Item 3.03. Material Modification to Rights of Security Holders.
On June 22, 2020, Discover Financial Services (the "Company") issued and sold
500,000 depositary shares ("Depositary Shares"), each representing a 1/100th
ownership interest in a share of 6.125% Fixed-Rate Reset Non-Cumulative
Perpetual Preferred Stock, Series D, $0.01 par value (the "Series D Preferred
Stock"), with a liquidation preference of $100,000 per Share (equivalent to
$1,000 per depositary share). The terms of the Depositary Shares are set forth
in the Deposit Agreement, dated June 22, 2020, among the Company, Computershare
Inc., Computershare Trust Company, N.A., and the holders from time to time of
the Depositary Receipts issued thereunder (the "Deposit Agreement") and the form
of Depositary Receipt attached thereto as Exhibit A. The Company filed a
Certificate of Designations (the "Certificate of Designations") with the
Secretary of State of the State of Delaware, establishing the voting rights,
powers, preferences and privileges, and the relative, participating, optional or
other rights, and the qualifications, limitations or restrictions thereof, of
the Series D Preferred Stock on June 22, 2020. Holders of the Depositary Shares
will be entitled to all proportional rights and preferences of the Series D
Preferred Stock (including dividend, voting, redemption and liquidation rights).
Under the terms of the Series D Preferred Stock, the ability of the Company to
pay dividends on, make distributions with respect to, or to repurchase, redeem
or acquire its common stock or any preferred stock ranking on parity with or
junior to the Series D Preferred Stock, is subject to restrictions in the event
that the Company does not declare and either pay or set aside a sum sufficient
for payment of dividends on the Series D Preferred Stock for the immediately
preceding dividend period.
The description of the terms of the Series D Preferred Stock is qualified in its
entirety by reference to the Certificate of Designations, which is included as
Exhibit 3.1 to this Current Report on Form 8-K and is incorporated by reference
herein.
The description of the terms of the Depositary Shares is qualified in its
entirety by reference to the Deposit Agreement and the form of Depositary
Receipt attached thereto, which are included as Exhibit 4.1 to this Current
Report on Form 8-K and are incorporated by reference herein.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
The Certificate of Designations became effective upon filing with the Secretary
of State of the State of Delaware and it amends the Company's Amended and
Restated Certificate of Incorporation. The terms of the Series D Preferred Stock
are more fully described in Item 3.03 of this Current Report on Form 8-K and the
Certificate of Designations which is included as Exhibit 3.1 to this Current
Report on Form 8-K, both of which are incorporated by reference herein.
Item 8.01 Other Events
On June 17, 2020, the Company entered into an Underwriting Agreement (the
"Underwriting Agreement") with BofA Securities, Inc., Citigroup Global Markets
Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC and Wells Fargo
Securities, LLC, as the representatives of the several underwriters named
therein (collectively, the "Underwriters"), pursuant to which the Company agreed
to sell to the Underwriters 500,000 Depositary Shares, each representing a
1/100th ownership interest in a share of Series D Preferred Stock.
The Underwriting Agreement contains customary representations, warranties and
agreements of the Company, conditions to closing, indemnification rights and
obligations of the parties, and termination provisions. Under the terms of the
Underwriting Agreement, the Company agreed to indemnify the Underwriters against
certain specified types of liabilities, including liabilities under the
Securities Act of 1933, as amended, and to contribute to payments the
Underwriters may be required to make in respect of these liabilities.
The net proceeds of the offering of the 500,000 Depositary Shares were
approximately $493,370,000, after deducting underwriting commissions and
estimated offering expenses. The offering was made pursuant to the prospectus
supplement dated June 17, 2020 and the accompanying prospectus dated June 22,
2018, filed with the Securities and Exchange Commission pursuant to the
Company's effective registration statement on Form S-3ASR (File No. 333-225830)
(the "Registration Statement"). The following documents are being filed with
this Current Report on Form 8-K and are incorporated by reference into the
Registration Statement: (a) the Underwriting Agreement, (b) the Certificate of
Designations, (c) the Deposit Agreement and the Form of Depositary Receipt
attached as Exhibit A thereto and (d) a validity opinion with respect to the
Depositary Shares and the Series D Preferred Stock.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description of Exhibit
1.1 Underwriting Agreement dated June 17, 2020
3.1 Certificate of Designations of Fixed-Rate Reset Non-Cumulative
Perpetual Preferred Stock, Series D
4.1 Deposit Agreement, dated June 22, 2020
4.2 Form of certificate representing the Fixed-Rate Reset
Non-Cumulative Perpetual Preferred Stock, Series D
5.1 Opinion of Sidley Austin LLP
23.1 Consent of Opinion of Sidley Austin LLP (included in Exhibit 5.1)
104 Cover Page Interactive Data File - the cover page from this Current
Report on Form 8-K, formatted as Inline XBRL
(included as Exhibit 101).
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