Document:

exv10w1

 

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

 

 

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

 

 

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.exv10w2

 

Exhibit 10.2

SERVICING AGREEMENT

     This AGREEMENT is dated as of January 1, 2007 (this “Agreement”) by and between DISCOVER
PRODUCTS INC., a Delaware corporation (“DPI”) and DISCOVER BANK, a Delaware bank (“DB”).

WITNESSETH:

     WHEREAS, DB and DPI have agreed to enter into this Servicing Agreement (“Agreement”) in order
to document the services that DPI will provide DB and may in the future provide DB;

     WHEREAS, DPI 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, but not limited to, services
related to advertising, telemarketing, promotion, and ventures or partnerships with third parties);
credit card and other non-card loan products (including, but not limited to, services related to
credit approval, credit processing, authorization, customer service, account servicing, and
collections); deposit products (including, but not limited to, services related to the direct
marketing, advertising and promotion of deposit accounts); and various other services in connection
with DB’s products and services, as may arise from time to time; and

          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. DPI 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”). DPI will not be
responsible for violations of federal or state law, including usury laws, fee restrictions or
privacy laws, to the extent that DPI acts consistently with directions or supervision received from
DB or its agents. DPI 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. DPI may satisfy its obligations to perform hereunder either through its own
employees, agents, representatives, affiliates or through independent contractors that it chooses
to retain.
DPI shall be responsible for actions of its agents, employees, representatives, and/or

 

 

independent
contractors used to provide the Services as if performed directly by DPI. 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. DPI shall provide 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, DPI shall adhere to the
following conditions:

               (i) all marketing materials, including visual and broadcast advertisements and telemarketing
scripts, will be 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 DPI solely in connection
with the performance of this Agreement and on such terms as DB, in its discretion, deems
appropriate;

               (iv) any remuneration that DPI receives from third parties with whom DPI 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. DPI will create and maintain, upon the request of and in
coordination with DB, policy and procedures manuals relating to the Services.

          C. Customer Service. DPI will provide telephone customer service for DB’s products
and services, including twenty-four (24) hour, seven (7) day per week service for credit card
accounts, in accordance with mutually agreed upon procedures and standards.

          D. Fraud and Investigation Services. DPI will provide fraud investigative services
for DB’s products and services utilizing mutually agreed upon procedures and standards.

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          E. Reports. At the request of DB, DPI 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. DPI will provide information
technology support services.

          G. Collection Services. DPI will provide a collection procedure for DB credit card
products and such other DB products and services as the parties mutually agree upon. DPI 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. DPI 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 DPI
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 DPI;

               (v) reporting information on DB’s customers to the various credit bureaus; and

               (vi) providing monthly delinquency reports.

     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. DPI shall have in place business continuity and disaster recovery plans in relation or that
apply to the Services rendered by DPI (“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.

3

 

          B. DPI shall review and, if necessary, update the Plan on an annual basis or upon request of
the DB. DPI shall notify DB of all material changes to the Plan.

          C. DPI shall periodically test and evaluate the Disaster Recovery Plan to ensure that it
remains predictable, effective and current. DPI 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 present at, and monitoring, each such test of the
Plan. DPI 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, DPI shall immediately notify DB of the nature and extent of the
disaster and the location of the recover center.

          E. Except as may be provided in a Disaster Recovery Plan and Section 6, the occurrence
of a disaster shall not relieve DPI of its obligation to perform the Services in accordance with
the terms hereof.

     5. Audit.

          A. DPI 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”). DPI shall provide the Regulatory
Agencies with access to any facility or part of a facility at which either DPI or any of its
subcontractors is performing the Services, to DPI personnel, and to data and records relating to
the Services for the purpose of performing audits, examinations and inspections of either DPI or
any of its subcontractors during the term and for the period DPI is required to maintain records
under this Agreement. DPI shall cooperate fully with regard to examinations by the Regulatory
Agencies. DPI shall immediately give DB notice of any inquiry or communication, whether formal or
informal, by a Regulatory Agency regarding the Services. DPI shall provide any and all assistance
to DB to facilitate any audit of an unaffiliated third party subcontractor of DPI by a Regulatory
Agency.

          B. DPI 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 DPI to any facility or part of a facility at
which either DPI or any of its subcontractors is performing the Services, to DPI personnel, and to
data, records, policies and procedures relating to the Services for the purpose of performing
audits, examination and inspections of either DPI or any of its subcontractors during the term of
the Agreement and for the period DPI is required to maintain records under this Agreement to
examine DPI’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)

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any other matters
reasonably requested by DB. DPI 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 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 DPI to comply with its obligations set forth in the Disaster Recovery
Plan.

          Upon occurrence of any force majeure event, DPI 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 Products Inc. DPI represents and
warrants to DB that it is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Utah, and this Agreement when duly executed and delivered by DPI
will constitute a legal, valid and binding obligation of DPI, enforceable against DPI 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. DPI further
represents and warrants to DB as follows:

          A. DPI 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 DPI, the
charter or bylaws of any DPI or of any agreement to which any DPI is a party or by which it may be
bound.

          C. Prior to the performance of any of its obligations pursuant to this Agreement, DPI 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 DPI, or the consummation by DPI, of the transactions contemplated by this
Agreement.

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     8. Representations and Warranties of Discover Bank. DB represents and warrants to DPI
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, 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. DPI 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 DPI pursuant to this
Agreement; (ii) willful misconduct or gross negligence of DPI; or (iii) any default by DPI in any
of its obligations or covenants under this Agreement.

          B. DB agrees to indemnify and hold harmless DPI 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), DPI and DB include their respective affiliates and
any of their employees, agents, representatives and/or independent contractors of each.

6

 

          D. Notwithstanding anything contained herein to the contrary, neither party shall be liable to
the other for consequential or incidental damages.

     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 Discover Products Inc., to:

Discover Products Inc.

2500 Lake Cook Road

Riverwoods, Illinois 60015

Attention: President

and, if to Discover Bank, to:

Discover Bank

12 Read’s Way

New Castle, DE 19720

Attention: President

     11. Confidentiality.

          A. It is understood that, in the performance by DPI of the Services, DPI 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 DPI. Each party shall keep, and 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 DPI 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

7

 

regarding DB’s customers (such information,
“Customer Information”). DPI agrees as follows with respect to Customer Information: (i) DPI 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) DPI 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) DPI shall not use any
Customer Information in any manner prohibited by Title V of GLBA; and (iv) DPI will implement and
maintain an appropriate written information security program, the terms of which shall meet or
exceed the requirements for financial institutions under the Interagency Guidelines. In the
event that DPI 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 DPI’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, DPI 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;

               (iii) computer-produced reports which reflect
activity during the ninety (90) day period immediately prior to
termination of the Agreement or the written request; and

               (iv) any other DB data that DB requests be
returned to DB.

          DPI shall cooperate with DB to transfer the Services that DPI performs for DB servicing 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, DPI shall submit a bill to DB for the cost incurred by DPI 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.

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     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.

          D. This document constitutes the entire Agreement between DPI and DB with respect to the
Services, and no representation or statement not contained in this Agreement shall be binding upon
DPI 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 constitutes the entire
understanding between the parties and supersedes all previous agreements and negotiations, whether
written or oral, respecting the subject matter hereof.

          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 DPI 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 DPI 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 DPI 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,

9

 

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.

10

 

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

DISCOVER PRODUCTS INC.

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

11

 

EXHIBIT A – Servicing Agreement (“Agreement”)

Discover Products Inc.

SERVICING FEES CHARGED TO DISCOVER BANK

EFFECTIVE JANUARY 1, 2007

Discover Bank (“DB”) will pay Discover Products Inc. (“DPI”) for costs incurred by DPI in its role
of providing services for cardmembers of Discover Bank. Each month, DPI 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, the
following general categories:

Marketing

Customer Services, Collections and Other Services

Business Technology

Leasing/Rental Expenses

In addition, DPI may bill DB for various services and supplies that DPI obtains from other
providers in connection with servicing DB’s customers, which may include a DPI markup to DB to
reflect the benefit of DPI’s management of the relationships with these other providers. The
amounts charged will be equal to the amounts paid by DPI, 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

Leasing/Rental Expenses

If new categories of items arise that are procured from outside providers, DPI 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

DPI intends to bill DB for the services it provides DB. The parties agree that fees charged to DB
hereunder shall not exceed the fees DB would have been charged for the Services by an unaffiliated
third party

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