Cherry Hill Mortgage Investment Corp

Current report

Risks Related to the Pending Mergers

Current report

The exchange ratio is fixed and will not be adjusted in the event of any change to MITT’s stock price or our stock price.

Current report

As a result of the Mergers, each share of our common stock issued and outstanding immediately prior to the effective time of the Company Merger (other than Cancelled Shares) will convert into the right to receive a fixed combination of stock and cash, consisting of (A) from MITT, (i) that number of validly issued, fully paid and non-assessable shares of MITT Common Stock equal to 0.3063x, and (ii) $0.41 per share in cash, without interest, and (B) from MITT Manager, $0.52 per share in cash. The 0.3063x exchange ratio is fixed and will not be adjusted to reflect changes in MITT’s stock price or our stock price.

Current report

Changes in MITT’s stock price prior to the Mergers will affect the market value of the consideration that our common stockholders will be entitled to receive at the effective time of the Company Merger. Stock price changes may result from a variety of factors (many of which are beyond the control of us and MITT), including the following factors:

Current report

MITT’s stock price at the closing of the Mergers may vary from its price on the date the Merger Agreement was executed. As a result, the market value of the MITT common stock that our stockholders will receive pursuant to the Merger Agreement will also vary. If the price of MITT’s common stock declines between the date the Merger Agreement was signed and the closing of the Mergers, including for any of the reasons described above, our common stockholders will receive MITT common stock that has a market value upon completion of the Mergers that is less than the market value of such shares calculated pursuant to the exchange ratio on the date the Merger Agreement was signed.

Current report

Therefore, since the number of shares of MITT common stock issuable pursuant to the Merger Agreement is fixed, our common stockholders cannot be sure of the market value of the MITT common stock they will receive upon consummation of the Mergers.

Current report

Completion of the Mergers is subject to a number of conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the Mergers could have material adverse effects on our business.

Current report

The completion of the Mergers are subject to a number of conditions, including, among other things, the approval of each of CHMI’s and MITT’s stockholders, the effectiveness of a registration statement on Form S-4 under the Securities Act of 1933, as amended, the listing on the NYSE of the MITT common stock and the MITT preferred stock issuable in the Merger, and the receipt of certain regulatory approvals, which make the completion and timing of the Mergers uncertain. The failure to satisfy any or all of the required conditions could delay the completion of the Mergers for a significant period of time or prevent them from occurring at all. There can be no assurance that the conditions precedent to the completion of the Mergers will be satisfied or waived, or that the Merger will be completed.

Current report

If the Mergers are not completed, we may be materially adversely affected and, without realizing any of the benefits of having completed the Mergers, will be subject to a number of risks, including the following:

Current report

In addition, if the Mergers are not completed, we could be subject to litigation related to any failure to complete the Mergers or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement. Any of these risks could materially and adversely impact our ongoing business, financial condition, financial results and stock price.

Current report

Similarly, delays in the completion of the Mergers could, among other things, result in additional transaction costs, loss of revenue or other negative effects associated with delay and uncertainty about completion of the Mergers and could materially and adversely impact our ongoing business, financial condition, financial results and stock price following the completion of the Mergers.

Current report

In addition, if the Merger Agreement is terminated under certain circumstances specified therein, we may be required to pay MITT a termination fee equal to 4.0% of our equity value.

Current report

The pendency of the Mergers could adversely affect our businesses and operations.

Current report

In connection with the pendency of the Mergers, it is possible that some counterparties, servicers, lenders and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships with us, as the case may be, as a result of the Mergers or otherwise, which could negatively affect our financial condition, results of operations and/or cash flows, as well as the market price of our common stock, regardless of whether the Mergers are completed. Similarly, our employees may experience uncertainty about their future roles with the combined company following the Mergers, which may adversely affect our ability to attract and retain key personnel during the pendency of the Mergers. In addition, due to covenants in the Merger Agreement, we may be unable (without MITT’s prior written consent), during the pendency of the Mergers, to undertake certain business activities, including our ability in certain cases to modify or terminate contracts, acquire or dispose of assets, incur indebtedness, issue equity securities, incur capital expenditures or settle claims. In addition, our quarterly dividends on common stock are capped at $0.10 per share during the pendency of the Mergers. Such limitations could adversely affect our business and operations prior to the completion of the Mergers.

Current report

The Merger Agreement contains provisions that could make it more difficult for a third party to acquire us or could result in any competing proposal being at a lower price than it might otherwise be.

Current report

We are subject to certain restrictions on our ability to solicit alternative acquisition proposals from third parties, to enter into an acquisition agreement with respect to an alternative acquisition proposal and to participate in discussions or negotiations with or provide non-public information to any person relating to an alternative acquisition proposal, subject to customary exceptions. In addition, we may be required to pay MITT a termination fee equal to 4.0% of our equity value under specified circumstances.

Current report

Notwithstanding these restrictions, prior to obtaining the approval of our stockholders, under specified circumstances, our board of directors may change its recommendation of the Mergers, and we may also terminate the Merger Agreement to enter into an acquisition agreement with respect to a superior proposal upon payment of the termination fee described above.

Current report

These provisions could make it more difficult for a third party that might have an interest in acquiring all or a significant part of us from considering or proposing such an acquisition, even if we were prepared to pay consideration with a higher per-share cash or market value than the market value proposed to be received in the Mergers, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in specified circumstances under the Merger Agreement.

Current report

Even if we complete the Mergers, the combined company may fail to realize the anticipated benefits of the Mergers.

Current report

No assurance can be given that the anticipated benefits, synergies, growth, profitability, cash flow generation and earnings accretion of the Mergers will be realized by the combined company or, if realized, may be realized more slowly than expected. Further, inherent in transactions such as these are the risks relating to the integration of the two businesses, including the combination of two mortgage REIT portfolios and related operations.