Item 3.03. Material Modifications to Rights of Security Holders.
Articles of Amendment to Implement Reverse Stock Split and Reduce Authorized Shares of Common Stock
Articles of Amendment of the Restated Articles of Incorporation (as amended, the “
Articles of Incorporation
”) of Dynex Capital, Inc. (the
“
Company
”
) became effective at 11:59 p.m. Richmond, Virginia time on June 20, 2019 (the “
Effective Time
”). The Articles of Amendment implemented the previously announced reverse stock split (the “
Reverse Stock Split
”) of the Company’s common stock, par value $0.01 per share (the “
Common Stock
”).
As a result of the Reverse Stock Split, every three shares of Common Stock issued and outstanding immediately prior to the Effective Time and held by each holder was automatically combined into one validly issued, fully paid and non-assessable share of Common Stock, par value of $0.01 each, without any further action by the Company or the holder thereof.
No fractional shares will be issued in connection with the Reverse Stock Split. A holder of Common Stock otherwise entitled to receive a fractional interest in a share of Common Stock as a result of the Reverse Stock Split is, with respect to such fractional interest, entitled to receive cash (without interest) from the Company in lieu of such fractional interest in an amount equal to the product of (i) the closing price per share of the Common Stock as reported on the New York Stock Exchange (or any other exchange or system on which the Common Stock is then listed, traded or quoted) on June 20, 2019 and (ii) the fraction of one share owned by such holder.
As a further result of the Reverse Stock Split, each certificate that, immediately prior to the Effective Time, represented shares of the Common Stock (the “
Old Certificates
”) shall thereafter represent the number of shares of Common Stock into which the shares of Common Stock represented by the Old Certificates have been combined, subject to the elimination of fractional share interests as provided above. A letter of transmittal relating to the Reverse Stock Split will be sent to record holders of certificated shares of Common Stock. Holders who receive this letter of transmittal should follow the instructions in such letter.
Holders of Common Stock who hold in “street name” in their brokerage accounts are not required to take any action as a result of the Reverse Stock Split. Their accounts were automatically adjusted to reflect the number of shares owned following the Reverse Stock Split.
The Reverse Stock Split did not change the terms of the Company’s common stock. After the Reverse Stock Split, shares of the Company’s common stock have the same voting rights and rights to dividends and distributions, and are identical in all other respects to the Company’s common stock authorized prior to the Reverse Stock Split. The Reverse Stock Split affected all of the Company’s common shareholders uniformly and did not affect any shareholder’s percentage ownership interests or proportionate voting power, other than as a result of the treatment of fractional shares as described above.
The Articles of Amendment also reduced the number of shares of Common Stock that the Company has the authority to issue from 200,000,000 to 90,000,000 shares of Common Stock, the par value of which remains unchanged.
The foregoing description of the Reverse Stock Split is only a summary of certain terms and conditions thereof and is qualified in its entirety by reference to the Articles of Amendment, which is filed herewith.
Effect of Reverse Stock Split on Series A Preferred Stock and Series B Preferred Stock
The Reverse Stock Split did not affect the number of authorized or outstanding shares of the Company’s 8.50% Series A Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “
Series A Preferred Stock
”), or 7.625% Series B Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “
Series B Preferred Stock
” and, together with the Series A Preferred Stock, the “
Preferred Stock
”), or the dividend rate of any outstanding shares of Preferred Stock.
Sections 8 of Article IIIA and Article IIIB of the Company’s Articles of Incorporation govern the conversion rights of, respectively, the Company’s Series A Preferred Stock and Series B Preferred Stock. Upon the occurrence of a Change of Control (as defined in the Articles of Incorporation), each holder of Preferred Stock will, subject to the Company’s ability to redeem shares of Preferred Stock, have the right to convert some or all of the shares of Preferred Stock held by such holder into a number of shares of Common Stock equal to the lesser of (i) a number derived pursuant to a formula contained in the Articles of Incorporation and (ii) the Share Cap (as such term is defined in the Articles of Incorporation) applicable to each series of Preferred Stock. In addition, the aggregate number of shares of Common Stock issuable upon conversion of shares of either Series A Preferred Stock or Series B Preferred Stock is limited by an Exchange Cap (as defined in the Articles of Incorporation).
Sections 8 of Article IIIA and Article IIIB of the Company’s Articles of Incorporation provide for the pro rata adjustment of the Share Cap and the Exchange Cap for any share splits, including the Reverse Stock Split. Following the Reverse Stock Split, for the Series A Preferred Stock, the Share Cap has been adjusted from 4.9116 to 1.6372 and the Exchange Cap has been adjusted from 39,292,800 shares to 13,097,471 shares. For the Series B Preferred Stock, the Share Cap has been adjusted from 4.7574 to 1.5858 and the Exchange Cap has been adjusted from 33,301,800 shares to 11,100,490 shares.
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