false 0001518621 0001518621 2021-11-16 2021-11-16
 
 
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
 
DC 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 17, 2021, (
November 16, 2021
)
Orchid Island Capital, Inc.
(Exact Name of Registrant as Specified in Charter)
Maryland
001-35236
27-3269228
(State or Other Jurisdiction of
Incorporation)
(Commission File Number)
(IRS Employer Identification No.)
3305 Flamingo Drive
,
Vero Beach
,
Florida
32963
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number,
 
including area code
(
772
)
231-1400
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
 
to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
☐
 
Written communications pursuant
 
to Rule 425 under the Securities Act (17 CFR 230.425)
☐
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a
 
-12)
☐
 
Pre-commencement communications pursuant to Rule 14d-2(b)
 
under the Exchange Act (17 CFR 240.14d-2(b))
☐
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
 
Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol:
 
Name of each exchange
 
on which registered:
Common Stock, par value $0.01 per share
ORC
NYSE
Indicate by check mark whether the registrant is an emerging growth
 
company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange
 
Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company
 
☐
If an emerging growth company,
 
indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange
Act.
 
☐
ITEM 1.01.
 
ENTRY INTO A MATERIAL
 
DEFINITIVE AGREEMENT.
Effective as of November 16, 2021, Orchid Island Capital, Inc.
 
(the “Company”) and the Company’s external manager, Bimini
Advisors, LLC (the “Manager”), entered into
 
a Third Amendment (the “Amendment”)
 
to the Management Agreement between
the Company and the Manager dated February 20, 2013
 
(the “Agreement”).
 
The Agreement was previously amended on April
1, 2014 and June 30, 2014.
 
Pursuant to the Agreement, the Manager performs management
 
and other activities relating to the mortgage-backed
 
securities
portfolio,
 
business
 
activities
 
and
 
day-to-day
 
operations
 
of
 
the
 
Company
 
as
 
set
 
forth
 
in
 
the
 
Management
 
Agreement,
 
and
provides the Company
 
with its management
 
team. In consideration
 
for such services, the
 
Manager receives management
 
fees
as well
 
as reimbursement
 
of certain
 
costs and
 
expenses.
 
Certain repurchase
 
agreement trading,
 
clearing and
 
administrative
services have been provided to the Company by AVM,
 
L.P.
 
(“AVM”).
 
Pursuant to Section 7 of the Agreement, the Company
is required to pay the fees for such services directly to AVM.
Pursuant to
 
the Amendment,
 
the Company
 
and the
 
Manager have
 
agreed the
 
services that
 
are currently
 
performed by
 
AVM
will be performed
 
by the Manager.
 
Bimini Capital Management,
 
Inc., the sole
 
member of the
 
Manager (“Bimini”), has
 
hired
Patrick Doyle,
 
effective as
 
of December
 
1, 2021,
 
to perform
 
the services
 
currently handled
 
by AVM.
 
The transition
 
of such
services from AVM
 
to the Manager
 
shall occur on
 
the first business day
 
immediately after the
 
termination of the
 
Company’s
arrangements with AVM,
 
which the Company currently expects will occur on approximately March
 
31, 2022.
 
Pursuant
 
to
 
the
 
Amendment,
 
following
 
termination
 
of
 
the
 
AVM
 
arrangements
 
and
 
in
 
consideration
 
for
 
the
 
repurchase
agreement trading, clearing and administrative services being performed by the Manager,
 
the Company will pay the following
fees to the Manager:
●
A daily fee
 
for repurchase agreement
 
funding transaction services
 
that is based
 
on the outstanding
 
principal balance
of the Company’s repurchase agreement funding.
 
The fee for
 
each day shall be
 
equal to the product
 
of the outstanding
principal balance
 
of repurchase
 
agreement funding
 
in place as
 
of the
 
end of
 
such day
 
and the
 
applicable basis
 
point
factor set forth in Appendix A of the Amendment, divided by 360; and
●
A fee for the clearing and operational services provided by personnel of the
 
Manager equal to $10,000 per month.
Pursuant
 
to
 
the
 
Amendment,
 
the
 
Company
 
is
 
also
 
required
 
to
 
pay
 
its
 
allocable
 
share
 
of
 
fees
 
incurred
 
for
 
safekeeping,
transactions and cash
 
services provided to the
 
Company by the Bank
 
of New York
 
Mellon (the “BNYM Fee”)
 
directly to the
Bank of New York
 
Mellon.
 
The Company’s allocable share of the BNYM Fee
 
shall be equal to the Company’s percentage of
all assets under management by the Manager,
 
inclusive of Bimini’s assets (measured as of
 
the first day of each month).
 
The
 
foregoing
 
description
 
of
 
the
 
Amendment
 
is
 
not
 
complete
 
and
 
is
 
qualified
 
in
 
its
 
entirety
 
by
 
reference
 
to
 
the
 
entire
Amendment, a copy of which is attached hereto as Exhibit 10.1, and incorporated
 
herein by reference.
ITEM 7.01.
 
REGULATION FD DISCLOSURE.
The Company
 
also issued a
 
press release today
 
announcing that Mr.
 
Doyle has been
 
hired by Bimini
 
and that the
 
repurchase
agreement funding
 
services and
 
clearing and
 
operational functions
 
currently handled
 
by AVM
 
are being
 
internalized by
 
the
Manager and will be handled by employees of the
 
Manager following a transition period. This press release is attached
 
hereto
as Exhibit 99.1 and is incorporated herein by reference.
The information referenced in this
 
Item
 
7.01 (including Exhibit 99.1 referenced in
 
Item 9.01 below) is
 
being “furnished” under
this Item 7.01. Regulation
 
FD Disclosure and, as such, shall
 
not be deemed to be
 
“filed” for the purposes of
 
Section 18 of the
Securities Exchange Act of
 
1934, as amended,
 
or otherwise subject
 
to the liabilities
 
of that Section and
 
shall not be
 
incorporated
by reference into any registration statement or other document filed by the Company pursuant to the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in
 
such filing.
Caution About Forward-Looking Statements.
 
This Current Report on Form 8-K contains forward-looking statements within
 
the meaning of the Private Securities Litigation
Reform Act of 1995 and
 
other federal securities laws, including, but
 
not limited to, statements about
 
the timing of the transition
of services from AVM to the Manager.
 
These forward-looking statements are based upon the Company’s present expectations,
but the Company
 
cannot assure investors
 
that actual results
 
will not vary
 
from the expectations
 
contained in the
 
forward-looking
statements. Investors
 
should not
 
place undue
 
reliance upon
 
forward looking
 
statements. For
 
further discussion
 
of the
 
factors
that could affect
 
outcomes, please refer
 
to the “Risk
 
Factors” section of
 
the Company's Annua
 
l
 
Report on Form
 
10-K for the
 
 
 
fiscal year ended December 31, 2020.
 
All forward-looking statements speak only as of the date on which they are made. New
risks
 
and
 
uncertainties
 
arise
 
over
 
time, and
 
it is
 
not possible
 
to
 
predict
 
those events
 
or how
 
they
 
may
 
affect
 
the Company.
Except
 
as required
 
by law,
 
the
 
Company
 
is not
 
obligated
 
to, and
 
does not
 
intend
 
to,
 
update or
 
revise
 
any
 
forward-looking
statements, whether as a result of new information, future events or otherwise.
Item 9.01. Financial Statements and Exhibits.
(d)
 
Exhibits
Exhibit No.
Description
10.1
99.1
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
 
report to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: November 17, 2021
 
ORCHID ISLAND CAPITAL,
 
INC.
By:
/s/ Robert E. Cauley
Robert E. Cauley
Chairman and Chief Executive Officer
 
 
 
 
 
 
 
THIRD AMENDMENT TO
MANAGEMENT AGREEMENT
THIS THIRD AMENDMENT TO MANAGEMENT AGREEMENT
 
(the “
Amendment
”) is
entered into effective as of November 16, 2021 (the “
Effective Date
”), by and between Orchid Island
Capital, Inc., a Maryland corporation (the “
Company
”), and Bimini Advisors, LLC, a Maryland limited
liability company (“
Manager
”). Capitalized terms used but not defined in this Amendment shall have
the meanings set forth in the Agreement (as defined below).
W I T N E S S E T H:
WHEREAS
, the Company and the Manager entered into a Management Agreement effective as
of February 20, 2013, the First Amendment to Management Agreement effective as of April 1, 2014 and
the Second Amendment to Management Agreement effective as of June 30, 2014 (collectively,
 
the
“
Agreement
”);
 
WHEREAS
, the execution of repurchase agreement funding transactions and certain clearing
and operational functions related to the Company’s trading activities are currently handled by AVM,
L.P.
 
(“
AVM
”), with the Company paying for such services directly to AVM;
WHEREAS
, Section 7 of the Agreement includes the following language relating to such
payment by the Company directly to AVM
 
(the “
AVM
 
Language
”):
“
For the avoidance of doubt, payment for all services provided to the Company by AVM, L.P.
(including repurchase agreement
 
trading, clearing and administrative services) shall be made by the
Company directly to AVM,
 
L.P.
”;
 
WHEREAS
, in connection with the Manager hiring an individual experienced in the execution
of repurchase agreement funding transactions and related clearing and operational functions, the
repurchase agreement funding services and clearing and operational functions currently handled by
AVM
 
are being internalized by the Manager and will be handled by employees of the Manager
following a transition period;
 
WHEREAS
, the Company will terminate its agreements with AVM
 
according to the terms
thereof; and
WHEREAS
, the Company and the Manager now desire to amend the Agreement on the terms
set forth herein.
NOW
,
THEREFORE
, in consideration of the premises and agreements contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which are expressly
acknowledged, the parties hereby amend and modify the Agreement in the manner set forth below:
1.
Section 2 of the Agreement is hereby amended by renumbering Sections 2(b)(xxv) and
2(b)(xxvi) as Sections 2(b)(xxvi) and 2(b)(xxvii), respectively, and by adding the following new
Section 2(b)(xxv) of the Agreement as follows:
“(xxv) performing repurchase agreement trading and certain clearing and operations services;”
2.
Section 7(a) of the Agreement is hereby deleted and replaced by the following:
 
“(a) Except as provided in Section 7(b)(xx) and 7(b)(xxi), the Manager shall be responsible for
(i) the expenses related to any and all personnel of the Manager and its Affiliates who provide
services to the Company pursuant to this Agreement or to the Manager pursuant to the Overhead
Sharing Agreement (including each of the officers of the Company and any directors of the
Company who are also directors, officers, employees or agents of the Manager, Bimini or any of
their Affiliates), including, without limitation, salaries, bonus and other wages, payroll taxes and
the cost of employee benefit plans of such personnel, and costs of insurance with respect to such
personnel and (ii) all other costs and expenses payable by the Manager under the Overhead
Sharing Agreement.”
3.
Section 7 of the Agreement is hereby amended by renumbering Section 7(b)(xxi) as Section
7(b)(xxiii), and by adding the following new Sections 7(b)(xxi) and 7(b)(xxii) of the Agreement as
follows:
“(xxi) beginning on the first business date immediately following the termination of the
Company’s agreements with AVM,
 
(a) fees for repurchase agreement funding transaction
services performed by personnel of the Manager which shall be calculated on a daily basis. The
fee for each day shall be equal to the product of (i) the outstanding principal balance of the
Company’s repurchase agreement funding in place as of the end of such day and (ii) the Basis
Point Factor, as described in Appendix A, divided by 360 ((principal * bps)/360); and
(b) a fee for the clearing and operational services provided by personnel of the Manager equal to
$10,000 per month;
(xxii) beginning on the first business date immediately following the termination of the
Company’s agreements with AVM,
 
the Company’s allocable share of fees incurred for
safekeeping, transactions and cash services provided by the Bank of New York
 
Mellon (the
“
BNYM fee
”). For purposes of this Section 7(b)(xxii), the Company’s “allocable share,” as
applied to the dollar amount of the BNYM fee, shall be equal to the Company’s percentage of all
assets under management by the Manager, inclusive of the assets of Bimini Capital Management,
Inc. (measured as of the first day of each month);”
4.
The AVM
 
Language in Section 7 of the Agreement is hereby deleted in its entirety and replaced
by the following:
 
“
For the avoidance of doubt, payment for safekeeping, transactions and cash services provided
to the Company by the Bank of New York
 
Mellon shall be made by the Company directly to the
Bank of New York
 
Mellon.
”
5.
Section 7(c) of the Agreement is hereby deleted in its entirety.
6.
Section 16(a) of the Agreement is hereby amended to amend and restate the notice information
for the Company as follows:
“The Company:
 
Orchid Island Capital, Inc.
3305 Flamingo Drive
Vero
 
Beach, FL 32963
Attention: Chief Executive Officer
Fax: 772-231-2896
with a copy to:
 
Vinson & Elkins L.L.P.
2200 Pennsylvania Avenue NW
Suite 500 West
Washington, DC 20037
Attention: S. Gregory Cope, Esq.
Fax: 202-879-8916”
7.
This Amendment constitutes an amendment or modification of the Agreement that is entered into
pursuant to Section 16(d) of the Agreement.
8.
Except as set forth in this Amendment, the parties acknowledge and agree that all other terms of
the Agreement shall remain in full force and effect.
9.
All prior agreements, promises, representations, or statements, whether oral or in writing,
regarding this Amendment are merged and integrated herein. This Amendment and the Agreement, as so
amended, constitute the entire agreement with respect to the subject matter hereof. No amendments,
waivers or modifications to the terms of the Agreement shall be valid unless set forth in writing and
signed by the Company and the Manager.
10.
This Amendment may be executed in counterparts, each of which will be deemed an original,
and all of which taken together shall constitute a single agreement.
[Signature page follows]
 
 
IN WITNESS WHEREOF
, the parties hereto have executed this Amendment as of the date
first written above.
ORCHID ISLAND CAPITAL,
 
INC.
By:
 
/s/ Robert E. Cauley
Name:
 
Robert E. Cauley
Title:
 
Chief Executive Officer
BIMINI ADVISORS, LLC
By:
 
/s/ George H. Haas, IV
Name:
 
George H. Haas, IV
Title:
 
Chief Financial Officer, Chief Investment Officer
and Secretary
 
Appendix A
Basis Point Factor
For purposes of calculating the daily fee set forth in Section 7(b)(xxi)(a) of the Agreement, (i) if
the aggregate outstanding principal balance of the Company’s repurchase agreement funding is equal to
or less than $5,000,000,000 (measured as of the end of each day), the Basis Point Factor to be applied
shall be equal to 1.5 basis points (or 0.00015) and (ii) if the aggregate outstanding principal balance of
the Company’s repurchase agreement funding is greater than $5,000,000,000 (measured as of the end of
each day), the Basis Point Factor to be applied for amounts in excess of $5,000,000,000 shall be equal to
1.0 basis points (or 0.00010).
 
ORCHID ISLAND CAPITAL, INC. AND
BIMINI CAPITAL MANAGEMENT,
 
INC. ANNOUNCE
THIRD AMENDMENT TO MANAGEMENT AGREEMENT
●
Third Amendment to Management Agreement
●
Internalization of Funding and Custody/Settlement Operations
●
Hiring of Patrick Doyle by Bimini Capital, Inc.
Vero
 
Beach, Fla., November 17, 2021 - Orchid Island Capital,
 
Inc. (“Orchid”) (NYSE: ORC) and Bimini Capital,
Inc. (“Bimini”) (OTCQB: BMNM)
 
jointly announced today that
 
effective as of November 16,
 
2021, Orchid and its
external manager, Bimini Advisors, LLC
 
(the “Manager”), entered
 
into a Third Amendment
 
(the “Amendment”) to
the Management
 
Agreement between
 
Orchid and
 
the Manager
 
dated February
 
20, 2013,
 
as previously
 
amended
(the “Agreement”).
 
The Manager is a wholly-owned subsidiary of Bimini.
 
Pursuant to the Agreement, the Manager
 
performs management services relating
 
to the mortgage-backed securities
portfolio, business activities and
 
day-to-day operations of Orchid.
 
In consideration for those
 
services, the Manager
receives management fees as well
 
as reimbursement of certain costs
 
and expenses from Orchid.
 
Also pursuant to
the Agreement, certain repurchase agreement
 
trading, clearing and administrative services
 
are provided to Orchid
by AVM,
 
L.P.
 
(“AVM”).
 
Orchid pays the fees for those services directly to AVM.
 
Bimini and
 
the Manager
 
are taking
 
steps to
 
internalize the
 
repurchase agreement
 
trading, clearing
 
and administrative
services that are
 
currently provided by AVM.
 
Pursuant to the Amendment,
 
Orchid and the Manager
 
have agreed
that
 
Orchid’s
 
agreements
 
with
 
AVM
 
will
 
be
 
terminated
 
and
 
the
 
Manager
 
will
 
become
 
responsible
 
for
 
the
performance of repurchase agreement trading, clearing and administrative
 
services.
 
Following
 
termination
 
of
 
the
 
AVM
 
arrangements
 
and
 
in
 
consideration
 
for
 
the
 
repurchase
 
agreement
 
trading,
clearing and
 
administrative services
 
to
 
be performed
 
by the
 
Manager,
 
Orchid will
 
pay the
 
following fees
 
to the
Manager:
●
A daily fee for
 
repurchase agreement funding transaction services
 
equal to the
 
product of the outstanding
principal balance
 
of repurchase
 
agreement funding
 
in place
 
as of
 
the end
 
of such
 
day and
 
the applicable
basis point factor set forth in the Amendment, divided by 360; and
●
A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per
month.
Pursuant to
 
the
 
Amendment, Orchid
 
is
 
also required
 
to
 
pay its
 
allocable share
 
of
 
fees incurred
 
for
 
safekeeping,
transactions and cash services provided to Orchid by
 
the Bank of New York Mellon (the “BNYM Fee”) directly to
the Bank of New York Mellon.
 
Orchid’s allocable share of the BNYM Fee
 
will be equal to Orchid’s percentage of
all the assets under management by the Manager,
 
inclusive of the assets of Bimini (measured as of the first
 
day of
each month).
 
AVM
 
also performs repurchase agreement trading, clearing and administrative services for Bimini with respect to
its
 
mortgage-backed
 
securities
 
portfolio.
 
The
 
Manager’s
 
internalization
 
of
 
these
 
services
 
will
 
allow
 
Bimini
 
to
terminate
 
its
 
arrangements
 
with
 
AVM,
 
and
 
the
 
Manager
 
will
 
become
 
responsible
 
for
 
the
 
performance
 
of
 
these
services for Bimini.
 
Bimini
 
has hired
 
Patrick Doyle,
 
effective
 
as
 
of December
 
1, 2021,
 
to lead
 
the Manager’s
 
repurchase agreement
trading, clearing and administrative services.
 
From 1998 until joining Bimini, Mr. Doyle was employed by AVM,
most recently as Head of Funding and Liquidity.
 
Commenting on the Amendment, the internalization
 
of certain functions and the hiring of Patrick
 
Doyle, Robert E.
Cauley, the Chairman and CEO of Orchid and Bimini, stated, “We are very pleased to welcome Pat to
 
Bimini.
 
Pat
has significant expertise and experience in the repo markets, as well as
 
extensive knowledge of the settlement and
operations related practices
 
of our business.
 
As a manager
 
of repo funding
 
operations at AVM, Pat has worked
 
with
Bimini
 
since
 
2003.
 
Once these
 
critical
 
functions
 
are
 
being
 
performed by
 
Bimini
 
for
 
Orchid,
 
we
 
will
 
be
 
able
 
to
provide
 
them
 
in
 
an
 
efficient
 
and
 
cost-effective
 
manner
 
with
 
the
 
help
 
of
 
one
 
of
 
the
 
funding
 
market’s
 
leading
professionals.”
 
Mr.
 
Doyle
 
added,
 
“The
 
opportunity
 
to
 
work
 
with
 
Bimini
 
is
 
very
 
exciting
 
for
 
me.
 
I
 
have
 
been
working with Bimini as a client since their inception in 2003. This opportunity is a natural
 
fit for both of us. I look
forward
 
to
 
enhancing
 
Bimini’s
 
abilities
 
to
 
fund
 
their
 
portfolios
 
under
 
management,
 
to
 
create
 
new
 
operational
efficiencies, and to enhance the management of liquidity risks.”
 
About Orchid Island Capital, Inc.
Orchid Island Capital, Inc. is a specialty finance company that invests on a leveraged basis in Agency RMBS. Our
investment strategy focuses on, and
 
our portfolio consists of,
 
two categories of Agency RMBS:
 
(i) traditional pass-
through Agency RMBS, such as mortgage pass-through certificates and collateralized mortgage
 
obligations issued
by
 
Fannie
 
Mae,
 
Freddie
 
Mac
 
or
 
Ginnie
 
Mae,
 
and
 
(ii)
 
structured
 
Agency
 
RMBS. The
 
Company
 
is
 
managed by
Bimini Advisors, LLC, a registered investment adviser with the Securities
 
and Exchange Commission.
About Bimini Capital Management, Inc.
Bimini Capital
 
Management, Inc.
 
invests primarily
 
in, but
 
is not
 
limited to
 
investing in,
 
residential mortgage-related
securities issued
 
by Fannie
 
Mae, Freddie
 
Mac and Ginnie
 
Mae. Its
 
objective is
 
to earn
 
returns on
 
the spread
 
between
the
 
yield on
 
its assets
 
and its
 
costs, including
 
the interest
 
expense on
 
the funds
 
it borrows.
 
In addition,
 
Bimini
generates a significant portion of
 
its revenue serving as
 
the manager of the MBS
 
portfolio of Orchid Island
 
Capital,
Inc.
 
Forward-Looking Statements
This
 
press
 
release
 
contains
 
forward-looking
 
statements
 
within
 
the
 
meaning
 
of
 
the
 
Private
 
Securities
 
Litigation
Reform Act of
 
1995 and
 
other federal
 
securities laws.
 
These forward-looking
 
statements include,
 
but are not
 
limited
to,
 
statements
 
about
 
the
 
transition
 
of
 
services
 
from
 
AVM
 
to
 
the
 
Manager
 
and
 
the
 
performance
 
of
 
repurchase
agreement
 
funding,
 
clearing
 
and
 
administrative services
 
by
 
the
 
Manager.
 
These forward-looking
 
statements are
based upon Orchid’s and Bimini’s present expectations, but these statements are
 
not guaranteed to occur. Investors
should not place
 
undue reliance upon forward-looking
 
statements. For further
 
discussion of the
 
factors that could
affect outcomes, please refer
 
to the “Risk Factors”
 
section of the Annual
 
Report on Form 10-K
 
for the fiscal year
ended December 31, 2020 of Bimini and Orchid, respectively.