-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ilWAqrnim8dFZe9FXKV3UNK8EyOZJl+PzturzfQrD6Bs8pjpA1Mnv79yHzI+LxrC rvDuinMhhMdXgMKgJR5HxQ== 0000778437-95-000021.txt : 19950801 0000778437-95-000021.hdr.sgml : 19950801 ACCESSION NUMBER: 0000778437-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950731 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT INC CENTRAL INDEX KEY: 0000778437 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 756335572 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09016 FILM NUMBER: 95557343 BUSINESS ADDRESS: STREET 1: 6220 N BELTLINE RD STREET 2: STE 205 CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 2145506053 MAIL ADDRESS: STREET 1: 6220 N BELTLINE ROAD STREET 2: SUITE 205 CITY: IRVING STATE: TX ZIP: 75063 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT DATE OF NAME CHANGE: 19931203 FORMER COMPANY: FORMER CONFORMED NAME: TRAMMELL CROW REAL ESTATE INVESTORS DATE OF NAME CHANGE: 19931203 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995................................................ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to ________________ Commission file number 1-9016 ___________________________ AMERICAN INDUSTRIAL PROPERTIES REIT (Exact name of registrant as specified in its charter) Texas 75-6335572 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) 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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ 9,075,400 Shares of Beneficial Interest were outstanding as of July 26, 1995. American Industrial Properties REIT Form 10-Q For the Quarter Ended June 30, 1995 INDEX Page Part I - Financial Information Item 1. Financial Statements Consolidated Statements of Operations for the three months and six months ended June 30, 1995 and 1994 3 Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II - Other Information Item 1. Legal Proceedings 10 Item 3. Defaults Upon Senior Securities 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 12 American Industrial Properties REIT Consolidated Statements of Operations (unaudited, in thousands except share and per share data) Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 REVENUES Rents $ 2,199 $ 2,117 $ 4,303 $ 4,074 Tenant reimbursements 771 670 1,446 1,353 Interest income 123 89 190 172 3,093 2,876 5,939 5,599 REAL ESTATE EXPENSES Property operating expenses: Property taxes 364 431 701 729 Property management fees 108 105 215 225 Utilities 104 108 218 227 General operating 162 170 339 363 Repairs and maintenance 105 115 224 255 Other property operating expenses 74 68 134 128 Depreciation and amortization 721 846 1,446 1,665 Interest on 8.8% notes payable 1,057 992 2,039 1,974 Interest on mortgages payable 444 171 923 349 Amortization of original issue discount on Zero Coupon Notes due 1997 - 376 - 751 Administrative expenses: Trust administration and overhead 295 387 777 765 Litigation and proxy costs 366 397 375 633 3,800 4,166 7,391 8,064 Loss from real estate operations (707) (1,290) (1,452) (2,465) Loss on sales of real estate - - (191) - Extraordinary loss on extinguishment of debt (55) - (55) - NET LOSS $ (762) $(1,290) $ (1,698) $(2,465) PER SHARE DATA Loss from real estate operations $ (0.07) $ (0.14) $ (0.16) $ (0.27) Loss on sales of real estate - - (0.02) - Extraordinary loss on extinguishment of debt (0.01) - (0.01) - Net Loss $ (0.08) $ (0.14) $ (0.19) $ (0.27) Distributions Paid - - - - Number of shares outstanding 9,075,400 9,075,400 9,075,400 9,075,400
The accompanying notes are an integral part of these financial statements. American Industrial Properties REIT Consolidated Balance Sheets (in thousands, except share and per share data) June 30, December 31, 1995 1994 (unaudited) ASSETS Real estate: Held for investment $95,396 $95,033 Held for sale 5,406 8,810 100,802 103,843 Accumulated depreciation (22,244) (21,859) Net real estate 78,558 81,984 Cash and cash equivalents: Unrestricted 7,809 6,919 Restricted 690 602 Total cash and cash equivalents 8,499 7,521 Other assets, net 2,731 3,045 Total Assets $89,788 $92,550 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: 8.8% notes payable $45,239 $45,239 Mortgage notes payable 17,685 20,374 Accrued interest 2,512 504 Accounts payable, accrued expenses and other liabilities 1,346 1,682 Tenant security deposits 508 555 Total Liabilities 67,290 68,354 Shareholders' Equity: Shares of beneficial interest, $0.10 par value authorized 10,000,000 Shares; issued and outstanding 9,075,400 Shares 908 908 Additional paid-in capital 124,605 124,605 Retained earnings (deficit) (103,015) (101,317) Total Shareholders' Equity 22,498 24,196 Total Liabilities and Shareholders' Equity $89,788 $92,550
The accompanying notes are an integral part of these financial statements. American Industrial Properties REIT Consolidated Statements of Cash Flows (unaudited, in thousands) Six Months Ended June 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $(1,698) $(2,465) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of original issue discount on Zero Coupon Notes due 1997 - 751 Depreciation and amortization 1,446 1,664 Loss on sales of real estate 191 - Extraordinary loss on extinguishment of debt 55 - Changes in operating assets and liabilities: Decrease (increase) in other assets 88 (108) Increase in accrued interest 2,008 974 Increase (decrease) in accounts payable, accrued expenses and other liabilities and tenant security deposits (348) 245 Net Cash Provided By Operating Activities 1,742 1,061 CASH FLOWS FROM INVESTING ACTIVITIES: Capitalized improvements and leasing commissions (496) (869) Net proceeds from sales of real estate 2,476 - Net Cash Provided By (Used In) Investing Activities 1,980 (869) CASH FLOWS FROM FINANCING ACTIVITIES: Principal repayments on mortgage notes payable (2,689) (69) Prepayment penalty on extinguishment of debt (55) - Partial repurchase of Zero Coupon Notes - (159) Net Cash Used In Financing Activities (2,744) (228) Net Increase in Cash and Cash Equivalents 978 (36) Cash and Cash Equivalents at Beginning of Period 7,521 1,119 Cash and Cash Equivalents at End of Period $ 8,499 $ 1,083 Cash Paid for Interest $ 954 $ 1,349
The accompanying notes are an integral part of these financial statements. American Industrial Properties REIT Notes to Consolidated Financial Statements June 30, 1995 (unaudited) Note 1 - Basis of Presentation The accompanying consolidated financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures required by generally accepted accounting principles or those contained in the Trust's Annual Report on Form 10-K. Accordingly, these financial statements should be read in conjunction with the audited financial statements of the Trust for the year ended December 31, 1994, included in the Trust's Annual Report on Form 10-K. The financial information included herein has been prepared in accordance with the Trust's customary accounting practices and has not been audited. In the opinion of management, the information presented reflects all adjustments necessary for a fair presentation of interim results. All such adjustments are of a normal and recurring nature. Certain amounts in prior year financial statements have been reclassified to conform with the current year presentation. Note 2 - Significant Accounting Policies Principles of Consolidation. The consolidated financial statements of the Trust include the accounts of American Industrial Properties REIT and its wholly-owned subsidiaries. Significant intercompany balances and transactions have been eliminated in consolidation. Real Estate. The Trust carries its real estate at the lower of depreciated cost or net realizable value. Management considers net realizable value for assets held for investment as the total of the estimated undiscounted future cash flows from the property. For assets held for sale, management considers net realizable value as estimated market value. Provisions for possible losses on real estate are recorded when management determines that the net book value of a specific real estate property is less than its net realizable value. At June 30, 1995, thirteen properties were classified as held for investment and one property was classified as held for sale. Should unforeseen factors cause additional properties to be classified as held for sale, significant adjustments to reduce the net book value of such properties could be required. Property improvements are capitalized while maintenance and repairs are expensed as incurred. Depreciation of buildings and capital improvements is computed using the straight-line method over forty years. Depreciation of tenant improvements is computed using the straight-line method over ten years. Other Assets. Other assets consists primarily of deferred rent receivable, prepaid leasing commissions and loan fees. Deferred rent receivable arises as the Trust recognizes rental income, including contractual rent increases or delayed rent starts, on a straight-line basis over the lease term. Leasing commissions are capitalized and amortized on a straight-line basis over the life of the lease. Loan fees are capitalized and amortized on a level yield basis over the term of the related loan. The Trust has recorded deferred rent receivable of $879,000 and $1,157,000 at June 30, 1995 and December 31, 1994, respectively. Income Taxes. The Trust qualifies as a real estate investment trust (a "REIT") under Federal income tax law as long as it meets certain asset, income, and ownership tests and it distributes 95% of its taxable income annually. No provisions for Federal income taxes have been required or recorded to date. American Industrial Properties REIT Notes to Consolidated Financial Statements (continued) June 30, 1995 (unaudited) Note 3 - Zero Coupon Notes In December 1993 and November 1994, the Trust partially in- substance defeased certain of its Zero Coupon Notes due 1997 (the "Notes") totaling $16,365,000 (face amount at maturity). At June 30, 1995, the accreted value of these Notes was $12,361,000. Note 4 - Litigation As previously reported, the Trust filed a lawsuit on May 1, 1995 against The Manufacturers Life Insurance Company ("MLI") in State District Court in Dallas, Texas. The Trust's lawsuit alleges that MLI, by declaring the Trust in default and threatening acceleration of the notes, has unlawfully sought to coerce the Trust into relinquishing certain of its rights and further alleges that MLI has engaged in acts of bad faith and conspiracy. The lawsuit was subsequently amended to name as additional defendants Fidelity Management and Research Company and certain affiliates (the "Fidelity Entities"). The Trust is seeking recovery of damages and injunctive relief to prevent MLI and the Fidelity Entities from continuing to violate the Trust's rights. Due to the circumstances resulting in this litigation, the Trust elected not to make the semi-annual interest payment due on May 27, 1995. On June 13, 1995, the lender declared the entire principal amount outstanding of $45,239,000 and all accrued interest thereon immediately due and payable. The lender further indicated that effective June 13, 1995, interest on the principal amount outstanding would accrue at the default rate of 11.7% as provided in the Note Purchase Agreement. Although management disagrees with the imposition of the default rate by the lender based on the circumstances resulting in the litigation, generally accepted accounting principles require that interest be accrued at the default rate. Accordingly, the accompanying financial statements include accrued interest based on the default rate from June 13, 1995. In the event that the loan is determined to be immediately due and payable, and is not ultimately modified or restructured through the favorable resolution of the litigation or otherwise, the Trust will be forced to consider such action as it deems necessary to protect the interests of the Trust and its shareholders, including seeking protection under applicable bankruptcy laws. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The table below provides a reconciliation of net loss, funds from operations ("FFO") and funds available for distribution ("FAD") for the three months and six months ended June 30, 1995 and 1994. Management believes that the presentation of FFO and FAD will enhance the reader's understanding of the Trust's financial condition as well as provide comparability to other real estate investment trusts. Neither FFO or FAD should be considered an alternative to net income as an indicator of the Trust's operating performance or to cash flows from operations as a measure of liquidity. The determination of FFO is based on the definition adopted by the National Association of Real Estate Investment Trusts which is net income (computed in accordance with generally accepted accounting principles), adjusted to exclude gains or losses from debt restructuring and sales of property, depreciation and amortization and to include adjustments for unconsolidated partnerships and joint ventures. FAD is generally more indicative of the Trust's ability to make distributions as it includes the effect of the Trust's capital expenditures. (000) (000) Three Months Six Months Ended Ended June 30, June 30, 1995 1994 1995 1994 Net loss $(762) $(1,290) $(1,698) $(2,465) Loss on sales of real estate 0 0 191 0 Extraordinary loss on extinguishment of debt 55 0 55 0 Depreciation and amortization 721 846 1,446 1,665 Amortization of original issue discount on Zero Coupon Notes due 1997 0 376 0 751 Funds from operations (FFO) 14 (68) (6) (49) Capitalized improvements and leasing commisions (336) (535) (496) (869) Funds available for distribution (FAD) $(322) (603) $(502) $(918)
The net loss of the Trust decreased by $767,000 when comparing the first six months of 1995 results to the same period in 1994. This decrease resulted from the following: i) increased net operating income from property operations as overall occupancy and rental rates continue to improve; ii) a decrease in Trust administrative expenses due primarily to the high level of expenses related to contested proxy costs incurred in the first half of 1994; iii) a decrease in depreciation and amortization expense due to the sale of the Quadrant property in February 1995; iv) the effect of the November 1994 financing and the defeasance of the Trust's zero coupon notes; v) a loss related to the sale of the Quadrant property in February 1995; and vi) a prepayment penalty associated with the payoff of a mortgage loan in May 1995. FFO for the six months ended June 30, 1995 increased by $43,000 from the same period in 1994 as a result of the increased net operating income of the properties, the decrease in the Trust administrative expenses, and the November 1994 financing discussed previously. FAD for the six months ended June 30, 1995 improved significantly from the year earlier period due to the same factors affecting FFO and the timing of capital expenditures such as tenant improvements and leasing commissions. These expenditures are indicative of the level of leasing and, over time, will decrease as the portfolio occupancy stabilizes. The overall occupancy of the Trust's portfolio on June 30, 1995 was 95%. On a same property basis, overall occupancy increased to 95% at June 30, 1995 from 92% at June 30, 1994. Same property revenue increased by 8% and net operating income increased by 13% when comparing the six months ended June 30, 1995 to the same period in 1994. The increase in net operating income resulted from increased revenues due to improving occupancy and rental rates, as well as a slight decrease in operating expenses. Liquidity and Capital Resources At June 30, 1995, the Trust had approximately $7.8 million in unrestricted cash reserves. These reserves could be decreased significantly should the Trust elect to purchase additional real estate properties or effect a refinancing or reduction of existing debt. As more fully described in Part II, Item 1. Legal Proceedings, the Trust is currently involved in litigation with its unsecured lender. Effective June 13, 1995, the lender declared the entire principal amount of $45,239,000 and accrued interest immediately due and payable and began accruing interest on the outstanding principal amount at the default rate of 11.7%. Although management disagrees with the imposition of the default rate by the lender based on the circumstances resulting in the litigation, generally accepted accounting principles require that the Trust accrue interest at the default rate. Management intends to vigorously defend against the actions of the defendants and believes that the Trust's claims will ultimately be resolved favorably to the Trust. However, there is no assurance as to the ultimate resolution of this litigation. Accordingly, in the event that the loan is determined to be immediately due and payable, and is not ultimately modified or restructured through the favorable resolution of the litigation or otherwise, the Trust will be forced to consider such action as it deems necessary to protect the interests of the Trust and its shareholders, including seeking protection under applicable bankruptcy laws. The costs of pursuing this litigation and defending against the actions of the defendants are expected to be significant and could adversely affect the Trust's resources and liquidity. In December 1993, the Trust announced the suspension of quarterly distributions until such time as the Trust's Zero Coupon Notes were fully defeased and such distributions could be made from the positive cash flow of the Trust. Although the Zero Coupon Notes have been fully defeased as described below, the Trust does not anticipate having the sustainable positive cash flow with which to initiate a distribution during calendar year 1995. It is uncertain when, and in what amount, such distributions will resume in the future. The initial capitalization of the Trust included $179,698,000 face amount at maturity of Zero Coupon Notes due 1997 (the "Notes") secured by first or second liens on all of the Trust's properties. In November 1994, the Trust completed a $14,500,000 refinancing of two properties. The proceeds of this refinancing were used to partially in-substance defease a portion of the outstanding Notes. This partial defeasance resulted in the release to the Trust of approximately $7.1 million in restricted funds previously held by the Trustee as well as the release of the liens securing the Notes which encumbered the Trust's properties. Although the defeasance of the Notes will result in reducing the net losses of the Trust, the defeasance will negatively impact the Trust's FFO and FAD as the amortization of the original issue discount on the Notes, which did not effect FFO or FAD, is effectively replaced with current- pay interest expense on the new financing, which does impact FFO and FAD. At June 30, 1995, the face amount at maturity and the accreted value of the defeased Notes were $16,365,000 and $12,361,000, respectively. The Trust intends to continue efforts to recapitalize its debt structure. Should such an opportunity materialize, the Trust may seek to retire existing debt obligations with proceeds from secured debt financings, property sales, cash on hand or a combination of these sources. Such a transaction may require the Trust to utilize a significant portion of its cash reserves. During the second quarter of 1995, the Trust elected to convert the interest rate on $14,424,000 in mortgage debt from a variable rate to a fixed rate. The Trust anticipates annual savings of approximately $100,000 from this transaction based on current interest rates. At June 30, 1995, the Trust had $17,685,000 in mortgage debt outstanding. Of this amount, $1,948,000 represented variable rate financing (with a weighted average interest rate of 11.0%) and $15,737,000 represented fixed rate financing (with a weighted average interest rate of 8.62%). Capitalized improvements and leasing commissions were $496,000 for the six months ended June 30, 1995 as compared to $869,000 for the same period in 1994. This decrease is primarily related to the significant increase in overall occupancy which occurred during the first half of 1994. PART II. OTHER INFORMATION Item 1.Legal Proceedings. On May 1, 1995, the Trust filed a lawsuit against The Manufacturers Life Insurance Company ("MLI") in the 134th Judicial District Court in Dallas, Texas. The suit alleges that MLI, which on April 21, 1995, had declared the Trust in default for non-monetary violations of the Note Purchase Agreement, had unlawfully sought to coerce the Trust into relinquishing certain of its rights. Specifically, the suit alleges that MLI and certain other entities had engaged in acts of bad faith and conspiracy in an attempt to force the Trust to consent to the transfer of the notes to a third party. On May 26, 1995, a First Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief was filed, naming Fidelity Management and Research Company, Fidelity Galileo Fund L.P., Belmont Capital Partners II, L.P., Fidelity Puritan Trust, and Fidelity Management Trust Company (together, the "Fidelity Entities") as additional defendants. On June 26, 1995, a Second Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief was filed, specifying damages to the Trust of up to $20,000,000. Item 3.Defaults Upon Senior Securities. On April 21, 1995, the Trust received a notice of default from The Manufacturers Life Insurance Company ("MLI") in connection with its unsecured notes payable in the outstanding principal balance of $45,239,000. The notice of default alleged that the Trust had violated certain non-monetary covenants and agreements and gave the Trust thirty days to remedy such defaults. A lawsuit was filed by the Trust on May 1, 1995 as described in Item 1 above. Due to the circumstances resulting in this litigation, the Trust elected not to make the semi-annual interest payment in the approximate amount of $2 million due MLI on May 27, 1995. Pursuant to a notice of acceleration issued by MLI on June 13, 1995, MLI declared the entire principal amount of the notes due and payable together with accrued interest thereon. The notice of acceleration also states that interest will accrue at the default rate of 11.7% as of June 13, 1995. Although management disagrees with the imposition of the default rate by the lender based on the circumstances resulting in the litigation, generally accepted accounting principles require that the Trust accrue interest at the default rate. As of June 30, 1995, the Trust has $45,239,000 in principal indebtedness to MLI and approximately $2,409,000, inclusive of the default interest, in accrued interest thereon. Item 6.Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit No. Description 27.1 * Financial Data Schedule 99.1 * First Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief 99.2 * Second Amended Petition, Application for Declarator Judgme and Application for Injunctive Relief * Filed herewith (b) Reports on Form 8-K Current Report on Form 8-K dated April 21, 1995, reporting Item 5. Current Report on Form 8-K dated May 30, 1995, reporting Item 5. Current Report on Form 8-K dated June 13, 1995, reporting Item 5. Current Report on Form 8-K dated June 19, 1995, reporting Item 5. 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, thereunto duly authorized. AMERICAN INDUSTRIAL PROPERTIES REIT (Registrant) Date:July 28, 1995 /s/ MARC A. SIMPSON Marc A. Simpson, Vice President and Chief Financial Officer (principal accounting and financial officer) EX-27 2
5 1000 6-MOS DEC-31-1995 JUN-30-1995 8499 0 0 0 0 0 100802 (22244) 89788 0 0 908 0 0 21590 89788 0 5939 0 7391 (191) 0 2962 0 0 0 0 (55) 0 (1698) (.19) (.19)
EX-99.1 3 CAUSE NO. 95-4181-G AMERICAN INDUSTRIAL IN THE DISTRICT COURT OF PROPERTIES REIT, Plaintiff, v. DALLAS COUNTY, TEXAS THE MANUFACTURERS LIFE INSURANCE COMPANY, FIDELITY MANAGEMENT & RESEARCH CORPORATION, FIDELITY GALILEO FUND, L.P., BELMONT CAPITAL PARTNERS II, L.P., FIDELITY PURITAN TRUST, and FIDELITY MANAGEMENT TRUST CO., Defendants. 134TH JUDICIAL DISTRICT FIRST AMENDED PETITION, APPLICATION FOR DECLARATORY JUDGMENT, AND APPLICATION FOR INJUNCTIVE RELIEF COMES NOW American Industrial Properties REIT (the "Trust") and files this its Original Petition, Application for Declaratory Judgment, and Application for Injunctive Relief, and would respectfully show as follows: I. PARTIES 1. The Trust is a real estate investment trust organized and existing under 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 Texas. 2. The Manufacturers Life Insurance Company ("MLI") is a Canadian corporation or life insurance company doing business in the State of Texas. MLI has appeared and answered herein. 3. Fidelity Management & Research Corporation is a Massachusetts corporation doing business in the State of Texas, which may be served by serving its registered agent, Practice Hall Corporation System, 400 N. St. Paul St., Dallas, Texas 75201. 4. Fidelity Galileo Fund, L.P. is a Delaware limited partnership which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109. 5. Belmont Capital Partners II, L.P. is a Delaware limited partnership which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 7.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Michael Forrester. 6. Fidelity Puritan Trust is an investment company and/or Massachusetts Business Trust which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Tom Lavin. 7. Fidelity Management Trust Co. is a Massachusetts bank and trust company which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Michael Forrester. 8. The entities described in paragraphs 3-7 are referred to collectively as the "Fidelity Entities." II. JURISDICTION AND VENUE 9. This Court has jurisdiction over Defendants as they regularly and systematically conducts business in the State of Texas, and/or the acts which gave rise to the claims asserted in this lawsuit occurred, in whole or in part, in Texas. Moreover, pursuant to the agreements that are at issue in this lawsuit, MLI has consented to suit in the State of Texas with respect to the matters asserted herein. The amount in controversy is within the jurisdictional limits of this Court. 10. Venue in Dallas County is proper pursuant to Texas Civil Practice & Remedies Code 15.001, 15.036, and 15.037 as all or part of the causes of action asserted herein accrued in Dallas County, and because, upon information and belief, MLI maintains an agent or representative in Dallas County. Moreover, pursuant to the agreements that are at issue in this lawsuit, MLI has agreed to venue in this county with respect to the matters asserted herein. III. BACKGROUND A. The MLI Notes and Agreement 11. MLI is the holder of certain promissory notes, executed by the Trust (the "Notes"). In connection with execution of the Notes, the Trust and MLI executed a Note Purchase Agreement, dated as of February 27, 1992 (the "Agreement"). The Notes call for semi-annual interest payments, with the principal balance not becoming due and payable until November 1997. The Agreement governs various aspects of the relationship between MLI and the Trust, including any potential transfer of the Notes by MLI. The Trust has performed all material obligations under the Notes and the Agreement. B. MLI's Refusal to Provide Information to the Trust 12. During the past year, MLI has advised the Trust of MLI's efforts to sell the Notes. In accordance with paragraph 8.3 of the Agreement, the Trust must consent to transfer of the Notes. Depending upon the characteristics of the proposed purchaser, the Trust must act reasonably in deciding whether to grant its consent. Accordingly, the Trust has requested from MLI certain basic information regarding prospective purchasers of the Notes, to permit the Trust to make an informed decision in exercising its rights under the Agreement. MLI, however, has repeatedly refused to provide basic information essential to allow the Trust to exercise its rights under the Agreement. 13. For example, MLI has advised the Trust that it had entered into an agreement with the Fidelity Entities for a potential sale of the Notes. Despite repeated requests by the Trust for information, MLI and the Fidelity Entities have refused to provide to the Trust critical information regarding the Fidelity entities. C. MLI's Scheme to Unlawfully Coerce the Trust 14. Rather than provide the Trust with the basic, essential information it has requested, MLI and the Fidelity Entities have decided to pursue a course of unlawful, coercive conduct intended to force the Trust to relinquish its rights under the Agreement. More specifically, even though the Trust has performed all material obligations under the Notes and the Agreement, MLI, by letter dated April 21, 1995, declared the Trust in default under the Agreement and threatened to accelerate the maturity of the Notes if the alleged defaults are not cured within 30 days of the date of the letter. The alleged defaults are all non-monetary in nature. Furthermore, the alleged defaults all relate to matters that, in fact, are not defaults under the Agreement, or they relate to technical defaults that are not material, or have been waived or cured. MLI has no good faith or reasonable basis for declaring the Trust in default or for threatening to accelerate the Notes. 15. Additionally, upon information and belief, MLI has joined with the Fidelity Entities and other individuals (including, but not limited to potential purchasers of the Notes) in an attempt to force the Trust to liquidate and/or change the ownership or control of the Trust through a pattern of coercion, duress and tortious interference. Upon information and belief, as part of its joint efforts with these individuals or entities, MLI has improperly disclosed confidential and proprietary information concerning the Trust to these other individuals and/or entities. The Trust has not consented and does not consent to such improper disclosures. Nor are these disclosures permitted by the Agreement. 16. MLI's bad faith declaration of default and threat to accelerate the Notes has been part of the scheme to coerce the Trust into relinquishing its rights under the Agreement, and to unlawfully force the Trust to consent to a transfer of the Notes to the Fidelity Entities. Upon information and belief, the Fidelity Entities, in concert with others, intend to wrongfully force a liquidation of the Trust and/or to change the ownership and control of the Trust through economic coercion and other unfair business practices. If MLI, the Fidelity Entities and the other individuals or entities in which they are acting in concert, succeed in their unlawful scheme, the Trust and its shareholders will suffer severe damages. 17. MLI's actions to date, as described above, have caused, and continue to threaten to cause, substantial, immediate, and irreparable damages to the Trust for which there is no adequate remedy at law. 18. All conditions precedent to the Trust's bringing this action have occurred or have been waived. IV. CAUSES OF ACTION A. Tortious Interference 19. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 20. The actions of MLI described above have interfered and/or threatened to interfere with the Trust's potential business relationships, including potential contracts to obtain additional capital for its business, and also threatened to interfere with the Trust's ability to fulfill its existing contracts with creditors. MLI knew or reasonably should have known that its actions would result in such interference, and such interference has proximately and substantially damaged the Trust in an amount within the jurisdictional limits of this Court. MLI's actions have been knowing, intentional, and malicious, and there is no reasonable or good faith basis for its actions. Accordingly, the Trust hereby seeks recovery of its actual damages, and punitive damages, for MLI's tortious interference. 21. The actions of the Fidelity Entities, and those acting in concert with them, have interfered with the Trust's existing contractual rights under the Notes and the Agreement. The Fidelity Entities, and those acting in concert with them, have acted knowingly and intentionally to injure the Trust, to take for themselves what belongs to the Trust and its shareholders. This tortious conduct has proximately injured the Trust and caused damages within the jurisdictional limits of this Court, for which the Trust now sues. Additionally, the Trust seeks an award of punitive damages. B. Economic Coercion 22. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 23. MLI has no right to declare a default, to threaten to accelerate the Notes, to force the Trust into agreeing to an unreasonable transfer of the Notes, or to engage in a concerted scheme to liquidate the Trust and/or to otherwise change its ownership and control. Such actions by MLI immediately and substantially threaten the continued viability of the Trust, and they threaten to substantially destroy the free will of the Trust. Moreover, MLI's coercion has already proximately caused substantial damages to the Trust in an amount within the jurisdictional limits of this Court, for which the Trust hereby seeks recovery. Additionally, because MLI's actions have been knowing, intentional, and malicious, the Trust also seeks an award of punitive damages. C. Breach of Contract 24. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 25. MLI's actions described above are in violation of its obligations under the Notes and the Agreement. Furthermore, by making demands for performance under the Notes and Agreement to which MLI is not entitled, MLI has anticipatorily breached the Notes and Agreement. These breaches have proximately and substantially damaged the Trust in an amount within the jurisdictional limits of this Court for which the Trust hereby seeks recovery. D. Civil Conspiracy 26. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 27. MLI, in concert with the Fidelity Entities and others, have agreed to pursue a scheme to accomplish an unlawful purpose. Alternatively, MLI in concert with the Fidelity Entities and others, have agreed to engage in a scheme to accomplish lawful ends through unlawful means. Accordingly, MLI has engaged in a civil conspiracy to injure and damage the Trust. As a direct result of this conspiracy, the Trust has been injured and damaged in an amount within the jurisdictional limits of this Court for which the Trust hereby seeks recovery. Additionally, because MLI and the Fidelity Entities' actions have been knowing, intentional and malicious, the Trust also seeks an award of punitive damages. E. Application for Declaratory Judgment 28. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 29. The dispute over whether MLI has the right to declare a default, accelerate the Notes, demand that the Trust consent to transfer of the Notes without providing adequate information to permit the Trust to determine whether to consent to the proposed transfer, and otherwise participate in a concerted scheme to liquidate and/or change the ownership or control of the Trust is a continuing and ongoing dispute which is ripe for resolution by the Court. Pursuant to Texas Civil Prac. & Rem. Code 37.001 et. seq., the Trust hereby requests a declaratory judgment that: (1) the Trust has not defaulted under the Agreement or the Notes; (2) that MLI's bad faith declaration of default to coerce the Trust to relinquish its rights under the Agreement is an anticipatory breach; and (3) the Trust is entitled to recover the damages it has incurred and will incur in the future as a result of Defendant's breach of the Agreement. F. Application for Injunctive Relief 30. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 31. The actions of MLI in wrongfully declaring a default under the Agreement, threatening to accelerate the Notes, attempting to coerce the Trust to grant its consent to transfer of the Notes without providing adequate information to permit the Trust to determine whether to consent to the proposed transfer, and otherwise participating in a scheme to force a liquidation and/or change in ownership and control of the Trust have caused, and continue to threaten to cause, substantial, immediate, and irreparable damages for which the Trust has no adequate remedy at law. Additionally, the Fidelity Entities' participation in this wrongful scheme has caused and threatens to cause substantial, immediate and irreparable damages for which the Trust has no adequate remedy at law. Moreover, MLI's wrongful disclosure of confidential and proprietary information concerning the Trust has caused, and continues to threaten to cause, substantial, immediate and irreparable damages for which the Trust has no adequate remedy at law. Accordingly, the Trust hereby requests that the Court enter preliminary and permanent injunctions which enjoin MLI from engaging in such wrongful conduct. G. Attorneys' Fees 32. Plaintiff incorporates the allegations contained in paragraphs 1 through 18 herein as if fully set forth. 33. Due to the wrongful acts of MLI as described herein, 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, expenses, and costs for doing so. Pursuant to the terms of the Agreement and the Notes, and pursuant to Chapters 37 and 38 of the Texas Civil Prac. & Rem. Code, and to any other applicable law, the Trust seeks an award of its costs and reasonable and necessary attorneys' fees and expenses from MLI. V. JURY DEMAND 34. The Trust hereby requests a trial by jury. WHEREFORE, PREMISES CONSIDERED, the Trust respectfully requests that MLI and the Fidelity Entities be cited to appear and answer herein, and that after an injunction hearing and/or trial on the merits, the Court enter judgment in the Trust's favor for the following: 1. Actual and punitive damages as set forth herein; 2. A declaration of rights as set forth herein; 3. Preliminary and permanent injunctions as set forth herein; 4. Its reasonable attorneys' fees, costs, and expenses associated with the litigation; 5. Pre and post judgment interest to the maximum extent allowed by law; 6. Costs of court; and 7. Such other and further relief to which the Trust may be justly entitled. Respectfully submitted, LIDDELL, SAPP, ZIVLEY, HILL & LaBOON, L.L.P. /s/ Craig L. Weinstock Craig L. Weinstock State Bar No. 21097300 Mark C. Taylor State Bar No. 19713225 Roger B. Cowie State Bar No. 00783886 2200 Ross Avenue, Suite 900 Dallas, Texas, 75201 (214) 220-4800 (Telephone) (214) 220- 4899 (Telecopier) ATTORNEYS FOR AMERICAN INDUSTRIAL PROPERTIES REIT CERTIFICATE OF SERVICE The foregoing First Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief was served on counsel for Defendant, on May 26, 1995, via telecopier and certified mail, return receipt requested. /s/ Mark C. Taylor MARK C. TAYLOR EX-99.2 4 CAUSE NO. 95-4181-G AMERICAN INDUSTRIAL IN THE DISTRICT COURT OF PROPERTIES REIT, Plaintiff, v. DALLAS COUNTY, TEXAS THE MANUFACTURERS LIFE INSURANCE COMPANY, FIDELITY MANAGEMENT & RESEARCH CORPORATION, FIDELITY GALILEO FUND, L.P., BELMONT CAPITAL PARTNERS II, L.P., FIDELITY PURITAN TRUST, and FIDELITY MANAGEMENT TRUST CO., Defendants. 134TH JUDICIAL DISTRICT SECOND AMENDED PETITION, APPLICATION FOR DECLARATORY JUDGMENT, AND APPLICATION FOR INJUNCTIVE RELIEF COMES NOW American Industrial Properties REIT (the "Trust") and files this its Second Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief, and would respectfully show as follows: I. PARTIES 1. The Trust is a real estate investment trust organized and existing under 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 Texas. 2. The Manufacturers Life Insurance Company ("MLI") is a Canadian corporation or life insurance company doing business in the State of Texas. MLI has appeared and answered herein. 3. Fidelity Management & Research Corporation is a Massachusetts corporation doing business in the State of Texas, which may be served by serving its registered agent, Practice Hall Corporation System, 400 N. St. Paul St., Dallas, Texas 75201. 4. Fidelity Galileo Fund, L.P. is a Delaware limited partnership which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109. 5. Belmont Capital Partners II, L.P. is a Delaware limited partnership which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 7.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Michael Forrester. 6. Fidelity Puritan Trust is an investment company and/or Massachusetts Business Trust which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Tom Lavin. 7. Fidelity Management Trust Co. is a Massachusetts bank and trust company which has conducted business in the State of Texas and has, by itself or through its agents, committed tortious activity in the State of Texas made the subject of this suit. Fidelity, therefore, is subject to jurisdiction of this court pursuant to Section 17.041 et. seq. of the Texas Civil Practice & Remedies Code. Service may be accomplished by serving the Texas Secretary of State, who will then forward the process to defendant's home office address, 82 Devonshire Street, Boston, Massachusetts 02109, Attn: Michael Forrester. 8. The entities described in paragraphs 3-7 are referred to collectively as the "Fidelity Entities." II. JURISDICTION AND VENUE 9. This Court has jurisdiction over Defendants as they regularly and systematically conducts business in the State of Texas, and/or the acts which gave rise to the claims asserted in this lawsuit occurred, in whole or in part, in Texas. Moreover, pursuant to the agreements that are at issue in this lawsuit, MLI has consented to suit in the State of Texas with respect to the matters asserted herein. The amount in controversy is within the jurisdictional limits of this Court. 10. Venue in Dallas County is proper pursuant to Texas Civil Practice & Remedies Code 15.001, 15.036, and 15.037 as all or part of the causes of action asserted herein accrued in Dallas County, and because, upon information and belief, MLI maintains an agent or representative in Dallas County. Moreover, pursuant to the agreements that are at issue in this lawsuit, MLI has agreed to venue in this county with respect to the matters asserted herein. III. BACKGROUND A. The MLI Notes and Agreement 11. In or around 1988, MLI acquired certain zero coupon bonds (the "MLI Zeros") by or through a brokerage firm named Printon, Kane. MLI paid approximately $31 million to acquire the MLI Zeros which were due in 1997, and had a total face amount of approximately $105 million dollars. By their terms, the MLI Zeros did not require the Trust to pay interest to MLI, at maturity, however, all principal and accreted interest was due and payable. 12. Approximately one year later, MLI concluded that it was apparent that the MLI Zeros could not pay their full face amount at maturity. Accordingly, MLI began negotiating a "swap" of the MLI Zeros for a series of unsecured notes that paid interest on a current basis. 13. As a result of these negotiations, MLI became the holder of certain promissory notes, executed by the Trust (the "Notes"). In connection with execution of the Notes, the Trust and MLI executed a Note Purchase Agreement, dated as of February 27, 1992 (the "Agreement"). At the end of 1992, the Trust paid off two of the Notes early. The remaining Notes call for semi- annual interest payments, with the principal balance not becoming due and payable until November 1997. The Agreement governs various aspects of the relationship between MLI and the Trust, including restrictions on any potential transfer of the Notes by MLI. B. MLI's Refusal to Provide Information to the Trust 14. During the past year, MLI has advised the Trust of MLI's efforts to sell the Notes. Pursuant to paragraph 8.3 of the Agreement, the Trust must not unreasonably withhold its consent to a transfer to a Qualified Institutional Investor. The Trust's right to reasonably withhold its consent is a valuable right it bargained for under the Agreement. Accordingly, the Trust has requested from MLI certain basic information regarding prospective purchasers of the Notes, to permit the Trust to make an informed decision in exercising its rights under the Agreement. MLI, however, has refused to provide information concerning the price, terms and conditions of the purchase, and potential transferees, investment goals and objectives with respect to the Notes, the prior business and investment activities of the Fidelity Entities, and the materials used to communicate to investors the investment strategies and objectives of the Fidelity Entities. For example, MLI has advised the Trust that it had entered into an agreement with the Fidelity Entities for a potential sale of the Notes. Despite repeated requests by the Trust for information, MLI and the Fidelity Entities have refused to provide to the Trust critical information regarding the Fidelity Entities. 15. Upon information and belief, the Notes are more valuable to the Fidelity Entities if they are in default, or if the Fidelity Entities could declare a default shortly after the transfer of the Notes. A defaulted note would allow Fidelity to attempt to obtain a quick return on its investment by forcing a liquidation of the Trust, thus maximizing the return to the Fidelity Entities. Upon information and belief, MLI was aware that the Fidelity Entities desired such a scenario, and embarked on a course of conduct, as described more particularly below, to create or manufacture a default when none existed, in order to obtain the highest possible price for the transfer of the Notes. C. MLI's Scheme to Unlawfully Coerce the Trust 16. Rather than provide the Trust with the basic, essential information it has requested, MLI and the Fidelity Entities have decided to pursue a course of unlawful, coercive conduct to manufacture a default under the Agreement in a concerted effort to force the Trust to relinquish its rights under the Agreement, including the right to withhold consent to a transfer of the Notes. More specifically, even though the Trust performed all material obligations under the Notes and the Agreement, MLI, by letter dated April 21, 1995, declared the Trust in default under the Agreement and threatened to accelerate the maturity of the Notes if the alleged defaults were not cured within 30 days of the date of the letter. The alleged defaults were all non- monetary in nature. Furthermore, the alleged defaults all related to matters that, in fact, are not defaults under the Agreement, or they relate to technical defaults that were not material, or had been waived or cured. MLI had no good faith or reasonable basis for declaring the Trust in default or for threatening to accelerate the Notes. 17. Additionally, upon information and belief, MLI joined with the Fidelity Entities in an attempt to force the Trust to liquidate and/or change the ownership or control of the Trust through a pattern of coercion, duress and tortious interference. Upon information and belief, as part of its joint efforts with these individuals or entities, MLI has improperly disclosed confidential and proprietary information concerning the Trust to these other individuals and/or entities. The Trust has not consented and does not consent to such improper disclosures, nor are these disclosures permitted by the Agreement. 18. MLI's bad faith declaration of default, its refusal, along with the Fidelity Entities, to provide information to the Trust, and threat to accelerate, and acceleration of, the Notes has been part of the concerted scheme with the Fidelity Entities to coerce the Trust into relinquishing its rights under the Agreement, and to unlawfully force the Trust to consent to a transfer of the Notes to the Fidelity Entities. Upon information and belief, MLI and the Fidelity Entities, intend to wrongfully force a liquidation of the Trust and/or to change the ownership and control of the Trust through economic coercion and other unfair business practices, including the manufacture of a default under the Agreement, the threat to accelerate, and acceleration of, the maturity of the Notes, the refusal to provide information concerning the Fidelity Entities and the terms of the proposed transfer, and the attempts to force the Trust to relinquish its rights to give consent to a proposed transfer. If MLI, the Fidelity Entities and the other individuals or entities in which they are acting in concert, succeed in their unlawful scheme, the Trust and its shareholders will suffer severe damages. 19. MLI's and the Fidelity Entities' actions to date, as described above, have caused, and continue to threaten to cause, substantial, immediate, and irreparable damages to the Trust for which there is no adequate remedy at law. 20. All conditions precedent to the Trust's bringing this action have occurred or have been waived. IV. CAUSES OF ACTION A. Tortious Interference 21. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 22. The actions of the Fidelity Entities have interfered with the Trust's existing contractual rights under the Notes and the Agreement. The Fidelity Entities, and those acting in concert with them, have acted knowingly and intentionally to injure the Trust, to take for themselves what belongs to the Trust and its shareholders. This tortious conduct has proximately injured the Trust and caused damages up to $20 million for which the Trust now sues. B. Economic Coercion 23. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 24. MLI has no right to declare a default, to threaten to accelerate the Notes, to force the Trust into agreeing to an unreasonable transfer of the Notes, or to engage in a concerted scheme to liquidate the Trust and/or to otherwise change its ownership and control. Such actions by MLI immediately and substantially threaten the continued viability of the Trust, and they threaten to substantially destroy the free will of the Trust. Moreover, MLI's coercion has already proximately caused substantial damages to the Trust up to $20 million, for which the Trust hereby seeks recovery. Additionally, because MLI's actions have been knowing, intentional, and malicious, the Trust also seeks an award of punitive damages. C. Breach of Contract 25. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 26. MLI's actions described above are in violation of its obligations under the Notes and the Agreement. Furthermore, by making demands for performance under the Notes and Agreement to which MLI is not entitled, MLI has anticipatorily breached the Notes and Agreement. These breaches have proximately and substantially damaged the Trust up to $20 million for which the Trust hereby seeks recovery. D. Civil Conspiracy 27. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 28. MLI, in concert with the Fidelity Entities and others, have agreed to pursue a scheme to accomplish an unlawful purpose. Alternatively, MLI in concert with the Fidelity Entities and others, have agreed to engage in a scheme to accomplish lawful ends through unlawful means. Accordingly, MLI and Fidelity have engaged in a civil conspiracy to injure and damage the Trust. As a direct result of this conspiracy, the Trust has been injured and damaged up to $20 million for which the Trust hereby seeks recovery. Additionally, because MLI and the Fidelity Entities' actions have been knowing, intentional and malicious, the Trust also seeks an award of punitive damages. E. Application for Declaratory Judgment 29. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 30. The dispute over whether MLI has the right to declare a default, accelerate the Notes, demand that the Trust consent to transfer of the Notes without providing adequate information to permit the Trust to determine whether to consent to the proposed transfer, and otherwise participate in a concerted scheme to liquidate and/or change the ownership or control of the Trust is a continuing and ongoing dispute which is ripe for resolution by the Court. Pursuant to Texas Civil Prac. & Rem. Code 37.001 et. seq., the Trust hereby requests a declaratory judgment that: (1) the Trust has not defaulted under the Agreement or the Notes; (2) that MLI's bad faith declaration of default to coerce the Trust to relinquish its rights under the Agreement is an anticipatory breach; and (3) the Trust is entitled to recover the damages it has incurred and will incur in the future as a result of Defendant's breach of the Agreement. F. Application for Injunctive Relief 31. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 32. The actions of MLI in wrongfully declaring a default under the Agreement, threatening to accelerate the Notes, attempting to coerce the Trust to grant its consent to transfer of the Notes without providing adequate information to permit the Trust to determine whether to consent to the proposed transfer, and otherwise participating in a scheme to force a liquidation and/or change in ownership and control of the Trust have caused, and continue to threaten to cause, substantial, immediate, and irreparable damages for which the Trust has no adequate remedy at law. Additionally, the Fidelity Entities' participation in this wrongful scheme has caused and threatens to cause substantial, immediate and irreparable damages for which the Trust has no adequate remedy at law. Moreover, MLI's wrongful disclosure of confidential and proprietary information concerning the Trust has caused, and continues to threaten to cause, substantial, immediate and irreparable damages for which the Trust has no adequate remedy at law. Accordingly, the Trust hereby requests that the Court enter preliminary and permanent injunctions which enjoin MLI from engaging in such wrongful conduct. G. Attorneys' Fees 33. Plaintiff incorporates the allegations contained in paragraphs 1 through 20 herein as if fully set forth. 34. Due to the wrongful acts of MLI as described herein, 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, expenses, and costs for doing so. Pursuant to the terms of the Agreement and the Notes, and pursuant to Chapters 37 and 38 of the Texas Civil Prac. & Rem. Code, and to any other applicable law, the Trust seeks an award of its costs and reasonable and necessary attorneys' fees and expenses from MLI. V. JURY DEMAND 35. The Trust hereby requests a trial by jury. WHEREFORE, PREMISES CONSIDERED, the Trust respectfully requests that MLI and the Fidelity Entities be cited to appear and answer herein, and that after an injunction hearing and/or trial on the merits, the Court enter judgment in the Trust's favor for the following: 1. Actual and punitive damages as set forth herein; 2. A declaration of rights as set forth herein; 3. Preliminary and permanent injunctions as set forth herein; 4. Its reasonable attorneys' fees, costs, and expenses associated with the litigation; 5. Pre and post judgment interest to the maximum extent allowed by law; 6. Costs of court; and 7. Such other and further relief to which the Trust may be justly entitled. Respectfully submitted, LIDDELL, SAPP, ZIVLEY, HILL & LaBOON, L.L.P. /s/ Craig L. Weinstock Craig L. Weinstock State Bar No. 21097300 Mark C. Taylor State Bar No. 19713225 Roger B. Cowie State Bar No. 00783886 2200 Ross Avenue, Suite 900 Dallas, Texas, 75201 (214) 220-4800 (Telephone) (214) 220-4899 (Telecopier) ATTORNEYS FOR AMERICAN INDUSTRIAL PROPERTIES REIT CERTIFICATE OF SERVICE The foregoing First Amended Petition, Application for Declaratory Judgment, and Application for Injunctive Relief was served on counsel for Defendant, on June 26, 1995, via telecopier and certified mail, return receipt requested. /s/ Mark C. Taylor MARK C. TAYLOR VERIFICATION STATE OF TEXAS COUNTY OF DALLAS BEFORE ME, the undersigned notary, on this day appeared Charles Wolcott, President of American Industrial Properties REIT, who, upon his oath, stated that he has personal knowledge of the matters set forth in paragraphs 1, 11-20, and 32, except where such matters are pleaded upon information and belief, and such matters are true and correct. CHARLES WOLCOTT STATE OF TEXAS COUNTY OF DALLAS The foregoing instrument was acknowledged before me this ____ day of __________________, 1995 by CHARLES WOLCOTT. Notary Public in and for the State of Texas Printed Name of Notary My Commission Expires: -----END PRIVACY-ENHANCED MESSAGE-----