Item 1.01.
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On June 27, 2017, First Potomac Realty Trust, a Maryland real estate investment trust (the
Company
), First Potomac Realty
Investment Limited Partnership, a Delaware limited partnership (the
Company LP
and, together with the Company, the
First Potomac Parties
) and Government Properties Income Trust, a Maryland real estate investment
trust (
GOV
), GOV NEW OPPTY REIT, a Maryland real estate investment trust and wholly-owned subsidiary of GOV (
REIT Merger Sub
) and GOV NEW OPPTY LP, a Delaware limited partnership, majority-owned subsidiary of
REIT Merger Sub and wholly-owned subsidiary of GOV (
Partnership Merger Sub
and, together with GOV and REIT Merger Sub, the
GOV Parties
), entered into a definitive Agreement and Plan of Merger (the
Merger Agreement
). The Merger Agreement provides that, subject to the satisfaction or waiver of certain customary conditions, Partnership Merger Sub will merge with and into the Company LP (the
Partnership
Merger
), and immediately following the Partnership Merger, the Company will merge with and into REIT Merger Sub (the
REIT Merger
and, together with the Partnership Merger, the
Mergers
). Upon completion
of the REIT Merger, REIT Merger Sub will survive and the separate corporate existence of the Company will cease. Upon completion of the Partnership Merger, the Company LP will survive as an indirect, majority-owned subsidiary of GOV and the separate
existence of Partnership Merger Sub will cease. The Mergers and the other transactions contemplated by the Merger Agreement are collectively referred to herein as the
Transaction
.
Pursuant to the terms and subject to the conditions and limitations set forth in the Merger Agreement: (i) at the effective time of the
REIT Merger (the
REIT Merger Effective Time
), each of the common shares of beneficial interest of the Company, par value $0.001 per share (the
Company Common Shares
), issued and outstanding immediately prior to
the REIT Merger Effective Time (other than any Company Common Shares held by a Company subsidiary) will be converted into the right to receive an amount in cash equal to $11.15, without interest (the
REIT Per Share Merger
Consideration
); and (ii) at the effective time of the Partnership Merger (the
Partnership Merger Effective Time
), each unit of limited partnership interests in the Company LP issued and outstanding immediately prior
to the Partnership Merger Effective Time (other than any Company LP limited partnership units held by the Company) will be converted into the right to receive an amount in cash equal to the REIT Per Share Merger Consideration, without interest (the
Partnership Per Unit Merger Consideration
), except that each holder of Company LP limited partnership interests may elect, in lieu of the Partnership Per Unit Merger Consideration, to have such holders units of limited
partnership interests in the Company LP converted into an equal number of preferred limited partnership interests in the Company LP. In addition, at the REIT Merger Effective Time, each outstanding option to purchase Company Common Shares, each
outstanding restricted Company Common Share granted under the Companys equity compensation plans and each award outstanding under the Companys legacy historical, long-term incentive program shall become fully vested and exercisable, and
shall be cancelled in exchange for the right to receive a single, lump sum cash payment in accordance with the Merger Agreement.
The
Transaction is subject to approval by the holders of at least a majority of the outstanding Company Common Shares, and each partys obligation to consummate the Transaction is subject to certain other customary conditions provided for in the
Merger Agreement, including the accuracy of the other partys representations and warranties, subject to customary qualifications, the other partys material compliance with its covenants and agreements, and, with respect to GOVs
obligations, the absence of a Company material adverse effect and the receipt by GOV of a tax opinion relating to the REIT status of the Company. The Transaction is expected to close prior to December 31, 2017.
Pursuant to the Merger Agreement, the Company has agreed that it will not pay regular, quarterly distributions to the holders of Company
Common Shares prior to the closing of the Transaction, except to the extent that dividends and other distributions are necessary for each of the Company and its REIT subsidiary to maintain its status as a REIT. Pursuant to the Merger Agreement, upon
request by GOV, the parties will work in good faith (i) to effect the Transaction by
means of a tender offer for all of the outstanding Company Common Shares for the REIT Per Share Merger Consideration, and/or (ii) in certain circumstances, to restructure the REIT Merger as
a reverse merger, subject to certain requirements including reasonable and customary amendments to the Merger Agreement.
The closing of
the Transaction is not subject to a financing condition, and the parties to the Merger Agreement have the right to specific performance to enforce the terms thereof, including the obligation of GOV to consummate the Transaction in accordance with
the terms and conditions of the Merger Agreement.
The Merger Agreement contains certain customary representations, warranties and
covenants, including, among others, covenants with respect to the conduct of the Companys business prior to closing, subject to certain consent rights by GOV, covenants prohibiting the Company from soliciting, providing information or entering
into discussions concerning proposals relating to an alternative acquisition transaction (for 20% or more of the equity or assets of the Company), subject to certain limited exceptions.
The Merger Agreement contains certain termination rights for the Company and GOV. Under specified circumstances, the Company is entitled to
terminate the Merger Agreement to accept a superior proposal (for 67% or more of the equity or assets of the Company), which proposal the Companys Board of Trustees (the
Board
) determines in its good faith judgment, if
consummated, would be more favorable to the shareholders of the Company from a financial point of view, and if accepted, is reasonably likely to be completed on the terms proposed on a timely basis. Upon such a termination by the Company, or under
certain other specified circumstances, the Company will be required to pay GOV a termination fee of $25 million. If the Merger Agreement is terminated by GOV for a material breach of the Merger Agreement by the Company or terminated by either
party as a result of the failure to obtain the approval of the Transaction by at least a majority of the holders of the Company Common Shares, the Company will be required to reimburse GOV up to $5 million for expenses incurred by GOV in
connection with the Merger Agreement (although if the termination fee later becomes payable, amounts reimbursed to GOV by the Company will be credited against the termination fee payable).
The foregoing description of the Merger Agreement does not purport to be complete, and is qualified in its entirety by reference to the full
text of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. A copy of the Merger Agreement has been included to provide shareholders with information regarding its terms and is not intended to
provide any factual information about the First Potomac Parties or the GOV Parties. The representations, warranties and covenants contained in the Merger Agreement have been made solely for the purposes of the Merger Agreement and as of specific
dates; were solely for the benefit of parties to the Merger Agreement; and are not intended as statements of fact to be relied upon by the Companys shareholders or GOVs shareholders, but rather as a way of allocating the risk between the
parties to the Merger Agreement in the event the statements therein prove to be inaccurate; have been modified or qualified by certain confidential disclosures that were made between the parties in connection with the negotiation of the Merger
Agreement, which disclosures are not reflected in the Merger Agreement attached hereto; may no longer be true as of a given date; and may apply standards of materiality in a way that is different from what may be viewed as material by shareholders.
Accordingly, shareholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the First Potomac Parties or the GOV Parties. Moreover,
information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Companys public disclosures. The Company
acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make
the statements in this Current Report on Form
8-K
not misleading.
Additional Information and Where to Find
It
In connection with the proposed merger transaction, the Company expects to file with the Securities and Exchange Commission
(the
SEC
) a proxy statement, which proxy statement will be mailed or otherwise
disseminated to the Companys shareholders when it becomes available. The Company also plans to file other relevant documents with the SEC regarding the proposed transactions.
INVESTORS
ARE URGED TO READ THE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
You may obtain a free copy of the proxy statement (if and when it becomes
available) and other relevant documents filed by the Company with the SEC at the SECs website at www.sec.gov. Copies of the documents filed by the Company will be available free of charge on its website at www.first-potomac.com, or by
directing a written request to First Potomac Realty Trust, 7600 Wisconsin Avenue, 11th Floor, Bethesda, MD 20814, Attention: Investor Relations.
The Company and its trustees and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed
merger transaction. You can find information about the Companys trustees and executive officers in the Companys definitive proxy statement filed with the SEC on April 6, 2017 in connection with its 2017 annual meeting of
shareholders. Additional information regarding the interests of such potential participants will be included in the proxy statement and other relevant documents filed with the SEC if and when they become available. You may obtain free copies of
these documents from the Company using the sources indicated above.
Cautionary Statement Regarding Forward Looking Statements
The forward-looking statements contained in this Current Report on Form
8-K,
including statements
regarding the proposed Transaction and the timing of such transaction, are subject to various risks and uncertainties. Although the Company believes the expectations reflected in any forward-looking statements contained herein are based on
reasonable assumptions, there can be no assurance that our expectations will be achieved. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally
identifiable by use of the words believe, expect, intend, anticipate, estimate, project, or other similar expressions. Such statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results of the Company to differ materially from future results, performance or achievements projected or contemplated in the forward-looking statements. Certain factors include, among
others, the ability of the Company to obtain the required shareholder approval to consummate the proposed merger transaction; the satisfaction or waiver of other conditions in the Merger Agreement; the Companys or GOVs ability to
consummate the proposed merger transaction; the outcome of any legal proceedings that may be instituted against the Company and others related to the Merger Agreement; the possibility that the anticipated benefits and synergies from the proposed
transaction cannot be fully realized or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of the Companys and GOVs operations will be greater than expected; operating costs
and business disruption may be greater than expected; the ability of the Company, GOV, or the combined company to retain and hire key personnel and maintain relationships with providers or other business partners pending the consummation of the
transaction; changes in general or regional economic conditions; and the impact of legislative, regulatory and competitive changes and other risk factors detailed in each of the Companys Annual Report on Form
10-K
and GOVs Annual Report on Form
10-K
and described from time to time in each of the Companys filings and GOVs filings with the SEC.
The risks set forth above are not exhaustive. Many of these factors are beyond our ability to control or predict. Forward-looking statements
are not guarantees of performance. For forward-looking statements herein, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The Company assumes no
obligation to update or supplement forward-looking statements that become untrue because of subsequent events. The Company does not intend to, and expressly disclaims any duty to, update or revise the forward-looking statements in this discussion to
reflect changes in underlying assumptions or factors, new information, future events, or otherwise, after the date hereof, except as may be required by law. In light of these risks and uncertainties, you should not rely upon these forward-looking
statements after the date of this communication and should keep in mind that any forward-looking statement made in this discussion, or elsewhere, might not occur.