Document:

director_feexpolicyx2021

Approved by the Board of Directors October 7, 2020        2021 DIRECTOR FEE POLICY       The Board of Directors (“Board”) of the Federal Home Loan Bank of Des  Moines (“Bank”) adopts this policy governing compensation for its Chair, Vice  Chair, Board Committee Chairs, and all other Member and Independent  Directors serving on the Bank’s Board, effective January 1, 2021.     I.  Annual Compensation    Annual compensation (“Annual Compensation”) for Bank Directors has been  determined after assessing studies1 on director compensation as well as  FHLBank System data.  The Annual Compensation for Bank Directors for 2021  shall be as follows:                Chair of Board of Directors:    $142,000    Vice Chair of Board of Directors:  $131,000    Chair of Audit Committee:            $126,000    Chairs of all other Board Committees: $121,000    All other Directors:    $109,000      Individuals serving as Chair or Vice Chair of the Board shall not be entitled to  Annual Compensation in excess of the amount to which they are entitled for  such service due to concurrent service as Chair of a Board Committee.      II.  Expenses    The Bank shall reimburse directors and pay for necessary and reasonable  travel, subsistence, and other related expenses incurred in connection with  performance of their duties in accordance with the Bank’s Travel and  Entertainment Policy and Director Position Description. Bank-approved  expenses of a Director’s spouse/guest accompanying a Director as an invited  guest to a Board meeting will be treated as compensation for such Director.    III. Limits and Controls    Performance Requirements. A Director shall receive one quarter of the Annual  Compensation following the end of each calendar quarter.  If it is determined  at the end of the calendar year that a Director has attended less than 75% of  the meetings the Director was required to attend during such year, the  Director will not receive the fourth quarter payment for such calendar year.                                                     1 Director compensation analysis provided in May 2019 by McLagan recommended the  following director pay ranges: Chair: $135,000 - $150,000; Vice Chair and Chair of Audit:  $110,000-$135,000; Other Committee Chairs: $107,000 - $125,000; Other Directors:  $100,000 - $115,000.    

 

Approved by the Board of Directors October 7, 2020    In the event that a Director serves on the Board for only a portion of a  calendar year, or only serves as a Board Chair, Board Vice Chair, or  Committee Chair for a portion of a calendar year, then the Annual  Compensation to which such director is entitled for that calendar year shall be  adjusted accordingly on a pro-rata basis.      Directors are expected to attend all Board meetings and meetings of the  Committees on which they serve, and to remain engaged and actively  participate in all meetings, in a manner consistent with the requirements of  the Corporate Governance Principles and Director Position Description.  In  addition to the Bank’s right to withhold fourth quarter Annual Compensation  from a Director, the Chair or Vice Chair of the Board shall direct the Corporate  Secretary to make any other appropriate adjustments in the payments to any  Director who regularly fails to attend Board meetings or meetings of  Committees on which the Director serves, or who consistently demonstrates a  lack of participation in or preparation for such meetings, to ensure that no  Director is paid fees that do not reflect that Director’s performance of his/her  duties. To assist the Board in making such determinations, the Corporate  Secretary will, on a quarterly basis and prior to payment of the most recently  completed quarter’s Director fees, review the attendance of each Director  during the quarter and raise any attendance issue identified with the Board  Chair.  In the event the potential issue involves the Board Chair, the  Corporate Secretary will raise such issue with the Board Vice Chair.    IV. Roles and Responsibilities    The Board of Directors shall be responsible for any adjustments to the Annual  Compensation.  The Corporate Secretary is responsible for processing fee  payments and expense reports and for remitting fees and expense  reimbursements to Directors on a quarterly basis.    The Board of Directors shall review and approve this policy annually.hsdt-ex47_10.htm

Exhibit 4.7

 

DESCRIPTION OF THE REGISTRANT’S SECURITIES REGISTERED PURSUANT

TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934

 

The following summary of the terms of our capital stock is qualified in its entirety by reference to our certificate of incorporation, as amended (“Certificate of Incorporation”) and amended and restated bylaws (“Bylaws”), copies of which are filed as exhibits to our Annual Report on Form 10-K of which this Exhibit 4.5 is a part, and the applicable provisions of the Delaware General Corporation Law (“DGCL”).

 

Our Certificate of Incorporation authorizes us to issue up to 150,000,000 shares of Class A Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share, all of which shares of preferred stock are currently undesignated. Our board of directors may establish the rights and preferences of the preferred stock from time to time.

 

Common Stock

Voting

Each holder of our common stock is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors. Our stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose.

Dividends

Subject to preferences that may be applicable to any then-outstanding preferred stock, holders of our common stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by the board of directors out of legally available funds.

Liquidation

In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted to the holders of any then-outstanding shares of preferred stock.

Rights and Preferences

Holders of our common stock have no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate in the future.

Preferred Stock

Our board of directors has the authority under our Certificate of Incorporation, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.

Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in control of us and may adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights attached to that preferred stock.

Description of Outstanding Warrants

As of March 5, 2021, there were warrants outstanding to purchase 594,186 shares of common stock issuable upon the exercise of warrants at a weighted-average exercise price of US$16.32, and warrants outstanding to purchase 68,351 shares of common stock 

issuable upon the exercise of warrants at a weighted-average exercise price of CAD$428.75 (or US$338.46 based on the exchange rate on March 5, 2021). Certain of these warrants have a net exercise provision under which its holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares based on the fair market value of our common stock at the time of exercise of the warrant after deduction of the aggregate exercise price. Each of these warrants also contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of dividends, share splits, reorganizations and reclassifications and consolidations. Certain of these warrants provide that, subject to limited exceptions, a holder will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own over 4.99% of our then outstanding common stock following such exercise; provided, however, that upon prior notice to us, the warrant holder may increase its ownership, provided that in no event will the ownership exceed 9.99%.

Anti-Takeover Provisions

Section 203 of the Delaware General Corporation Law

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

 

	
 
	
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before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

 

	
 
	
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upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

	
 
	
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on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

In general, Section 203 defines a “business combination” to include the following:

 

	
 
	
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merger or consolidation involving the corporation or any direct or indirect majority-owned subsidiary of the corporation and the interested stockholder;

 

	
 
	
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any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder (in one transaction or a series of transactions);

 

	
 
	
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subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation or by any direct or indirect majority-owned subsidiary of the corporation of any stock of the corporation or of such subsidiary to the interested stockholder;

 

	
 
	
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any transaction involving the corporation or any direct or indirect majority-owned subsidiary of the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

 

	
 
	
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the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.

In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

Certificate of Incorporation and Amended and Restated Bylaws

Our Certificate of Incorporation provides that the authorized number of directors may be changed only by resolution of the board of directors, and vacancies and newly created directorships on the board of directors may, except as otherwise required by law or determined by the board of directors, only be filled by a majority vote of the directors then serving on the board of directors, even though less than a quorum.

Our Amended and Restated Bylaws provide that all stockholder actions must be effected at a duly called meeting of stockholders and eliminate the right of stockholders to act by written consent without a meeting. Our Amended and Restated Bylaws 

also provide that only our Chairman of the board of directors, Chief Executive Officer or the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors may call a special meeting of stockholders.

Our Amended and Restated Bylaws also provide that stockholders seeking to present proposals before a meeting of stockholders to nominate candidates for election as directors at a meeting of stockholders must provide timely advance notice in writing, and specify requirements as to the form and content of a stockholder’s notice. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote at the election.

Our Certificate of Incorporation and Amended and Restated Bylaws provide that the stockholders cannot amend many of the provisions described above except by a vote of 66 2/3% or more of our outstanding Common stock. As described above, our Certificate of Incorporation gives our board of directors the authority, without further action by our stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series.

 

The combination of these provisions will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of us by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change our control.

These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may also inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts. We believe that the benefits of these provisions, including increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms.

Choice of Forum

Our Certificate of Incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for:

 

	
 
	
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any derivative action or proceeding brought on our behalf;

 

	
 
	
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any action asserting a breach of fiduciary duty;

 

	
 
	
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any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our Certificate of Incorporation or our Amended and Restated Bylaws; or

 

	
 
	
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any action asserting a claim against us that is governed by the internal affairs doctrine.

The provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act.

The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in such action. Our Certificate of Incorporation further provides that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.

Participation Rights of Investors in October 2020 Private Placement

Pursuant to the securities purchase agreement for the October 2020 Private Placement, if we issue any shares of common stock or common stock equivalents for cash consideration, indebtedness or a combination thereof, with certain exceptions, within twelve months of the closing of the private placement, each purchaser who subscribed for at least $250,000 in the private placement has the right to participate in up to such purchaser’s pro rata portion of 30% of the such subsequent financing on the same terms, conditions and price provided for in the subsequent financing.

 

Registration Rights of A&B

Pursuant to the terms of convertible notes issued to A&B (HK) Company Limited in October 2015 and December 2015, we agreed to register any shares issued upon the conversion of such convertible notes upon the

request of A&B (HK) Company Limited. As of March 5, 2021, A&B (HK) Company Limited beneficially owned 71,306 shares of Common stock that were issued upon the conversion of such convertible notes.

Transfer Agent and Registrar

The transfer agent and the registrar for the Company is American Stock Transfer & Trust Company LLC, 6201 15th Avenue, Brooklyn, New York 11219; Telephone: 800-937-5449.

Common Stock Listing

Our common stock is listed on the Nasdaq Capital Market under the symbol “HSDT” and on the TSX under the symbol “HSM.”

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