Certain Transactions
Certain of our directors, officers and certain members of their immediate families have received, from time to time, extensions of credit from us in connection with mortgage loans, credit card transactions and lines of credit. The extensions of credit were made in the ordinary course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to us and did not involve more than normal risk of collectability or present other unfavorable terms.
We or one of our subsidiaries may occasionally enter into transactions with certain “related persons.” Related persons include our executive officers, directors, nominees for directors, beneficial owners of 5% or more of our Common Stock and immediate family members of these persons. We refer to transactions involving amounts in excess of $120,000 and in which the related person has a direct or indirect material interest as “related person transactions.” Each related person transaction must be approved or ratified in accordance with the Company’s written Related Person Transactions Policy as follows: (i) proposed related person transactions involving executive officers (and/or their immediate family members) other than our CEO or our General Counsel will be referred to our CEO and our General Counsel for approval or ratification, as applicable; (ii) proposed related person transactions involving our General Counsel (and/or the General Counsel’s immediate family members) will be referred to our CEO for approval; and (iii) proposed related person transactions involving 5% Company shareholders, directors, director nominees or our CEO (and/or their immediate family members) will be referred to the Nominating and Governance Committee for approval or, if the Nominating and Governance Committee determines that the approval or ratification of such related person transaction should be considered by all disinterested members of the Board, by the vote of a majority of such disinterested members. Those reviewing proposed related person transactions shall be provided with full details of the proposed related person transaction. All determinations by our CEO and our General Counsel under the Related Person Transactions Policy shall be reported to the Nominating and Governance Committee at its next regularly scheduled meeting.
The determinations made under the Related Person Transactions Policy consider all relevant factors when determining whether to approve a related person transaction including, without limitation, the following:
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the commercial reasonableness of the terms of the proposed transaction;
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the benefit to the Company;
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the availability and/or opportunity costs of alternate transactions;
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the materiality and character of the related person’s direct or indirect interest;
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whether the transaction would, or would be perceived to, present an improper conflict of interest for the related person, taking into account: (i) the business of the Company; (ii) the size of the transaction; (iii) the overall financial position of the related person; (iv) the direct or indirect nature of the related person’s interest in the transaction; (v) whether the transaction is of an ongoing nature; and (vi) any other relevant factors; and
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if the related person is a director (or an immediate family member of a director), the impact on the director’s independence.
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Other Business
Management does not know of any matters to be presented at the Annual Meeting other than those mentioned in the Notice of Annual Meeting of Shareholders. However, if other matters come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote said proxy in accordance with their judgment on such matters.
Shareholder Proposals and Director Nominations for the 2020 Annual Meeting
Shareholders intending to present a proposal at the 2020 Annual Meeting and have it included in our proxy statement for that meeting must submit the proposal in writing to Discover Financial Services, c/o Corporate Secretary, 2500 Lake Cook Road, Riverwoods, Illinois 60015. We must receive the proposal no later than December 5, 2019.
Shareholders intending to nominate a person for election as a director at the 2020 Annual Meeting and have the candidate included in our proxy statement and form of proxy for that meeting under the proxy access provisions in Section 2.08 of our Bylaws must comply with the requirements set forth in our Bylaws. The Bylaws require, among other things, that our Secretary receive written notice from the record shareholder or group of shareholders of such nomination no more than 150 days and no less than 120 days prior to the first anniversary of the date that the proxy statement was first mailed to shareholders in connection with the previous year’s annual meeting. Therefore, the Company must receive notice of such a nomination for the 2020 Annual Meeting no earlier than the close of business on November 5, 2019 and no later than the close of business on December 5, 2019. The notice must contain the information required by the Bylaws, a copy of which is available upon request to our Secretary at the above address.
Shareholders intending to present a proposal or to nominate a person for election as a director under the advance notice provisions in Section 2.07 of our Bylaws at the 2020 Annual Meeting, but not to include the proposal or director candidate in our proxy statement and form of proxy, must comply with the requirements set forth in our Bylaws. The Bylaws require, among other things, that our Secretary receive written notice from the record shareholder of intent to present such proposal or nomination no more than 120 days and no less than 90 days prior to the anniversary of the preceding year’s annual meeting. Therefore, the Company must receive notice of such a proposal or nomination for the 2020 Annual Meeting no earlier than January 17, 2020 and no later than February 16, 2020. The notice must contain the information required by the Bylaws, a copy of which is available upon request to our Secretary at the above address.
This Proxy Statement is provided to you at the direction of the Board of Directors.
D. Christopher Greene
Vice President, Acting General Counsel and Secretary
Questions and Answers About the Annual Meeting and Voting
Why did I receive these materials?
This Proxy Statement provides notice of the Annual Meeting, describes the proposals presented for shareholder action and includes information required to be disclosed to shareholders. The Proxy Card provides shareholders with a way to vote on the described proposals without having to attend the Annual Meeting in person. Shareholders of the Company at the close of business on the Record Date are entitled to vote at the Annual Meeting.
Can I attend the Annual Meeting?
Yes. To gain admission to the Annual Meeting, you will need to show that you are a shareholder of the Company. All shareholders will be required to show valid, government-issued, picture identification or an employee badge issued by the Company. If your shares are registered in your name, your name will be compared to the list of registered shareholders to verify your share ownership. If your shares are held in the name of your broker or bank, you will need to bring evidence of your share ownership, such as your most recent brokerage account statement or a legal proxy from your broker. If you do not have valid picture identification and proof that you own Company shares, you will not be admitted to the Annual Meeting. In the interest of security, all packages and bags are subject to inspection. Please arrive before the start of the Annual Meeting to allow time for identity verification. You may also listen to a live audio webcast of the Annual Meeting through the investor relations page of our internet site, www.discover.com.
What proposals am I being asked to vote on and how does the Board of Directors recommend that I vote?
You are asked to vote on the following matters at the annual meeting:
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Proposal
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Our Board’s
Recommendation
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Election of Directors
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“FOR”
the election of each director nominee
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Advisory Vote to Approve Named Executive Officer Compensation
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“FOR”
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Ratification of Appointment of Independent Registered Public Accounting Firm
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“FOR”
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4
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Amend Certificate of Incorporation to Eliminate Supermajority Voting Requirements
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“FOR”
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5
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Amend Certificate of Incorporation to Grant Shareholders the Right to Call Special Meetings
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“FOR”
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6
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Advisory Vote on One Shareholder Proposal, if properly presented
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“AGAINST”
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What does it mean if I receive more than one set of materials?
This means you hold shares of the Company in more than one way. For example, you may own some shares directly as a “registered holder” and other shares through a broker or you may own shares through more than one broker. In these situations you may receive multiple sets of proxy materials. In order to vote all of the shares you own, you must follow the voting procedures on each Notice of Internet Availability of Proxy Materials that you receive or sign and return each of the Proxy Cards that you receive. Each Proxy Card you receive comes with its own prepaid return envelope. If you vote by mail, make sure you return each Proxy Card in the return envelope which accompanied that Proxy Card.
Questions and Answers About the Annual Meeting and Voting
Does my vote matter?
YES! We are required to obtain shareholder approval for the election of directors and other important matters. Each share of Common Stock is entitled to one vote on each matter voted upon at the meeting. In order for the Company to obtain the necessary shareholder approval of proposals, a “quorum” of shareholders (i.e., a majority of the issued and outstanding shares entitled to vote, excluding treasury stock) must be represented at the Annual Meeting in person or by proxy. If a quorum is not obtained, the Company must postpone the Annual Meeting and solicit additional proxies; this is an expensive and time-consuming process that is not in the best interests of the Company or its shareholders. Since few shareholders typically attend shareholder meetings in person, voting by proxy is important to obtain a quorum and complete the shareholder vote.
How do I vote?
You may vote using any of the following methods:
By Internet or telephone.
The Internet and telephone voting procedures we have established for shareholders of record are designed to authenticate your identity, allow you to give your voting instructions and confirm that these instructions have been properly recorded. The availability of Internet and telephone voting for beneficial owners will depend on the voting processes of your broker, bank or nominee. Therefore, we recommend that you follow the voting instructions in the materials you receive.
Annual Proxy Card.
Be sure to complete, sign and date the card and return it in the prepaid envelope. If you are a shareholder of record and you return your signed Proxy Card without indicating your voting preferences, the persons named in the Proxy Card will vote FOR the election of directors, FOR the approval on an advisory, non-binding basis, of NEO compensation, FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019, FOR the amendment of the Company's Certificate of Incorporation to eliminate supermajority voting requirements, FOR the amendment of the Company's Certificate of Incorporation to grant shareholders the right to call special meetings, and AGAINST the shareholder proposal. By voting by Internet or telephone, or by returning your signed and dated Proxy Card in time to be received for the Annual Meeting, you authorize D. Christopher Greene and Jennifer K. Schott (the “Proxies”) to act as your proxies to vote your shares of Common Stock as instructed in the proxy card.
In person at the Annual Meeting.
All shareholders may vote in person at the Annual Meeting. If you are a beneficial owner of shares, you must obtain a legal proxy from your broker, bank or nominee and present it to the Company’s inspectors of elections (the “Inspector of Elections”) with your ballot when you vote at the meeting.
How many votes are required to approve a proposal?
Each director will be elected by a majority of the votes cast with respect to such director. A “majority of the votes cast” means that the number of votes cast “for” a given director exceeds the number of votes cast “against” that director. Under Delaware law, if a director is not elected at the Annual Meeting, the director will continue to serve on the Board as a “holdover director.” As required by the Company’s Bylaws, each current director has submitted an irrevocable letter of resignation as a director that becomes effective if he or she is not elected by shareholders and if the Board accepts such resignation. If a director is not elected, the Nominating and Governance Committee will consider the director’s resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject the resignation and publicly disclose its decision and, if it rejects the resignation, the rationale behind such decision, within 90 days after the election results for the Annual Meeting are certified.
The advisory, non-binding vote to approve NEO compensation, the advisory vote to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019, and the advisory vote on the shareholder proposal each requires the affirmative vote of a majority of the shares of Common Stock represented at the Annual Meeting and entitled to vote thereon. The vote to amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements requires the affirmative vote of the shareholders of at least 80% of the outstanding shares of Common Stock of the Company. The vote to amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings requires the affirmative vote of the shareholders of a majority of the outstanding shares of Common Stock of the Company.
You may “abstain” from voting on any of the proposals in this Proxy Statement. Shares voting “abstain” on any nominee for director will be excluded entirely from the vote and will have no effect on the election of directors. Shares voting “abstain” on the advisory, non-binding vote to approve NEO compensation, the advisory vote to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019, the vote to amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements, the vote to amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings, and the advisory vote on the shareholder proposal will be counted as present at the Annual Meeting for purposes of each such applicable proposal, and your abstention will have the effect of a vote against the applicable vote or proposal.
Questions and Answers About the Annual Meeting and Voting
What is the effect of not voting?
The effect of not voting depends on how ownership of your shares is registered and the proposal to be voted upon. If you own shares as a registered holder, rather than through a broker, your unvoted shares will not be represented at the Annual Meeting and will not count toward the quorum requirement. Except as described below, assuming a quorum is obtained, your unvoted shares with respect to any nominee for director will be excluded entirely from the vote and will have no effect on the election of directors. Your unvoted shares will also have no effect on the advisory, non-binding vote to approve NEO compensation, the advisory vote to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2019 and the advisory vote on the shareholder proposal. But your unvoted shares with respect to the proposals to amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements and to amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings will have the effect of a vote against the applicable proposal.
If you own shares through a broker and do not vote, your broker may represent your shares at the Annual Meeting for purposes of obtaining a quorum. As described in the answer to the following question, in the absence of your voting instructions, your broker may or may not vote your shares.
If I don’t vote, will my broker vote for me?
If you own your shares through a broker and you don’t vote, your broker may vote your shares at its discretion on certain “routine matters.” The ratification of the appointment of Deloitte and Touche LLP as our independent registered public accounting firm for 2019 is a “routine matter” on which brokers will be permitted to vote any unvoted shares. All of the other proposals set forth in this Proxy Statement are “non-discretionary” items, and your broker may not be able to vote your shares for you. The aggregate number of unvoted shares is reported as the “broker non-vote.” “Broker non-votes” with respect to any nominee for director will be excluded entirely from the vote and will have no effect on the election of directors. “Broker non-votes” will also have no effect on the advisory, non-binding vote to approve NEO compensation proposal and the advisory vote on the shareholder proposal. But “broker non-votes” with respect to the proposals to amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements and to amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings will have the effect of a vote against the applicable proposal.
If I own my shares through a broker, how is my vote recorded?
Brokers typically hold shares of Common Stock for many shareholders. In this situation, the registered holder on the Company’s stock register is the broker or its nominee. This often is referred to as holding shares in “street name.” The “beneficial owners” do not appear in the Company’s shareholder register. Therefore, for shares held in street name, distributing the proxy materials and tabulating votes are both two-step processes. Brokers will inform the Company how many of their clients are beneficial owners and the Company will provide the broker with that number of proxy materials. Each broker will then forward the proxy materials to its clients who are beneficial owners to obtain their votes. When you receive proxy materials from your broker, they will provide instructions for sending your vote to your broker. Before the Annual Meeting, each broker will total the votes it has received and submit a Proxy Card reflecting the aggregate votes of the beneficial owners for whom it holds shares.
Are my votes confidential?
Yes. The vote of any shareholder will not be revealed to anyone other than a non-employee tabulator of votes or the independent Inspector of Elections, except (i) as necessary to meet legal requirements or to assist in the pursuit or defense of legal action; (ii) if the Company concludes in good faith that a bona fide dispute exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (iii) in the event of a proxy contest or other solicitation in opposition to the voting recommendation of the Board; or (iv) if you request, or consent to, disclosure of your vote or if you write comments on your Proxy Card or ballot.
Can I revoke my proxy and change my vote?
Yes. You have the right to revoke your proxy at any time prior to the time your shares are voted. If you are a registered holder, your proxy can be revoked in several ways: (i) by timely delivery of a written revocation to the Corporate Secretary; (ii) by submitting another valid proxy bearing a later date (including by voting on the Internet or telephone or mailing a new Proxy Card); or (iii) by attending the Annual Meeting and giving notice to the Inspector of Elections that you intend to vote your shares in person. If you are the beneficial owner of shares held by a broker, you must contact your broker in order to revoke your proxy.
Questions and Answers About the Annual Meeting and Voting
Will any other business be transacted at the Annual Meeting? If so, how will my proxy be voted?
Management does not know of any business to be transacted at the Annual Meeting other than the matters described in this Proxy Statement. The period specified in the Company’s Bylaws for submitting additional proposals to be considered at the Annual Meeting has passed and there are no such proposals to be considered. However, should any other matters properly come before the Annual Meeting, or any adjournments and postponements thereof, shares to which voting authority has been granted to the Proxies will be voted by the Proxies in accordance with their judgment.
Who counts the votes?
Votes will be counted and certified by the Inspector of Elections, who are employees of Computershare, Inc. (“Computershare”). If you are a registered holder, your executed Proxy Card is returned directly to Computershare for tabulation. As noted above, if you hold your shares through a broker, your broker returns one Proxy Card to Computershare on behalf of all its clients.
How much does the proxy solicitation cost?
The largest expense in the proxy process is printing and mailing the proxy materials. We also reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of our Common Stock. Proxies may be solicited on behalf of the Company by directors, officers or employees of the Company in person or by mail, telephone, over the Internet or facsimile transmission. No additional compensation will be paid to such directors, officers, or employees for soliciting proxies. The Company will bear the entire cost of solicitation of proxies, including the preparation, assembly, printing and mailing of this Proxy Statement and the accompanying Proxy Card, Notice of Annual Meeting and Annual Report to Shareholders. The Company has retained Georgeson Inc. to assist with the solicitation of proxies from certain shareholders for a fee of approximately $7,500 plus reimbursement for certain expenses.
Exhibits
Exhibit A
Amendments to the Amended and Restated Certificate of Incorporation of Discover Financial Services
Eliminate Supermajority Voting Requirements
If the shareholders approve Proposal 4, Discover Financial Services (the “
Company
”) currently intends to file with the Delaware Secretary of State a certificate of amendment, which, among the other amendments described herein, would amend Article 5 of the Amended and Restated Certificate of Incorporation of the Company (the “
Charter
”) in its entirety to read as follows (with deletions shown in strike-through text and additions shown in underlined text):
ARTICLE 5
BY-LAWS
In furtherance of, and not in limitation of, the powers conferred by law, the Board of Directors is expressly authorized and empowered:
1. to adopt, amend or repeal the Bylaws of the Corporation;
provided, however
, that the Bylaws adopted by the Board of Directors under the powers hereby conferred may be amended or repealed by the Board of Directors or by the stockholders having voting power with respect thereto;
provided further
that, in the case of amendments by stockholders, the affirmative vote of the holders of
at least 80 percent
a majority
of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required in order for the stockholders to alter, amend or repeal any provision of the Bylaws or to adopt any additional Bylaw; and
2. from time to time to determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Corporation, or any of them, shall be open to inspection of stockholders; and, except as so determined or as expressly provided in this Certificate of Incorporation or in any Preferred Stock Designation, no stockholder shall have any right to inspect any account, book or document of the Corporation other than such rights as may be conferred by applicable law.
The Corporation may in its Bylaws confer powers upon the Board of Directors in addition to the foregoing and in addition to the powers and authorities expressly conferred upon the Board of Directors by applicable law.
For the purposes of this Certificate of Incorporation, “Voting Stock” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
If the shareholders approve Proposal 4, the Company currently intends to file with the Delaware Secretary of State a certificate of amendment, which, among the other amendments described herein, would amend Article 10 of the Charter in its entirety to read as follows (with deletions shown in strike-through text):
ARTICLE 10
AMENDMENTS
Except as may be expressly provided in this Certificate of Incorporation, the Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation or a Preferred Stock Designation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed herein or by applicable law, and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article 10;
provided, however
, that any amendment or repeal of Article 8 or 9 of this Certificate of Incorporation shall not adversely affect any right or protection existing thereunder in respect of any act or omission occurring prior to such amendment or repeal; and
provided further
that no Preferred Stock Designation shall be amended after the issuance of any share of the series of Preferred Stock created thereby, except in accordance with the terms of such Preferred Stock Designation and the requirements of applicable law.
Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to approval by the Board of Directors, the affirmative vote of the holders of at least 80 percent of the voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, repeal or adopt any provision inconsistent with paragraph 1 of Article 5 or this second paragraph of this Article 10. For the purposes of this Certificate of Incorporation, “
Voting Stock
” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
Exhibit B
Amendments to the Amended and Restated Certificate of Incorporation of Discover Financial Services
Permit Stockholder Called Special Meetings
If the shareholders approve Proposal 5, the Company currently intends to file with the Delaware Secretary of State a certificate of amendment, which, among the other amendments described herein, would amend Article 6 of the Charter in its entirety to read as follows (with additions shown in underlined text):
ARTICLE 6
ACTION OF STOCKHOLDERS
Subject to the rights of the holders of any series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing in lieu of a meeting of such stockholders.
Subject to the rights of the holders of any class or series of Preferred Stock or any other series or class of stock as set forth in this Certificate of Incorporation, special meetings of stockholders may be called at any time only by the Secretary of the Corporation at the direction of the Board of Directors or at the written request of stockholders who have, or who are acting on behalf of persons who have, beneficial ownership of at least 25% of the Common Stock outstanding; provided that the Bylaws of the Corporation (as amended from time to time) may define beneficial ownership (including without limitation to require ownership of a “net long position” and to require ownership for a minimum period of time) to exclude one or more shares from being deemed owned by any person for purposes of requesting a special meeting.
The provisions of this Article (other than the first sentence of this Article) shall be subject to the provisions of the Bylaws of the Corporation (as amended from time to time) that limit the ability to make a request for a special meeting and that specify the circumstances pursuant to which a request for a special meeting will be deemed to be revoked. The Board of Directors shall have the authority to interpret the provisions of this Article and the Bylaws of the Corporation relating to special meetings of stockholders and to determine whether a party has complied with such provisions. Each such interpretation and determination shall be set forth in a written resolution filed with the Secretary of the Corporation and shall be binding on the Corporation and its stockholders.
Exhibit C
Amendments to the Amended and Restated Bylaws of Discover Financial Services
Implement Procedures Relating to Stockholder Called Special Meetings
If the shareholders approve Proposal 5, the Board of Directors currently intends to amend Section 2.02 of the Amended and Restated Bylaws of Discover Financial Services (the “Bylaws”) in its entirety to read as follows (with additions shown in underlined text):
Section 2.02
Special Meeting.
(a)
Subject to the rights of the holders of any
class or
series of preferred stock of the Corporation (the “Preferred Stock”) or any other series or class of stock as set forth in the Amended and Restated Certificate of Incorporation, special meetings of the stockholders may be called at any time only by the Secretary
of the Corporation
at the direction of the Board of Directors
(
pursuant to a resolution adopted by the Board of Directors
) or at the written request of stockholders who have, or who are acting on behalf of beneficial owners who have, an aggregate “net long position” of at least 25% of the Common Stock as of the Ownership Record Date (as defined in Section 2.02(b)) and who otherwise comply with the requirements of these Bylaws; provided that each such stockholder, or beneficial owner directing such stockholder, must have held such “net long position” included in such aggregate amount continuously for the one-year period ending on the Ownership Record Date and must continue to hold such “net long position” through the date of the conclusion of the special meeting (such aggregate “net long position” held for the requisite period, the “Required Percentage”). “Net long position” shall be determined with respect to each stockholder requesting a special meeting and each beneficial owner who is directing a stockholder to act on such owner’s behalf (each stockholder and owner, a “party”) in accordance with the definition thereof set forth in Rule 14e-4 under the Securities Exchange Act of 1934, as amended from time to time, provided that (i) for purposes of such definition, in determining such party’s “short position,” the reference in Rule 14e-4 to “the date that a tender offer is first publicly announced or otherwise made known by the bidder to holders of the security to be acquired” shall be the Ownership Record Date, and the reference to the “highest tender offer price or stated amount of the consideration offered for the subject security” shall refer to the closing sales price of the Corporation’s Common Stock on the New York Stock Exchange (or such other securities exchange designated by the Board of Directors if the Common Stock is not listed for trading on the New York Stock Exchange) on the Ownership Record Date (or, if such date is not a trading day, the next succeeding trading day) and (ii) the “net long position” of such party shall be reduced by the number of shares as to which the Board of Directors determines that such party does not, or will not, have the right to vote or direct the vote at the special meeting or as to which the Board of Directors determines that such party has entered into any derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares.
(b)
Ownership Record Date
. Any record stockholder (whether acting for him, her or itself, or at the direction of a beneficial owner) may, by written notice to the Secretary, demand that the Board of Directors fix a record date to determine the stockholders who are entitled to deliver a written request to call a special meeting (such record date, the “Ownership Record Date”). A written demand to fix an Ownership Record Date shall include all of the information that must be included in a written request to call a special meeting, as set forth in paragraph (d) of this Section 2.02. The Board of Directors may fix the Ownership Record Date within 10 days of the Secretary’s receipt of a valid demand to fix the Ownership Record Date. The Ownership Record Date shall not precede, and shall not be more than 10 days after, the date upon which the resolution fixing the Ownership Record Date is adopted by the Board of Directors. If an Ownership Record Date is not fixed by the Board of Directors within 10 days of the Secretary’s receipt of a valid demand, the Ownership Record Date shall be the date that the first written request to call a special meeting is received by the Secretary with respect to the proposed business to be submitted for stockholder approval at a special meeting.
(c)
Beneficial Ownership
. A beneficial owner who wishes to deliver a written request to call a special meeting must cause the nominee or other person who serves as the record stockholder of such beneficial owner’s stock to sign the written request to call a special meeting. If a record stockholder is the nominee for more than one beneficial owner of stock, the record stockholder may deliver a written request to call a special meeting solely with respect to the Common Stock of the Corporation owned by the beneficial owner who is directing the record stockholder to sign such written request to call a special meeting.
(d)
Written Requests to Call Special Meeting.
Each written request to call a special meeting shall include the following: (i) the signature of the record stockholder submitting such request and the date such request was signed, (ii) the text of each business proposal desired to be submitted for stockholder approval at the special meeting, and the nominee(s) for director election to be presented at such meeting (if applicable), each of which must be limited to the business or nominees set forth in the written demand for the Board of Directors to set an Ownership Record Date, and (iii) as to the beneficial owner, if any, directing such record stockholder to sign the written request to call a special meeting and as to such record stockholder (unless such record stockholder is acting solely as a nominee for a beneficial owner) (each such beneficial owner and each record stockholder who is not acting solely as a nominee, a “Disclosing Party”):
(A)
the name and address of each Disclosing Party;
(B)
all of the information, statements, questionnaires, consents and representations concerning the Disclosing Party and the business (and director nominee(s), as applicable) required to be submitted with respect to business (or director nominee(s)) at an annual meeting of stockholders, including as specified in Sections 2.07 and 2.08(h) (which information set forth in this Section 2.02(d)(iii)(B) shall be supplemented by each Disclosing Party, not later than 10 days after the record date for determining the record stockholders entitled to notice of the special meeting (such record date, the “Meeting Record Date”), to disclose the foregoing information as of the Meeting Record Date);
(C)
with respect to each business proposal (and director nominee(s)) to be submitted for stockholder approval at the special meeting, a statement whether or not any Disclosing Party will deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to adopt or approve the proposal, or, in the case of a nominee, to holders of a majority of the voting power of the outstanding Voting Stock (such statement, a “Solicitation Statement”); and
(D)
any additional information necessary to verify the “net long position” of such Disclosing Party (including such information for the one-year period prior to the Ownership Record Date).
Each written request must be delivered to the Secretary by hand or by registered or certified mail (return receipt requested) within 60 days of the Ownership Record Date. Each time a Disclosing Party’s “net long position” decreases following the delivery of the foregoing information to the Secretary, such Disclosing Party shall notify the Corporation of his, her or its decreased “net long position,” together with all information necessary to verify such position, within 10 days of such decrease or as of the 5th day before the special meeting, whichever is earlier. In addition, each record stockholder submitting a request to call a special meeting, and each Disclosing Party, shall submit such other information as the Corporation may reasonably request within 10 business days of such a request.
(e)
Invalid Requests
. The Secretary shall not accept, and shall consider ineffective, a written request from a stockholder to call a special meeting if (i) the request does not comply with these Bylaws, (ii) the request relates to an item of business that is not a proper subject for stockholder action under applicable law, (iii) the request includes an item of business that is the same or substantially similar to an item presented at a stockholder meeting held within 90 days before the Secretary’s receipt of such request (and the election, removal and/or appointment of directors will be considered substantially similar to the election of directors at a preceding stockholder meeting) or (iv) the request is delivered during the period starting 90 days before the first anniversary of the preceding year’s annual meeting and ending on the date of the next annual meeting.
(f)
Revocations
.
(i)
A record stockholder may revoke a request to call a special meeting at any time before the special meeting by sending written notice of such revocation to the Secretary of the Corporation.
(ii)
All written requests for a special meeting shall be deemed revoked:
(A)
upon the first date that, after giving effect to revocation(s) and “net long position” decreases (including pursuant to Section 2.02(f)(i) and the penultimate sentence of Section 2.02(d), respectively), the aggregate “net long position” of all the Disclosing Parties who are listed on the unrevoked written requests to call a special meeting decreases to a number of shares of Common Stock less than the Required Percentage;
(B)
if any Disclosing Party who has provided a Solicitation Statement with respect to any business proposal to be submitted for stockholder approval at such special meeting does not act in accordance with the representations set forth therein; or
(C)
if any Disclosing Party does not provide the supplemental information required by Section 2.02(d)(iii)(B) or by the final two sentences of Section 2.02(d), in accordance with such provisions.
(iii)
If a deemed revocation of all written requests to call a special meeting has occurred after the special meeting has been called by the Secretary, the Board of Directors shall have the discretion to determine whether or not to proceed with the special meeting.
(g)
Miscellaneous
. After receiving a request to call a special meeting, the Board of Directors shall determine in good faith whether the record stockholders submitting a request to call a special meeting have satisfied the requirements for calling a special meeting, and the Corporation shall notify the record stockholder requesting the meeting of the Board’s determination about whether the request to call a special meeting is valid, which determination shall be conclusive and binding on the Corporation and all stockholders and other persons. The Board of Directors shall determine the place, and fix the date and time, of any special meeting called at the request of one or more stockholders. The Board of Directors may submit its own proposal or proposals for consideration at a special meeting called at the request of one or more stockholders. The record date for determining the record stockholders entitled to notice of or to vote at a special meeting shall be fixed in accordance with Section 213 (or its successor provision) of the General Corporation Law of the State of Delaware. Business transacted at any special meeting shall be confined to the purpose or purposes stated in the notice of such special meeting. Notwithstanding the foregoing provisions of this Section 2.02, unless otherwise required by law or as otherwise determined by the Chairman of the Board, if none of the stockholders who requested the meeting (and no qualified representative of such stockholders) appears at the special meeting to present the nomination or proposed business included in the requests to call the special meeting, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation
.
If the shareholders approve
Proposal 5, the Board of Directors currently intends to amend Section 2.07(b)(ii) of the Bylaws in its entirety to read as follows (with additions shown in underlined text):
(ii) provided that the Board of Directors has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 2.07 and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. If the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any stockholder entitled to vote in such election may nominate such number of persons for election to such position(s) as are specified in the Corporation’s notice of meeting, if the stockholder’s notice as required by clause (ii) of Section 2.07(a) of these Amended and Restated Bylaws shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth day prior to such special meeting and not later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting is first made by the Corporation. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. For the avoidance of doubt, stockholders are not permitted to nominate persons for election to the Board of Directors pursuant to Section 2.08 at a special meeting of stockholders.
Notwithstanding any other provision of these Bylaws, in the case of a special meeting called at the request of one or more stockholders, no stockholder may nominate a person for election to the Board of Directors or propose any business to be considered at a meeting, except pursuant to a written request to call a special meeting pursuant to Section 2.02 that identifies the nominees for election and business to be considered at the special meeting and that meets the requirements of these Bylaws.
If the shareholders approve
Proposal 5, the Board of Directors currently intends to amend Section 2.07(c)(i) of the Bylaws in its entirety to read as follows (with additions shown in underlined text):
(i) Only persons who are nominated in accordance with the procedures set forth in these Amended and Restated Bylaws shall be eligible to be elected as directors at (A) an annual meeting of stockholders, in accordance with the procedures set forth in this Section 2.07 or in Section 2.08, or (B) a special meeting of stockholders, in accordance with the procedures set forth in this Section 2.07
(or Section 2.02, as applicable)
. Only such other business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.07
(or Section 2.02, as applicable)
. Except as otherwise provided by law, the
Amended and Restated Certificate of Incorporation or these Amended and Restated Bylaws, the Chairman of the Board shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed in accordance with the procedures set forth in
Section 2.02,
this Section 2.07 and Section 2.08 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made (or is part of a group which solicited) did or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (a)(ii)(C)(6) of this Section 2.07) and, if any proposed nomination or business is not in compliance with this Section 2.07 or Section 2.08, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 2.07 or Section 2.08, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.07
and Section 2.02
, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
If the shareholders approve
Proposal 5, the Board of Directors currently intends to amend Section 2.07(c)(iii) of the Bylaws in its entirety to read as follows (with deletions shown in strike-through text and additions shown in underlined text):
(iii) Notwithstanding the foregoing provisions of this Section 2.07 and Section 2.08, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.07 and Section 2.08; provided, however, that any references in these Amended and Restated Bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit any requirements (including paragraphs (a)(i)(C) and (b) of this Section 2.07) applicable to stockholder nominations or proposals as to any other business to be considered pursuant to this Section 2.07 and Section 2.08 and compliance with paragraphs (a)(i)(C) and (b) of this Section 2.07 shall be the exclusive means for a stockholder to make nominations or submit proposals for any other business to be considered at an annual or special meeting of stockholders
(
other than
,
(A)
as provided in the third to last sentence of (a)(ii), matters brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time
, (B
)
other than
nominations to be considered at an annual meeting of stockholders pursuant to Section 2.08
and (C) nominations or business permitted to be presented at a special meeting called at the request of stockholders pursuant to Section 2.02
. Nothing in this Section 2.07 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to applicable rules and regulations under the Exchange Act or (b) of the holders of any series of Preferred Stock, or any other series or class of stock as set forth in the Amended and Restated Certificate of Incorporation, to elect directors pursuant to any applicable provisions of the Amended and Restated Certificate of Incorporation.
If the shareholders approve
Proposal 5, the Board of Directors currently intends to amend Section 2.08(h) of the Bylaws in its entirety to read as follows (with additions shown in underlined text):
(h)
Submission of Questionnaire, Representation and Agreement
. To be eligible to be a nominee for election or reelection, and to serve, as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice
or request for a special meeting
under
Section 2.02,
Section 2.07 or Section 2.08, as applicable) to the Secretary at the Corporation’s principal place of business a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (i) is not and will not become a party to (A) any Voting Commitment that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (ii) is not and will not become a party to any Compensation Arrangement (A) in connection with such person’s nomination or candidacy for director of the Corporation that has not been disclosed to the Corporation or (B) in connection with service or action as a director of the Corporation, (iii) will comply with all informational and similar requirements of applicable insurance policies and laws and regulations, (iv) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, if elected as a director of the Corporation, will be in compliance with, and will in the future comply with, all applicable laws (including, without limitation, fiduciary duty requirements), policies and guidelines of the Corporation, including, without limitation, those relating to corporate governance, conflict of interest, confidentiality, stock ownership and securities trading, (v) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, and (vi) will promptly provide to the Corporation such other information as it may reasonably request.
IMPORTANT ANNUAL MEETING INFORMATION
Vote by Internet
Go to www.investorvote.com/dfs
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
Shareholder Meeting Notice
Important Notice Regarding the Availability of Proxy Materials for the Discover Financial Services Shareholder Meeting to be Held on May 16, 2019
Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual shareholders’ meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and the location of the annual meeting are on the reverse side. Your vote is important!
This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report to shareholders are available at
www.investorvote.com/dfs
Easy Online Access - A Convenient Way to View Proxy Materials and Vote
When you go online to view materials, you can also vote your shares.
Step 1
: Go to www.investorvote.com/dfs.
Step 2
: Click on the icon on the right to view current meeting materials.
Step 3
: Return to the investorvote.com window and follow the instructions on the screen to log in.
Step 4
: Make your selection as instructed on each screen to select delivery preferences and vote.
When you go online, you can also help the environment by consenting to receive electronic delivery of future materials.
Obtaining a Copy of the Proxy Materials
If you want to receive a paper or email copy of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before May 2, 2019 to facilitate timely delivery.
Shareholder Meeting Notice
The Discover Financial Services Annual Meeting of Shareholders will be held on May 16, 2019 at the Company’s corporate headquarters located at 2500 Lake Cook Road, Riverwoods, IL 60015, at 9:00 a.m. local time for holders of record as of the close of business on March 18, 2019.
Proposals to be voted on at the meeting are listed below along with the Board of Directors' recommendations.
Discover Financial Services’ Board recommends a vote "FOR" each nominee listed below and "for" Proposals 2, 3, 4, and 5:
1. Election of Directors: For Against Abstain
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01 - Jeffrey S. Aronin
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02 - Mary K. Bush
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03 - Gregory C. Case
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04 - Candace H. Duncan
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05 - Joseph F. Eazor
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06 - Cynthia A. Glassman
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07 - Roger C. Hochschild
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08 - Thomas G. Maheras
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09 - Michael H. Moskow
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10 - Mark A. Thierer
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11 - Lawrence A. Weinbach
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2. Advisory vote to approve named executive officer compensation: For Against Abstain
3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm: For Against Abstain
4. To amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements: For Against Abstain
5. To amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings: For Against Abstain
Discover Financial Services’ Board recommends a vote "AGAINST" Proposal 6:
6. Advisory vote on a shareholder proposal regarding the right of shareholders to call special meetings, if properly presented: For Against Abstain
7. To transact any other business as may properly come before the meeting, or any adjournment or postponement of the meeting.
PLEASE NOTE - YOU CANNOT VOTE BY RETURNING THIS NOTICE
. To vote your shares you must vote online, by telephone, by mail or in person. You may vote by mail by requesting a paper copy of the proxy materials which will include a proxy card. If you wish to attend and vote at the meeting, please bring this notice with you.
Here’s how to order a copy of the proxy materials and select a future delivery preference:
Paper copies
: Current and future paper delivery requests can be submitted via the telephone, Internet or email options below.
Email copies:
Current and future email delivery requests must be submitted via the Internet following the instructions below. If you request an email copy of current materials you will receive an email with a link to the materials.
PLEASE NOTE:
You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials.
Internet
- Go to
www.investorvote.com/dfs
. Follow the instructions to log in and order a copy of the current meeting materials and submit your preference for email or paper delivery of future meeting materials.
Telephone
- Call us free of charge at 1-866-641-4276 and follow the instructions to log in and order a paper copy of the materials by mail for the current meeting. You can also submit a preference to receive a paper copy for future meetings.
Email
- Send an email to investorvote@computershare.com with “Proxy Materials Discover Financial Services” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse side, and state in the email that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 2, 2019.
IMPORTANT ANNUAL MEETING INFORMATION
Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one
of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by
11:59 PM Eastern Time, on May 15, 2019.
Vote by Internet
Go to www.investorvote.com/dfs
Or scan the QR code with your smartphone
Follow the steps outlined on the secure website
Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the USA,
US territories & Canada on a touch tone telephone.
Follow the instructions provided by the recorded message
Annual Meeting Proxy Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
A - Proposals
Discover Financial Services’ Board recommends a vote "FOR" each nominee listed below and "for" Proposals 2, 3, 4, and 5:
1. Election of Directors: For Against Abstain.
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01 - Jeffrey S. Aronin
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02 - Mary K. Bush
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03 - Gregory C. Case
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04 - Candace H. Duncan
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05 - Joseph F. Eazor
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06 - Cynthia A. Glassman
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07 - Roger C. Hochschild
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08 - Thomas G. Maheras
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09 - Michael H. Moskow
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10 - Mark A. Thierer
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11 - Lawrence A. Weinbach
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2. Advisory vote to approve named executive officer compensation: For Against Abstain.
3. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm: For Against Abstain.
4. To amend the Company's Certificate of Incorporation to eliminate supermajority voting requirements: For Against Abstain
5. To amend the Company's Certificate of Incorporation to grant shareholders the right to call special meetings: For Against Abstain
Discover Financial Services’ Board recommends a vote "AGAINST" Proposal 6:
6. Advisory vote on a shareholder proposal regarding the right of shareholders to call special meetings, if properly presented: For Against Abstain
B - Authorized Signatures
-
This section must be completed for your vote to be counted. Date and sign below. Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
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Signature 1
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Signature 2
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Date (mm/dd/yyyy) - Please print date
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Proxy - DISCOVER FINANCIAL SERVICES