing price of our common stock on the last business day prior to the conversion.
Amendment and Termination of the Deposit Agreement
The form of
depositary receipt evidencing the depositary shares which represent the preferred stock and any provision of the deposit agreement may at any time be amended by agreement between us and the preferred stock depositary. However, any amendment that
materially and adversely alters the rights of the holders of depositary receipts will not be effective unless such amendment has been approved by the existing holders of at least a majority of our depositary shares evidenced by the depositary
receipts then outstanding.
The deposit agreement may be terminated by us upon not less than 30 days prior written
notice to the preferred stock depositary if a majority of the holders of each class of our depositary shares affected by such termination consents to such termination, whereupon the preferred stock depositary shall deliver or make available to each
holder of depositary receipts, upon surrender of the depositary receipts held by such holder, such number of whole or fractional shares of our preferred stock as are represented by the depositary shares evidenced by such depositary receipts. In
addition, the deposit agreement will automatically terminate if:
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all outstanding depositary shares shall have been redeemed; |
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there shall have been a final distribution in respect of the related preferred stock in connection with any liquidation, dissolution or winding up of
us and such distribution shall have been distributed to the holders of depositary receipts evidencing the depositary shares representing such preferred stock; or |
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each related share of preferred stock shall have been converted into our capital stock not so represented by depositary shares.
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Charges of Preferred Stock Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the existence of the deposit agreement. In
addition, we will pay the fees and expenses of the preferred stock depositary in connection with the performance of its duties under the deposit agreement. However, holders of our depositary receipts will pay the fees and expenses of the preferred
stock depositary for any duties requested by such holders to be performed which are outside of those expressly provided for in the deposit agreement.
Resignation and Removal of Preferred Stock Depositary
The
preferred stock depositary may resign at any time by delivering to us notice of its election to do so, and we may at any time remove the preferred stock depositary. Any such resignation or removal shall take effect upon the appointment of a
preferred stock depositary successor. A preferred stock depositary successor must be appointed within 60 days after delivery of the notice of resignation or removal and must be a bank or trust company having its principal office in the United
States and having a combined capital and surplus of at least $50,000,000.
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Miscellaneous
The preferred stock depositary will forward to holders of our depositary receipts any reports and communications from us that are received by the preferred stock depositary with respect to the related
preferred stock.
Neither we nor the preferred stock depositary will be liable if we are prevented from or delayed in, by law
or any circumstances beyond our control, performing our obligations under the deposit agreement. Our obligations and the obligations of the preferred stock depositary under the deposit agreement will be limited to performing our respective duties
under the deposit agreement in good faith and without gross negligence or willful misconduct, and neither we nor the preferred stock depositary will be obligated to prosecute or defend any legal proceeding in respect of any depositary receipts,
depositary shares or preferred stock represented by the depositary shares unless satisfactory indemnity is furnished. We and the preferred stock depositary may rely on written advice of counsel or accountants, or information provided by persons
presenting preferred stock represented by the depositary shares for deposit, holders of depositary receipts or other persons believed to be competent to give such information, and on documents believed to be genuine and signed by a proper party.
If the preferred stock depositary shall receive conflicting claims, requests or instructions from any holders of depositary
receipts, on the one hand, and us, on the other hand, the preferred stock depositary shall be entitled to act on such claims, requests or instructions received from us.
DESCRIPTION OF WARRANTS
We may issue warrants
to purchase debt securities, shares of common stock or shares of preferred stock. We may issue warrants independently or together with other securities. Warrants sold with other securities may be attached to or separate from the other securities. We
will issue warrants under one or more warrant agreements between us and a warrant agent that we will name in the prospectus supplement.
The prospectus supplement relating to any warrants we are offering will include specific terms relating to the offering. These terms will include some or all of the following:
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the title of the warrants; |
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the aggregate number of warrants offered; |
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the designation, number and terms of the debt securities, shares of common stock or shares of preferred stock purchasable upon exercise of the warrants
and procedures by which those numbers may be adjusted; |
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the exercise price of the warrants; |
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the dates or periods during which the warrants are exercisable; |
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the designation and terms of any securities with which the warrants are issued; |
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if the warrants are issued as a unit with another security, the date on and after which the warrants and the other security will be separately
transferable; |
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if the exercise price is not payable in U.S. dollars, the foreign currency, currency unit or composite currency in which the exercise price is
denominated; |
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any minimum or maximum amount of warrants that may be exercised at any one time; |
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any terms relating to the modification of the warrants; and |
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any terms, procedures and limitations relating to the transferability, exchange or exercise of the warrants. |
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The description in the prospectus supplement will not necessarily be complete, and reference
will be made to the warrant agreements which will be filed with the SEC.
DESCRIPTION OF STOCK
PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts, including contracts obligating holders
to purchase from us, and us to sell to the holders, a specified number of shares of common stock at a future date or dates, which we refer to in this prospectus as Stock Purchase Contracts. The price per share of common stock and number
of shares of common stock may be fixed at the time the Stock Purchase Contracts are issued or may be determined by reference to a specific formula set forth in the Stock Purchase Contracts. The Stock Purchase Contracts may be issued separately or as
a part of units consisting of a Stock Purchase Contract and our debt securities or debt obligations of third parties, securing the holders obligations to purchase the shares of common stock under the Stock Purchase Contracts, which we refer to
in this prospectus as Stock Purchase Units. The Stock Purchase Contracts may require holders to secure their obligations thereunder in a specified manner. The Stock Purchase Contracts also may require us to make periodic payments to the
holders of the Stock Purchase Units or vice-versa and such payments may be unsecured or prefunded on some basis.
The
applicable prospectus supplement will describe the terms of any Stock Purchase Contracts or Stock Purchase Units. The description in the prospectus supplement will not necessarily be complete, and reference will be made to the Stock Purchase
Contracts, and, if applicable, collateral or depositary arrangements, relating to the Stock Purchase Contracts or Stock Purchase Units. Material United States federal income tax considerations applicable to the Stock Purchase Units and the Stock
Purchase Contracts will also be discussed in the applicable prospectus supplement.
PLAN OF
DISTRIBUTION
We or a selling securityholder may sell the offered securities inside and outside the United States from
time to time (a) through underwriters or dealers, (b) directly to one or more purchasers, including our affiliates, (c) through agents, or (d) through a combination of any of these methods. The applicable prospectus supplement
will describe the terms of the offering of these securities and the method of distribution of these securities, including the following information, if applicable:
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the names of any underwriters or agents; |
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the name or names of any managing underwriter or underwriters; |
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the purchase price of the securities from us; |
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the net proceeds to us from the sale of the securities; |
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any delayed delivery arrangements; |
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any underwriting discounts, commissions and other items constituting underwriters compensation; |
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any initial public offering price; |
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any discounts or concessions allowed or reallowed or paid to dealers; and |
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any commissions paid to agents. |
General
Underwriters, dealers, agents and remarketing firms that
participate in the distribution of the offered securities may be underwriters as defined in the Securities Act of 1933. Any discounts or commissions they receive from us and any profits they receive on the resale of the offered
securities may be treated as underwriting
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discounts and commissions under the Securities Act of 1933. We will identify any underwriters, agents or dealers and describe their commissions, fees or discounts in the applicable prospectus
supplement.
Sale Through Underwriters or Dealers
If we use underwriters in a sale, they will acquire the offered securities for their own account. The underwriters may resell the securities in one or more transactions, including negotiated transactions.
These sales will be made at a fixed public offering price or at varying prices determined at the time of the sale.
We may
offer the securities to the public through an underwriting syndicate or through a single underwriter.
Unless the applicable
prospectus supplement states otherwise, the obligations of the underwriters to purchase the offered securities will be subject to certain conditions contained in an underwriting agreement that we will enter into with the underwriters. The
underwriters will be obligated to purchase all of the securities of the series offered if any of the securities are purchased, unless the applicable prospectus supplement says otherwise. Any initial public offering price and any discounts or
concessions allowed, re-allowed or paid to dealers may be changed from time to time.
If we use dealers in a sale of securities, we will sell the securities to them as principals. They may then resell those securities to
the public at varying prices determined by the dealers at the time of resale. We will include in the prospectus supplement the names of the dealers and the terms of the transaction.
Direct Sales and Sales Through Agents
We may choose to sell the
offered securities directly. In this case, no underwriters or agents would be involved. We may also sell the securities through agents we designate from time to time. In the prospectus supplement, we will name any agent involved in the offer or sale
of the offered securities, and we will describe any commissions payable by us to the agent. Unless we inform you otherwise in the prospectus supplement, any agent will agree to use its best efforts to solicit purchases for the period of its
appointment.
We may sell the securities directly to institutional investors or others who may be deemed to be underwriters
within the meaning of the Securities Act with respect to any sale of those securities. We will describe the terms of any such sales in the prospectus supplement.
Delayed Delivery Contracts
If we so indicate in the prospectus
supplement, we may authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase securities from us at the public offering price under delayed delivery contracts. These contracts would provide for payment
and delivery on a specified date in the future. The contracts would be subject only to those conditions described in the prospectus supplement. The prospectus supplement will describe the commission payable for solicitation of those contracts.
Indemnification
We may have agreements with agents, underwriters, dealers and remarketing firms and each of their respective affiliates to indemnify them against certain civil liabilities, including liabilities under the
Securities Act. Agents, underwriters, dealers and remarketing firms, and their affiliates, may engage in transactions with, or perform services for, us in the ordinary course of business. This includes commercial banking and investment banking
transactions.
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Market Making, Stabilization and Other Transactions
Unless the applicable prospectus supplement states otherwise, each series of offered securities will be a new issue and will have no
established trading market. We may elect to apply to list any series of offered securities on an exchange. Any underwriters that we use in the sale of offered securities may make a market in such securities, but may discontinue such market making at
any time without notice. Therefore, we cannot assure you that the offered securities will have a liquid trading market.
In
connection with the distribution of the securities offered under this prospectus, we may enter into swap or other hedging transactions with, or arranged by, underwriters or agents or their affiliates, which may include short sales of the securities
by counterparties or option, forward or other types of transactions that require delivery of securities to a counterparty, who may resell or transfer the securities under this prospectus.
Underwriters and others who are deemed to be underwriters under the Securities Act may engage in transactions that stabilize, maintain or
otherwise affect the price of the common stock, including the entry of stabilizing bids or syndicate covering transactions or the imposition of penalty bids. Any such underwriters and distribution participants may be subject to applicable provisions
of the Exchange Act and the associated rules and regulations under the Exchange Act, including Regulation M, which provisions may limit the timing of purchases and sales of shares by the selling securityholders. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited from simultaneously engaging in market making and certain other activities with respect to such securities for a specified period of time prior to the commencement of such distributions,
subject to special exceptions or exemptions. In addition, the anti-manipulation rules under the Exchange Act may apply to sales of the securities in the market. All of these limitations may affect the marketability of the securities and the ability
of any person to engage in market-making activities with respect to the securities.
LEGAL
MATTERS
The validity of the securities offered pursuant to this prospectus will be passed upon for us by Sidley Austin
LLP.
EXPERTS
The consolidated financial statements incorporated in this prospectus by reference from Discover Financial Services Annual Report on Form 10-K for the year
ended November 30, 2011, and the effectiveness of Discover Financial Services internal control over financial reporting have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in
their reports, which are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements and includes an explanatory paragraph relating to Discover Financial Services adoption of
the accounting standards, Accounting for Transfers of Financial Assetsan amendment of FASB Statement No. 140 and Amendments to FASB Interpretation No. 46(R), on December 1, 2009 and
(2) express an unqualified opinion on the effectiveness of internal control over financial reporting). Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements and other information with the Securities and Exchange Commission
(SEC). Our SEC filings are available to the public over the Internet at the SECs web site at http://www.sec.gov and on the investor relations page of our website at http://www.discoverfinancial.com. The information available at our
website does not constitute a part of this
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prospectus. You may also read and copy any document we file with the SEC at the SECs public reference facilities at 100 F Street N.E., Washington, D.C. 20549. You can also obtain copies of
the documents upon the payment of a duplicating fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference
facilities. You may also request a copy of our SEC filings, or the documents we incorporate by reference herein, at no cost, by writing or telephoning us at:
Discover Financial Services
2500 Lake Cook Road
Riverwoods, Illinois 60015
Attention: Investor Relations
Telephone: (224) 405-0900
This prospectus omits some information contained in the registration statement in accordance with SEC rules and regulations. You should
review the information and exhibits included in the registration statement for further information about us and the securities we are offering. Statements in this prospectus concerning any document we filed as an exhibit to the registration
statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to these filings. You should review the complete document to evaluate these statements.
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 or to make any representations other than as contained in this prospectus or in any prospectus supplement. We are not making any offer of these securities in any state or
jurisdiction where the offer is not permitted.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference much of the information that we file with it, which means that we can
disclose important information to you by referring you to those publicly available documents. The information that we incorporate by reference is an important part of this prospectus. Any statement contained in a document incorporated or deemed to
be incorporated by reference into this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or any other subsequently filed document that is deemed to be
incorporated by reference into this prospectus modifies or supersedes the statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
This prospectus incorporates by reference the documents listed below and any filings we make with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, after the initial filing of the registration statement related to this prospectus until the termination of the offering of the securities described in this prospectus; provided,
however, that we are not incorporating by reference any documents, portions of documents or other information that is deemed to have been furnished and not filed with the SEC:
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our Annual Report on Form 10-K for the fiscal year ended November 30, 2011;
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our Quarterly Reports on Form 10-Q for the quarters ended February 28, 2012 and May 31, 2012;
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our Current Reports on Form 8-K, dated December 16, 2011, April 9,
2012, April 19, 2012, April 20, 2012, April 24, 2012, May 3, 2012 and May 10, 2012; and |
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the description of our common stock under the heading Description of our Capital Stock, in our Information Statement included with
Amendment No. 4 to our Form 10 filed with the SEC on June 1, 2007, including any subsequently filed amendments and reports updating such description. |
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% Senior Notes due
Prospectus Supplement
Joint
Book-Running Managers
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Barclays |
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Credit Suisse |
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Deutsche Bank Securities |
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