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EXHIBIT 99(c)(9)
FRANK ROTHMAN (CA State Bar No. 22890)
HARRIET S. POSNER (CA State Bar No. 116097)
STEVEN A. VELKEI (CA State Bar No. 160561)
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
(213) 687-5000
Attorneys for Plaintiffs/ Counterdefendants
MCNEIL PACIFIC INVESTORS
FUND 1972, et al.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
MCNEIL PACIFIC INVESTORS FUND 1972, LTD., MCNEIL ) Case No. CV-96-5680 SVW (CWx)
REAL ESTATE FUND IX, LTD., MCNEIL REAL ESTATE FUND )
X, LTD., MCNEIL REAL ESTATE FUND XI, LTD., MCNEIL ) [PROPOSED] SUPPLEMENTAL AND AMENDED COMPLAINT
REAL ESTATE FUND XIV, LTD., MCNEIL REAL ESTATE FUND ) FOR DECLARATORY AND INJUNCTIVE RELIEF
XV, LTD., MCNEIL REAL ESTATE FUND XX, L.P., MCNEIL )
REAL ESTATE FUND XXIV, L.P., MCNEIL REAL ESTATE )
FUND XXV, L.P., MCNEIL REAL ESTATE FUND XXVI, and )
MCNEIL REAL ESTATE FUND XXVII, )
)
Plaintiffs, )
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v. )
)
HIGH RIVER LIMITED PARTNERSHIP, RIVERDALE INVESTORS )
CORP., INC., CARL C. ICAHN, and UNICORN ASSOCIATES )
CORPORATION, )
Defendants. )
)
)
AND RELATED COUNTERCLAIMS. )
)
)
)
)
)
)
)
)
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Plaintiffs, McNeil Pacific Investors Fund 1972, Ltd., McNeil Real
Estate Fund IX, Ltd., McNeil Real Estate Fund X, Ltd., McNeil Real Estate Fund
XI, Ltd., McNeil Real Estate Fund XIV, Ltd., McNeil Real Estate Fund XV, Ltd.,
McNeil Real Estate Fund XX, L.P., McNeil Real Estate Fund XXIV, L.P., McNeil
Real Estate Fund XXV, L.P., McNeil Real Estate Fund XXVI, L.P. and McNeil Real
Estate Fund XXVII, L.P. (collectively, the "Partnerships"), by their attorneys,
Skadden, Arps, Slate, Meagher & Flom, for their [Proposed] Supplemental and
Amended Complaint for Declaratory and Injunctive Relief against defendants High
River Limited Partnership, Riverdale Investors Corp., Inc., Carl C. Icahn, and
Unicorn Associates Corporation, allege as follows:
JURISDICTION
1. The jurisdiction of this Court is invoked pursuant to 28
U.S.C. Section 1332 (federal question jurisdiction); 15 U.S.C. Section 78aa
(jurisdiction over claims arising under the Securities Exchange Act of 1934);
and 28 U.S.C. Section 1367 (supplemental jurisdiction).
SUMMARY OF SUPPLEMENTAL AND AMENDED COMPLAINT
2. This is an action to enjoin a series of ongoing illegal
tender offers by affiliates of the well-known corporate raider, Carl Icahn, for
eleven real estate limited partnerships.
3. In early August, defendants unlawfully made a public
announcement of their intention to conduct a series of
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tender offers for limited partnership units in ten California limited
partnerships (the "Original Ten Partnerships"). As a matter of law under SEC
Rule 14d-2, this unlawful announcement caused tender offers to be commenced at
that time. Yet, for more than six weeks, the bidders failed to provide the
unitholders, the Partnerships and the Securities and Exchange Commission with
the required information to which they were entitled under the federal
securities laws. One effect (or, indeed, possibly the intention) of
defendants' unlawful announcement was to predispose the unitholders with
specific promises concerning purported tender offers -- a manipulative device
the SEC has expressly barred pursuant to its authority to make rules to protect
investors from the manipulative devices employed during tender offers.
4. For more than six weeks after August 5, 1996, defendants
allowed its unlawful tender offers to remain pending, without either (i)
disseminating tender offer materials to the Partnerships' unitholders, or (ii)
withdrawing or discontinuing the tender offers. Finally, on September 20,
1996, defendant High River Limited Partnership ("High River") finally commenced
its tender offers for nine of the Original Ten Partnerships -- omitting one
partnership that was in the process of being liquidated, with substantially
greater financial benefit to unitholders than they would have received from
defendants' lowball offers -- together with two additional partnerships.
However, High River's belated commencement of its formal tender offers fails to
cure its blatant and continuous pattern of illegality.
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5. Among other defects, High River's current tender offers for
"any and all units" in the Partnerships are undertaken in violation of the
applicable Partnership Agreements, each of which precludes transfers of
Partnership units that would have the effect of dissolving or terminating the
Partnership. As High River has itself acknowledged, the Internal Revenue Code
and applicable IRS regulations provide that the transfer of more than 50% of
partnership interests within any 12-month period results in termination of the
Partnership for federal tax purposes. Accordingly, High River should not be
permitted to conduct, let alone consummate, coercive tender offers that
threaten to cause the Partnerships to terminate, with potentially serious,
harmful tax consequences for non-tendering limited partners and the
Partnerships themselves, and the offers should be enjoined. Additionally, High
River's Schedule 14D-1 disclosures are false, misleading and omissive in
several other respects, including such material matters as the time when
unitholders can expect to receive payment for their units and the price to be
received. The defects in High River's disclosures, individually and
cumulatively, warrant injunctive relief against continuation and consummation
of the tender offers pending fair and complete correct disclosures and the
passage of a reasonable time thereafter.
6. As an aid to their illegal offers, defendants have served the
Original Ten Partnerships with demands for lists of unitholders, allegedly made
pursuant to the California Limited Partnership Act. Admittedly, defendants'
purpose in requesting these lists is to facilitate the pending High River
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tender offers that not only are being pursued in violation of the federal
securities laws, but would also, if successful, destroy the Partnerships and
damage thousands of unitholders. Because defendants' request for the lists is
illegal and made for an improper purpose, the Partnerships are further entitled
to a declaratory judgment that they are under no obligation to furnish
defendants (or any other person or entity acting in concert with them) with the
unitholder lists under these circumstances.
PARTIES
7. Each of the plaintiff Partnerships (McNeil Pacific Investors
Fund 1972, Ltd., McNeil Real Estate Fund IX, Ltd., McNeil Real Estate Fund X,
Ltd., McNeil Real Estate Fund XI, Ltd., McNeil Real Estate Fund XIV, Ltd.,
McNeil Real Estate Fund XV, Ltd., McNeil Real Estate Fund XX, L.P., McNeil Real
Estate Fund XXIV, L.P., McNeil Real Estate Fund XXV, L.P., McNeil Real Estate
Fund XXVI, L.P. and McNeil Real Estate Fund XXVII, L.P.) is a limited
partnership. All the plaintiffs except McNeil Real Estate Fund XXVII, L.P.
("Fund XXVII") are California limited partnerships. Fund XXVII is a Delaware
limited partnership.
8. Defendant High River is a Delaware limited partnership and is
one of the bidders in the unlawful tender offers for the Partnerships.
9. Defendant Riverdale is a Delaware corporation and is the
general partner of High River and is another bidder in the unlawful tender
offers.
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10. Defendant Icahn is a natural person who is another bidder in
the unlawful tender offers. Upon information and belief, Icahn controls his
co-defendants High River, Riverdale and Unicorn.
11. Defendant Unicorn is a New York corporation.
12. All the defendants have acted in concert in connection with
all the matters that form the subject of this action.
FACTS
A. Icahn's Prior Tender Offers.
13. On August 3, 1995, High River launched a series of ten
unsolicited tender offers seeking to acquire up to 45% of the units in each of
Original Ten Partnerships.
14. Unitholders in each of the Partnerships overwhelmingly
rejected High River's 1995 tender offers. When these tender offers closed on
October 6, 1995, High River received tenders of less than approximately 10% of
the outstanding limited partnership units in each of the Original Ten
Partnerships.
15. Soon after Icahn commenced his tender offers of last year,
the proverbial bevy of class action law suits were reflexively filed in
California, New York and Texas, purportedly seeking to "protect" the
Partnerships' unitholders. As the Partnerships allowed Icahn's tender offers
to be consummated without seeking judicial assistance to impede them, these
purported "defenders" of unitholder interests found no occasion to do anything
in connection with Icahn's tender offers that
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would justify any recovery, judicial relief, or, critically, any legal fees.
While the actions in New York and Texas were abandoned by these class
plaintiffs, they have expressed their intention to consolidate all their
alleged grievances in a pending action in California state court, principally
to press contrived claims of breach of fiduciary duty by the Partnerships and
their general partner.
16. The units tendered to High River in each of the Ten Original
Partnerships have been transferred to High River, or, at High River's
designation, to Unicorn. High River is now, and has been throughout 1996, a
limited partner of each of the Ten Original Partnerships, and is bound by the
Partnership Agreement governing each of the Partnerships.
B. The 1996 Schedule 13D Amendment.
17. On August 5, 1996, the Icahn Group filed with the Securities
and Exchange Commission Amendment No. 4 to its joint Schedule 13D with respect
to the Original Ten Partnerships. A copy of this Amendment to Schedule 13D is
annexed hereto as Exhibit A. The contents of the amendment have routinely been
placed on databases that are accessible throughout the United States, including
this District, and have also been the subject of wire service coverage.
18. The Icahn Group's Amendment to Schedule 13D was filed for
the purpose, inter alia, of disclosing the terms of an extraordinary letter
agreement between High River and counsel for the purported class plaintiffs
who, as noted above, have brought class or derivative claims against the
Partnerships and their general partner.
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19. Under Item 6 ("Contracts, Arrangements, Understandings or
Relationships With Respect to Securities of the Issuer"), the Icahn Group
disclosed:
The Letter Agreement . . . provides, among other things, that . .
. High River will commence, as soon as possible, but in no event more
than 6 months, the Tender Offers for any and all of the outstanding
Units of the Partnerships at a price that is not less than 75% of the
estimated liquidation value of the Units (as determined by utilizing the
same methodology that was used to determine the liquidation values in
High River's previous tender offers for the Partnerships), which Tender
Offers may be subject to such other terms and conditions as High River
determines in its sole discretion. . . .
[Emphasis added.]
20. In apparent exchange for this unenforceable "promise," High
River's letter agreement with the class plaintiffs also contained an
unprecedented -- and probably illegal and unenforceable -- provision under
which counsel for the putative class purportedly agreed not to settle the
pending California state-court litigation against the Partnerships and their
general partner for less than a specified (and exorbitant) amount of
consideration.
C. Defendants' August 5 Filings Commenced Tender Offers.
21. As a matter of law, the disclosure made by defendants on
August 5, 1996, constituted the commencement of tender offers for any or all
outstanding limited partnership
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units in each of the Original Ten Partnerships, by each of the defendants, who
together constitute a "group" under Section 13(d).
22. SEC Rule 14d-2(a)(5), 15 C.F.R. Section 240.14d-2(a)(5),
provides that a tender offer is commenced for purposes of Section 14(d) at
12:01 a.m. on the date when "[t]he tender offer is first published or given to
security holders by the bidder. . . ." Under Rules 14d-2(b) and (c), a public
announcement by a bidder "shall be deemed to constitute the commencement of a
tender offer" if the announcement includes "(1) [t]he identity of the bidder;
(2) [t]he identity of the subject company; and (3) [t]he amount and class of
securities being sought and the price or range of prices being offered
therefor."
23. The Icahn Group's Amendment to Schedule 13D contained all
the information sufficient to satisfy each and every element of Rule 14d-2,
including the identity of the bidder (High River), the identity of the target
(the Original Ten Partnerships), the quantity of securities to be acquired (any
and all limited partnership units), and the "range of prices" to be offered
(not less than a stated percentage of the Partnerships' liquidation values).
The announced price range referred to methodology that had been expressly used
and disclosed by High River in the 1995 tender offers for the same
Partnerships, and therefore not only constituted part of the public record but
was also known to the very unitholders whom the Icahn Group's disclosure was
intended to reach and effect.
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24. Accordingly, the Icahn Group's amended Schedule 13D
constituted a "public announcement" of High River's commencement of tender
offers for the Original Ten Partnerships, effective August 5, 1996.
Thereafter, within five (5) business days after August 5, 1996, i.e., by August
12, 1996, the Icahn Group was required either to (1) publicly announce that it
had determined not to continue with the tender offers, or (2) disseminate all
information to which unitholders are entitled to evaluate the tender offers and
determine whether to tender, as set forth in SEC Schedule 14D-1. SEC Rule
14d-2(b), 15 C.F.R. Section 240.14d-2(b).
25. For more than six weeks after August 5, 1996, High River
undertook neither of the two legally permissible alternatives. High River
failed either to discontinue its tender offers or to make Schedule 14D-1
disclosure to investors even after the Partnerships filed their initial
Complaint in this action asking this Court to enjoin defendants' blatant Rule
14d-2 violation and manipulative tactics. Throughout this time, High River
was, therefore, in violation of the SEC Rules governing tender offers:
If the bidder makes the subsequent announcement contemplated by
the first option, the initial announcement will not be deemed to
commence an offer. If the bidder complies with the filing, disclosure
and dissemination requirements of the second option, the tender offer
will commence on the date of such compliance, rather than the date of
the earlier public announcement. . . . If the bidder exercises
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neither option, the tender offer commences on the date of the initial
announcement, resulting, however, in filing and disclosure violations.
As a result, it is not anticipated that a bidder making such a public
announcement will select the "do nothing" alternative.
SEC Exchange Act Release No. 16384, Fed. Sec. L. Rep. (CCH) 82,373, at 82,583
(Dec. 19, 1979) (emphasis added).
26. Although High River belatedly filed its Schedules 14D-1 on
September 20, 1996, and provided tender offer materials to the Partnerships for
mailing on September 30, 1996, High River, as a matter of law, could not and,
as a matter of fact, did not even attempt to "unring the bell" of its Rule
14d-2 violation. Rather, during those six weeks between August 5 and September
20, 1996, the unlawful information in the Schedule 13D filing was allowed to
remain publicly available to influence unitholders with respect to its offers.
D. High River's Schedule 14D-1 Filings.
27. On September 20, 1996, at long last, High River finally
filed Schedules 14D-1 with the SEC, purportedly commencing tender offers for
"any and all units" in the eleven plaintiff Partnerships, including nine of the
Original Ten Partnerships affected by the August Schedule 13D Amendments,
together with McNeil Real Estate Funds XXVI, L.P. ("Fund XXVI") and Fund XXVII.
A copy of the Schedule 14D-1 for Fund XXIV, which is representative of all
these filings, is annexed hereto as Exhibit B.
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28. High River's Schedule 14D-1 filings disclosed that High
River had entered into two more unusual agreements with the plaintiffs'
attorneys in the putative class actions against the partnerships. First,
defendants committed themselves to make tender offers for units in two
additional Partnerships, Fund XXVI and Fund XXVII, in addition to the Ten
Original Partnerships. On the other hand, Plaintiffs' Counsel released High
River from its obligation to commence a tender offer for McNeil Real Estate
Limited Fund V, Ltd. ("Fund V"), which was in the process of liquidating on
terms substantially more favorable than those reflected in High River's lowball
offer made in 1995 or the price that would have been offered in 1996.
29. High River's tender offers are for "any and all units" in
the eleven Partnerships that are the present plaintiffs herein. However, these
tender offers violate the Partnership Agreements that are the organic documents
for these Partnerships.
30. Section 708(b)(1)(B) of the United States Internal Revenue
Code, 26 U.S.C. Section 708(b)(1)(B), provides that if more than 50% of the
partnership interests in a partnership change hands within a 12-month period,
the partnership shall terminate under the tax laws. High River's Schedules
14D-1 acknowledge that should High River complete its tender offers in
accordance with their terms, Section 708(b)(1)(B) would be triggered, with
negative consequences for non-tendering limited partners.
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31. The Partnership Agreements that govern these Partnerships
preclude limited partners from taking any actions that would dissolve or
terminate the Partnership. Section 16.6 of the Partnership Agreement for each
Partnership (except for McNeil Pacific Investors Fund 1972, Ltd. ("Fund 1972"))
provides that:
No Limited Partner shall have the right or power to . . . (iii)
cause the termination and dissolution of the Partnership by court decree
or otherwise, except as set forth in this Partnership Agreement. . . .
Termination of the Partnerships for tax purposes by act of the limited partners
is not among the bases for dissolution or termination authorized by the
Partnership Agreements. Thus, successful consummation of High River's tender
offers in whole or significant part would contravene and violate the
Partnership Agreements.
32. In the 1995 tender offers, High River (and its affiliate,
Unicorn) acquired between 5% and 10% of the limited partnership units in the
Ten Original Partnerships. Moreover, there have been and will continue to be
ongoing transfers of limited partnership interests in the ordinary course.
Thus, pursuant to the express terms of the Partnership Agreements asked above,
High River may not acquire, other limited partners may not transfer, and McNeil
may not recognize the transfer of, more than 50 percent of the outstanding
limited partnership units in any 12 month period -- much less "any and all
units" in each Partnership. Moreover, by failing to disclose that
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High River may not validly tender for and acquire "any and all units" in the
Partnerships, High River's tender offer materials are false and misleading.
E. High River's False, Misleading And Misleadingly Omissive Schedules
14D-1.
1. High River's Failure To Disclose Delays In Payments.
33. The Schedules 14D-1 filed by High River are also false and
misleading in numerous other respects. First, High River has failed to
disclose that, notwithstanding the reasonable expectations of investors and SEC
Rule 14e-1(c), it does not pay investors for units that are tendered to them
"promptly" after a tender offer closes.
34. High River closed its 1995 tender offers on October 6, 1995.
Transfer of most partnership units to High River (and Unicorn) occurred on
December 31, 1995. Yet, High River failed to pay many limited partners for
their units for several months after December 1995. McNeil and High River each
received numerous communications from limited partners complaining of High
River's inexcusable failure to make timely payments to unitholders. High River
has never publicly disclosed any of these delays or the reason for such delays.
35. High River's prior record of unlawful delay in paying for
the units acquired would be highly significant to a reasonable investor
considering whether to tender units in the presently pending tender offers.
Yet, far from disclosing that it previously delayed in paying for units, High
River now claims in its tender offer materials that it will pay for units
tendered to it "as promptly as possible following the Expira-
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tion Date." Under the circumstances, High River's disclosure is misleading and
fails to disclose facts that are necessary to make the statements that are
disclosed not misleading.
2. High River's Misleading Disclosure Of The Tender Offer Prices.
36. With respect to six Partnerships, High River's disclosure of
the price to be paid for each unit -- the single most material disclosure
imaginable -- is materially false and misleading, in that High River discloses
in prominent text on the cover of its tender offer materials the price it will
pay for units, while only disclosing in the clause thereafter that that price
is to be reduced by the (unspecified) amount of distributions that the
Partnerships made recently (but well before High River's Schedules 14D-1 were
filed) to the unitholders.
37. For example, in the case of Fund XXVII, High River initially
asserts that its offer price is $6.190 per unit. However, given that Fund
XXVII made a distribution to unitholders of $0.56884 per unit in August 1996,
High River's real offer price for units in Fund XXVII is the lesser sum of
$5.6312 -- or a reduction of almost 9.2% from the prominently displayed price.
Similarly misleading "prices" are disclosed with respect to distributions made
by Funds XV, XX, XXIV, XXV and XXVI. As the August 1996 distributions to
unitholders were made approximately one month ago, High River certainly had
sufficient time to disclose, in the bold print on the front page of their
tender offer materials, the real prices it will pay for tendered units.
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3. Defendants' Failure To Adequately Disclose Their Financial
Condition.
38. Finally, the Schedules 14D-1 filed by High River are also
insufficient because they fail to adequately disclose the present financial
position of High River and its affiliates.
39. High River's Schedules 14D-1 contain only unaudited
financial statements as of June 30, 1996 for High River, but do not contain any
other additional financial information concerning High River, although such
information is material to investors who are entitled to know (i) whether High
River is likely to be able to pay for the units it contracts to purchase, and
(ii) the financial position of a party that concededly may seek to take control
of the Partnerships. Moreover, the Schedules 14D-1 contain no financial
information concerning Riverdale, which is High River's general partner, Icahn
and/or Unicorn.
F. High River's Demand For Unitholder Lists.
40. On August 12, 1996, High River wrote to each of the Ten
Original Partnerships making a demand for lists of the unitholders in each
Partnership. Specifically, High River's letter indicated:
We request permission to inspect and copy, no later than August
19, 1996, during normal business hours, a current list, for each
Partnership, of the full name and list known business or residence
address of each partner, set forth in alphabetical order together with
the contribution and the share in
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profits and losses of each partner (collectively, the Unitholder
Lists"). The undersigned, or an affiliate of the undersigned, intends
to make a tender offer for Units of each of the Partnerships. [Emphasis
added.]
A copy of High River's demand letter is annexed hereto as Exhibit C.
41. As demonstrated by the contents and timing of its August 12
letter, High River sought to obtain the unitholder lists for the purpose of
facilitating tender offers for the Ten Original Partnerships. However, as
demonstrated above, the tender offers are palpably illegal in that, inter alia,
(i) they are being conducted in gross violation of the applicable SEC Rules
designed to prevent market manipulation and to ensure that unitholders receive
all the information they need in order to make informed investment decisions,
and (ii) they seek tenders that would cause termination of the Partnerships, in
violation of the Partnership Agreements and to the extreme detriment of other
unitholders. California state law, which under other circumstances might
require the Partnerships to provide High River with the information it seeks,
does not require the Partnerships to provide shareholder lists for the purpose,
as here, of facilitating the conduct of tender offers that violate both the
federal securities laws and the Partnership Agreements, and which offers
themselves must be enjoined.
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FIRST CLAIM FOR RELIEF
[For Violation Of Sections 14(d) and 14(e)
Of The Exchange Act And The Rules And
Regulations Promulgated Thereunder --
Premature Commencement Of Offers Under Rule 14d-2]
42. Plaintiffs repeat and reallege the allegations of the
preceding paragraphs as if fully set forth herein.
43. Sections 14(d) and (e) of the Exchange Act, 15 U.S.C.
Section 78n(d)-(e), require that in connection with a tender offer, full
disclosure must
be made of the information specified in Section 14(d) and the rules and
regulations promulgated thereunder, and make it unlawful to engage in any
fraudulent deceptive or manipulative act in connection with any tender offer.
44. Sections 14(d) and (e) and the SEC regulations thereunder
are thus intended to insure that security holders confronted with a tender
offer are provided with all the information about the offeror and the offer
necessary for them to make an informed investment decision whether to tender or
hold their securities.
45. Under Rule 14d-2, High River commenced tender offers for all
outstanding units of the Partnerships on August 5, 1996, yet High River failed
for weeks thereafter either (i) to disclose or disseminate to shareholders
virtually any of the information required to be disclosed on Schedule 14D-1,
and (ii) also failed, as the only other permissible alternative, to announce
within five business days that it was discontinuing the tender offers. High
River's manipulation of the marketplace continued until September 20, 1996,
when High River
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belatedly filed its Schedules 14D-1 which, in any event, were themselves
materially false and omissive.
46. Defendants' Schedule 13D Amendment purporting to disclose an
intention to commence tender offers was calculated improperly to condition the
Unitholders and interfere with trading in limited partnership units that would
otherwise take place. As defendants, who are veteran, sophisticated tender
offerors with years of experience in tender offer matters, well know, the
avoidance of such manipulative abuses is the very purpose of Rule 14d-2.
47. By reason of the foregoing, defendants should be
preliminarily and permanently enjoined from any further violations of the
federal securities laws, including without limitation Sections 14(d) and (e) of
the Exchange Act and the SEC Rules promulgated thereunder. In particular, High
River and any other offeror should be mandatorily enjoined to promptly cure
their prior violation of Rule 14d-2 by discontinuing the ongoing, unlawful
tender offers for the Partnerships, without acquiring any units pursuant
thereto, and waiting at least 60 days thereafter, to allow the market to
recover from defendants' unlawful "gun-jumping," before commencing any further
tender offers..
48. The Partnerships and their limited partners have no adequate
remedy at law.
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SECOND CLAIM FOR RELIEF
[For Breach Of The Partnership Agreements And For
Participating In, Aiding And Abetting, And Soliciting
Breaches Of The Partnership Agreements]
49. Plaintiffs repeat and reallege the allegations of the
preceding paragraphs as if fully set forth herein.
50. Section 708(b)(1)(B) of the United States Internal Revenue
Code, 26 U.S.C. Section 708(b)(1)(B), provides that if more than 50% of the
partnership interests in a partnership change hands within a 12-month period,
the partnership shall be treated as having been terminated for tax purposes.
High River's Schedule 14D-1 acknowledges that should High River succeed with
its tender offers, Section 708 would be triggered, with potential negative
consequences for non-tendering limited partners.
51. The Partnership Agreement for each Partnership precludes
limited partners from taking actions that would dissolve or terminate the
Partnership. Section 16.6 of the Partnership Agreement for each Partnership
(except McNeil Pacific Investors Fund 1972, Ltd.) provides that:
No Limited Partner shall have the right or power to . . . (iii)
cause the termination and dissolution of the Partnership by court decree
or otherwise, except as set forth in this Partnership Agreement. . .
52. High River has offered to acquire "any and all" units in
each of the Partnerships would result in the transfer, within a 12-month
period, of more than 50% of the units of each Partnership. Such transfer would
result in the application of
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Section 708 to each Partnership, with resulting potentially disastrous tax
consequences to each limited partner who elects not to tender units.
53. By proposing to engage in conduct that would result in the
tax termination of the Partnerships, High River has breached the Partnership
Agreements with respect to each of the Partnerships in which it is a limited
partner, which include all the Partnerships as to which High River made its
1995 tender offers.
54. Additionally, any limited partner transferring units that
would result in the overall transfer of more than 50% of the outstanding units
in a 12-month period would, unwittingly, thereby breach the Partnership
Agreement. By seeking to induce unitholders to effect such transfers, High
River is intentionally participating in, aiding and abetting and soliciting
such breaches.
55. High River's conduct concededly threatens irreparable harm
not only to the Partnerships but to their limited partners who may choose not
to tender units to High River, many of whom chose to invest in the Partnership,
in part, as the result of tax considerations. It is fundamentally unfair and
illegal for High River to be permitted to destroy, for many limited partners,
the Partnerships' favorable tax treatment, in violation of the Partnership
Agreements that are the Partnerships' organic documents.
56. By reason of the foregoing, High River should be
preliminarily and permanently enjoined from continuing and consummating its
pending tender offers for "any and all units"
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in the Partnerships, or offers for any number of units that, when combined with
the units previously transferred in the preceding 12 months (including those
previously acquired by High River and Unicorn), and/or when combined with the
units that can be expected to be transferred by other unitholders in the (next)
12 months, would result in the transfer of more than 50% of outstanding units
and the triggering of Section 708(b)(1)(B).
57. The Partnerships and their limited partners have no adequate
remedy at law.
THIRD CLAIM FOR RELIEF
[For Violation Of Sections 14(d) and 14(e)
Of The Exchange Act And The Rules And
Regulations Promulgated Thereunder --
False, Misleading And Misleadingly Omissive
Schedules 14D-1 And Tender Offer Materials]
58. Plaintiffs repeat and reallege the allegations of the
preceding paragraphs as if fully set forth herein.
59. High River has purported to commence tender offers for "any
and all units" in each of the Partnerships and has filed Schedules 14D-1 and
disseminated tender offer materials purporting to offer to purchase "any and
all units." Yet, for the reasons discussed above, High River may not,
consistent with the Partnership Agreements, acquire units that would cause the
transfer of more than 50% of the outstanding units in any Partnership, and
should be enjoined from doing so. In fact, the number of units that High River
may validly acquire in each Partnership is, in light of its prior tender offers
and other transfers that occur in the ordinary course, substantially less
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than 50% of the outstanding units -- not 100%, as High River depicts.
60. High River's tender offer materials are false, misleading
and misleadingly omissive in failing to disclose that High River is not
entitled to acquire "any and all units" and that transfer of units that would
cause the tax termination of the Partnerships under Section 708 would be in
breach of the Partnership Agreements and, therefore, cannot take place.
61. High River's tender offer materials are also false,
misleading and omissive in that:
(a) While stating that unitholders will be paid for their
units as promptly as possible following consummation of the offers, they fail
to disclose that in the previous tender offers for these Partnerships, High
River unreasonably and without excuse delayed for up to several months in
making payment for units it purchased and thereby violated SEC Rule 14e-1(c),
17 C.F.R. Section 240.14e-1(c);
(b) With respect to six Partnerships, while High River
discloses on the cover of its tender offer materials the price it will pay for
units, High River discloses only in a later clause that that price to be paid
is to be reduced by amounts of distributions that the Partnerships made
recently to the unitholders; and
(c) The Schedules 14D-1 filed by High River fail to
adequately disclose the financial position of High River and its affiliates.
62. By reason of the foregoing, defendants should be
preliminarily and permanently enjoined from continuing or
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consummating their tender offers for the Partnerships until they disseminate
amended materials containing full, fair and complete supplemental disclosures
with respect to each false, misleading or misleadingly omissive statement
contained in their Schedules 14D-1 and unitholder mailings, and for a
reasonable time (and in no event less than 60 days) thereafter to permit
investors to consider and evaluate the contents of such curative disclosures.
63. The Partnerships and their limited partners have no adequate
remedy at law.
FOURTH CLAIM FOR RELIEF
[For Violation Of Section 13(d)
Of The Exchange Act And The Rules And
Regulations Promulgated Thereunder]
64. Plaintiffs repeat and reallege the allegations of the
preceding paragraphs as if fully set forth herein.
65. Section 13(d) of the Exchange Act, 15 U.S.C. Section
78m(d), and the SEC Rules promulgated thereunder make it unlawful for any
person to file a Schedule 13D (including an amendment thereto) containing any
materially false or misleading statement or omission.
66. Amendment No. 4 to the Icahn Group's Schedule 13D, filed
August 5, 1996, is materially false, misleading and omissive in that it fails
to disclose that under the SEC Rules, the filing of the Amended Schedule 13D
constituted the commencement of tender offers with respect to each Partnership,
and that the Icahn Group intended within five business days neither to
discontinue the tender offers nor to disclose and
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disseminate the information required to be disclosed so that unitholders could
make informed decisions as to whether to tender their units.
67. By reason of the foregoing, defendants should be
preliminarily and permanently enjoined from any further violations of the
federal securities laws, including without limitation Section 13(d) of the
Exchange Act. In particular, defendants should be mandatorily enjoined to
promptly amend its Schedule 13D to disclose that on August 5, 1996, High River
(and any other offerors) commenced tender offers for the Partnerships and that
they have discontinued such tender offers without acquiring any units from any
limited partners.
68. The Partnerships and their limited partners have no adequate
remedy at law.
FIFTH CLAIM FOR RELIEF
[Against High River For A Declaratory Judgment
That The Partnerships Are Not
Required To Provide High River With
Unitholder Lists To Aid It In
Pursuing Its Illegal Tender Offers]
69. The Partnerships repeat and reallege the allegations of the
preceding paragraphs as if fully set forth herein.
70. This claim is brought on behalf of the Ten Original
Partnerships (except for Fund V).
71. On August 12, 1996, High River wrote to each of the Ten
Original Partnerships making a demand for lists of the unitholders in each
Partnership.
72. As demonstrated by the contents and timing of its August 12
letter, High River is seeking to obtain the unitholder lists for the express
and conceded purpose of con-
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ducting tender offers for the Ten Original Partnerships. However, as
demonstrated above, these tender offers are palpably illegal in that they (i)
are being conducted in plain violation of the applicable SEC Rules designed to
prevent market manipulation, and (ii) could trigger termination of the
Partnerships in violation of the Partnership Agreements. Under California law,
the Partnerships should not be required to provide shareholder lists for the
purpose of facilitating the conduct of tender offers that violate the federal
securities laws and the Partnership Agreements, to the manifest detriment of
the Partnerships and the unitholders, and themselves must therefore be
enjoined.
73. By reason of the foregoing, the Partnerships are entitled to
a declaratory judgment that High River is not entitled to be provided
unitholder lists, or any other information, pursuant to High River's letter of
August 12, 1996 or which would otherwise be used in connection with illegal
tender offers, other conduct in violation of the Partnership Agreements, or any
attempt to profit from unlawful market manipulation.
WHEREFORE, plaintiffs respectfully demand judgment:
I. Declaring that defendants have violated Sections 14(d) and
(e) and 13(d) of the Securities Exchange Act of 1934, 15 U.S.C. Sections
78n(d)-(e), 78m(d), and the SEC Rules promulgated thereunder in connection with
their commencement and continuation of tender offers for the Partnerships on
and after August 5, 1996 and September 20, 1996;
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II. Granting plaintiffs injunctive relief commanding High River
to withdraw, discontinue and acquire no units pursuant to its existing tender
offers for "any and all units" of the Partnerships, or any of them;
III. Granting plaintiffs injunctive relief against defendants
and defendants' respective officers, directors, employees, agents and
affiliates, and all other persons acting in concert with defendants or on their
behalf, directly or indirectly:
(a) enjoining them from committing any further violations
of the Securities Exchange Act and SEC tender offer rules in connection with
the Partnerships and their affiliates;
(b) enjoining them from continuing or consummating their
pending tender offers, which were commenced in violation of Rule 14d-2, and
enjoining them from commencing any new tender offer for the Partnerships for a
reasonable period (not less than 60 days) to dissipate the effects of
defendants' unlawful conduct;
(c) enjoining them from continuing or consummating their
pending tender offers or any other tender offers for "any and all" units of the
Partnerships or any number of units that could have the effect of causing the
Partnerships to terminate, for tax purposes or otherwise, in violation of
Section 16.6 of the Partnership Agreement;
(d) in the alternative, enjoining consummation of the
tender offers pending accurate and complete corrective disclosure with respect
to each and every false, misleading and/or misleading omissive matter contained
in High River's
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Schedules 14D-1 and tender offer materials disseminated to unitholders;
III. Requiring defendants and their affiliates to divest
themselves of all Partnership Units beneficially owned by them, acquired after
the start of their unlawful tender offers and the filing of their false and
misleading Schedule 13D Amendment and, later, Schedules 14D-1;
IV. Granting a declaratory judgment that the Partnerships are
not required to provide High River with unitholder lists, or any other
information, pursuant to High River's letter of August 12, 1996 or which would
otherwise be used in connection with illegal tender offers, tender offers
conducted in violation of the Partnership Agreements, or any attempt to profit
from unlawful market manipulation; and
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V. Granting the Partnerships such other and further relief as
the Court may deem just and proper, together with the costs, disbursements and
attorneys' fees of this action.
DATED: September 30, 1996
FRANK ROTHMAN
HARRIET S. POSNER
STEVEN A. VELKEI
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
By
-----------------------------------
Harriet S. Posner
Attorneys for Plaintiffs/
Counterdefendants
McNEIL PACIFIC INVESTORS
FUND 1972, et al.
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