0000921749-95-000039.txt : 19950822 0000921749-95-000039.hdr.sgml : 19950822 ACCESSION NUMBER: 0000921749-95-000039 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19950821 SROS: NONE GROUP MEMBERS: HIGH RIVER LIMITED PARTNERSHIP GROUP MEMBERS: ICAHN CARL C ET AL GROUP MEMBERS: RIVERDALE INVESTORS CORP., INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MCNEIL REAL ESTATE FUND IX LTD CENTRAL INDEX KEY: 0000276326 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 942491437 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-39644 FILM NUMBER: 95565603 BUSINESS ADDRESS: STREET 1: 13760 NOEL RD STE 700 STREET 2: LB70 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144485800 MAIL ADDRESS: STREET 1: 13760 NOEL ROAD SUITE 700 LB 70 CITY: DALLAS STATE: TX ZIP: 75240 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ICAHN CARL C ET AL CENTRAL INDEX KEY: 0000921669 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: 100 SOUTH BEDFORD ROAD CITY: MT KISCO STATE: NY ZIP: 10549 BUSINESS PHONE: 9142427700 MAIL ADDRESS: STREET 1: 200 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10166 SC 14D1/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 14D-1 Tender Offer Statement Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 (Amendment No. 4)* MCNEIL REAL ESTATE FUND IX, LTD. (Name of Subject Company [Issuer]) HIGH RIVER LIMITED PARTNERSHIP CARL C. ICAHN (Bidders) LIMITED PARTNERSHIP UNITS (Title of Class of Securities) 582568 87 9 (CUSIP Number of Class of Securities) Keith L. Schaitkin, Esq. Gordon Altman Butowsky Weitzen Shalov & Wein 114 West 47th Street, 20th Floor New York, New York 10036 (212) 626-0800 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) Calculation of Filing Fee ------------------------------------------------------------------- Transaction Amount of filing fee: $1,417.90 Valuation*: $7,089,511 ------------------------------------------------------------------- * For purposes of calculating the fee only. This amount assumes the purchase of 49,577 units of limited partnership interest (the "Units") of the subject partnership for $143.00 per Unit. The amount of the filing fee, calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate of the cash offered by the bidder. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $1,417.90 Form or Registration No.: Schedule 14D-1, dated August 3, 1995 Filing Party: High River Limited Partnership & Carl C. Icahn Date Filed: August 4, 1995 *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). AMENDMENT NO. 4 TO SCHEDULE 14D-1 This Amendment No. 4 to Schedule 14D-1 amends and supplements the Tender Offer Statement on Schedule 14D-1 filed by High River Limited Partnership, a Delaware limited partnership ("High River"), Riverdale Investors Corp., Inc., a Delaware corporation ("Riverdale"), and Carl C. Icahn, a citizen of the United States (collectively, the "Reporting Persons") with the U.S. Securities and Exchange Commission (the "Commission") on August 4, 1995, as amended by Amendment No. 1 filed with the Commission on August 9, 1995, Amendment No. 2 filed with the Commission on August 14, 1995 and Amendment No. 3 filed with the Commission on August 18, 1995. All capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Offer to Purchase dated August 3, 1995, as amended through August 7, 1995 (the "Offer to Purchase") and the related Assignment of Partnership Interest, as amended through August 7, 1995 (collectively with the Offer to Purchase, the "Offer"). Item 10. Additional Information Item 10(e) is hereby amended and restated in its entirety as follows: (e) The information set forth in Exhibits 12 and 13 attached hereto is incorporated herein by reference. Item 11. Materials to be Filed as Exhibits. The following documents are filed as exhibits to this Schedule 14D-1: (g) Exhibit 12 Complaint filed by High River Limited Partnership, as Plaintiff, against McNeil Partners L.P., McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., Robert A. McNeil and Carole J. McNeil, as Defendants Exhibit 13 Counterclaim and Answer of McNeil Partners L.P., McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., Robert A. McNeil and Carole J. McNeil, as Defendants/ Counterclaimants McNeil Partners, L.P., et al. SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: August 21, 1995 HIGH RIVER LIMITED PARTNERSHIP By: Riverdale Investors Corp., Inc. Title: General Partner By: /s/ Robert J. Mitchell Robert J. Mitchell Title: Vice President and Treasurer RIVERDALE INVESTORS CORP., INC. By: /s/ Robert J. Mitchell Robert J. Mitchell Title: Vice President and Treasurer /s/ Carl C. Icahn Carl C. Icahn [Signature Page for Amendment No. 4 to McNeil Real Estate Fund IX, Ltd. Schedule 14D-1] EXHIBIT INDEX Page Number ----------- Exhibit 12 Complaint filed by High River Limited Partnership, as Plaintiff, against McNeil Partners L.P., McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., Robert A. McNeil and Carole J. McNeil, as Defendants Exhibit 13 Counterclaim and Answer of McNeil Partners L.P., McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., Robert A. McNeil and Carole J. McNeil, as Defendants/ Counterclaimants McNeil Partners, L.P., et al. EX-99 2 EXHIBIT 12 THEODORE ALTMAN (TA 8368) GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN 114 West 47th Street New York, New York 10036 Telephone: (212) 626-0800 Attorneys for Plaintiff UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -----------------------------------X HIGH RIVER LIMITED PARTNERSHIP, : a Delaware Limited Partnership, : Plaintiff, : - against - : COMPLAINT McNEIL PARTNERS L.P., McNEIL INVESTORS, INC., McNEIL : PACIFIC INVESTORS FUND 1972, LTD., McNEIL REAL ESTATE FUND V, 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., : ROBERT A. McNEIL and CAROLE J. McNEIL, : Defendants. -----------------------------------X Plaintiff, High River Limited Partnership ("High River"), by its attorneys, Gordon Altman Butowsky Weitzen Shalov & Wein hereby alleges, upon personal knowledge as to its own acts and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION 1. Plaintiff High River has made tender offers for up to 45% of the outstanding units of ten California limited partnerships (the "California Limited Partnerships" or the "Partnerships"), as described below. This is an action, brought pursuant to Rule 14d-5 of the Securities Exchange Act of 1934, to compel the general partner of those partnerships, McNeil Partners, L.P., ("McNeil Partners" or the "General Partner"), and the remaining defendants (all of which are affiliated with or controlled by defendant Robert A. McNeil) to comply with the specific provisions of Rule 14d-5 which require it to promptly provide the tender offeror with a list of the unit holders and their addresses or to promptly mail copies of High River's tender offers to the limited partners. By letter of August 9, 1995 -- a day after the time period during which it was required to respond to plaintiff's request -- defendant McNeil Partners indicated its refusal to comply with this provision, in an attempt to deny the limited partners access to the terms of High River's tender offers. 2. It is apparent from an examination of recently filed public documents pertaining to the Partnerships that the defendants may have a very good -- albeit improper and unlawful -- reason for attempting to deny the limited partners access to crucial information regarding High River's tender offers, in violation of federal securities laws. For the past several years, the General Partner has been operating the Partnerships for its own benefit, and at the expense of the limited partners. The General Partner's improper conduct regarding the Partnerships includes, but is not limited to: * paying itself and entities owned and controlled by it exorbitant fees and so- called reimbursements of general and administrative expenses while permitting the Partnerships to sustain staggering continued losses so that the Partnerships' current value is now a fraction of its original value; * trafficking in control of the Partnerships for its own benefit, by selling and repurchasing its general partnership interests, at great profit, without regard to the substantial detriment suffered by the Partnerships and their limited partners; and * managing the Partnerships so as to extend indefinitely the fat fee arrangements enjoyed by the General Partner and its affiliates. 3. After having soaked the Partnerships of over $12 million dollars in fees in 1994 alone, defendants now seek to perpetuate their unconscionable and excessive fee schemes by denying the limited partners access to information about High River's tender offers, which may be the limited partners' last and only chance to get some value for their units. This suit seeks to compel defendants to comply with their obligations under Rule 14d-5 in providing limited partner lists to High River so that the plaintiff might inform the limited partners of the terms of its offer. JURISDICTION AND VENUE 4. Jurisdiction of this Court is conferred by Section 27 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78aa). 5. Venue is appropriate in this jurisdiction pursuant to 28 U.S.C. Section 1391 and 15 U.S.C. Section 78aa because the improper actions of defendants, in violation of federal securities laws, took place and will have a substantial impact within this district. PARTIES 6. Plaintiff High River is a limited partnership organized pursuant to the laws of Delaware, and is located in New York, c/o Riverdale Investors Corp., Inc., 100 South Bedford Road, Mount Kisco, New York 10549. High River is an entity controlled by Carl C. Icahn. 7. Defendant McNeil Partners is a Delaware Limited Partnership, with offices in Dallas, Texas. McNeil Partners is in the business of real estate management, and is general partner of all of the California Limited Partnerships defendants, as described below. 8. Defendant McNeil Investors, Inc. ("McNeil Investors") is a Delaware Corporation which is the general partner of McNeil Partners. 9. Defendant Robert A. McNeil ("McNeil") is the Chairman of the Board and sole limited partner of the McNeil Partners. McNeil is also Chairman of McNeil Investors. 10. Defendant Carole J. McNeil is Co-Chairman of the Board of McNeil Investors and is McNeil's wife. 11. The defendants McNeil Pacific Investor Fund 1972 ("McNeil Pacific"), McNeil Real Estate Fund V, Ltd. ("McNeil V"), McNeil Real Estate Fund IX, Ltd. ("McNeil IX"), McNeil Real Estate Fund X, Ltd. ("McNeil X"), McNeil Real Estate Fund XI, Ltd. ("McNeil XI"), McNeil Real Estate Fund XIV, Ltd. ("McNeil XIV"), McNeil Real Estate Fund XV, Ltd. ("McNeil XV"), McNeil Real Estate Fund XX, L.P. ("McNeil XX"), McNeil Real Estate Fund XXIV, L.P. ("McNeil XXIV"), and McNeil Real Estate Fund XXV, L.P. ("McNeil XXV") are limited partnerships organized under California Law. BACKGROUND FACTS 12. On August 4, 1995, High River commenced a series of tender offers for up to 45% of the units of the California Limited Partnerships (the "Tender Offers"). (The specific prices tendered for the units of the various partnerships are described, infra, at paragraph 25.) In connection with the Tender Offer, High River requested by telecopied letter of August 3, 1995, that the General Partner comply with Rule 14d-5 of the Securities Exchange Act of 1934 (the "Act"), which requires that pursuant to a request by a tender offeror, that the subject company (here, the Partnerships) must either mail the tender offer materials to the limited partners, or supply the offeror with a list of the limited partners and their addresses. The Rule also provides that: No later than the second business day after the date of the bidder's request, the subject company shall orally notify the bidder, which notification shall be confirmed in writing, of the subject company's election [to mail or to provide a limited partner list]. 13. High River received no response to its request until four business days later, and three days after the Tender Offers were filed with the S.E.C., when it received two telecopied letters from New York Counsel Skadden, Arps, Slate, Meagher & Flom ("Skadden Arps"). 14. One of the letters, dated August 8, 1995 (but received on August 9), signed by defendants Robert A. McNeil and Carole J. McNeil, demanded that High River and Carl C. Icahn sign a certificate stating that they had not received any confidential information relating to the Partnerships from an unnamed former lawyer of the McNeils. The accompanying letter, signed by Patrick J. Foye of Skadden Arps, indicated that the General Partner would not supply the limited partner list, nor would it begin to mail the Tender Offers to any limited partners, until it received the signed certificate that had been attached to the letter from the McNeils. High River, through its counsel, responded on the same day by stating that there was no basis for defendants' claims that it had obtained confidential information and that, in any event, there was no excuse for the defendants' refusal to honor their 14d-5 obligation. 15. The immediate notification of the limited partners of the details of the pending Tender Offers is absolutely essential to allowing them a full and fair opportunity to weigh the merits of the offers, which are for amounts substantially in excess of the market price for the limited partnership units. Defendants' foot-dragging in complying with the unambiguous terms of the federal securities laws is a transparent and pretextual attempt to deny the limited partners this essential information. 16. The General Partner's brazen violation of the requirements of Rule 14d-5 comes as no surprise in light of the recent history of the Partnerships. Over the past several years, the General Partner has set up an egregious and unconscionable scheme of compensation benefiting only itself, all while the Partnerships have suffered stunning losses. THE HISTORY OF THE PARTNERSHIPS 17. The California Limited Partnerships were formed between 1971 and 1985 for the purpose of investing, holding, managing and disposing of real estate and real- estate related investments. 18. Most of the California Limited Partnerships were founded by Robert A. McNeil, who is a member of the California bar and has been actively involved in the management of real estate for at least 25 years. McNeil and The Robert A. McNeil Corporation ("Ramco"), a corporation McNeil controlled, acted as the general partner for most of the Partnerships that McNeil founded. In the mid-1980s, McNeil sold his interest in Ramco to a corporation called Southmark Investment Group, Inc. ("Southmark"). In 1989 Southmark filed for bankruptcy. During 1991 and 1992, McNeil, acting through business entities he controlled, repurchased the general partnership interests of the California Limited Partnerships that he sold to Southmark, along with the general partnership interests of the few of the Partnerships that Southmark created. 19. Since reacquiring the general partnership interests in the name of McNeil Partners, the General Partner has operated the Partnerships as its own personal piggy bank, through an unconscionable compensation and "reimbursement" scheme, and an incestuous web of self- dealing with affiliated entities. EXCESSIVE FEES 20. The General Partner has paid its affiliates enormous property management fees -- in amounts wholly disproportionate with the services actually performed. At the same time, the General Partner has caused the Partnerships to reimburse its affiliates for certain general and administrative expenses and has received certain other distributions in the form of both cash and other consideration. As a result, much of the property management and other fees represent pure profit. All the while the limited partners suffered with a thankless, losing investment. 21. The property management fees, expenses resulting from payment of general and administrative expenses and other distributions paid to McNeil Partners or its affiliates from each Partnership for the fiscal year ended December 31, 1994, and the distributions to limited partners for the same year are compared below: * The General Partner took $66,285 in general and administrative expenses and $72,765 in property management fees from McNeil Pacific. The limited partners of McNeil Pacific have not received distributions since 1990. * The General Partner took $30,000 in general and administrative expenses and $193,145 in property management fees from McNeil V. The same year the limited partners of McNeil V received distributions of $570,008. * The General Partner took $719,703 in general and administrative expenses and $915,989 in property management fees from McNeil IX. The General Partner also received $973,023 as a "Contingent Management Incentive Distribution." Distributions to the limited partners of McNeil IX have been suspended since 1986 and will remain suspended for the foreseeable future. * The General Partner took $609,197 in general and administrative expenses and $868,408 in property management fees from McNeil X. The General Partner also received $634,802 as a "Contingent Management Incentive Distribution." Distributions to the limited partners of McNeil X have been suspended since 1986 and will remain suspended for the foreseeable future. * The General Partner took $434,577 in general and administrative expenses and $671,785 in property management fees from McNeil XI. The General Partner also received $769,448 as a "Contingent Management Incentive Distribution." Distributions to the limited partners of McNeil XI have been suspended since 1986 and will remain suspended for the foreseeable future. * The General Partner took $346,327 in general and administrative expenses and $441,082 in property management fees from McNeil XIV. The General Partner also received $573,908 as a "Contingent Management Incentive Distribution." Distributions to the limited partners of McNeil XIV have been suspended since 1986 and will remain suspended for the foreseeable future. * The General Partner took $236,077 in general and administrative expenses and $376,559 in property management fees from McNeil XV. The General Partner also received $508,862 as a "Contingent Management Incentive Distribution." The same year the limited partners received distributions of $499,993. * The General Partner took $199,786 in general and administrative expenses and $57,289 in property management fees from McNeil XX. The General Partner also received a $167,194 "Asset Management Fee." The same year the limited partners received distributions of $249,933. * The General Partner took $291,507 in general and administrative expenses and $235,662 in property management fees from McNeil XXIV. The General Partner also received a $316,808 "Asset Management Fee." No distributions have been paid to the limited partners since 1991 and none are anticipated in 1995. * The General Partner took $269,869 in general and administrative expenses and $534,044 in property management fees from McNeil XXV. The General Partner also received a $626,282 "Asset Management Fee." The same year the limited partners were paid $400,207. 22. In total, the General Partner and its affiliates received approximately $12 million in cash and other consideration as property management fees, "reimbursements" for general and administrative expenses, and other distributions in 1994. By contrast, the limited partners, the owners of the enterprises, received approximately only $1.7 million during the same year. 23. McNeil Partners' scheme to pay itself excessive compensation is especially egregious because of the decline in the value of the units of the Partnerships. The original offering price per unit of most of the Partnerships is listed below: Partnership Original Offering Price ___________ _______________________ McNeil V $1000 McNeil IX $500 McNeil X $500 McNeil XI $500 McNeil XIV $500 McNeil XV $500 McNeil XX $500 McNeil XXIV $1000 McNeil XXV $1 24. Because there is no established market for the trading of units of interest in these limited partnerships it is difficult to determine a current value of the units. Nevertheless, High River recently purchased units of limited partnership interest in McNeil IX, McNeil XI, McNeil XV, McNeil XXIV and McNeil XXV on the Chicago Partnership Board, Inc. (the "Chicago Board"), an organization which attempts to facilitate the sale of limited partnership interests to potential buyers through an auction process. The Chicago Board price at which High River purchased its units of limited partnership interest was substantially lower than the original offering price. The Chicago Board price of each of these partnerships and the Partnership's original offering price is listed below: Chicago Board Original Partnership Purchase Price Offering Price ___________ ______________ ______________ McNeil IX $133.00 500 McNeil XI $55.00 500 $58.00 500 McNeil XV $80.01 500 McNeil XXIV $126.00 1000 McNeil XXV $.23 1 The Chicago Board price for the other Partnerships suffered similar steep discounts from their original offering prices. 25. High River, which is currently making a tender offer for up to 45% of the units of the Partnerships, believes that the remaining Partnerships have suffered similar decreases in value. High River's offering prices in the tender offer for each of the Partnerships are listed below: McNeil Pacific $110.00 McNeil V $400.00 McNeil IX $143.00 McNeil X $ 92.00 McNeil XI $ 63.00 McNeil XIV $ 95.00 McNeil XV $ 95.00 McNeil XX $100.00 McNeil XXIV $150.00 McNeil XXV $ .24 TRAFFICKING IN CONTROL OF THE PARTNERSHIPS 26. In 1986, McNeil sold his general partnership interests in the seven California Limited Partnerships that he had founded to Southmark. As part of the sale of the assets of the Partnerships, McNeil received substantial compensation, and remained a co-general partner in most of the Partnerships, along with Southmark. McNeil also received an indemnification from Southmark, insulating him from liability for claims brought against the general partners for mismanagement of the Partnerships. 27. A mere three years after McNeil sold his general partnership interests to it, Southmark filed for bankruptcy protection. After having received substantial compensation for his general partnership interests from Southmark in 1986, McNeil approached Southmark to repurchase the general partnership interests in 1990, proposing to pay only a small fraction of what Southmark had paid for them. 28. McNeil's attempts to repurchase the general partnership interests should be viewed against the backdrop of a $5.4 million claim for indemnification that he had brought against Southmark in 1989, that apparently arose out of claims against McNeil and Southmark by third parties. Thus, McNeil had substantial leverage in exercising control from Southmark. Indeed, when McNeil repurchased the general partnership interests from Southmark, he agreed to settle his claims for indemnification as part of the deal. 29. Further, when McNeil reacquired the general partner's interests in the Partnerships, he not only greatly increased his own compensation from the majority of the Partnerships, as described above, but he also imposed amendments to the partnership agreements, varying in specifics from partnership to partnership, substantially insulating himself from liability for misconduct as a general partner, and severely restricting the ability of the limited partners to remove him for cause. 30. McNeil, therefore, through his sales and repurchases of the general partner's interests in the various Partnerships, trafficked in control of the Partnerships for his own personal gain and without regard to the detriment that he caused to the Partnerships and the Limited Partners. THE GENERAL PARTNER'S PERPETUATION OF THE EXCESSIVE FEE ARRANGEMENTS 31. Upon reacquiring the general partners' interest in the Partnerships, McNeil coupled his unconscionable boost of the Partnerships' payment obligations to him with an extension of the dates for the sale of the Partnerships' assets. The purpose stated by the General Partner for extending the time period was to allow the real estate market and the performance of the Partnership's investment to improve. It is apparent, however, that the General Partner intends to prolong for as long as possible the unconscionable and excessive compensation, fees and reimbursement schemes that the General Partner and its affiliated entitles are enjoying at the Partnerships' expense, and at the expense of the limited partners. 32. The General Partner's plans for the Partnerships are apparent from the latest "10-K" filings that the General Partner has filed with the Securities Exchange Commission (the "SEC"), which describe an intention to continue to operate the Partnerships indefinitely, and only consider sale of some or all of their assets at some indefinite time in the future. The most recent 10-Ks therefore demonstrate that the General Partner intends to extend for as long as possible the gravy-train provided by its unconscionable compensation and reimbursement schemes. 33. The Tender Offer constitutes a rare and unique opportunity for limited partners to sell and consider the sale of their otherwise illiquid investment. This Court should not countenance the defendants' unlawful and pretextual attempts to place conditions on their ethical obligations and compliance with the federal securities laws. This Court should not countenance such unethical and unlawful conduct. WHEREFORE, plaintiff demands judgment: 1. Granting a temporary restraining order, preliminary and permanent injunctive relief, compelling defendants to immediately turn over the limited partner lists of the ten California Limited Partnerships; 2. Awarding costs of the suit, including reasonable attorneys' fees, and such other and further relief as the Court deems proper. Dated: New York, New York August 10, 1995 GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN By:___________________________ Theodore Altman (TA 8368) Charles S. Beal (CB 0123) Howard S. Koh (HK 4730) 114 West 47th Street New York, New York 10036 (212) 626-0800 Attorneys for Plaintiff EX-99 3 EXHIBIT 13 Macro E. Schnabl (MS9845) IRA B. Matetsky (IM181) SKADDEN, ARPS, SLATE, MEAGHER & FLOM 919 Third Avenue New York, New York 10022 (212) 735-3000 Attorneys for Defendants/ Counterclaimants UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK -------------------------------------X HIGH RIVER LIMITED PARTNERSHIP, : A DELAWARE LIMITED PARTNERSHIP, : 95 Civ 6019 (PKL) Plaintiff/ Counterclaim- : Defendant, : - against - : COUNTERCLAIM AND ANSWER McNEIL PARTNERS L.P., McNEIL OF DEFENDANTS/COUNTER- INVESTORS, INC., McNEIL PACIFIC : CLAIMANTS MCNEIL INVESTORS FUND 1972, LTD., PARTNERS, L.P., ET AL. McNEIL REAL ESTATE FUND V, 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., : ROBERT A. McNEIL and CAROLE J. McNEIL, : Defendants/ : Counterclaimants. -------------------------------------X COUNTERCLAIM Defendants/Counterclaimants, McNeil Partners, L.P. (the "General Partner"), McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd. ("Fund 1972"), McNeil Real Estate Fund V, Ltd. ("Fund V"), McNeil Real Estate Fund IX, Ltd. ("Fund IX"), McNeil Real Estate Fund X, Ltd. ("Fund X"), McNeil Real Estate Fund XI, Ltd ("Fund XI"), McNeil Real Estate Fund XIV, Ltd. ("Fund XIV"), McNeil Real Estate Fund XV, Ltd. ("Fund XV"), McNeil Real Estate Fund XX, L.P. ("Fund XX"), McNeil Real Estate Fund XXIV, L.P. ("Fund XXIV"), McNeil Real Estate Fund XXV, L.P. ("Fund XXV"), Robert A. McNeil and Carole J. McNeil (collectively, "McNeil"; Funds 1972, V, IX, X, XI, XIV, XV, XX, XXIV, and XXV, hereafter collectively referred to as the "Partnerships"), by their undersigned attorneys, allege, upon knowledge with respect to themselves and their own acts, and upon information and belief as to all other matters, as follows: SUMMARY OF COUNTERCLAIM 1. This is an action to enjoin ten separate unsolicited tender offers (the "Tender Offers") recently commenced by High River Limited Partnership ("High River"), a Delaware limited partnership, for up to 45k of the limited partnership interests (the "Units") in each of the ten Partnerships. The Tender Offers have been undertaken in violation of the federal securities laws, on the basis of material, non-public, secret, privileged and confidential information that defendants' long-time former counsel ("Disclosing Counsel") has made available, and may continue to make available, to High River and to Carl C. Icahn ("Icahn"), the controlling principal of High River and a well-known corporate raider, in connection with the Tender Offers. 2. Disclosing Counsel, a tax and real estate lawyer, was for more than twenty years the principal legal architect of the Partnerships. Counsel designed the legal structure of these Partnerships, drafted their constituent agreements, regularly discussed the Partnerships' businesses and strategies, and was intimately familiar with their most sensitive strategic commercial, tax and legal information. Over the course of Disclosing Counsel's representation of the defendants, these Partnerships expended millions of dollars for Disclosing Counsel's services. The services of Disclosing Counsel were terminated following an acrimonious dispute over legal fees. 3. Approximately one week before Icahn launched his tender offer for the Partnerships, the representatives of the General Partner of the Partnerships were contacted by Disclosing Counsel and Icahn, who stated that Disclosing Counsel had contacted him to "broker a deal" relating to the Partnerships. Shortly after McNeil rebuffed Icahn's overtures, Icahn initiated the Tender Offers. 4. Disclosing Counsel's exchanges and discussions with Icahn in connection with, or in anticipation of, the Tender Offers are plainly the result of his unique knowledge of the Partnerships, gleaned from his more than twenty-year fiduciary relationship with McNeil. Disclosing Counsel provided material, confidential, and privileged information to High River and Carl Icahn that was used to inform, and make decisions with respect to, the Tender Offers. It is well-settled law that tender offers thus infected with material, confidential and nonpublic information may not be allowed to proceed. 5. In addition, High River's Tender Offer documents (the "Offering Materials") omit and/or misrepresent certain material information about High River's Tender Offers. In particular: * The Offering Materials are false and misleading because they fail to disclose that High River has benefitted from confidential, secret and proprie- tary material information improperly obtained from Disclosing Counsel. * The Offering Materials are false and misleading because they fail to disclose that the offers were in whole or in part prompted by Disclosing Counsel's improper statements. * The Offering Materials are false and misleading because they fail to disclose Icahn's true intentions to seek control of the Partnerships, but rather falsely assert that Icahn has no present intention to remove the General Partner. * The Offering Materials are false and misleading because they fail to disclose material financial information about High River's or Icahn's exper- ience in the field of real estate management. * The Offering Materials are false and mis- leading because they fail to disclose Icahn's long record of self-enrichment at the expense of the equityholders of the targets of Icahn's hostile acquisitions. 6. Counterclaimants hereby seek, among other relief, (i) a preliminary and permanent injunction barring High River from proceeding with Tender Offers that are contaminated with information improperly obtained from Disclosing Counsel, and (ii) in the alternative, an injunction requiring High River to make full and fair disclosure in its Offering Materials of the information improperly withheld from the investors to whom the Tender Offers are addressed. JURISDICTION 7. The jurisdiction of this Court is conferred by Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. Section 78aa. In addition, pursuant to Fed. R. Civ. P. 13(a), defendants' counterclaim falls within the ancillary jurisdiction of the Court and therefore does not require an independent basis of federal subject matter jurisdiction. THE PARTIES 8. Defendant/Counterclaimant McNeil Partners, L.P. (herein, the "General Partner") is a Delaware limited partnership with offices in Dallas, Texas. McNeil Partners is the general partner of each of the ten limited partnerships that are the targets of High River's Tender Offers. 9. Defendant/Counterclaimant McNeil Investors, Inc. ("McNeil Investors") is a Delaware corporation and is the general partner of the General Partner. 10. Defendants/Counterclaimants McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., and McNeil Real Estate Fund XXV, L.P. (herein, the "Partnerships") are California limited partnerships that are the targets of High River's tender offers. 11. Defendant/Counterclaimant Robert A. McNeil is the Chairman of the Board and sole limited partner of the General Partner and Chairman of the General Partner. 12. Defendant/Counterclaimant Carole J. McNeil is Co-Chairman of the Board of McNeil Investors. 13. Plaintiff/Counterclaim-Defendant High River is a Delaware limited partnership. High River's sole general partner is Riverdale Investors Corp., Inc. ("Riverdale"), and its sole limited partner is Highcrest Investors Corp. ("Highcrest"). High River is controlled by Carl C. Icahn, who directly owns Riverdale and indirectly owns Highcrest. BACKGROUND 14. The Partnerships were formed in the 1970's and through the mid-1980's to invest in, hold, manage and dispose of real estate and real estate-related investments. 15. Disclosing Counsel was the legal architect of many of the Partnerships. A tax and real estate lawyer, Disclosing Counsel designed the legal structure of these Partnerships, drafted their constituent agreements, regularly discussed the Partnerships' businesses and strategies, and was intimately familiar with their most sensitive strategic, commercial, tax and legal information. 16. In early 1990, Disclosing Counsel drafted amended and restated partnership agreements for each of the Partnerships, effecting a substantial restructuring of the Partnerships. This intricate process took more than two years, and placed Disclosing Counsel at the very center of discussions about the structure, purpose and strategies envisioned by McNeil for the Partnerships that are now under attack. 17. Accordingly, throughout his more than twenty-year history of representing the Partnerships, Disclosing Counsel acquired confidential, secret, proprietary and privileged material information about the Partnerships. 18. Disclosing Counsel obtained this confidential, secret, proprietary and privileged material information as a result of his fiduciary relationship with the Partnerships and other Counterclaimants. As past Counsel for the Partnerships and other Counterclaimants, Disclosing Counsel has, and at all relevant times had, a fiduciary duty, as well as a legal and ethical obligation under the relevant Canons of Ethics governing the conduct of attorneys, to maintain the secrecy of this information and to refrain from using it except in the interest of McNeil. 19. The confidential, secret, proprietary and privileged information known to Disclosing Counsel would be extremely valuable to competitors of the Partnerships and, of course, to High River and Icahn in making the Tender Offers. Disclosure of such competitively sensitive information would cause immediate and irreparable harm to the Partnerships and would be a violation of the foregoing duties and obligations. MISAPPROPRIATION OF MATERIAL, CONFIDENTIAL,SECRET, PROPRIETARY AND PRIVILEGED INFORMATION: THE HOSTILE TENDER OFFERS 20. Shortly before the Tender Offers were commenced, Disclosing Counsel wrongfully disclosed to High River confidential, secret, proprietary and privileged information he learned in his years as McNeil's lawyer. 21. Moreover, in violation of his duty of loyalty to the General Partner, the Partnerships and the McNeils, his former clients, Disclosing Counsel (with the knowledge and/or encouragement of High River) acted adversely to McNeil to promote the making of hostile Tender Offers. 22. At all relevant times, High River and Icahn knew -- or at the very least should have known - of Disclosing Counsel's prior relationship with McNeil, and his breaches of duty. 23. On or about Wednesday, July 26, 1995, Robert A. and Carole J. McNeil (the "McNeils") received an unsolicited telephone call from Disclosing Counsel. During this call, Disclosing Counsel told the McNeils that he wanted to arrange a conference call with Carl Icahn to explore a transaction regarding some of the California limited partnerships. 24. In the next several days, Icahn and Disclosing Counsel participated in conversations in which Icahn made an offer to acquire a controlling interest in the General Partner -- and, thus, control of each of the Partnerships and several affiliated partnerships -- which was rejected by the McNeils. 25. Thereafter, Icahn advised the McNeils that, if they did not enter into a transaction with him immediately, he would launch hostile tender offers for the Partnerships. 26. In a conversation with McNeil's counsel on August 1, 1995. in which Disclosing Counsel and Icahn participated, Icahn stated that Disclosing Counsel had called Icahn to "broker a deal" relating to the Partnerships. Icahn reiterated his wish to buy certain limited partnerships, including the Partnerships. 27. During that same telephone conversation, in violation of his fiduciary, legal and ethical obligations, Disclosing Counsel referred to privileged and confidential tax information concerning the Partnerships and Mr. McNeil. 28. Additionally, Disclosing Counsel -- without the knowledge or consent of the General Partner, the Partnerships and/or the McNeils -- has spoken with representatives of other potential acquirors and investors about the possibility of a takeover of the Partnerships. 29. It is apparent that Disclosing Counsel, in possession of many years' worth of confidential, privileged and proprietary information about McNeil, has consulted with High River and provided it with material confidential knowledge and advice with which to inform, and make decisions about, the Tender Offers. 30. At no time did Disclosing Counsel request, much less receive, permission from McNeil to disclose to High River, Icahn or any other person any confidential or privileged information relating to McNeil. 31. A few days after the foregoing conversation involving Disclosing Counsel and Icahn, High River commenced its Tender Offers for the Partnerships. These Tender Offers were directly informed by advice or information improperly provided by Disclosing Counsel. 32. On August 8, 1995, McNeil requested that High River and Icahn certify in writing that they had not received any confidential information from Disclosing Counsel, and that the Tender Offers and their plans for the Partnerships were not based on any such information. High River and Icahn refused to sign such certification. 33. Rather, High River responded (through its counsel) on August 9, 1995, merely to the effect that High River had been "advised" by Disclosing Counsel that Disclosing Counsel had not breached any privilege owed to McNeil. However, High River's response also stated that it "and its affiliates were not aware that any information received from the attorney is or was non-public, confidential, privileged or proprietary." The response did not set forth any efforts by High River to ascertain whether the information -- provided to it by an attorney who it knew had represented McNeil for well over twenty years -- was being provided with the consent of McNeil. 34. Attorneys are under ethical obligations to preserve the confidences and secrets of a client. Under governing law, a lawyer is prohibited from disclosing information acquired in the course of representation of a client to the disadvantage of the client. Moreover, the obligation to protect confidences and secrets of a client continues after the termination of the attorney/client relationship. 35. The making of the Tender Offers based on, or reflecting, such ill-gotten information subjects McNeil to immediate irreparable harm. HIGH RIVER'S OFFERING MATERIALS ARE MATERIALLY MISLEADING AND OMISSIVE 36. The Tender Offers violate the federal securities laws for the additional reason that the Offering Materials are false, misleading and omissive. 37. The Offering Materials fail to disclose that confidential, secret and proprietary material information about the Partnerships was used by High River in the Tender Offers and that High River received such information from Disclosing Counsel in violation of Disclosing Counsel's fiduciary duty to the Partnerships. 38. In addition, the Offering Materials fail to disclose that High River's offer to purchase 45k of the Units is, in fact, intended ultimately to wrest control of the Partnerships away from the General Partner and place it in Icahn's hands. 39. Rather, the Offering Materials misleadingly state as to each Partnership that High River is seeking to purchase Units as an investment vehicle, but that High River "may, if successful, be in a position, and may later determine. to seek to acquire control of the Partnership." The Offering Materials also falsely state that the Purchaser has no present intention of removing the General Partner. 40. However, High River's true intentions to take prompt control of the Partnerships are illustrated by Icahn's repeated offers, shortly before launching the Tender Offers, to purchase control of the McNeils' general partnership interests. 41. Additionally, the Offering Materials are misleading because they fail adequately to disclose material financial information about (i) High River, (ii) its sole limited partner, Highcrest, (iii) High Rivers sole general partner, Riverdale, and (iv) Icahn, who controls High River and its affiliates. 42. The Offering Materials disclose only sketchy, unaudited balance sheets for High River as at June 30, 1995, and December 31, 1994. The High River financial statements lack footnotes, do not purport to be prepared in accordance with generally accepted accounting principles and provide absolutely no information about High River's income or cash flow, or detail about its assets. The balance sheets provide no explanation of the nature of High River's debts and obligations. 43. High River's financial disclosures are insufficient to enable the limited partners to determine whether High River has the financial ability to fund the Tender Offers and to run the business of the Partnerships when, as it inevitably will, it completes its ongoing effort to become the general partner of the Partnerships. 44. The Offering Materials disclose only an unaudited income statement and balance sheet for Highcrest, High River's sole limited partner, for (and as at) the year ended December 31, 1994. These are unaccompanied by explanatory footnotes or discussion and lack any comparative information to historical data. No financial disclosures are provided about Riverdale, High River's sole general partner, which is liable for High River's debts and obligations. Likewise, no financial disclosures are provided about Icahn, the controlling person of High River, Highcrest and Riverdale. The absence of financial information about High River and Highcrest, renders particularly significant the financial information about Icahn. 45. The lack of meaningful financial disclosures by High River, Highcrest or Riverdale -- privately owned entities with no audited, let alone publicly available, financial information -- leaves limited partners, who may well remain as partners in Partnerships controlled by Icahn, unable to make an informed decision regarding whether to tender their Units. 46. Limited partners are entitled to detailed information regarding the financial condition of High River, its affiliates and Icahn, regardless of whether they tender their Units. Each of the Tender Offers is for a maximum of 45k of the outstanding limited partnership Units, but provides that, if any of the Tender Offers are oversubscribed, Units will be accepted on a pro rata basis. Accordingly, even limited partners who tender all their Units cannot be certain whether at the conclusion of the Tender Offers they may not be "partners" with Icahn and his controlled entities. The value of any Unit not tendered or bought out necessarily will be affected by High River's future management of the Partnerships and its financial predicament. 47. Icahn has a long history of using the takeover process to obtain short-term profits at the expense of the interests of the targets' other shareholders, their employees and the communities that they serve. Icahn has repeatedly extracted quick profits from his corporate targets, even at the cost of forcing the complete or partial liquidation of their business, to the detriment of other equity holders, customers, employees and suppliers. 48. The Offering Materials, however, disclose nothing about Icahn's history as a corporate raider. This history is plainly material to any decision whether to tender Units or risk remaining a partner in an Icahn controlled Partnership. FIRST CLAIM FOR RELIEF [FOR VIOLATIONS OF SECTIONS 14(D) AND 14(E) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER] 49. McNeil repeats and realleges the allegations of the preceding paragraphs as if fully set forth herein. 50. Section 14(d)(1) of the Exchange Act, 15 U S.C. Section 78n(d)(1), requires 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. Section 14(e) of the Exchange Act, 15 U.S.C. Section 78n(e), additionally prohibits any person from making any untrue statement of material fact or omitting to state any material fact necessary in order to make the statements made not misleading, or from engaging in any fraudulent, deceptive or manipulative acts in connection with any tender offer. SEC Rule 14e, 17 C.F.R. Section 240.14e-3, requires a bidder to disclose all material non-public information in its possession relating to a tender offer. Thus, Sections 14(d) and (e) and SEC Rule 14e-3 prohibit High River from making the Tender Offers for the Partnerships without disclosing all material, non-public information which High River received from Disclosing Counsel. 51. However, such information may not be publicly-disclosed without the consent of McNeil) because to do so would constitute a further violation of the fiduciary, legal and ethical duties to maintain client confidences and to act with complete loyalty to McNeil. Any public disclosure of such improperly obtained information would only compound the breaches of the duties owed to McNeil that have already occurred. 52. Under these circumstances, where it would be improper for High River to disclose the material nonpublic information wrongfully provided to it, the Tender Offers cannot lawfully be continued and should therefore be preliminarily and permanently enjoined by the Court. 53. McNeil and the limited partners of the Partnerships have no adequate remedy at law. SECOND CLAIM FOR RELIEF [FOR VIOLATIONS OF SECTIONS 14(D) AND 14(E) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER] 54. McNeil repeats and realleges the allegations of the preceding paragraphs as if fully set forth herein. 55. In violation of Sections 14(d) and 14(e) of the Exchange Act, 15 U.S.C. Section 78n(d) and (e), and the SEC Rules promulgated thereunder, the Offering Materials fail fully and accurately to disclose (a) High River's purpose in making the Tender Offers for such Units and its plans with respect to the Partnerships; (b) the financial information required to be disclosed concerning High River, Icahn, and their affiliates; and (c) the long experience of Icahn and his affiliates in making hostile acquisitions to the detriment of other equityholders, all as set forth herein. In particular, and without limitation, the Offering Materials (a) fail to disclose that the purpose of the Tender Offers is to gain control over the Partnerships, (b) fail meaningfully to disclose financial information about High River, Highcrest, Riverdale and Icahn and (c) fail to provide any back- ground information regarding Icahn's notorious activities as a corporate raider over at least a fifteen-year period. 56. McNeil and the limited partners of the Partnerships have no adequate remedy at law. THIRD CLAIM FOR RELIEF [VIOLATIONS OF SECTION 10(B) OF THE EXCHANGE ACT AND RULE 10B-5 PROMULGATED THEREUNDER] 57. McNeil repeats and realleges the allegations of the preceding paragraphs as if fully set forth herein. 58. Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder prohibit any person from engaging in any fraudulent, deceptive or manipulative acts, in connection with the purchase or sale of securities. Section 10(b) and Rule 10b-5 prohibit the purchasing or selling securities on the basis of material non-public information. 59. As a recipient of material non-public information from Disclosing Counsel, High River is subject to the prohibition against trading on undisclosed material information. Therefore, High River is prohibited from making or consummating a tender offer based on, or informed by, such information. To consummate a tender offer based on, or informed by, such information violates Section 10(b) of the Exchange Act and Rule 10b-5. 60. McNeil and the limited partners of the Partnerships have no adequate remedy at law. IRREPARABLE HARM TO MCNEIL AND THE LIMITED PARTNERS OF EACH OF THE PARTNERSHIPS 61. McNeil and the limited partners of the Partnerships are being and, unless High River preliminarily and permanently enjoined as requested herein, will continue to be immediately and irreparably injured as a result of the above-described actions of High River, in that, INTER ALIA: a. Each of the foregoing omitted or misstated facts is material in that each would be considered important by a limited partner in the Partnerships in determining whether to accept the Tender Offers; b. The limited partners have been and will continue to be denied material information to which they are lawfully entitled and which is essential to the making of an informed decision with respect to whether to tender, hold or sell in the market their Units of the Partnerships; and c. The disclosure of confidential and privileged information, in High River's possession solely by reason of the improper conduct of Disclosing Counsel, would also irreparably harm McNeil and the limited partners. 62. Counterclaimants have no adequate remedy at law and are entitled to injunctive relief against High River. ANSWER Defendants, McNeil Partners, L.P., McNeil Investors, Inc., McNeil Pacific Investors Fund 1972, Ltd., McNeil Real Estate Fund V, 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., Robert A. McNeil, and Carole J. McNeil, answer plaintiff's Complaint as follows: 1. Deny each and every allegation of the first sentence of paragraph 1, except admit that High River has made tender offers for up to 45% of the outstanding Units of ten California limited partnerships. Deny each and every allegation of the second sentence of paragraph 1, except admit that plaintiff purports to bring an action as described therein. Deny each and every allegation of the third sentence of paragraph 1. 2. Deny each and every allegation of paragraph 2. 3. Deny each and every allegation of paragraph 3. 4. State that the allegations of paragraph 4 constitute legal conclusions to which no response is required. 5. State that the allegations of paragraph 5 constitute legal conclusions to which no response is required. 6. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 6, except admit, upon information and belief, that High River is controlled by Carl C. Icahn. 7. Admit the allegations of paragraph 7. 8. Admit the allegations of paragraph 8. 9. Admit the allegations of paragraph 9. 10. Admit the allegations of paragraph 10. 11. Admit the allegations of paragraph 11. 12. Admit the allegations of the first sentence of paragraph 12. Deny knowledge or information sufficient to form a belief as to the truth of the allegations of the second sentence of paragraph 12. Deny each and every allegation of the third sentence of paragraph 12, except admit that on August 3, 1995, High River sent a letter to McNeil Partners, L.P., and respectfully refer the Court to that letter for its complete contents. State that the fourth sentence of paragraph 12 consti- tutes a legal conclusion to which no response is required, and respectfully refer the Court to SEC Rule 14d-5 for its complete contents. 13. Deny each and every allegation of paragraph 13, except admit that High River received two telecopied letters from defendants' counsel, and respectfully refer the Court to those letters for their complete contents. 14. Deny each and every allegation of paragraph 14, except admit that defendants' counsel transmitted a letter to High River on August 8, 1995, and that High River responded by letter dated August 9, 1995, and respectfully refer the Court to those respective letters for their complete terms. 15. Deny each and every allegation of paragraph 15. 16. Deny each and every allegation of paragraph 16. 17. Deny each and every allegation of paragraph 17. 18. Admit the allegations of paragraph 18. 19. Deny each and every allegation of paragraph 19. 20. Deny each and every allegation of paragraph 20. 21. Responding to paragraph 21, respectfully refer the Court to the public filings of the Partnerships with the SEC for information concerning the financial performance of the Partnerships. 22. Responding to paragraph 22, respectfully refer the Court to the public filings of the Partnerships with the SEC for information concerning the financial performance of the Partnerships. 23. Responding to the second sentence of paragraph 23, deny each and every allegation of the first sentence of paragraph 23. Respectfully refer the Court to the public filings of the Partnerships with the SEC. 24. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 24. 25. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 25, except admit that the prices offered in High River's tender offers are as set forth therein. 26. Admit the allegations contained in the first sentence of paragraph 26. Deny each and every allegation contained in the second and third sentences of paragraph 26. 27. Deny each and every allegation of paragraph 27, except admit that Southmark filed for bankruptcy protection and McNeil entered into an asset purchase agreement with Southmark. 28. Deny each and every allegation of paragraph 28. 29. Deny each and every allegation of paragraph 29. 30. Deny each and every allegation of paragraph 30. 31. Deny each and every allegation of paragraph 31. 32. Deny each and every allegation of the first sentence of paragraph 32 and respectfully refer the Court to the General Partner's latest SEC filings on Form 10-K for their complete contents. Deny each and every allegation of the second sentence of paragraph 32. 33. Deny each and every allegation of paragraph 33. FIRST AFFIRMATIVE DEFENSE The Complaint fails to state a claim upon which relief may be granted. SECOND AFFIRMATIVE DEFENSE The allegations of the Complaint and the relief sought therein are moot. WHEREFORE, Counterclaimants seek judgment: I. Preliminarily and permanently enjoining High River, its officers, directors, employees, agents and affiliates, and all other persons acting in concert with High River or on High River's behalf, directly or indirectly, from: a. continuing or consummating the Tender Offers for Units of the Partnerships; b. making any other tender offer or request or invitation for tenders of any Units of the Partnerships or of any other limited partnerships affiliated with McNeil; c. acquiring or attempting to acquire any Units of the Partnerships or of any other limited partnerships affiliated with McNeil; d. soliciting or arranging for the solicitation of orders to sell any Units of the Partnerships or other limited partnerships affiliated with McNeil group; e. voting in person or by proxy any Units of the Partnerships; f. publicly disclosing any material nonpublic information concerning McNeil acquired, directly or indirectly, from Disclosing Counsel; g. making or disseminating any false or misleading statements in connection with High River's Tender Offers; h. otherwise using or attempting to use any Units of the Partnerships or of other McNeil limited partnerships as a means of affecting the management of any of the Partnerships, the General Partner, or any of their affiliates; or i. exercising or attempting to exercise, directly or indirectly, any influence upon the management of any of the Partnerships, the General Partner, or any of their affiliates. II. Preliminarily and permanently enjoining High River to make, in the alternative, appropriate corrective disclosures to cure all the materially false and misleading statements and omissions made by High River in connection with the Tender Offers and ordering that the Tender Offers remain open until such corrective disclosures are properly disseminated in the market; III. Requiring High River and its affiliates to divest themselves of all Partnership Units beneficially owned by them; IV. Awarding Defendant/Counterclaimants damages in an amount to be determined at trial and interest thereon, and awarding defendants their costs and disbursements in this action, including reasonable attorneys' fees; V. Dismissing the Complaint in all respects with prejudice; and VI. Granting Defendant/Counterclaimants such other and further relief as the Court may deem just and proper. Dated: August 18, 1995 New York, New York SKADDEN, ARPS, SLATE, MEAGHER & FLOM By:_________________________ Marco E. Schnabl (MS9845) Ira B. Matetsky (IM1881) 919 Third Avenue New York, New York 10022 (212) 735-3000 Attorneys for Defendants/ Counterclaimants McNeil Partners, L.P. ET AL.