I. INTRODUCTION

Pending before the Court is plaintiffs' Motion for a TRO and a Preliminary Injunction, which was filed on October 1, 1997 and is now fully briefed. Late yesterday, plaintiffs learned that, on October 10, 1997, defendants mailed to the Limited Partners the original September 19 Proxy, along with a letter urging Limited Partners to sign and return the Proxy. Wininger Decl. & Evans Decl., Ex. A, B. It is undisputed that this original Proxy contains a key, highlighted misrepresentation: that the Limited Partners must vote in favor of defendants' Proposed Plan in order to receive cash in the Plan's Underwritten Sale. Wininger Decl. & Evans Decl., Ex. B, second unnumbered page. In their papers in opposition to the TRO motion, defendants have admitted that this statement in the original Proxy is false, but claim that it was "cured" by a September 26 letter and a revised Proxy that was mailed with the September 26 letter. See Defendants' Opposition (filed on October 6, 1997) at 11-15.

Now, incredibly, defendants -- while representing to this Court that this violation has been cured -- have chosen to send the original, admittedly false, Proxy with the October 10 solicitation and repeat their violation. Plaintiffs file this Supplemental Brief and accompanying declarations to bring this latest, most egregious, and incurable violation to the Court's attention.

II. AS DEFENDANTS HAVE ALREADY ACKNOWLEDGED, THE PROXY SENT ON OCTOBER 10 CONTAINS THE MOST MATERIAL MISREPRESENTATION IMAGINABLE: THAT LIMITED PARTNERS MUST VOTE IN FAVOR OF THE PROPOSED PLAN TO RECEIVE CASH FOR THEIR INVESTMENT

On September 19, 1997, defendants mailed out a Proxy which represented that Limited Partners had to vote for the Proposed Plan in order to participate in the Withdrawal and the Underwritten Sale. Ex. C at 2.¹ This representation contradicted statements in the Proxy Statement itself. Ex. E at 3; Ex. I at C-4. The representation was highly material because it led Limited Partners to believe that they had to vote for the Plan or else be stuck in the Plan's unfavorable Dissolution phase.²

On September 26, 1997, defendants mailed out an Additional Solicitation to the Limited Partners. Ex. J. The Cover Letter to the Additional Solicitation stated that Limited Partners did not have to vote for the Proposed Plan in order to participate in the Underwritten Sale. Ex. J at 29. The September 26 Additional Solicitation contained a Revised Proxy which made no representation, one way or the other, on whether Limited Partners had to vote for the Proposed Plan in order to participate in the Underwritten Sale. Ex. J at 24-29. Notably, in defendants' opposition to plaintiffs' motion for a preliminary injunction and a TRO, defendants admitted that Limited Partners do not have to vote for the Proposed Plan to participate in the Underwritten Sale, thereby conceding that the original Proxy was false and misleading. Defendants' Opposition at 11.

Defendants' latest securities law violation -- the subject of this brief -- occurred on October 10, 1997, when they mailed out a third solicitation. The October 10 solicitation consisted of a cover letter, a Proxy, and a Withdrawal Election Agreement. Wininger Decl. & Evans Decl., ¶¶ 2-3. Defendants filed the cover letter with the SEC on October 10, but did not file the Proxy itself. See Supplemental Luchenitser Decl. (filed on October 15, 1997). Thus, plaintiffs' counsel first learned of the content of the Proxy when plaintiff Wininger and the other Limited Partners received the Proxy on October 14, 1997. See Wininger Decl. & Evans Decl., ¶ 2.

Shockingly, the Proxy sent to the Limited Partners on October 10 was the original Proxy, not the Revised Proxy! Wininger Decl. & Evans Decl., Ex. B. The Proxy mailed to the Limited Partners on October 10 states, "IF THE PROPOSED PLAN IS APPROVED, SUCH APPROVAL WILL BIND ALL HOLDERS, AND ANY HOLDER WHO DOES NOT VOTE FOR THE PLAN WILL BE ISSUED COMMON STOCK IN THE DISSOLUTION AS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS." Wininger Decl. & Evans Decl., ¶ 4, Ex. B, second unnumbered page. Thus, the defendants have once again falsely represented to the Limited Partners that they must vote for the Proposed Plan in order to participate in the Plan's Underwritten Sale. It is hard to imagine a misrepresentation that could be more material or more likely to deceive the Limited Partners into voting for the Proposed Plan.

Little more needs to be said about this brazen violation of SEC Rules 14a-9 and 10b-5. See 17 C.F.R. §§ 240.14a-9, .10b-5. Despite representing to this Court in their opposition brief, and to the Limited Partners in the Additional Solicitation, that participation in the Withdrawal and the Underwritten Sale does not require voting for the Proposed Plan, the defendants have once again made a contrary representation to the Limited Partners. With the Special Meeting scheduled for October 24 (next Friday, see Ex. F), the Limited Partners have been repeatedly misled and confused by defendants' false and contradictory representations. The proxy solicitation process has thus been irrevocably tainted.

III. CONCLUSION

The only meaningful remedy for defendants' latest violation is the invalidation of all proxies solicited thus far and an injunction against the holding of the Special Meeting and against any continued solicitation of proxies. For the foregoing additional reasons, plaintiffs respectfully submit that their Motion for a TRO and a Preliminary Injunction must be granted to protect the investors and ensure that the defendants do not profit from their repeated violations of the federal securities laws.

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¹ Except where indicated, all exhibit cites herein are to the Declaration of Alex J. Luchenitser in Support of TRO and Preliminary Injunction (filed on October 1, 1997).

² As explained in plaintiffs' prior briefing in support of a TRO and a Preliminary Injunction, defendants' Proposed Plan consists of two phases -- the Withdrawal (which encompasses the Underwritten Sale) and the Dissolution. Ex. G at 1. Limited Partners can choose to participate in the Withdrawal, the Dissolution, or both. Ex. E at 1. The Withdrawal is far more favorable than the Dissolution, because Limited Partners who participate in the Withdrawal would promptly receive cash for their illiquid (Ex. G at 19, 82) Partnership Units from the proceeds of the Underwritten Sale. Ex. G at 6-7. On the other hand, Limited Partners who participate only in the Dissolution would not receive full liquidity for their illiquid Units for two or more years after approval of the Plan (Ex. G at 6-7), and would likely receive a lower return than Limited Partners who participate in the Withdrawal (Ex. G at 2, 9, 24).