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): September 20,
1996
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of registrant as specified in its charter)
Texas 1-9016 75-6335572
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification
Incorporation) Number)
6220 North Beltline, Suite 205, Irving,
Texas 75063
(Address of principal executive offices) (zip code)
(972) 550-6053
(Registrant's telephone number,
including area code)
Item 5. Other Events
On September 23, 1996, American Industrial Properties
REIT (the "Trust") announced that it intends to seek
reconsideration of the September 9, 1996 ruling by Judge
Barefoot Sanders of the U.S. District Court for the Northern
District of Texas (the "Ruling") which held that the Trust's
Bylaw provision limiting share ownership to 9.8% of the
Trust's issued and outstanding shares (the "Excess Share
Provision) is invalid under the Texas REIT Act. The court
entered its ruling in response to a motion for partial
summary judgment filed by Pure World, Inc. and Paul O.
Koether in connection with a lawsuit initiated by the Trust.
The Trust's suit against Pure World, Inc. and Paul O.
Koether alleges, among other things, violations under
federal and state securities laws for material
misrepresentations and omissions made by the defendants in
filings made with the Securities and Exchange Commission.
On September 20, 1996, in an effort to address the
court's concerns as expressed in the Ruling while ensuring
the protection of the Trust from an inadvertent or
involuntary loss of its REIT status under the Internal
Revenue Code of 1986, as amended (the "Code"), the Trust
Managers of the Trust adopted a modified Bylaw provision
(the "Bylaw Amendment") that will become effective upon the
existing Excess Share Provision being finally adjudicated to
be invalid or the Trust being enjoined from enforcing the
existing Excess Share Provision. The Bylaw Amendment does
not contain any restrictions on the transfer of Trust
shares. Rather, the Bylaw Amendment seeks to assure
preservation of REIT status by imposing an ownership limit
consistent with the Code and industry standards. When
triggered, the Bylaw Amendment results in the formation of a
charitable trust to own Trust shares purchased in violation
of the Bylaw Amendment.
The Trustee is entitled to vote all shares held in the
charitable trust and to receive all distributions on such
shares, and will hold such distributions, for the benefit of
the charitable beneficiary. If any distributions with
respect to such shares are paid to the person who otherwise
would have been considered the owner (the "Conveying
Shareholder") before the Trust discovers the breach of the
ownership limit, the Conveying Shareholder must pay that
amount to the Trustee. Distributions on shares held in the
charitable trust will be used by the trustee first to defray
expenses of the charitable trust and second to pay any
excess to the charitable beneficiary. The Conveying
Shareholder will not receive any benefit from distributions.
The Trustee is obligated to sell shares held in the
charitable trust as soon as practicable to a person whose
ownership of such shares would not cause a breach of the
ownership limit. The net sale proceeds will be distributed
first to defray expenses of the charitable trust, second to
reimburse the Conveying Shareholder an amount intended to
ensure that such person will not realize any appreciation in
value of the shares and third to pay any excess to the
charitable beneficiary. If a Conveying Shareholder sells
such shares prior to the Trust discovering the prior
automatic conveyance to the charitable trust, such shares
shall be deemed to have been sold on behalf of the
charitable trust and the Conveying Shareholder must deliver
to the charitable trust an amount equal to the excess of the
amount received by the Conveying Shareholder in such sale
over the amount that the Conveying Shareholder would have
received under the provisions of the Bylaw Amendment.
The Bylaw Amendment requires any person who would
beneficially own Trust shares in excess of the ownership
limit but for the conveyance to a charitable trust, or who
attempts to acquire such shares, to give the Trust immediate
written notice of that event. In the case of such a
proposed or attempted conveyance, the Conveying Shareholder
must give at least fifteen days' prior written notice of the
event and provide any other information that the Trust
Managers request in order to determine whether such
conveyance affects the Trust's status as a REIT under the
Code.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
99.1 Amendment to the Bylaws of American
Industrial Properties REIT, dated September
20, 1996, adding Article XIII to the Bylaws.
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.
AMERICAN INDUSTRIAL PROPERTIES
REIT
/s/ Charles W. Wolcott
Charles W. Wolcott
President and Chief Executive Officer
DATE: September 24, 1996
Index to Exhibits
Sequentially
Exhibit No. Description Numbered Pages
99.1 Amendment to the Bylaws of American
Industrial Properties REIT, dated
September 20, 1996, adding Article
XIII to the Bylaws.
Exhibit 99.1
ARTICLE XIII
REIT QUALIFICATION PROVISIONS
Section 13.1 Trust Compliance with Internal
Revenue Code REIT Provisions. The Shares are, and shall at
all times remain, freely transferable and such Shares shall
retain, at all times, all of the rights and benefits
accorded such Shares by the Declaration of Trust and
applicable law, provided however, that certain shareholders
shall be subject to the provisions of this Article XIII in
order to ensure that their Beneficial Ownership of Shares
does not prevent the Trust from fully complying with Section
856(h) of the Code, and the Treasury Regulations and rulings
of the Internal Revenue Service (the "IRS") promulgated
thereunder, and qualifying as a real estate investment trust
("REIT") under the Code.
Section 13.2 Definitions. For purposes of this
Article XIII, the following terms shall have the following
meanings:
"Acquiring Shareholder" shall mean any Person capable
of purchasing Shares from the Trustee in accordance with the
provisions of Subsection 13.7.5.
"Beneficial Ownership" shall mean ownership of Shares
by a Person, whether the interest in the Shares is held
directly by such Person or indirectly (including by a
nominee), and shall include interests in Shares that would
be treated as owned through the application of Section 544
of the Code, as modified by Section 856(h) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
"Charitable Beneficiary" shall mean, with respect to
any Charitable Trust, one or more organizations that are
named by the Trust Managers as the beneficiary or
beneficiaries of such Charitable Trust and which are
organized in accordance with the provisions of Section
501(c)(3) of the code and in such manner that contributions
to each such organization are eligible for deduction under
Section 170(b)(1)(A) of the Code.
"Charitable Trust" shall mean any separate trust
created pursuant to Section 13.6 and administered in
accordance with the terms of Section 13.7 for the benefit of
any Charitable Beneficiary.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Conveyance" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as
any other event that causes any Person to have or acquire
Beneficial Ownership, or any agreement to take any such
actions or cause any such events, of Shares or the right to
vote or receive dividends on Shares, whether voluntary or
involuntary, whether of record, or Beneficially, and whether
by operation of law or otherwise. The terms "Convey,"
"Conveyed" and "Conveying" shall have correlative meanings.
"Conveying Shareholder" shall mean, with respect to any
Conveyance, any Person who, but for the provisions of
Section 13.6, would Beneficially Own Shares.
"Ownership Limit" shall initially mean nine and eight-
tenths percent (9.8%) of the lesser of the number or value
of the outstanding Shares, and after any adjustment as set
forth in Subsection 13.4.1, shall mean such greater
percentage of the number or value of the outstanding Shares
as so adjusted, but not less than nine and eight-tenths
percent (9.8%). The number and value of the outstanding
Shares of the Trust shall be determined by the Trust
Managers in good faith, which determination shall be
conclusive.
"Person" shall mean an individual, corporation,
partnership, limited liability company, estate, trust
(including a trust qualified under Section 401(a) or
501(c)(17) of the Code), group (as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended), a portion of a trust permanently set
aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association,
private foundation within the meaning of Section 509(a) of
the Code, joint stock company or other entity.
"Shares" shall mean all of the shares, par value $0.10
per share, of beneficial interest in the Trust.
"Trustee" shall mean the Person, unaffiliated with both
the Trust and any Conveying Shareholder, that is designated
by the Trust Managers to act as trustee of a Charitable
Trust, or any successor trustee designated by the Trust
Managers.
Section 13.3 Basic REIT Ownership Provisions. In the
event that the provisions of Article IX of these Bylaws are
finally adjudicated by a court of competent jurisdiction to
be unenforceable or otherwise invalid, including any and all
appeals or other appellate review, or the Trust is enjoined
from enforcing any or all of the provisions of Article IX,
this Article XIII shall automatically become effective in
its entirety as of February 1, 1994.
13.3.1 Ownership Provisions. Except as
provided in Subsections 13.4.2 and 13.4.3, no Person shall
Beneficially Own Shares in excess of the Ownership Limit.
13.3.2 Basic REIT Ownership Tests. No Person
shall Beneficially Own Shares to the extent that such
Beneficial Ownership would cause the Trust to become
"closely held" within the meaning of Section 856(h) of the
Code, or otherwise fail to qualify as a REIT.
Section 13.4 Modification of Ownership Provisions.
13.4.1 Changes to Ownership Limit. Subject to
the limitations contained in Subsection 13.4.4, the Trust
Managers may from time to time increase the Ownership Limit.
13.4.2 Underwriter Exception to Ownership
Limit. The Trust Managers may permit an underwriter that
participates in a public offering or private placement of
any securities of the Trust to Beneficially Own Shares in
excess of the Ownership Limit pursuant to the provisions of
Subsection 13.4.3.
13.4.3 Exceptions to Ownership Limit. Subject
to Subsections 13.3.2 and 13.4.4, the Trust Managers in
their sole discretion may exempt from any Ownership Limit
any Person who provides the Trust Managers such evidence and
assurances satisfactory to the Trust Managers in their sole
discretion that such Person's Beneficial Ownership of Shares
above the Ownership Limit will not thereby jeopardize the
qualification of the Trust as a REIT under the Code, or
otherwise hinder the maintenance of its REIT status under
the Code.
13.4.4 Limitations on Modifications and
Exceptions. Prior to any modification or creation of, or
establishment of an exception to, any Ownership Limit, the
Trust Managers may require such opinions of counsel (or
rulings from the IRS), affidavits, representations,
certificates, undertakings or agreements as they may deem
necessary or advisable in order to determine or ensure the
Trust's status as REIT under the Code and the favorable tax
treatment of its (and its shareholders') income or to
ascertain any facts relevant to determinations under this
provision.
Section 13.5 Reporting of Ownership.
13.5.1 Notice of Possibly Violative
Conveyances. Any Person who has acquired, or acquires, or
attempts to acquire, or intends to acquire, Beneficial
Ownership of Shares that will or may violate Section 13.3,
or any Person who would have so Beneficially Owned Shares
that resulted in a Conveyance to a Charitable Trust pursuant
to the provisions of Section 13.6, shall immediately give
written notice to the Trust Managers of such event, or in
the case of such a proposed or attempted transaction, give
at least 15 days' prior written notice to such Trust
Managers, and shall provide to the Trust Managers such other
information as the Trust Managers may request in order to
determine the effect, if any, of such Conveyance on the
Trust's status as a REIT under the Code.
13.5.2 Beneficial Owners Required To Provide
Information. Each Person who is a Beneficial Owner of
Shares and each Person (including the shareholder of record)
who is holding shares for a Beneficial Owner shall provide
to the Trust Managers such information as the Trust may
request in order to determine the Trust's status as a REIT
under the Code, to ensure compliance with the Ownership
Limit, and to comply with the requirements of any taxing
authority or governmental agency, or to determine any such
compliance.
Section 13.6 Creation of Charitable Trust. If there
is a Conveyance, regardless of whether the Conveyance
results from a transaction entered into through facilities
of the New York Stock Exchange ("NYSE"), such that, if it
were effective, any Person would Beneficially Own Shares in
violation of the provisions of Subsections 13.3.1 or 13.3.2,
then that number of Shares that otherwise would cause such
Person to violate Subsections 13.3.1 or 13.3.2 (rounded up
to the nearest whole Share) shall be automatically Conveyed
to a Charitable Trust for the benefit of a Charitable
Beneficiary, as described in this Section 13.6 and Section
13.7, and the Person who otherwise would have been treated
as holding such Shares shall have no Beneficial Ownership of
such Shares. If the Conveyance to the Charitable Trust
described in the preceding sentence would not be effective
for any reason to prevent that Person from violating the
applicable Ownership Limit, then the Conveyance shall be
ineffective from the time the Conveyance was initiated and
the intended transferee shall acquire no Beneficial
Ownership of such Shares.
Section 13.7 Charitable Trust Terms.
13.7.1 Trust Creation. Any Shares Conveyed to
a Charitable Trust pursuant to the first sentence of Section
13.6 shall be deemed to have been Conveyed automatically and
by operation of law to the Trustee in its capacity as
trustee of a Charitable Trust for the exclusive benefit of
one or more Charitable Beneficiaries. The Conveyance to a
Charitable Trust shall be effective as of the close of
business on the business day prior to the date of the
Conveyance that results in the Conveyance to the Charitable
Trust. Within five (5) business days after discovery of the
existence of a Charitable Trust, the Trust Managers shall
appoint a Trustee, which shall be unaffiliated with the
Trust and any Conveying Shareholder, and shall name one or
more Charitable Beneficiaries of each such Charitable Trust.
13.7.2 Status of Shares Held in Trust. Shares
in a Charitable Trust shall remain issued and outstanding
Shares of the Trust and shall be entitled to the same rights
and privileges on identical terms and conditions as all
other issued and outstanding Shares of the Trust, and such
Shares shall be, and at all times shall remain, freely
transferable as set forth in Section 13.1 and Subsection
13.7.5, shall retain voting rights as set forth in
Subsection 13.7.4 and shall receive all distributions with
respect to such Shares as set forth in Subsection 13.7.3.
13.7.3 Distribution Rights. The Trustee shall
be entitled to receive all distributions as may be
authorized and declared by the Trust Managers of the Trust
on Shares held in the Charitable Trust and shall hold such
distributions in trust for the benefit of the Charitable
Beneficiary or Charitable Beneficiaries as set forth in
Subsection 13.7.6. If any distributions with respect to
Shares held in the Charitable Trust were paid prior to the
discovery of the Conveyance to the Charitable Trust, the
recipient of those payments shall pay that amount to the
Trustee immediately upon written demand to do so by the
Trust Managers (or the Trustee). The Trust Managers shall
take all measures that they determine to be reasonably
necessary to recover the amount of any such distributions,
including, if necessary, withholding any portion of future
distributions payable on Shares Beneficially Owned by the
Conveying Shareholder, and, as soon as reasonably
practicable following the Trust's receipt or withholding
thereof, shall pay over to the Trustee for the benefit of
the Charitable Beneficiary or Charitable Beneficiaries and
to apply such distributions so received or withheld, as the
case may be, as set forth in Subsection 13.7.6.
13.7.4 Voting Rights. The Trustee shall be
entitled to vote all Shares held in the Charitable Trust.
The Conveying Shareholder shall be deemed to have given, as
of the close of business the business day prior to the date
of the Conveyance that results in the Conveyance to the
Charitable Trust, an irrevocable proxy to the Trustee to
vote the Shares held in the Charitable Trust in the manner
in which the Trustee, in its sole and absolute discretion,
desires. Any vote by or on behalf of a Conveying
Shareholder as a holder of Shares prior to the discovery by
the Trust Managers that the Shares are held in the
Charitable Trust shall be subject to rescission by the
Trustee if the rescission is permitted by applicable law and
in the case of such a rescission, any such votes shall be
ineffective at the time cast with respect to such Shares
held in the Charitable Trust.
Notwithstanding the provisions of this Article
XIII, until the Trust has received notification that Shares
have been Conveyed to a Charitable Trust pursuant to Section
13.6, the Trust shall be entitled to rely on its Share
transfer and other shareholder records for purposes of
preparing lists of shareholders entitled to vote at
meetings, determining the validity and authority of proxies
and otherwise conducting votes of shareholders.
13.7.5 Conveyance of Shares Held in Trust. As
reasonably promptly as practicable after the Conveyance of
Shares to a Charitable Trust pursuant to Section 13.6, the
Trustee shall Convey the Shares held in the Charitable Trust
to an Acquiring Shareholder selected by the Trustee,
provided, however, that (a) the Acquiring Shareholder must
purchase for valuable consideration (whether in a public or
private sale) such Shares and (b) the Acquiring Shareholder
must acquire such Shares without such acquisition resulting
in a Conveyance to a Charitable Trust pursuant to Section
13.6.
Upon completion of such Conveyance, the Trustee of
the Charitable Trust shall: (a) cause to be Conveyed to the
Acquiring Shareholder that number of Shares acquired by the
Acquiring Shareholder; (b) cause to be recorded on the books
of the Trust that the Acquiring Shareholder is the holder of
record of such number of Shares; and (c) distribute the net
proceeds of the Conveyance pursuant to Subsection 13.7.6.
Amounts received by the Trustee with respect to Shares held
in the Charitable Trust upon the liquidation of the Trust
shall be treated in the same fashion as would proceeds from
the Conveyance of the Shares.
If prior to the discovery by the Trust Managers
that Shares have been Conveyed to a Charitable Trust, those
Shares are Conveyed by the Conveying Shareholder, then (a)
such Shares shall be deemed to have been Conveyed on behalf
of a Charitable Trust; (b) to the extent that the amount
received in that Conveyance exceeds the amount that the
Conveying Shareholder would have been entitled to retain
from a Conveyance under the preceding provisions of this
Subsection 13.7.5, the excess shall be immediately delivered
to a Charitable Trust under Section 13.6; and (c) any votes
of the Conveying Shareholder shall be subject to Subsection
13.7.4.
Section 13.7.6 Application of Distributions
and Sale Proceeds.
(a) The Trustee shall apply any distributions on Shares
held in the Charitable Trust in the following order:
(1) first, to pay any expenses of the Charitable Trust;
(2) second, to pay any expenses of the Trust incurred in
connection with the Charitable Trust or the Conveyance of the
Shares held in the Charitable Trust; and
(3) finally, to pay any excess to the Charitable
Beneficiary (or Charitable Beneficiaries).
(b) The Trustee shall apply any net proceeds realized from
the Conveyance of Shares held in the Charitable Trust in the
following order:
(1) first, to pay any expenses of the Charitable Trust not
paid out of distributions under clause (a)(1) above;
(2) second, to pay any expenses of the Trust incurred in
connection with the Trust or the Conveyance of the Shares held in
the Charitable Trust not paid out of distributions under clause
(a)(2) above;
(3) third, to pay to the Conveying Shareholder out of any
remaining net proceeds from any such Conveyance, the lesser of
(i) in the case of (A) a Conveyance in which the Conveying
Shareholder gave value for Shares, the price per share, if any,
such Conveying Shareholder paid for such Shares, or (B) a
Conveyance in which the Conveying Shareholder did not give value
for such Shares (e.g., if the Shares were received through a gift
or devise), the price per share equal to the last sale price,
regular way, on the date of such Conveyance, or, in case no such
sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the
principal consolidated transaction system with respect to
securities listed or admitted to trading on the NYSE, of the
Shares of the Trust; or
(ii) the price per Share received by the Trustee of the
Charitable Trust from the Conveyance of such Shares in accordance
with Subsection 13.7.5; provided, however, that in computing any
amount under this clause 13.7.6(b)(3), any amounts paid pursuant
to clauses (a)(1) and (b)(1) and (a)(2) and (b)(2) of this
Subsection 13.7.6 shall be treated as amounts paid to the
Conveying Shareholder and shall reduce any amount that otherwise
would be payable to the Conveying Shareholder; and
(4) finally, to the Charitable Beneficiary (or Charitable
Beneficiaries).
(5)
Section 13.8 Legend. In the event that this
Article XIII becomes effective, the Trust Managers shall
place an appropriate legend reflecting the provisions of
this Article XIII on each certificate for Shares.
Section 13.9 Interpretation; Remedies.
13.9.1 Ambiguity. In the case of any
ambiguity or uncertainty in the interpretation or
application of any of the provisions of this Article XIII,
including any definition contained in Section 13.2, the
Trust Managers shall have the power to determine the
interpretation or application of the provisions of this
Article XIII with respect to any situation based on the
facts known to them.
13.9.2 Severability. If any provision in
this Article XIII or any application of any such provision
is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the
remaining provisions shall not be affected and other
applications of such provision shall be affected only to the
extent necessary to comply with the determination of such
court.
13.9.3 Remedies. If the Trust or its
designees shall at any time determine in good faith that a
Conveyance has taken place in violation of Section 13.3 or
that a Person intends to acquire or dispose of, or has
attempted to acquire or dispose of, Beneficial Ownership of
any Shares in violation of Section 13.3 (whether or not the
violation is intended), or in a manner that results in a
Conveyance to a Charitable Trust pursuant to Section 13.6
subject to Subsection 13.9.5, the Trust Managers shall take
such action as they deem advisable to refuse to give effect
to or to prevent such Conveyance or acquisition or other
event, including, but not limited to, refusing to give
effect to any Conveyance on the books of the Trust or
instituting proceedings to enjoin such Conveyance on the
books of the Trust or instituting proceedings to enjoin such
Conveyance, acquisition or other event. Any action (or
inaction) by the Trust pursuant to this Subsection 13.9.3
shall not affect the automatic Conveyance into a Charitable
Trust or the treatment of such Conveyance as set forth in
Section 13.7.1.
13.9.4 Remedies Not Limited. Other than
Subsection 13.9.5, nothing contained in this Article XIII
shall limit the authority of the Trust to take such other
action as it deems necessary or advisable to protect the
Trust and the interests of its shareholders by preservation
of the Trust's status as a REIT under the Code and to ensure
compliance with the Ownership Limit and the other provisions
of this Article XIII.
13.9.5 Exchange or Market Transactions.
Nothing in the provisions of this Article XIII or these
Bylaws shall preclude the settlement of any transaction in
the stock of this Trust entered into through the facilities
of the NYSE. The fact that the settlement of any
transactions takes place shall not negate the effect of any
other provision of this Article XIII or these Bylaws and any
transferee in such a transaction shall be subject to all of
the provisions and limitations set forth in these Bylaws.
