Item 1.01. Entry into a Material Definitive Agreement.
On August 2, 2022, Matrix Financial
Services Corporation (“Matrix”), an Arizona corporation and wholly owned
subsidiary of Two Harbors Investment Corp. (“Two Harbors” or the
“Company”), entered into a stock purchase agreement (the “Agreement”)
with Freedom Mortgage Corporation (“Seller” or “Freedom”)
and RoundPoint Mortgage Servicing Corporation (“RoundPoint”).
Pursuant to the terms and conditions set
forth in the Agreement and following the satisfaction or waiver of the conditions set forth therein, Matrix will purchase and
acquire all of the issued and outstanding equity securities of RoundPoint (the “Acquisition”).
The preliminary purchase price to be paid by Matrix at the closing of the Agreement shall consist of (a) a premium amount equal
to $10,500,000, plus (b) the Tangible Net Book Value (as defined in the Agreement) of RoundPoint as of the last calendar
day of the month immediately preceding the closing date (the “Cutoff
Date”), minus (c) the aggregate amount of indebtedness or advances payable by RoundPoint or its subsidiary
to their respective affiliates. The preliminary purchase price will be further adjusted based on (y) the change in Tangible Net
Book Value of RoundPoint between the Cutoff Date and the closing date of the Acquisition and (z) the Earnings (as defined in
the Agreement) of RoundPoint during the period commencing on October 1, 2022 and ending on the closing date of the
Acquisition.
The Agreement includes customary
representations and warranties of Matrix, Seller and RoundPoint. The Agreement also includes customary covenants of Matrix, Seller
and RoundPoint to be performed during the period between execution of the Agreement and the closing date of the Acquisition (the
“Pre-Closing Period”), including, among other things, covenants by
Seller with respect to the conduct of RoundPoint. During the Pre-Closing Period, Seller shall divest certain assets from RoundPoint,
including assets unrelated to the mortgage servicing and subservicing business of RoundPoint, which assets and corresponding
liabilities will not be included in the Acquisition. Also during the Pre-Closing Period, Matrix, Seller and RoundPoint shall enter
into a subservicing agreement. Following execution of the subservicing agreement and prior to the closing of the Acquisition, Matrix
will transfer the servicing of certain mortgage loans to RoundPoint in accordance with an agreed upon schedule.
The Agreement includes customary indemnification
provisions, including with respect to breaches of representations, warranties and covenants and, in the case of Seller, liabilities retained
by Seller and in the case of Matrix, liabilities of the acquired business arising after the closing and resulting from Matrix’s
operation of the business.
The closing of the Acquisition is subject to certain
conditions, including: (a) the absence of any law or order prohibiting the closing or materially restricting the assets, ownership
or operation of the business following the closing; (b) the absence of any proceeding wherein an unfavorable order would reasonably
be expected to prevent the closing; (c) the accuracy of representations and warranties and compliance with covenants, subject to
customary materiality qualifiers; and (d) in the case of Matrix, (i) completion of the divestiture described above, (ii) receipt
of the approvals and filings required to operate the business after the closing date without the imposition of any burdensome condition,
(iii) absence of a material adverse effect, (iv) receipt of certain third-party consents and (v) receipt of certain financial
statements for the business.
The Agreement may be terminated, on or prior
to the closing date of the Acquisition by: (a) the mutual written agreement of Matrix, Seller and RoundPoint; (b) by Matrix or
Seller if the other party materially breaches its representations or warranties or fails to materially comply with its covenants
under the Agreement, subject to a cure right; (c) by Matrix if any required approval is denied and non-appealable; (d) by
either Matrix or Seller if the transaction has not closed by October 31, 2023, subject to an automatic extension to
April 30, 2024 if all conditions are satisfied other than the receipt of required approvals; or (e) by Matrix or Seller if
a final non-appealable order is issued prohibiting the closing. The Agreement provides for the payment of certain termination fees
in the event the Agreement terminates under certain circumstances.
The foregoing description of the Agreement does
not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Agreement, which will be filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022. The representations, warranties and covenants contained in the Agreement were made only
for the purposes of the Agreement, as of specific dates and solely for the benefit of the parties to the Agreement and may not have been
intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among
the parties to the Agreement. The assertions embodied in those representations and warranties may be subject to important qualifications
and limitations agreed to by Matrix, Seller and RoundPoint in connection with negotiating their respective terms. Moreover, the representations
and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to stockholders.
For the foregoing reasons, none of Two Harbors’ stockholders or any other person should rely on such representations and warranties,
or any characterizations thereof, as statements of factual information at the time they were made or otherwise.