Document:

ex_175748.htm

Exhibit 4.2

 

DESCRIPTION OF CAPITAL STOCK

 

The summary of the general terms and provisions of the capital stock of HMN Financial, Inc. (the “Company”) set forth below does not purport to be complete and is subject to and qualified by reference to the Company’s Certificate of Incorporation (the “Certificate”), and By-Laws (the “By-Laws,” and together with the Certificate, the “Charter Documents”), each of which is incorporated herein by reference and attached as an exhibit to the Company’s most recent Form 10-K filed with the Securities and Exchange Commission (the “SEC”). For additional information, please read the Company’s Charter Documents and the applicable provisions of the Delaware General Corporation Law (the “DGCL”).

 

Capital Stock

 

The Company is authorized to issue up to 16,000,000 shares of common stock, par value $0.01 per share (the “Common Stock”), and 500,000 shares of preferred stock, par value $0.01 per share (the “Preferred Stock”). The Company’s Board of Directors (the “Board”) is authorized at any time and from time to time, subject to any limitations prescribed by law, to provide for the issuance of Preferred Stock in one or more series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix by resolution the designation, powers, preferences and rights of the shares of such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock.

 

Voting Rights

 

The holders of shares of the Common Stock are entitled to one vote per share for each share of Common Stock owned of record on all matters submitted to a vote of stockholders, subject to the restrictions on acquisitions of stock and related takeover defensive provisions set forth in the Charter Documents summarized below. All elections for board members are determined by a plurality of the votes cast, and except as otherwise required by law or as provided in the Certificate, all other matters are determined by a majority of the votes cast. The Common Stock does not have cumulative voting rights with respect to the election of board members.

 

Classified Board

 

Members of the Board are divided into three classes and serve staggered three-year terms. This means that approximately one-third of the directors are elected at each annual meeting of shareholders and that it would take two years to replace a majority of the directors unless they are removed. Under the Certificate, directors can be removed from office, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class. At least 80% of the outstanding voting stock, voting together as one class, must approve any proposal to amend or repeal, or adopt any provisions that are inconsistent with these provisions of the Certificate.

 

Dividend Rights

 

Subject to the rights of the holders of Preferred Stock and any other class or series having a preference as to dividends over the Common Stock then outstanding, the holders of the Common Stock are entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board upon the terms and conditions provided by law and the Certificate and out of funds legally available therefor. The ability to pay dividends depends on the amount of dividends paid to the Company by Home Federal Savings Bank (the “Bank”), a wholly-owned subsidiary of the Company. As further described in Part I, Item 1 “Business” of the Form 10-K of which this Exhibit 4.2 is a part, the Company’s payment of dividends, and the Bank’s payment of dividends to the Company, are subject to government regulation, in that regulatory authorities may invoke their authority to prohibit banks and their holding companies from paying dividends for a number of reasons, including, for example, a determination that such payments would constitute an unsafe or unsound banking practice or a determination that such payments would reduce the amount of either entity’s capital below that necessary to meet minimum applicable regulatory capital requirements.

 

 

 

 

Liquidation Rights

 

In the event of the liquidation or dissolution of the Company, the holders of Common Stock are entitled to receive, after payment or provision for payment of all of the Company’s debts and liabilities (including all deposits held by the Bank and accrued interest thereon) and after the distribution to certain eligible account holders who continue their deposit accounts at the Bank, all assets of the Company available for distribution, in cash or in kind. If the Company issues Preferred Stock, the holders thereof may have a priority interest over the holders of the Common Stock in the event of liquidation or dissolution.

 

Other Rights and Preferences

 

The Common Stock has no sinking fund or redemption provisions or preemptive, conversion or exchange rights. The absence of preemptive rights could result in a dilution of the interest of investors should additional capital stock be issued. Holders of Common Stock may not act by written consent in lieu of meeting.

 

Listing

 

The Common Stock is currently traded on the Nasdaq Stock Market under the symbol “HMNF.”

 

Potential Anti-Takeover Effects

 

Some provisions of the Charter Documents may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. This could limit the price that certain investors might be willing to pay in the future for the Common Stock.

 

Among other things, the Charter Documents:

 

	 	
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			allow the Company to issue Preferred Stock without any vote or further action by the Company’s stockholders;

			

 

	 	
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			provide that the size of the Board may be increased or decreased only by a majority vote of the Board, and any vacancy occurring on the Board, including a vacancy created by an increase in the number of directors, shall be filled for the remainder of the unexpired term by a majority of the directors then in office;

			

 

	 	
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			provide that any holder of shares of Common Stock that beneficially owns in excess of 10% of the then outstanding shares of Common Stock (the “Limit”) is permitted to cast a number of votes equal to (i) the total number of votes such person would be entitled to cast with respect to all Common Stock owned by such person, multiplied by (ii) a fraction, the numerator of which is the number of shares of such class or series beneficially owned by such person and owned of record by such record owner and the denominator of which is the total number of shares of Common Stock beneficially owned by such person owning shares in excess of the Limit;

			

 

	 	
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			require that amendments to the Certificate be approved by a majority vote of the Board and also by a majority of the outstanding shares of Common Stock; except that approval by at least 80% of the then-outstanding shares of voting stock of the Company, voting together as a single class, is generally required to approve amendments to certain provisions included in the Certificate, including provisions relating to number, classification, election and removal of directors; amendment of By-Laws; calling special stockholder meetings; offers to acquire, and acquisitions of, control; director liability; certain business combinations; power of indemnification; and amendments to provisions relating to the foregoing in the Certificate;

			

 

	 	
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			require that certain business combinations (as defined in the Certificate) between the Company (or any majority-owned subsidiary thereof) and a 10% or more stockholder either (1) be approved by at least 80% of the total number of outstanding shares of Common Stock, voting as a single class, (2) be approved by a majority of the Company’s disinterested directors or (3) involve consideration per share of stock generally equal to that paid by such 10% stockholder when it acquired its block of stock;

			

 

 

 

 

	 	
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			eliminate the ability of stockholders to act by written consent without a meeting; and

			

 

	 	
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			allow the Company to specify procedures for director nominations by stockholders and submission of other proposals for consideration at stockholder meetings.

			

 

The Company is subject to provisions of Delaware law that could also delay or make more difficult a merger, tender offer or proxy contest involving the Company. In particular, Section 203 of the DGCL prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years from such interested stockholder’s acquisition (together with affiliates or associates) of 15% of more of our voting stock unless the transaction meets certain conditions.

 

The possible issuance of Preferred Stock, the procedures required for director nominations and stockholder proposals and Delaware law could have the effect of delaying, deferring or preventing a change in control of the Company, including without limitation discouraging a proxy contest or making more difficult the acquisition of a substantial block of the Company’s Common Stock.

 

***Promissory Note

 Exhibit 10.1 

THIS PROMISSORY NOTE (this “NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM,
SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. 
 PROMISSORY NOTE 

 

	 Principal Amount: $300,000 
	 Dated as of January 31, 2020 

New York, New York 

Fortress Value Acquisition Corp., a Delaware corporation (the “Maker”), promises to pay to the order of Fortress Acquisition
Sponsor LLC or its registered assigns or successors in interest (the “Payee”), or order, the principal sum of Three Hundred Thousand Dollars ($300,000) or such lesser amount as shall have been advanced by Payee to Maker and shall
remain unpaid under this Note on the Maturity Date (as defined below) in lawful money of the United States of America, on the terms and conditions described below. All payments on this Note shall be made by wire transfer of immediately available
funds or as otherwise determined by the Maker to such account as the Payee may from time to time designate by written notice in accordance with the provisions of this Note. 

1.    Principal. The entire unpaid principal balance of this Note shall be payable on the earlier of:
(i) December 31, 2020, and (ii) the date on which Maker consummates an initial public offering of its securities (such earlier date, the “Maturity Date”). The principal balance may be prepaid at any time by Maker, at
its election and without penalty. Under no circumstances shall any individual, including but not limited to any officer, director, employee or shareholder of the Maker, be obligated personally for any obligations or liabilities of the Maker
hereunder. 
 2.    Drawdown Requests. Maker and Payee agree that Maker may request, from time to time, up to Three
Hundred Thousand Dollars ($300,000) in drawdowns under this Note to be used for costs and expenses related to Maker’s formation and the proposed initial public offering of its securities (the “IPO”). Principal of this Note may
be drawn down from time to time prior to the Maturity Date upon written request from Maker to Payee (each, a “Drawdown Request”). Each Drawdown Request must state the amount to be drawn down, and must not be an amount less than Ten
Thousand Dollars ($10,000). Payee shall fund each Drawdown Request no later than three (3) business days after receipt of a Drawdown Request; provided, however, that the maximum amount of drawdowns outstanding under this Note at any time may
not exceed Three Hundred Thousand Dollars ($300,000). No fees, payments or other amounts shall be due to Payee in connection with, or as a result of, any Drawdown Request by Maker. 

3.    Interest. No interest shall accrue on the unpaid principal balance of this Note. 

4.    Application of Payments. All payments shall be applied first to payment in full of any costs incurred in the
collection of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in full of any late charges and finally to the reduction of the unpaid principal balance of this Note. 

5.    Events of Default. The following shall constitute an event of default (“Event of Default”): 

 (a)    Failure to Make Required Payments. Failure by Maker to pay
the principal amount due pursuant to this Note within five (5) business days of the date specified above. 

(b)    Voluntary Bankruptcy, Etc. The commencement by Maker of a voluntary case under any applicable bankruptcy,
insolvency, reorganization, rehabilitation or other similar law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of Maker or for any
substantial part of its property, or the making by it of any assignment for the benefit of creditors, or the failure of Maker generally to pay its debts as such debts become due, or the taking of corporate action by Maker in furtherance of any of
the foregoing. 
 (c)    Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of Maker in an involuntary case under any applicable bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of Maker
or for any substantial part of its property, or ordering the winding-up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive
days. 
 6.    Remedies. 

(a)    Upon the occurrence of an Event of Default specified in Section 5(a) hereof, Payee may, by written notice to
Maker, declare this Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable hereunder, shall become immediately due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding. 

(b)    Upon the occurrence of an Event of Default specified in Sections 5(b) or 5(c), the unpaid principal balance of this
Note, and all other sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action on the part of Payee. 

7.    Waivers. Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand,
notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any
present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil
process, or extension of time for payment; and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued hereon, may be sold upon any such writ in whole or in part in
any order desired by Payee. 
 8.    Unconditional Liability. Maker hereby waives all notices in connection with the
delivery, acceptance, performance, default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any
indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee with respect to the payment or other
provisions of this Note, and agrees that additional makers, endorsers, guarantors, or sureties may become parties hereto without notice to Maker or affecting Maker’s liability hereunder. 

9.    Notices. All notices, statements or other documents which are required or contemplated by this Note shall be: in
writing and delivered (i) personally or sent by first class registered or certified mail, 

 
overnight courier service or facsimile or electronic transmission to the address designated in writing, (ii) by facsimile to the number most recently provided to such party or such other
address or fax number as may be designated in writing by such party and (iii) by electronic mail, to the electronic mail address most recently provided to such party or such other electronic mail address as may be designated in writing by such
party. Any notice or other communication so transmitted shall be deemed to have been given on the day of delivery, if delivered personally, on the business day following receipt of written confirmation, if sent by facsimile or electronic
transmission, one (1) business day after delivery to an overnight courier service or five (5) days after mailing if sent by mail. 

10.    Construction. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. 
 11.    Severability. Any provision contained in this Note which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 
 12.    Trust
Waiver. Notwithstanding anything herein to the contrary, the Payee hereby waives any and all right, title, interest or claim of any kind (“Claim”) in or to any distribution of or from the trust account to be established in which
the proceeds of the IPO conducted by the Maker (including the deferred underwriters discounts and commissions) and the proceeds of the sale of the warrants issued in a private placement to occur prior to the consummation of the IPO are to be
deposited, as described in greater detail in the registration statement and prospectus to be filed with the Securities and Exchange Commission in connection with the IPO, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction
for any Claim against the trust account for any reason whatsoever. 
 13.    Amendment; Waiver. Any amendment hereto or
waiver of any provision hereof may be made with, and only with, the written consent of the Maker and the Payee. 

14.    Assignment. No assignment or transfer of this Note or any rights or obligations hereunder may be made by any party
hereto (by operation of law or otherwise) without the prior written consent of the other party hereto and any attempted assignment without the required consent shall be void. 

[Signature page follows] 

 IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note
to be duly executed by the undersigned as of the day and year first above written. 
  

			
	FORTRESS VALUE ACQUISITION CORP.
		
	By:	 	 /s/ Andrew A. McKnight

	Name:	 	Andrew A. McKnight
	Title:	 	Director

 Acknowledged and Agreed to 

as of the date first written above. 
  

			
	FORTRESS ACQUISITION SPONSOR LLC
		
	By:	 	 /s/ Alexander Gillette

	Name:	 	Alexander Gillette
	Title:	 	Secretary

 [Signature Page to Promissory Note]

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