Discover 2009 Annual Report Download - page 129

Maturities. Long-term borrowings had the following maturities at November 30, 2009 (dollars in thousands):
Discover Financial
Services
(Consolidated)
Discover Financial
Services
(Parent Company Only)
Due in 2010 ...................................................................................................................................... $ 623,811 $ 400,000
Due in 2011 ...................................................................................................................................... 306,703 —
Due in 2012 ...................................................................................................................................... — —
Due in 2013 ...................................................................................................................................... — —
Due in 2014 ...................................................................................................................................... — —
Thereafter.......................................................................................................................................... 1,497,587 799,385
Total.............................................................................................................................................. $2,428,101 $1,199,385
In connection with related party transactions with the Company’s former parent company, Morgan Stanley, the
Company recorded $14.9 million in interest expense related to long-term borrowings for the year ended November 30,
2007. Prior to the Distribution, the Company repaid all outstanding balances due to Morgan Stanley.
The Company has entered into an unsecured credit agreement that is effective through May 2012. The agreement
provides for a revolving credit commitment of up to $2.4 billion (of which the Company may borrow up to 30% and
Discover Bank may borrow up to 100% of the total commitment). As of November 30, 2009, the Company had no
outstanding balances due under the facility. The credit agreement provides for a commitment fee on the unused portion of
the facility, which can range from 0.07% to 0.175% depending on the index debt ratings. Loans outstanding under the
credit facility bear interest at a margin above the Federal Funds rate, LIBOR, the EURIBOR or the Euro Reference rate. The
terms of the credit agreement include various affirmative and negative covenants, including financial covenants related to
the maintenance of certain capitalization and tangible net worth levels, and certain double leverage, delinquency and
Tier 1 capital to managed loans ratios. The credit agreement also includes customary events of default with corresponding
grace periods, including, without limitation, payment defaults, cross-defaults to other agreements evidencing indebtedness
for borrowed money and bankruptcy-related defaults. The commitment may be terminated upon an event of default.
13. Stock-Based Compensation Plans
In connection with the Distribution, the Company adopted three stock-based compensation plans: the Discover
Financial Services Omnibus Incentive Plan, the Discover Financial Services Directors’ Compensation Plan and the Discover
Financial Services Employee Stock Purchase Plan.
Omnibus Incentive Plan. The Discover Financial Services Omnibus Incentive Plan (“Omnibus Plan”), which is
stockholder-approved, provides for the award of stock options, stock appreciation rights, restricted stock, restricted stock
units (“RSUs”) and other stock-based and/or cash awards (collectively, “Awards”). The total number of shares that may
be granted is 45 million shares, subject to adjustments for certain transactions as described in the Omnibus Plan
document. Shares granted under the Omnibus Plan may be authorized but unissued shares or treasury shares that the
Company acquires in the open market, in private transactions or otherwise.
Option awards are generally granted with an exercise price equal to the fair market value of one Discover share at the
date of grant; these types of awards expire ten years from the grant date and may be subject to restrictions on transfer,
vesting requirements, which are set at the discretion of the Compensation Committee of the Board of Directors, or
cancellation under specified circumstances. Stock awards also may be subject to similar restrictions determined at the time
of grant under this plan. Certain option and stock awards provide for accelerated vesting if there is a change in control or
upon certain terminations (as defined in the Omnibus Plan).
Directors’ Compensation Plan. The Discover Financial Services Directors’ Compensation Plan (the “Directors’
Compensation Plan”), which is stockholder-approved, permits the grant of RSUs to non-employee directors. The total
number of units available for grant under the Directors’ Compensation Plan equals the excess, if any, of (i) 500,000
shares over (ii) the sum of (a) the number of shares subject to outstanding awards granted under the Directors’
Compensation Plan and (b) the number of shares previously issued pursuant to the Directors’ Compensation Plan. Shares
of stock that are issuable pursuant to the awards granted under the Directors’ Compensation Plan may be authorized but
unissued shares, treasury shares or shares that the Company acquires in the open market.
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