Exhibit 10.1
AMENDED AND RESTATED SERVICING AGREEMENT
     This AGREEMENT (“Agreement’) is dated as of this January 1, of 2007 by and
between DISCOVER FINANCIAL SERVICES LLC., a Delaware limited liability company
(“DFS”) and DISCOVER BANK, a Delaware bank (“DB”).
WITNESSETH:
     WHEREAS, on May 17, 2000, Discover Financial Services, Inc. (DFS’s
predecessor) entered into the First Revised Service Agreement with Greenwood
Trust Company (DB’s predecessor), as amended on September 16, 2002;
     WHEREAS, this Agreement supersedes and replaces in its entirety the First
Revised Service Agreement, as amended;
     WHEREAS, DFS may, but is not required to, perform some or all of the
following services for DB as set forth in this Agreement, including marketing
(including services related to advertising, telemarketing, promotion, and
ventures or partnerships with third parties); credit card and other non-card
loan products (including services related to credit approval, credit processing,
authorization, customer service, account servicing, payment processing and
collections); deposit products (including services related to the direct
marketing, advertising and promotion of deposit accounts); and various other
services in connection with DB’s bank products, as may arise from time to time;
and
     WHEREAS, it is the mutual desire of the parties that DFS continue to
perform these services.
     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
     1. Term. The term of this Agreement (“Term”) shall commence as of the date
hereof and shall continue in effect provided that either party can terminate
this Agreement on any anniversary date by written notice of termination to the
other party at least one hundred eighty (180) days prior to such anniversary
date.
     2. Services. DFS shall perform the services, which are described without
limitation in subparagraphs A through H of this Section 2, and such additional
services as agreed to from time to time by the parties, in accordance with all
applicable federal and state laws, including statutes, regulations and rules
(individually and collectively, the “Services”). DFS will not be responsible for
violations of federal or state law, including usury laws, fee restrictions or
privacy laws, to the extent that DFS acts consistently with

 

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directions or supervision received from DB or its agents. DFS shall provide the
services utilizing at least such levels of diligence, care, completeness and
timeliness customarily followed by large banking institutions in respect of
their business. DFS may satisfy its obligations to perform hereunder either
through its own employees, agents, representatives, or through independent
contractors used to provide the Services as if provided directly by DFS. DFS
shall be responsible for actions of its agents, employees, representatives, or
independent contractors when acting on DB’s behalf. DB will be solely
responsible for establishing the annual percentage yields and rates, credit
underwriting standards, insurance premiums, and other charges and fees for its
credit cards, deposit accounts and other products and services and for ensuring
that such yields, rates, premiums, charges or fees are in compliance with state
and federal laws.
          A. Marketing Services. DFS shall create and manage such marketing
programs for DB’s products and services as DB may request from time to time.
These marketing programs may incorporate, without limitation, direct mailings;
telemarketing; special promotional events; visual and broadcast advertisements
delivered via traditional mass-media channels, the Internet or other electronic
communication devices; and ventures, partnerships or other cooperative marketing
arrangements with third parties. In performing these marketing services, DFS
shall adhere to the following conditions:
               (i) all marketing materials, including visual and broadcast
advertisements and telemarketing scripts, will be made subject to DB’s review
and prior approval;
               (ii) all marketing materials, including visual and broadcast
advertisements and telemarketing scripts, will be prepared in accordance with
applicable legal, regulatory and policy requirements;
               (iii) the names, addresses and account numbers of DB’s customers
shall at all times remain the exclusive property and confidential information of
DB and may be used by DFS solely in connection with the performance of this
Agreement and on such terms as DB, in its discretion, deems appropriate;
               (iv) any remuneration that DFS receives from third parties with
whom DFS has contracted on DB’s behalf in furtherance of this Agreement, shall
belong to DB and must be conveyed to DB as soon as practicable whenever such
remuneration is determined by the parties to constitute payment for the use of,
or access to, DB’s customer lists or other proprietary information or property.
          B. Policy Manuals. DFS will create and maintain, upon the request of
and in coordination with DB, policy and procedures manuals relating to DB’s
products and services.
          C. Customer Service. DFS will provide telephone customer service for
DB’s products and services, including twenty-four (24) hour, seven (7) day per
week

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service for credit card accounts, in accordance with mutually agreed upon
procedures and standards.
          D. Fraud and Investigation Services. DFS will provide fraud
investigative services for various DB products and services utilizing mutually
agreed upon procedures and standards.
          E. Reports. At the request of DB, DFS will provide reports concerning
customer account activity and such other matters as DB may designate in
accordance with mutually agreed upon procedures and standards.
          F. Information Technology and Support Services. DFS will provide
information technology support services.
          G. Collection Services. DFS will provide collection services for DB
products and services as the parties mutually agree upon. DFS will not take any
legal action with respect to any DB account, except in accordance with DB
policies and procedures or with the prior consent of DB.
          H. Other Services. DFS may perform the following services in
connection with DB issued credit and debit cards, other products and services as
the parties find mutually agreeable:
               (i) approving or denying applications by customers in accordance
with DB’s guidelines, including a credit scoring system (a statistical
evaluation model that assigns point values to credit information regarding
applicants) supplied by DB or, if requested by DB, developed by DFS and approved
by DB;
               (ii) furnishing authorizations for purchases;
               (iii) processing transactions;
               (iv) establishing and maintaining account records in a form
satisfactory to DB and consistent with the computer programming parameters of
DFS;
               (v) reporting information on DB’s customers to the various credit
bureaus;
               (vi) embossing and distributing credit and debit cards;
               (vii) preparing monthly statements in a form satisfactory to DB
and consistent with the computer programming parameters of DFS;
               (viii) providing monthly delinquency reports; and

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               (ix) providing remittance processing services, which shall
include without limitation:

  (a)   receiving remittances from the U.S. Postal Service;     (b)   sorting;  
  (c)   opening envelopes and extracting contents;     (d)   assigning a payment
transaction date;     (e)   converting remittance to machine readable form
(encoding/endorsing);     (f)   maintaining security over all checks and cash
received;     (g)   depositing funds on the date received or no later than the
next business day in a bank designated by, and in an account in the name of, DB;
    (h)   doing other research as necessary to correctly apply payments to
cardholders’ accounts; and     (i)   handling postdated and returned checks,
cash and returned card controls.

     3. Fees and Payments. The fees for the Services and the schedule and manner
for payment are set forth in Exhibit A, which is attached hereto and made a part
hereof.
     4. Disaster Recovery Plan.
          A. DFS shall have in place business continuity and disaster recovery
plans in relation or that apply to the Services rendered by DFS (“Disaster
Recovery Plan” or “Plan”). The Disaster Recovery Plan shall comply in all
respects with all applicable federal, state and local laws, and shall be subject
to the approval of DB.
          B. DFS shall review and, if necessary, update the Plan on an annual
basis or upon request of the DB. DFS shall notify DB of all material changes to
the Plan.
          C. DFS shall periodically test and evaluate the Disaster Recovery Plan
to ensure that it remains predictable, effective and current. DFS shall give DB
an opportunity to participate in all Disaster Recovery Plan testing. Without
limiting the foregoing, the DB shall have the right to have its employees,
agents and representatives

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present at, and monitoring, each such test of the Plan. DFS shall provide DB
with the results of each Disaster Recovery Plan test.
          D. In the event of a disaster, in addition to performing Disaster
Recovery in accordance with the Disaster Recovery Plan, DFS shall immediately
notify DB of the nature and extent of the disaster and the location of the
recovery center.
          E. Except as may be provided in a Disaster Recovery Plan and
Section 6, the occurrence of a disaster shall not relieve DFS of its obligation
to perform the Services in accordance with the terms hereof.
     5. Audit.
          A. DFS acknowledges that DB is subject to regulation and examination
by the Federal Deposit Insurance Corporation and the Delaware Office of the
State Bank Commissioner and certain other state and federal regulatory agencies
(“Regulatory Agencies”). DFS shall provide the Regulatory Agencies with access
to any facility or part of a facility at which either DFS or any of its
subcontractors is performing the Services, to DFS personnel, and to data and
records relating to the Services for the purpose of performing audits,
examinations and inspections of either DFS or any of its subcontractors during
the term and for the period DFS is required to maintain records under this
Agreement. DFS shall cooperate fully with regard to examinations by the
Regulatory Agencies. DFS shall immediately give DB notice of any inquiry or
communication, whether formal or informal, by a Regulatory Agency regarding the
Services. DFS shall provide any and all assistance to DB to facilitate any audit
of an unaffiliated third party subcontractor of DFS by a Regulatory Agency.
          B. DFS shall provide DB and its auditors (including internal audit
staff and external auditors), inspectors, and other representatives as DB may
from time to time designate, access at all reasonable times upon reasonable
advance notice to DFS to any facility or part of a facility at which either DFS
or any of its subcontractors is performing the Services, to DFS personnel, and
to data, records, policies and procedures relating to the Services for the
purpose of performing audits, examination and inspections of either DFS or any
of its subcontractors during the term of the Agreement and for the period DFS is
required to maintain records under this Agreement to examine DFS’s performance
of the Services and compliance with the terms of this Agreement, including
(i) practices, policies and procedures; (ii) systems, equipment and software;
(iii) general controls and security practices and procedures; (iv) disaster
recovery and back-up procedures; and (v) any other matters reasonably requested
by DB. DFS will provide DB with copies of any internal audit reports reasonably
related to the Services or systems or practices that support the Services.
     6. Force Majeure. Neither party shall be liable for any loss, injury,
damages, delay in performance or failure to perform any obligation under this
Agreement to the extent such loss, injury, damages, delay or failure to perform
is the result of causes beyond the control of that party and is without its
fault or negligence, including, but not

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limited to, acts of God, labor disputes, governmental regulations or orders,
civil disturbance, war conditions, terrorist acts, riots, explosions, fires or
the result of a failure by the other party to satisfy its obligations under this
Agreement, except to the extent such loss, injury, damages, delay or
non-performance is the result of any failure of DFS to comply with its
obligations set forth in the Disaster Recovery Plan.
     Upon occurrence of any force majeure event, DFS shall render the Services
in accordance with the emergency service levels and other conditions as detailed
in the Disaster Recovery Plan. Each party to this Agreement shall also make a
good faith effort to mitigate the effects of any occurrence beyond its control
that results in any loss, injury, damages, delay or failure to perform its
obligations under this Agreement.
     7. Representations and Warranties of Discover Financial Services LLC. DFS
represents and warrants to DB that it is a limited liability company duly
formed, validly existing and in good standing under the laws of the State of
Delaware, and this Agreement when duly executed and delivered by DFS will
constitute a legal, valid and binding obligation of DFS, enforceable against DFS
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, liquidation or other similar laws affecting generally
the enforcement of creditors’ rights. DFS further represents and warrants to DB
as follows:
          A. DFS has full power and authority to do and perform all acts
contemplated by this Agreement.
          B. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, the fulfillment of, or
compliance with, the terms and provisions hereof, nor the performance of its
obligations under this Agreement will conflict with, or result in a breach of
any of the terms, conditions or provisions of any Law applicable to any DFS, the
charter or bylaws of any DFS or of any agreement to which any DFS is a party or
by which it may be bound.
          C. Prior to the performance of any of its obligations pursuant to this
Agreement, each DFS will have obtained and/or made any consent, approval, waiver
or other authorization of or by, or filing or registration with, any court,
administrative or governmental agency that is required to be obtained in
connection with the execution, delivery or performance by DFS, or the
consummation by DFS, of the transactions contemplated by this Agreement.
     8. Representations and Warranties of Discover Bank. DB represents and
warrants to DFS as follows:
          A. DB is an FDIC-insured bank duly organized and validly existing
under the laws of the State of Delaware, and this Agreement has been duly
authorized,

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executed and delivered by DB and constitutes a legal, valid and binding
obligation of DB, except as enforcement may be limited by bankruptcy,
insolvency, conservatorship, receivership, liquidation or other similar laws
affecting generally the enforcement of creditors’ rights.
          B. None of the execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, the fulfillment of, or
compliance with, the terms and provisions hereof, nor the performance of its
obligations hereunder will conflict with, or result in a breach of any of the
terms, conditions or provisions of Law applicable to DB, or the charter or
bylaws of DB or of any agreement to which DB is a party or by which it may be
bound.
          C. Prior to the performance of any of its obligations pursuant to this
Agreement, DB will have obtained and/or made any consent, approval, waiver or
other authorization of or by, or filing or registration with, any court,
administrative or Regulatory Agency that is required to be obtained by DB in
connection with the execution, delivery or performance by DB, or the
consummation by DB, of the transactions contemplated by this Agreement.
     9. Liability and Indemnification.
          A. DFS agrees to be liable for, and to indemnify and hold harmless DB
from and against, any and all liability, loss, claim, cost or expense (including
court costs and attorneys’ fees) attributable to (i) a breach of any
representation or warranty made by DFS pursuant to this Agreement; (ii) willful
misconduct or gross negligence of DFS; or (iii) any default by DFS in any of its
obligations or covenants under this Agreement.
          B. DB agrees to indemnify and hold harmless DFS from and against any
and all liability, loss, claim, cost or expense (including court costs and
attorneys’ fees) attributable to (i) a breach of any representation or warranty
by DB pursuant to this Agreement; (ii) willful misconduct or gross negligence of
DB; or (iii) any default of DB in any of its obligations or covenants under this
Agreement.
          C. For purposes of Section 8(A) and (B), DFS and DB include their
affiliates and any of their employees, agents, representatives and/or
independent contractors of each.
     10. Notice. Any notice required to be given hereunder by either party to
the other shall be given in writing by personal delivery or certified mail,
return receipt requested, and shall be effective when received. Every such
notice shall be addressed as follows:
If to DFS, to:
Discover Financial Services LLC

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2500 Lake Cook Road
Riverwoods, Illinois 60015
Attention: President
and, if to DB, to:
Discover Bank
12 Read’s Way
New Castle, DE 19720
Attention: President
     11. Confidentiality.
          A. It is understood that, in the performance by DFS of the Services,
DFS may have access to private or confidential information of DB and DB’s
employees and customers, and that DB may have access to confidential information
of DFS. Each party shall keep, and to have its employees, agents and
subcontractors keep, any and all private or confidential information of the
other party strictly confidential and to use such information only for the
purpose of providing the Services or as otherwise agreed to by the other party.
Each party acknowledges and agrees that in the event of a breach or threatened
breach by it of the provisions of this Section, the other party will have no
adequate remedy in money or damages and, accordingly, shall be entitled to an
injunction against such breach. However, no specification in this Agreement of a
specific legal or equitable remedy shall be construed as a waiver or prohibition
against any other legal or equitable remedies in the event of a breach of any
provision of this Agreement. Neither party shall provide any private or
confidential information of the other party to third parties pursuant to an
administrative or judicial subpoena, summons, search warrant or other
governmental order without providing prior notice to such other party, unless
otherwise provided by law or court order.
          B. DB and DFS agree that the DB’s confidential information includes
all non-public personal information (as that term is defined in Title V of the
Gramm-Leach-Bliley Act of 1999 or any successor federal statute, and the rules
and regulations thereunder, all as may be amended from time to time) and other
non-public information regarding DB’s customers (such information, “Customer
Information”). DFS agrees as follows with respect to Customer Information:
(i) DFS shall exercise a standard of care in the protection of Customer
Information which is consistent with the Interagency Guidelines for Safeguarding
Customer Information set forth in part 364, Appendix B of the FDIC Regulations
(the “Interagency Guidelines”); (ii) DFS shall use and maintain Customer
Information only as necessary for the purpose of providing the Services for
which the Customer Information was disclosed and only in accordance with
applicable law, rule or regulation of any jurisdiction relating to disclosure or
use of Customer Information; (iii) DFS shall not use any Customer Information in
any manner prohibited by Title V of GLBA; and (iv) DFS will implement and
maintain an appropriate written information security program, the terms of which
shall meet or exceed the requirements

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for financial institutions under the Interagency Guidelines. In the event that
DFS learns or has reason to believe that Customer Information of DB has been
disclosed or accessed by an unauthorized person: (i) it shall immediately give
notice of such event to DB and cooperate with DB and the relevant supervisory
authorities in the event of litigation or a regulatory inquiry concerning the
disclosure and (ii) it shall immediately take appropriate steps to ensure that
any disclosure of, or unauthorized access to, Customer Information does not
continue and shall inform the other party of steps taken to address the cause of
the disclosure.
          C. The DFS’s and DB’s obligations and agreements under this Section 11
hereof shall not apply to any information supplied that: (i) was known to the
receiving party prior to the disclosure by the other; (ii) is or becomes
generally available to the public other than by breach of this Agreement; or
(iii) otherwise becomes lawfully available on a nonconfidential basis from a
third party who is not under an obligation of confidence to the other party.
          D. Upon termination of this Agreement, or upon DB’s written request,
DFS shall promptly return to DB the following DB data, which is and shall remain
the property of DB:

  (i)   Account master tape files;     (ii)   Agent master tape files; and    
(iii)   Computer-produced reports which reflect activity during the ninety
(90) day period immediately prior to termination of the Agreement or the written
request.

     DFS shall cooperate with DB to transfer the Services performed by DFS back
to DB or to a new servicing organization as determined by DB. Upon the return of
any such DB data, and the transfer of Services, DFS shall submit a bill to DB
for the cost incurred by DFS in returning such DB data and coordinating the
transfer. DB shall pay any such bill within thirty (30) days of the receipt of
such bill.
     12. General Conditions.
          A. The validity, construction and performance of this Agreement is
governed by the laws of the State of Delaware.
          B. All provisions contained in this Agreement extend to and are
binding upon the parties and their respective successors and assigns. This
Agreement may not be assigned by either party without the prior written consent
of the other party, which consent will not be unreasonably withheld.
          C. Each paragraph and provision of this Agreement is severable from
the entire Agreement, and if one provision hereof is declared invalid, the
remaining provisions shall nevertheless remain in effect.

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          D. This document constitutes the entire Agreement between DFS and DB
with respect to the Services, and no representation or statement not contained
in this Agreement shall be binding upon DFS or DB as a warranty or otherwise.
This Agreement may not be amended, changed, modified or altered except in
writing, signed by both parties. This Agreement supersedes and replaces the
agreement dated as of May 17, 2000, as amended, between Greenwood Trust Company
(DB’s predecessor) and Discover Financial Services, Inc. (DFS’s predecessor).
          E. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be deemed to
constitute but one and the same instrument.
          F. The relationship of DFS to DB under this Agreement is that of
independent contractor. Nothing herein contained shall be construed as
constituting a partnership, joint venture or agency between the parties hereto.
          G. No term or provision hereof will be deemed waived, and no variation
of terms or provisions hereof shall be deemed consented to, unless such waiver
or consent shall be in writing and signed by the party against whom such waiver
or consent is sought to be enforced. Any delay, waiver or omission by DFS or DB
to exercise any right or power arising from any breach or default of the other
party in any of the terms, provisions or covenants of this Agreement shall not
be construed to be a waiver by DFS or DB of any subsequent breach or default of
the same or other terms, provisions or covenants on the part of the other party.
          H. Headings used in this Agreement are for reference purposes only and
shall not be deemed a part of this Agreement.
          I. Any exhibit to this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been set
forth herein. Any agreement, schedule, or exhibit referred to herein shall mean
such agreement, schedule, or exhibit as amended, restated, supplemented or
modified from time to time to the extent permitted by the applicable provisions
thereof and this Agreement.
          J. Each defined term shall have the meaning set forth herein and shall
be equally applicable to both the singular and plural forms. The words
“including,” “include” and “includes” shall each be deemed to be followed by the
term “without limitation.” Reference to any statute, rule or regulation means
such statute, rule or regulation as amended and supplemented at the time and
from time to time and includes any successor statute, rule or regulation. Unless
otherwise stated, references to recitals, articles, sections, paragraphs, and
schedules shall be references to recitals, articles, sections, paragraphs and
schedules of this Agreement.
          K. The agreements contained in Sections 5, 9, 10, 11 and 12 of this
Agreement shall survive the termination of this Agreement.

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date first above written.
DISCOVER FINANCIAL SERVICES LLC

             
By:
  /s/ Gerry Egner              
Name:
  Gerry Egner              
Title:
  Vice President              
 
            DISCOVER BANK    
 
           
By:
  /s/ Michael F. Rickert              
Name:
  Michael F. Rickert              
Title:
  Vice President, Chief Financial Officer and Treasurer              

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EXHIBIT A – Servicing Agreement
Discover Financial Services LLC
SERVICING FEES CHARGED TO DISCOVER BANK
EFFECTIVE JANUARY 1, 2007
Discover Bank (“DB”) will pay Discover Financial Services LLC (“DFS”) for costs
incurred by DFS in its role of providing services for DB. Each month, DFS will
determine the amount of expenses it incurs associated with providing services to
DB and will invoice those costs to DB under the servicing agreement. The amounts
invoiced may include, but are not limited to, into the following general
categories:
Marketing
Customer Services, Collections and Other Services
Business Technology
In addition, DFS may bill DB for various services and supplies that DFS obtains
from other providers in connection with servicing DB’s customers, which may
include a DFS markup to DB to reflect the benefit of DFS’s management of the
relationships with these other providers. The amounts charged will be equal to
the amounts paid by DFS, plus any markup. The items to be billed under this
portion of the agreement may include, but are not limited to, the following:
Advertising & Media
Promotional Marketing
Direct Mail
Marketing – Other
Inquiry Fees
Consumer Credit Counseling Fees
Collection Fees
Policy Adjustments/Fraud
Amounts paid to third parties for:
- Royalties
- Cardmember/Partner Rewards
If new categories of items arise that are procured from outside providers, DFS
will be allowed to include them in the service fee charged, provided they are
separately identified in the invoice to DB, and a DB officer approves the new
item on the invoice.
Amount To Be Invoiced Under Servicing Fee
It is agreed that amounts invoiced by DFS under the servicing agreement with DB
will not cause DB’s ratio of non-interest expense (calculated on a consolidated
basis with Discover Products Inc.) to average managed loans for the entire
fiscal year to be more than the average of the same non interest expense ratio
for the group of peer banks for the

 

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most recently completed fiscal year for which information is available. The
parties agree that the fees charged to DB hereunder will not exceed the fees
that DB would have been charged for the Services by an unaffiliated third party.