DEFS14A: Definitive proxy statement for special meeting
Published on June 30, 1999
Dynex Capital, Inc.
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Notice of Special Meeting of Stockholders
and
Proxy Statement
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Special Meeting of Stockholders
July 26, 1999
DYNEX CAPITAL, INC.
June 30, 1999
To Our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Dynex Capital, Inc. (the "Company") to be held in The Atrium at the Highwoods I
building located at 10900 Nuckols Road, Glen Allen, Virginia on Monday, July 26,
1999, at 2:00 p.m. Eastern time.
The business of the meeting is to vote on an amendment to the Company's
Articles of Incorporation to effect a reverse stock split whereby each four
shares of outstanding common stock, par value $0.01, would be automatically
converted into one share of outstanding common stock, par value $0.01.
While stockholders may exercise their right to vote their shares in person,
we recognize that many stockholders may not be able to attend the Special
Meeting. Accordingly, we have enclosed a proxy which will enable you to vote
your shares on the matter to be considered at the Special Meeting even if you
are unable to attend. All you need to do is mark the proxy to indicate your
vote, date and sign the proxy, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with management's recommendations, you need not mark your votes on the proxy but
need only sign, date and return the proxy in the enclosed postage-paid envelope
in order to record your vote.
Sincerely,
Thomas H. Potts
President
DYNEX CAPITAL, INC.
10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
____________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Our Stockholders:
A Special Meeting of Dynex Capital, Inc. (the "Company") will be held in
The Atrium at the Highwoods I building located at 10900 Nuckols Road, Glen
Allen, Virginia on Monday, July 26, 1999, at 2:00 p.m. Eastern time, to consider
and act upon the proposal to amend the Company's Articles of Incorporation to
effect a one-for-four reverse stock split whereby each four shares of common
stock, par value $0.01, would be automatically converted into one share of
common stock, par value $0.01, of the Company.
Only stockholders of record at the close of business on June 28, 1999, the
record date, will be entitled to vote at the Special Meeting.
Management desires to have maximum representation at the Special Meeting
and respectfully requests that you date, execute and promptly mail the enclosed
proxy in the accompanying postage-paid envelope whether or not you expect to
attend the meeting in person. A proxy may be revoked by a stockholder by notice
in writing to the Secretary of the Company at any time prior to its use, by
presentation of a later-dated proxy, or by attending the Special Meeting and
voting in person.
By order of the Board of Directors
Lynn K. Geurin
Secretary
Dated: June 30, 1999
Directions from the North on Interstate 95:
Take the Interstate 295 West-Charlottesville exit. Travel approximately 8.5
miles on Interstate 295 West towards Charlottesville. Take the Nuckols
Road-South Exit. Travel approximately 0.5 mile. Turn left at first light. Turn
right into the parking lot of the Highwoods I building. The Atrium is located on
the first floor.
Directions from the airport:
(In regards to the map above - Interstate 64 should be used as a reference
point only) As you leave the airport on 156 North-Airport Drive follow the "to
295-North" signs. You will pass the Interstate 64 East and West exits and the
Interstate 295 South exit. After these exits, continue on 156 North-Airport
Drive approximately 2.5 miles. Take the "295 North to 95-North and 64-West" exit
North towards Washington. Stay on Interstate 295 North for approximately 19.5
miles. Take the Nuckols Road-South Exit. Travel approximately 0.5 mile. Turn
left at first light. Turn right into the parking lot of the Highwoods I
building. The Atrium is located on the first floor.
Directions from the South or Downtown:
Take Interstate 64 West to Interstate 295 towards Washington. Take the
first exit - Nuckols Road South. Travel approximately 0.5 mile. Turn left at
first light. Turn right into the parking lot of the Highwoods I building. The
Atrium is located on the first floor.
DYNEX CAPITAL, INC.
10900 Nuckols Road
Glen Allen, Virginia 23060
(804) 217-5800
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PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
July 26, 1999
To Our Stockholders:
This Proxy Statement is furnished with the solicitation by the Board of
Directors of Dynex Capital, Inc. (the "Company") of proxies to be used at the
Special Meeting of Stockholders of the Company to be held in The Atrium at the
Highwoods I building located at 10900 Nuckols Road, Glen Allen, Virginia. The
Special Meeting is being held for the purpose set forth in the accompanying
notice of Special Meeting of Stockholders. This Proxy Statement, the
accompanying proxy card and the notice of Special Meeting are being provided to
stockholders beginning on or about June 30, 1999.
GENERAL INFORMATION
Solicitation
The enclosed proxy is solicited by the Board of Directors of the Company.
The costs of this solicitation will be borne by the Company. Proxy solicitations
will be made by mail, and also may be made by personal interview, telephone and
telegram by directors and officers of the Company. Brokerage houses and nominees
will be requested to forward the proxy soliciting material to the beneficial
owners of the Company's common stock and to obtain authorization for the
execution of proxies. The Company will, upon request, reimburse such parties for
their reasonable expenses in forwarding proxy materials to such beneficial
owners. Additionally, the Company has engaged the firm of MacKenzie Partners,
Inc., New York, New York, to conduct proxy solicitations on its behalf at a cost
estimated to be $5,000, plus reasonable out-of-pocket expenses.
Voting Rights
Holders of shares of the Company's common stock at the close of business on
June 28, 1999, the record date, are entitled to notice of, and to vote at, the
Special Meeting. As of June 21, 1999, 46,036,949 shares of common stock were
outstanding. Each share of common stock outstanding on the record date is
entitled to one vote on the matter presented at the Special Meeting. The
presence, in person or by proxy, of stockholders entitled to cast a majority of
all the votes entitled to be cast constitutes a quorum for the transaction of
business at the Special Meeting. The beneficial ownership of common stock held
by the directors, certain executive officers and holders of 5% or more of the
outstanding common stock is set forth in the Proxy Statement under the caption
"Ownership of Common Stock".
Voting of Proxies
Shares of common stock represented by all properly executed proxies
received in time for the Special Meeting will be voted in accordance with the
choices specified in the proxy. Unless contrary instructions are indicated on
the proxy, the shares will be voted FOR the amendment to the Company's Articles
of Incorporation (the "Amendment") to effect the one-for-four reverse stock
split of the issued and outstanding shares of common stock. No other matters may
be brought before the Special Meeting other than as set forth herein.
Revocability of Proxy
The giving of the enclosed proxy does not preclude the right to vote in
person should the stockholder delivering the proxy so desire. A proxy may be
revoked at any time prior to its exercise by delivering a written statement to
the Secretary of the Company that the proxy is revoked, by presenting to the
Company a later-dated proxy executed by the person executing the prior proxy, or
by attending the Special Meeting and voting in person. Dissenters' rights of
appraisal will not be available under Virginia law with respect to the proposed
Amendment.
OWNERSHIP OF COMMON STOCK
The table below sets forth, as of May 31, 1999, the number of shares of
common stock beneficially owned by owners of more than five percent of the
Company's common stock outstanding, each Director and executive officer of the
Company, and the number of shares beneficially owned by all of the Company's
Directors and executive officers as a group. To the Company's knowledge, no
other person beneficially owns more than 5% of the outstanding shares of common
stock. Unless otherwise indicated, all persons named as beneficial owners of
common stock have sole voting power and sole investment power with respect to
the shares beneficially owned.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO EFFECT THE REVERSE STOCK SPLIT
General
The Board of Directors has declared it advisable and in the best interest
of the Company and its stockholders to amend the Articles of Incorporation to
effect a one-for-four reverse stock split (the "Reverse Stock Split") of the
issued and outstanding shares of common stock. A copy of the Amendment is
attached as Appendix A.
If the Amendment is approved by the stockholders, each four shares of
common stock outstanding at the close of business on the effective date of the
Amendment (the "Effective Time") will be converted automatically into one share
of common stock. To avoid the existence of fractional shares of common stock,
stockholders who would otherwise be entitled to receive fractional shares of
common stock equal to one-half or more will receive one whole share. No shares
or scrip shall be issued to holders in respect of any fraction less than
one-half. The Effective Time is anticipated to be as soon as practicable
following the date of the Special Meeting.
Purposes of Reverse Stock Split
The Board of Directors believes that the Reverse Stock Split will cause the
stock price of the common stock, currently below $5.00, to be more appropriately
aligned with the Company's peers in the finance industry. The Reverse Stock
Split should cause the common stock to be more attractive to the financial
community and lower trading costs for the investing public. Further, the Reverse
Stock Split will reduce administrative costs for the Company.
Many institutional and other investors look upon stock trading at low
prices as unduly speculative in nature and, as a matter of policy, avoid
investment in such stocks. Accordingly, the Board of Directors believes that the
current per share price of the common stock may reduce the effective
marketability of the shares because of the reluctance of many leading brokerage
firms to recommend low priced stock to their clients. Further, various brokerage
house policies and practices tend to discourage individual brokers from dealing
in low priced stocks. Some of those policies and practices pertain to the
payment of brokers' commissions and to time-consuming procedures which function
to make the handling of low priced stocks unattractive to brokers from an
economic standpoint. Additionally, the structure of trading commissions also
tends to have an adverse impact upon holders of low priced stock because the
brokerage commission on a sale of low priced stock generally represents a higher
percentage of the sales price than the commission on higher priced issues.
The Board of Directors believes that the shares of common stock will, as a
result of the Reverse Stock Split, trade at higher prices than those which have
prevailed recently. There can be no assurance, however, that such increase in
the market value will occur or, if such an increase occurs, that it will equal
or exceed the direct arithmetical result of the Reverse Stock Split since there
are numerous factors and contingencies which would effect such value, including
the status of the market for the shares of common stock at the time, the
Company's reported results of operations in future fiscal periods and general
stock market conditions. Therefore, there can be no assurance that the shares of
common stock will not, despite the Reverse Stock Split, trade at prices which
are less than the arithmetical equivalent share price resulting from the Reverse
Stock Split.
Effects of Reverse Stock Split
If the Amendment is implemented the number of outstanding shares of common
stock will be reduced from approximately 46,036,949 shares to approximately
11,509,237 shares. The Amendment would not affect any stockholder's
proportionate equity interest in the Company, except for minor differences
resulting from the rounding of fractional shares. The Amendment also would not
affect the rights, preferences privileges or priorities of any of the Company's
outstanding classes and series of stock. The Amendment will not affect the
registration of the common stock under the Securities Exchange Act of 1934. The
Company intends to apply for listing of the post-conversion common stock on the
New York Stock Exchange (the "NYSE"). All fees incurred in connection with the
implementation of the proposed one-for-four Reverse Stock Split will be borne by
the Company.
The Company also has approximately 10,802,404 shares reserved for issuance
upon exercise of stock appreciation rights ("SARs") and conversion of
outstanding shares of Preferred Stock, leaving 43,160,647 shares of common stock
authorized, but unissued and not reserved for any particular purpose. All of the
43,160,647 shares of common stock authorized but unissued and not reserved for
future issuance would be subject to issuance, from time to time, in the
discretion of the Board of Directors for any proper corporate purpose without
further action by stockholders unless otherwise required by law or other
applicable rules and regulations.
The number of shares subject to stock appreciation rights ("SARs") granted
to directors, officers and employees of the Company under the Company's various
stock plans and the strike price for such SARs will be proportionately adjusted
for the Reverse Stock Split. The number of shares of common stock authorized for
the stock plans will also be proportionately adjusted.
The number of shares of common stock into which the outstanding shares of
Series A Cumulative Convertible Preferred Stock, Series B Cumulative Convertible
Preferred Stock and Series C Cumulative Convertible Preferred Stock may be
converted will also be appropriately adjusted to account for the Reverse Stock
Split pursuant to the applicable terms of each series of Preferred Stock set
forth in the Company's Articles of Incorporation, as amended.
The Reverse Stock Split may leave certain stockholders with one or more
"odd lots" of common stock, or stock in amounts of less than 100 shares. Such
odd lots may be more difficult to sell or may require greater transaction costs
per share to sell than shares in even multiples of 100. Last year, the Company
concluded, and will consider implementing in the future, an odd-lot repurchase
program to allow shareholders owning less than 100 shares of common stock to
sell their odd-lot holdings.
Although the Board of Directors believes as of the date of this Proxy
Statement that the Reverse Stock Split is advisable, the Reverse Stock Split
Proposal may be abandoned by the Board of Directors at any time before, during
or after the Special Meeting and prior to filing the amendment to the Articles
of Incorporation with the State Corporation Commission.
Exchange of Stock Certificates and Elimination of Fractional Share Interests
The Reverse Stock Split will occur at the Effective Time without any action
on the part of the Company's stockholders and without regard to the date or
dates certificates formerly representing shares of common stock ("old
certificates") are physically surrendered for certificates representing the
number of shares of common stock such stockholders are entitled to receive as a
result of the Reverse Stock Split ("new certificates").
As soon as practicable after the Effective Time, the Company will send a
letter of transmittal to each stockholder of record at the Effective Time for
use in transmitting old certificates to the Company's transfer agent, First
Union National Bank, Shareholder Services Group, 1525 West W.T. Harris Blvd.,
3C3, Charlotte, NC 28288-1153, (800) 829-8432 (the "Exchange Agent"). The letter
of transmittal will contain instructions for the surrender of old certificates
to the Exchange Agent in exchange for new certificates representing the number
of whole shares of new common stock into which their shares of common stock
represented by the old certificates have been converted as a result of the
Reverse Stock Split. Stockholders should not send their old certificates to the
Exchange Agent until they have received the letter of transmittal. Old
certificates not presented for surrender as soon as is practicable after the
letter of transmittal is sent shall be exchanged for new certificates at the
first time they are otherwise presented for transfer. Until so surrendered, each
current certificate representing shares of common stock will be deemed for all
corporate purposes after the Effective Date to evidence ownership of common
stock in the appropriately reduced whole number of shares.
Federal Income Tax Consequences
The following is a summary of the material anticipated federal income tax
consequences of the Reverse Stock Split to stockholders of the Company. This
summary is based on the federal income tax laws now in effect and as currently
interpreted; it does not take into account possible changes in such laws or
interpretations, including amendments to applicable statutes, regulations and
proposed regulations or changes in judicial or administrative rulings, some of
which may have retroactive effect. This summary is provided for general
information only and does not purport to address all aspects of the possible
federal income tax consequences of the Reverse Stock Split and is not intended
as tax advice to any person. In particular, and without limiting the foregoing,
this summary does not consider the federal income tax consequences to
stockholders of the Company in light of their individual investment
circumstances or to holders subject to special treatment under the federal
income tax laws (for example, life insurance companies, regulated investment
companies and foreign taxpayers). The summary does not address any consequence
of the Reverse Stock Split under any state, local, or foreign tax laws.
No ruling from the Internal Revenue Service ("Service") or opinion of
counsel will be obtained regarding the federal income tax consequences to the
stockholders of the Company as a result of the Reverse Stock Split. Accordingly,
each stockholder is encouraged to consult his or her tax advisor regarding the
specific tax consequences of the proposed transaction to such stockholder,
including the application and effect of state, local, and foreign income and
other tax laws.
The Company believes that the Reverse Stock Split would be a tax-free
recapitalization to the Company and its stockholders. If the Reverse Stock Split
qualifies as a recapitalization under Section 368 (a)(1)(E) of the Internal
Revenue Code of 1986, as amended, a stockholder of the Company who exchanges his
or her common stock solely for new common stock should recognize no gain or loss
for federal income tax purposes. A stockholder's aggregate tax basis in his or
her shares of new common stock received from the Company should be the same as
his or her aggregate tax basis in the common stock exchanged therefor. The
holding period of the new common stock received by such stockholder should
include the period during which the common stock surrendered in exchange
therefor was held, provided all such common stock was held as a capital asset on
the date of the exchange.
Vote Required
Assuming a quorum is present, the affirmative vote of the holders of a
majority of the outstanding shares of common stock of the Company is required to
approve the Amendment. The presence in person or by proxy of stockholders
entitled to vote a majority of the outstanding shares of common stock will
constitute a quorum. Shares represented by proxy or in person at the meeting,
including shares represented by proxies that reflect abstentions, will be
counted as present in the determination of a quorum. An abstention will have the
same effect as a vote "against" the Amendment proposal. "Broker non-votes"
(i.e., where a broker or nominee submits a proxy specifically indicating the
lack of discretionary authority to vote on a matter) will be treated in the same
manner as abstentions.
The votes represented by the proxies received will be voted FOR approval of
the adoption of the proposed amendment to the Company's Articles of
Incorporation, unless a vote against such approval or to abstain from voting is
specifically indicated on the proxy.
The Board of Directors recommends a vote FOR the proposal to amend the
Articles of Incorporation to effect a one-for-four split of the issued and
outstanding shares of common stock.
OTHER MATTERS
Stockholder Proposals
Stockholder proposals intended to be included in the Company's proxy
statement and form of proxy relating to, and to be presented at, the Annual
Meeting of Stockholders of the Company to be held in 2000 must be received by
the Company on or before December 31, 1999. Any proposals of stockholders to be
presented at the 2000 Annual Meeting which are delivered to the Company later
than March 16, 2000 will be voted by the proxy holders designated for the 2000
Annual Meeting in their discretion.
Incorporation by Reference
This Proxy Statement incorporates by reference certain financial statements
and other information filed with the SEC from (i) the Company's Annual Report on
Form 10-K for the year ended December 31, 1998, filed on March 31, 1999, as
amended by Form 10-K/A filed on April 15, 1999; and (ii) the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1999, filed on May 17, 1999.
A copy of the Company's Annual Report on Form 10-K and Form 10-K/A and/or the
Company's Quarterly Report on Form 10-Q will be furnished by first class mail
without charge upon the oral or written request to the Company's Secretary at
the address or telephone number shown in the front of this Proxy Statement.
By the order of the Board of Directors
Thomas H. Potts
President
June 30, 1999
APPENDIX A
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION
The first paragraph of Article III (as amended May 5, 1997) shall be
deleted and in place thereof shall be the following:
Common Stock
The number of shares of Common Stock that the Corporation shall have the
authority to issue shall be 100,000,000 shares of Common Stock with the par
value of $.01 each. Effective at the close of business on the effective date of
this amendment (the "Effective Time"), the filing of this amendment shall effect
a reverse stock split (the "Reverse Stock Split") pursuant to which each four
(4) issued and outstanding shares of Common Stock of the Corporation, par value
of $.01 per share, shall be combined into one (1) validly issued, fully paid and
nonassessable share of Common Stock of the Corporation, par value of $.01 per
share. Each stock certificate that prior to the Effective Time represented
shares of Common Stock shall, following the Effective Time, represent the number
of shares into which the shares of Common Stock represented by such certificate
shall be combined.
No fractional shares or scrip for fractional shares shall be issued by
reason of this Reverse Stock Split. In cases in which the Reverse Stock Split
would otherwise result in any shareholder holding a fractional share, the
Corporation shall issue one share for each fractional share of Common Stock
equal to or greater than one-half and no shares for each fractional share of
Common Stock less than one-half.
After the Effective Time, each holder of record of shares of Common Stock
shall be entitled to receive, upon the surrender of the certificate or
certificates representing the shares of Common Stock held by such holder
immediately prior to the Effective Time at the office of the transfer agent of
the Corporation in such form and accompanied by such documents, if any, as may
be prescribed by the transfer agent of the Corporation, a new certificate or
certificates representing the number of shares of Common Stock of which such
record owner is entitled after giving effect to the Reverse Stock Split. The
Reverse Stock Split will be deemed to occur at the Effective Time, regardless of
when the certificates are surrendered.