UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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): January 8,
1996
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of Registrant as specified in its charter)
Texas 1-9016 75-6335572
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
6220 North Beltline Road, Suite 205
Irving, Texas 75063-2656
(Address of principal executive offices) (Zip code)
(214) 550-6053
(Registrant's telephone number, including area code)
Item 5. Other Events
On January 8, 1996, the Trust filed a lawsuit in federal
court in Dallas against Paul Koether and his controlled
corporation, Pure World, Inc. ("Pure World"). The suit alleges
violations under federal and state securities laws for material
misrepresentations and omissions made by Koether and Pure World
in filings made with the Securities and Exchange Commission
regarding undisclosed meetings by Koether with representatives of
The Manufacturers Life Insurance Company ("MLI"), the Trust's
largest unsecured creditor, regarding the proposed purchase at a
discount of the Trust's unsecured notes held by MLI. The Trust
seeks injunctive relief preventing future discussions with MLI
regarding the purchase of the Trust's unsecured notes, further
attempts to gain control of the Trust and any further purchases
of shares in the Trust by Koether or Pure World until proper
disclosures are made. In addition, the Trust seeks a declaratory
judgment regarding enforcement of the share ownership
restrictions contained in the Trust's Bylaws and injunctive
relief preventing the voting of shares accumulated in excess of
the share ownership limitations contained in the Bylaws. The
Trust also seeks recovery of distributions paid on shares
accumulated in excess of these share ownership limitations.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(c) Exhibits
99.1 Complaint
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: January 10, 1996
Index to Exhibits
Sequentially
Exhibit No. Description
Numbered Page
*99.1 Complaint
____________
* Filed herewith.
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
AMERICAN INDUSTRIAL PROPERTIES
REIT,
Plaintiff,
vs. CIVIL ACTION NO.:
(Jury Trial Demanded)
PURE WORLD, INC. and PAUL O.
KOETHER,
Defendants.
COMPLAINT
COMES NOW American Industrial Properties REIT (the "Trust")
and complains of Pure World, Inc. f/k/a American Holdings, Inc.,
f/k/a Computer Memories, Inc. ("Pure World") and Paul Koether
("Koether") (collectively, "Defendants"), as follows:
I.
NATURE OF ACTION
1. Pure World is a corporation principally owned and
controlled by Paul Koether, a sophisticated investor with a
reputation of being a "corporate raider" and "greenmailer." His
latest target is the Trust, a Dallas County-based real estate
investment trust. As explained more fully herein, Koether, by
and through Pure World and others, is impermissibly seeking to
seize control of and/or liquidate the Trust to further his own
hidden agenda through the use of false and misleading Schedule
13Ds and proxy statements in violation of the Securities Exchange
Act of 1934, as amended, and rules and regulations promulgated
thereunder by the Securities Exchange Commission (the
"SEC")(collectively, the "Exchange Act") and also in violation of
state common and statutory law. The Trust respectfully petitions
the Court herein for relief to stop these violations and to
compel full and complete disclosure by Koether of his plans and
purposes in accordance with his obligations under federal and
state law. Additionally, the Trust seeks an award of damages for
the harm that Koether has caused by his illegal activities, and
certain declaratory relief as set forth herein.
II.
PARTIES
2. The Trust is a real estate investment trust (a "REIT")
organized and existing pursuant to the laws of the State of
Texas, with its principal place of business in Dallas County,
Texas. The managers of the Trust are citizens of the States of
Texas and Montana, respectively.
3. Pure World is a Delaware corporation with its principal
place of business in New Jersey. As set forth below, Pure World
engages in business in Texas, but does not maintain a regular
place of business or a designated agent for service of process in
Texas. Accordingly, under Tex. Civ. Prac. & Rem. Code 17.041,
et seq. and Fed. R. Civ. P. 4(h), Pure World may be served with
process by serving the Texas Secretary of State, who will
immediately mail the process to Pure World, directed to the
attention of its president, Paul Koether, at Pure World's home
office address, 211 Pennbrook Road, Far Hills, New Jersey 07931.
4. Koether is a citizen of New Jersey. As set forth
below, Koether engages in business in Texas, but does not
maintain a regular place of business or a designated agent for
service of process in Texas. Accordingly, under Tex. Civ. Prac.
& Rem. Code 17.041, et seq. and Fed. R. Civ. P. 4(e), Koether
may be served with process by serving the Texas Secretary of
State, who will immediately mail the process to Koether at his
home address, 211 Pennbrook Road, Far Hills, New Jersey 07931.
III.
JURISDICTION AND VENUE
5. This Court has subject matter jurisdiction over this
action pursuant to 28 U.S.C. 1331, as all or part of the claims
asserted herein arise under the laws of the United States.
Additionally, this Court has jurisdiction under 15 U.S.C. 78aa
because the Trust is seeking to enforce liabilities and duties
created by the Exchange Act and to enjoin future violations
thereof. Additionally, this Court has jurisdiction pursuant to
28 U.S.C. 1332 because this action is between citizens of
different states and the matter in controversy exceeds the sum or
value of $50,000, exclusive of interest and costs.
6. Venue in this district is proper pursuant to 15
U.S.C. 78aa and 28 U.S.C 1391 as Defendants transact business
in this district, Defendants are subject to personal jurisdiction
in this district, and all or a substantial part of the events or
omissions which form the basis of the Trust's claims asserted
herein, including tort claims, occurred in this district.
IV.
FACTS
Pure World and Koether
7. Pure World is a corporation that is substantially owned
and controlled by Koether. Koether is the president and CEO of
Pure World. As he has done on previous occasions, Koether
acquired control of Pure World as part of a hostile takeover
during the late 1980s.
Koether's History of Greenmail
8. Over the years, Koether, in conjunction with his wife,
Natalie Koether, has proven to be a "corporate raider" and
"greenmailer," preying primarily on small and medium-sized
companies which do not have large institutional investors with
the sophistication and wherewithal to adequately protect
themselves. See, e.g., "Matrix Board Tells Shareholders of
Koether Group's Track Record," PR Newswire (December 30, 1987),
Ex. A; "Natalie Koether: The Lady is a Raider," Business Week
(February 23, 1987), Ex. B; "Stater-Bros. Chairman Discloses
Background about Craig Corp.," Business Wire (April 21, 1986),
Ex. C; "A New Greenmailer Swings into Action," Fortune (August 5,
1985), Ex. D, each of which are incorporated herein by reference.
The common pattern used by Koether is to purchase, directly or
indirectly, a large block of a company's stock and then either:
(1) attempt to force the company to repurchase the shares at an
inflated price, threatening a takeover if the company does not do
so (i.e., "greenmail"); or (2) actually take control of a company
and use its assets to engage in self-dealing transactions and
support other Koether-owned/controlled business ventures through
a complex pattern of interlocking ownerships and agreements. See
Exhibits A-D.
9. An example of Koether's greenmail activities was
explained by the Delaware Court of Chancery in Emerald Partners
v. Berlin, W.L. 25269 (Del. Ch. 1988). In that case, Emerald
Partners, a partnership owned and controlled by Koether
("Emerald"), was acquiring the stock of a corporation that was
attempting to merge with another corporation. The court
explained that although Koether was seeking to enjoin the merger
based on the guise of exercising his rights as a shareholder,
Koether's opposition appeared to be "based on motives other than
the best interests of [the target corporation]." Id. at *4. The
court further explained that "Mr. Koether ... apparently
threatened that if [the target corporation] did not purchase
Emerald's interest [at an approximately $1.00 per share premium
over market prices], Emerald would make it very difficult to
complete the proposed merger." Id. Indeed, the court
unequivocally found that "Emerald obviously deals in many forms
of shareholder blackmail, i.e. greenmail, in attempts to gain
control of corporations or be bought out at a substantial
premium." Id.
Koether's History of Self-Dealing
10. In situations where Koether does not stop at mere
greenmail attempts, but rather goes on to seize control of a
target company, Koether has exhibited a consistent pattern of
extensive self-dealing. See, e.g., "Matrix Board Tells
Shareholders of Koether Group's Track Record," PR Newswire
(December 30, 1987), Ex. A; "Stater-Bros. Chairman Discloses
Background about Craig Corp.," Business Wire (April 21, 1986),
Ex. C.
11. For example, in 1987, Paul and Natalie Koether (the
"Koethers") gained control of Texas American Energy Corporation
("TAE") through a hostile proxy fight. After experiencing
approximately two years of Koether-controlled management, the
remaining shareholders were forced to institute a shareholder
derivative action alleging, inter alia, that the Koethers: (1)
caused TAE to sell TAE's primary asset for the Koethers' own
financial benefit and to TAE's detriment through the use of false
and misleading proxy statements soliciting shareholder approval
for the transaction; (2) sold 1.6 million of TAE's common shares
to entities owned or controlled by the Koethers for $1.25 per
share when the shares were trading at $1.44 per share; (3)
purchased 972,000 of TAE's common shares from an entity owned or
controlled by the Koethers at $2.50 per share when the shares
were trading at $1.62 per share; (4) caused TAE to use its assets
to participate in greenmail transactions to the benefit of the
Koethers and at the expense of TAE; and (5) caused TAE to pay
Natalie Koether and her law firm $2 to $3 million in legal fees
for "documenting, restructuring or implementing the self-dealing
transactions described herein." See Abrams v. Koether, 766 F.
Supp. 237 (D.N.J. 1991) ("Abrams I"); Abrams v. Koether, Fed.
Sec. L. Rep. (D. N.J. 1992) (CCH) 96,995, p. 94,336 ("Abrams
II"). Ultimately, shareholders were successful in forcing the
Koethers to appoint independent directors to a majority of the
board of directors' seats, and requiring the independent
directors to approve any future related-party transactions by the
Koethers with respect to TAE.
12. One tactic of Koether appears to be using the assets of
an acquired corporation to generate and pay for exorbitant fees
to himself and his affiliates. For example, during 1992 alone,
Koether caused Pure World to pay his wife's law firm over
$250,000 in legal fees; to pay Koether himself over $200,000 in
salary and related benefits; and to pay affiliated companies over
$200,000 for rental expenses, office sharing arrangements, and
brokerage fees and commissions. Similarly, from 1990-1992,
Koether caused Kent Financial Services, Inc. (the successor to
TAE) to pay his wife's law firm approximately $2.5 million in
legal fees, and to pay himself approximately $1 million in salary
and commissions. Upon information and belief, these are only
examples of a regular pattern of self-dealing conduct that
Koether has exhibited once acquiring control of his target
corporations.
Koether's History of False and Misleading Disclosures
13. Upon information and belief, another pattern of conduct
exhibited by Koether in his history of hostile takeovers has been
the use of false or misleading disclosures to hide his true
intentions and motivations in purchasing the stock of target
corporations and soliciting the proxies of other shareholders.
14. For example, in 1984, the Koethers, through use of a
corporation under their control called Edudata Corporation
("Edudata"), sought to gain control of Scientific Computers, Inc.
("SCI"). SCI alleged that Edudata "conspired, with the Koethers
[and two other entities substantially owned and controlled by the
Koethers], to take over SCI through a series of fraudulent
disclosures and material omissions and dilute it of its assets."
Edudata Corporation v. Scientific Computers, Inc., 599 F. Supp.
1084, 1087 (D. Minn. 1984). The alleged omissions included
failure to: (1) specify the Koethers' future plans concerning
SCI; (2) identify adequately Edudata's background and affiliates;
and (3) specify any potential liability Edudata may have due to
misstatements or omissions of material fact made in its July 1984
public offering. Id. at 1086. Despite being on notice that
their disclosures were inadequate and misleading, the Koethers
failed to amend their tender offer materials until after being
enjoined from proceeding with their tender offer by the District
Court and by the Minnesota Commissioner of Commerce. Id; see
also Abrams I, supra; Irvin E. Schermer Trust et al. v. Sun
Equities Corp. et al., Cause No. 4-86-122, D. Minn. (filed
2/11/86)(both alleging the Koethers and affiliates filed
misleading statements with the SEC, and in both cases, the
Koethers settled with the plaintiffs). Upon information and
belief, the Koethers have regularly engaged in a pattern of
hiding their true intentions and secret self-dealing plans when
pursuing control of their target companies.
Koether's Hidden Agenda for the Trust
15. Beginning in December 1993, Koether, through Pure World
(then known as American Holdings, Inc.), began acquiring shares
of the Trust. In January 1994, Pure World's ownership interest
exceeded five percent of the Trust's outstanding shares, and Pure
World's most recent public disclosures state that it now owns
9.785% of the Trust's outstanding shares. Beginning in February
1994, and continuing to this day, Koether, through Pure World,
has stated in Pure World's public disclosures, including its
Schedule 13Ds, that Pure World "has acquired [its interest in the
Trust] for capital appreciation." Koether has also stated in the
past that the Trust should be liquidated. The Trust has recently
learned, however, that the Trust's shares are not all that
Koether has been attempting to acquire, but that Koether also has
an undisclosed ulterior motive for seeking to liquidate the
Trust.
16. More particularly, at the same time Koether was
acquiring the Trust's shares and proposing to take control of the
Trust, and near the time Koether was proposing to liquidate the
Trust, Koether was also engaged in secret negotiations with the
Trust's largest creditor, The Manufacturers Life Insurance
Company ("MLI"), to acquire the Trust's debt to MLI at a discount
from its face value for his/Pure World's own benefit.
Specifically, beginning in mid-1994, Koether began negotiations
with MLI to purchase at a discount approximately $45 million in
promissory notes (the "Notes") held by MLI. Koether also
discussed with MLI the possibility of pursuing a scheme by which
Koether would gain control of the Trust and give MLI a
substantial equity stake in the Trust. Later in 1994, Koether
and/or Pure World did, in fact, make a secret offer to purchase
the Notes at a discount from face value, with an alternative
proposal of issuing new shares and giving MLI an equity stake in
the Trust. Koether and Pure World have continued their contact
with MLI and, more recently, inquired as to whether MLI would
sell the Notes if Koether or someone connected with him provided
MLI with an indemnity. Koether and Pure World, however, have
failed to disclose these negotiations and their attempts to buy
the Notes in their disclosures to the Trust and the public,
including the Schedule 13Ds and proxy statements they have filed
with the SEC. Upon information and belief, Koether's undisclosed
efforts to obtain the Notes at a discount are coupled with his
efforts to obtain control of the Trust through a proxy contest so
that Koether and Pure World could obtain the discount for
themselves instead of on behalf of the Trust's shareholders.
Upon information and belief, it continues to be Koether's secret
plan, through Pure World, to: (1) seize control of the Trust;
(2) concurrently and secretly acquire the Trust's Notes for
himself or an affiliated company at a substantial discount from
their face value; and then (3) liquidate the Trust to pay off the
Notes at their full face value prior to maturity, all without
disclosing his hidden interest in the Notes.
Koether's Attempts to Implement his Hidden Agenda
17. The Trust is managed by trust managers in accordance
with the Texas Real Estate Investment Trust Act (the "Texas REIT
Act"). Under the Texas REIT Act, "all powers necessary or
appropriate to effect any or all of the purposes for which the
real estate investment trust is organized shall be vested in one
or more trust manager(s) named in the declaration of trust or
successor(s) selected in accordance therewith." At least a two-
thirds vote of the Trust's outstanding shares is required for the
shareholders to elect a successor trust manager under the bylaws
of the Trust and in accordance with the Texas REIT Act.
18. Beginning in the fall of 1994, Koether, by and through
Pure World, attempted to implement his hidden agenda and seize
control of the Trust through a hostile proxy contest. The annual
meeting of the Trust's shareholders was held in Dallas, Texas on
November 21, 1994. Pure World and Koether did not obtain the two-
thirds vote required to elect their own nominees.
19. Undeterred by his defeat in 1994, Koether continued his
campaign of deception, misrepresentation and fraudulent omissions
in 1995, again launching a hostile proxy contest to replace the
current trust managers with his own nominees. Even though they
solicited proxies based on false and misleading information,
including the filing of false and misleading Schedule 13Ds and
proxy statements, Koether and Pure World, at the Trust's 1995
meeting in Dallas, did not come close to obtaining the two-thirds
required to elect their proposed trust managers. Koether and
Pure World continued to conceal their secret negotiations with
MLI to acquire the Notes for their own benefit at a discount, and
they continued to conceal their hidden agenda to pay off the
Notes in full shortly after Koether could acquire them from MLI
for a substantial discount. Notwithstanding this second defeat,
Koether's efforts to implement his secret plan are continuing and
ongoing.
Koether's Failure to Disclose His "Group"
20. Upon information and belief, Koether and Pure World
have been acting in concert with an undisclosed syndicate or
group (the "Group") for the common purpose of acquiring, holding,
voting or disposing shares of the Trust. Koether and Pure World,
however, have not disclosed the existence, identity, background,
ownership interests, purposes, or agreements of the Group in any
of their public disclosures, including Pure World's Schedule
13Ds, as required by applicable federal and state securities
laws.
Koether's Wrongful Acquisition of Excess Shares
21. Under the Internal Revenue Code, the Trust's tax status
is endangered if five or fewer shareholders obtain ownership of
fifty percent or more of the Trust's outstanding shares.
Accordingly, to ensure that this requirement is not violated, and
in accordance with industry practice, the Trust's bylaws provide
that no person, including natural persons, corporations, trusts,
partnerships and other entities "shall at any time directly or
indirectly acquire or hold beneficial ownership of shares with an
aggregate value in excess of 9.8% of the aggregate value of all
outstanding shares." The bylaws further provide that any
transfer of shares in excess of the 9.8% limitation is void ab
initio, and the purported transferee is not entitled to vote the
excess shares or receive dividends for the excess shares, unless
waived by the Trust. The Trust has not granted any such waivers
to Koether or Pure World.
22. Upon information and belief, Koether and Pure World, by
themselves and/or in concert with others, have secretly acquired
beneficial ownership of Trust shares, directly or indirectly, in
excess of 9.8% of the aggregate value of the Trust's outstanding
shares (the "Excess Shares") notwithstanding the bylaws
restrictions on ownership. Additionally, upon information and
belief, Koether and Pure World, by themselves and/or in concert
with others, have wrongfully collected dividends on the Excess
Shares to which they are not entitled, and they have
impermissibly used the Excess Shares in their attempts to take
over the Trust. This information has not been disclosed in any
of Pure World's public disclosures.
Damage to the Trust and Its Shareholders
23. In addition to harming the Trust's past and present
shareholders by artificially suppressing the price of the Trust's
shares and impairing their right to be accurately and fully
informed in deciding whether to give Pure World and Koether their
proxies and to buy/sell their shares, the misleading statements
and omissions described above have caused, and are continuing to
cause, substantial and irreparable damage to the Trust, and are
threatening the continued viability of the Trust's business, by:
(1) Interfering with the Trust's ability to
restructure its capitalization;
(2) Disrupting the Trust's normal business operations
by forcing the Trust to respond to and oppose the Defendants'
misleading Schedule 13Ds and proxy statements;
(3) Creating uncertainty about the Trust's future that
has impaired, and will continue to impair, investor, creditor,
and customer confidence; and
(4) Causing the Trust to pay Koether/Pure World
dividends on the Excess Shares to which they are not entitled.
24. All conditions precedent to the Trust's bringing this
action and obtaining the relief sought herein have occurred or
have been waived.
V.
CAUSES OF ACTION
COUNT I: VIOLATION OF SECTION 13(D)
25. Paragraphs 1-24 are adopted by reference.
26. Koether and Pure World have violated, and are
continuing to violate Section 13(d) of the Exchange Act,
including without limitation rules 13d-1 and 13d-2 promulgated by
the SEC thereunder, by filing with the SEC and sending to the
Trust a materially false and misleading Schedule 13D and amended
Schedule 13Ds that:
(1) Misrepresent that their purpose in acquiring the
Trust's shares is for capital appreciation when, in fact, their
true purpose is to allow Koether and/or Pure World to gain
control of the Trust and engage in the self-dealing described
above;
(2) Fail to disclose their negotiations with MLI
regarding the Trust's Notes, and fail to disclose their hidden
agenda regarding the Notes and the proposed liquidation as
described above;
(3) Fail to disclose the identity and existence of the
Group and the purposes, understandings, and agreements of the
Group; and
(4) Fail to disclose that their beneficial ownership
interest, and/or the beneficial ownership interest held by
Koether, Pure World, and others acting in concert with them,
exceeds 9.8% of the aggregate value of the Trust's outstanding
shares in violation of the Trust's bylaws.
27. In addition to harming the Trust's past and present
shareholders by artificially suppressing the price of the Trust's
shares, Defendants' misleading Schedule 13D and amended Schedule
13Ds have caused, and are continuing to cause, irreparable damage
to the Trust, and threatening the continued viability of the
Trust's business, as set forth above.
COUNT II: VIOLATION OF SECTION 14(A)
28. Paragraphs 1-27 are adopted by reference.
29. Koether and Pure World have violated, and are
continuing to violate, 14(a) of the Exchange Act by filing and
sending to the Trust and its shareholders materially false and
misleading proxy statements that:
(1) Misrepresent that their purpose in acquiring the
Trust's shares is for capital appreciation when, in fact, their
true purpose is to allow Koether and/or Pure World to gain
control of the Trust and engage in the self-dealing described
above;
(2) Fail to disclose their negotiations with MLI
regarding the Trust's Notes, and fail to disclose their hidden
agenda regarding the Notes and the proposed liquidation as
described above;
(3) Fail to disclose the identity and existence of the
Group and the purposes, understandings, and agreements of the
Group; and
(4) Fail to disclose that their beneficial ownership
interest, and/or the beneficial ownership interest held by
Koether, Pure World, and others acting in concert with them,
exceeds 9.8% of the aggregate value of the Trust's outstanding
shares in violation of the Trust's bylaws.
30. In addition to harming the Trust's past and present
shareholders by artificially suppressing the price of the Trust's
shares and impairing their right to be accurately and fully
informed in deciding whether to give Defendants their proxies,
Defendants' misleading proxy statements have caused, and are
continuing to cause, substantial and irreparable damage to the
Trust, and threatening the continued viability of the Trust's
business as set forth above.
COUNT III: FRAUD
31. Paragraphs 1 through 30 are adopted by reference.
32. Koether and Pure World have committed, and are
continuing to attempt to commit, fraud in at least the following
ways:
(1) Misrepresenting that their purpose in acquiring
the Trust's shares is for capital appreciation when, in fact,
their true purpose is to allow Koether and/or Pure World to gain
control of the Trust and engage in the self-dealing described
above;
(2) Failing to disclose their negotiations with MLI
regarding the Trust's Notes, and failing to disclose their hidden
agenda regarding the Notes and the proposed liquidation as
described above;
(3) Failing to disclose the identity and existence of
the Group and the purposes, understandings, and agreements of the
Group; and
(4) Failing to disclose that their beneficial
ownership interest, and/or the beneficial ownership interest held
by Koether, Pure World, and others acting in concert with them,
exceeds 9.8% of the aggregate value of the Trust's outstanding
shares in violation of the Trust's bylaws.
33. The foregoing misrepresentations and omissions were of
material facts, were made knowingly or with reckless disregard
for the truth, and were made with the intention that the Trust
and its shareholders rely on the misrepresentations and
omissions. The Trust and its past and present shareholders, to
their detriment, have relied on the foregoing misrepresentations
and omissions, and as a proximate result thereof, have suffered
the damages described above.
COUNT IV: VIOLATION OF TEXAS SECURITIES LAWS
34. Paragraphs 1 through 33 are adopted by reference.
35. Koether and Pure World have committed, and are
continuing to commit, violations of the Texas Securities Act,
including Tex. Civ. Stat. Art. 581-33, by, inter alia, buying and
selling the Trust's shares based on at least the following
material misrepresentations and omissions:
(1) Misrepresenting that their purpose in acquiring
the Trust's shares is for capital appreciation when, in fact,
their true purpose is to allow Koether and/or Pure World to gain
control of the Trust and engage in the self-dealing described
above;
(2) Failing to disclose their negotiations with MLI
regarding the Trust's Notes, and failing to disclose their hidden
agenda regarding the Notes and the proposed liquidation as
described above;
(3) Failing to disclose the identity and existence of
the Group and the purposes, understandings, and agreements of the
Group; and
(4) Failing to disclose that their beneficial
ownership interest, and/or the beneficial ownership interest held
by Koether, Pure World, and others acting in concert with them,
exceeds 9.8% of the aggregate value of the Trust's outstanding
shares in violation of the Trust's bylaws.
36. In addition to harming the Trust's past and present
shareholders by artificially suppressing the price of the Trust's
shares and impairing their right to be accurately and fully
informed in deciding whether to give Defendants their proxies,
Defendants' misleading proxy statements have caused, and are
continuing to cause, substantial and irreparable damage to the
Trust, and threatening the continued viability of the Trust's
business as set forth above.
COUNT V: CONSPIRACY
37. Paragraphs 1 through 36 are adopted by reference.
38. Koether, Pure World, and others acting in concert with
them have conspired with each other to commit fraud and
violations of the Exchange Act, the Texas Securities Act and the
Trust's bylaws, as described above, and they have committed one
or more acts in Dallas County in furtherance of their conspiracy.
Their wrongful acts have directly and proximately damaged the
Trust and its present and past shareholders as described above,
and continue to threaten to cause substantial and irreparable
damage to the Trust.
COUNT VI: DECLARATORY JUDGMENT
39. Paragraphs 1 through 38 are adopted by reference.
40. Pursuant to Texas Civil Practice and Remedies Code
Chapter 37 et seq. and the Federal Declaratory Judgment Act, the
Trust requests a declaration regarding the status of the Excess
Shares. More particularly, a dispute exists between the Trust
and Koether/Pure World regarding whether they, by themselves
and/or in concert with others, have acquired beneficial ownership
of Excess Shares, and if so, the rights they have with respect to
the Excess Shares. The Trust contends that Koether/Pure World,
by themselves and/or in concert with others, have secretly
acquired beneficial ownership of Excess Shares. The Trust
further contends that Koether/Pure World have no voting, dividend
or other rights with respect to these Excess Shares except as set
forth in the Trust's bylaws. Koether and Pure World, however,
disagree. This dispute is continuing and ongoing, and it is ripe
for resolution by this Court.
COUNT VII: MONEY HAD AND RECEIVED; UNJUST ENRICHMENT
41. Paragraphs 1 through 39 are adopted by reference.
42. Without knowing that Koether/Pure World, by themselves
and/or in concert with others, had secretly acquired beneficial
ownership of more than 9.8% of the value of the Trust's
outstanding shares, the Trust has paid Koether/Pure World
dividends on the Excess Shares which, under the Trust's bylaws,
Koether/Pure World were not entitled to receive. Koether/Pure
World would be unjustly enriched if they were permitted to keep
these dividends, which justly and rightly belong to the Trust,
and the Trust demands that Koether and Pure World return these
dividends to the Trust. Under principles of equity, including
money had and received and unjust enrichment, the Trust requests
that the Court order Koether/Pure World to return to the Trust
the amount of dividends paid on the Excess Shares.
COUNT VIII: INJUNCTIVE RELIEF
43. Paragraphs 1 through 42 are adopted by reference.
44. As set forth above, Defendants, upon information and
belief, are attempting to seize control and force a liquidation
of the Trust based on materially false and misleading statements
and omissions, including SEC filings. Defendants attempts to do
so have caused, or are likely to cause, permanent and irreparable
injury to the Trust. Accordingly, the Trust requests a
preliminary and permanent injunction restraining Defendants from
attempting to seize control of and/or liquidate the Trust, and
from further attempting to acquire the Notes from MLI, until the
disclosures required under federal and state securities laws have
been made. Additionally, the Trust requests a preliminary and
permanent injunction restraining Defendants, and all others
acting in concert with them, from further acquiring Excess Shares
and from further voting or otherwise using the Excess Shares in
their efforts to seize control of and/or liquidate the Trust.
COUNT IX: ATTORNEYS' FEES
45. Due to the dispute that exists between the Trust and
Defendants, the Trust has retained the Law Firm of Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P. ("Liddell Sapp") to represent it
and to prosecute this action on the Trust's behalf. The Trust
has further agreed to pay Liddell Sapp its reasonable attorneys'
fees and costs for doing so. Pursuant to Texas Civil Practice
and Remedies Code 37.009, the Securities Exchange Act of 1934,
the Texas Securities Act, and any other applicable law, the Trust
seeks an award of its costs and reasonable and necessary
attorneys' fees from Defendants.
VI.
RELIEF SOUGHT
46. Paragraphs 1-45 are adopted by reference.
47. The Trust respectfully requests that Defendants be
summoned to appear and answer herein, and that the Court:
(1) Issue preliminary and permanent injunctions ordering
Defendants to make the disclosures required by Sections 13(d) and
14(a) of the Exchange Act and the Texas Securities Act as
discussed more fully above, and to cease their attempt to acquire
the Notes from MLI until the disclosures are made;
(2) Issue preliminary and permanent injunctions prohibiting
Defendants from acquiring or trading any additional shares of the
Trust until the required Section 13(d) disclosures and the Texas
Securities Act disclosures discussed herein are made;
(3) Issue preliminary and permanent injunctions prohibiting
Defendants from further soliciting any proxies or exercising any
proxies already obtained until they provide full and adequate
disclosure under Section 14(a) of the Exchange Act and the Texas
Securities Act as discussed more fully above;
(4) Issue preliminary and permanent injunctions enjoining
Defendants from taking any further action in furtherance of their
conspiracy, as discussed above, until full and adequate
disclosure of the conspiracy is provided pursuant to Sections
13(d) and 14(a) of the Exchange Act and the Texas Securities Act;
(5) Issue preliminary and permanent injunctions enjoining
Defendants, and all others acting in concert with them, from
further acquiring Excess Shares and from voting or otherwise
using the Excess Shares in their efforts to seize control of
and/or liquidate the Trust;
(6) Enter judgement awarding the Trust its actual damages,
as set forth herein, against Defendants, jointly and severally;
(7) Enter judgment against Defendants awarding the Trust a
declaration of rights as set forth herein;
(8) Enter judgment against Defendants awarding the Trust a
recovery of dividends paid on the Excess Shares as set forth
herein;
(9) Enter judgment for the Trust against Defendants,
jointly and severally, for the Trust's reasonable costs and
attorneys' fees incurred in bringing and prosecuting this
lawsuit;
(10) Enter judgment for the Trust against Defendants,
jointly and severally, for prejudgment and postjudgment interest
to the maximum extent allowed by law; and
(11) Award the Trust such other and further relief to which
it may be entitled at law or in equity.
VII.
JURY DEMAND
48. The Trust hereby demands a trial by jury.
Respectfully submitted,
LIDDELL, SAPP, ZIVLEY, HILL
& LaBOON, L.L.P.
By: /s/ Craig L. Weinstock
Craig L. Weinstock
State Bar No. 21097300
Kirte Kinser
State Bar No. 11489650
900 Texas Commerce Tower
2200 Ross Avenue
Dallas, Texas 75201
(214) 220-4800 (Telephone)
(214) 220-4899 (Telecopier)
ATTORNEYS FOR AMERICAN
INDUSTRIAL PROPERTIES REIT
