SECURITIES AND EXCHANGE COMMISSION
Washington 20549
____________________
SCHEDULE 14D-9
____________________
Solicitation/ Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
(Amendment No. 2)
___________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Subject Company)
____________________
PROMETHEUS INCOME PARTNERS,
a California Limited Partnership
(Name of Person(s) Filing Statement)
____________________
Units of Limited Partnership Interest
(Title of Class of Securities)
____________________
742941 10 7
(CUSIP Number of Class of Securities)
____________________
Vicki R. Mullins
Chief Financial Officer
Prometheus Development Co., Inc.
350 Bridge Parkway
Redwood City, California 94065-1517
(415) 596-5300
(Name, address and telephone number of person authorized to
receive notice and communications on behalf of the person(s)
filing statement)
Copy to:
Gary Apfel, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
1999 Avenue of the Stars, Suite 1600
Los Angeles, California 90067
(310) 788-1000
This Amendment amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") filed with the Securities and Exchange
Commission on November 4, 1996, as amended and supplemented on
November 15, 1996, by Prometheus Income Partners, a California
Limited Partnership (the "Partnership"). Unless otherwise
indicated, capitalized terms used herein have the same meaning as
set forth in the originally filed Schedule 14D-9.
Item 2. Tender Offer of the Bidder
Item 2(a) of the Schedule 14D-9 is amended to add the following
information:
On November 27, 1996, Apollo further amended the Amended Apollo
Tender Offer. According to Amendment No. 2 to the Apollo
Schedule 14D-1, the Amended Apollo Tender Offer was amended to
extend the expiration date under the Amended Apollo Tender Offer
to 12:00 midnight, New York City Time, on December 4, 1996.
On December 5, 1996, Apollo further amended the Apollo Tender
Offer. According to Amendment No. 3 to the Apollo Schedule 14D-
1, the Amended Apollo Tender Offer has been amended to (1)
increase the Apollo Purchase Price to $480 per Unit, net to the
seller in cash, without interest thereon, less the aggregate
amount of any distributions per Unit declared or made by the
Partnership after October 18, 1996 and the date of payment of the
Apollo Purchase Price for the Units by Apollo, upon the terms and
subject to the conditions set forth in the Apollo Offer to
Purchase and the related Letter of Transmittal and (2) extend the
expiration date under the Amended Apollo Tender Offer to 12:00
midnight, New York City time, on December 20, 1996, unless
further extended.
On December 10, 1996, Apollo further amended the Apollo Tender
Offer. According to Amendment No. 4 to the Apollo Schedule 14D-
1, the Amended Apollo Tender Offer has been amended to (1)
increase the Apollo Purchase Price to $490 per Unit, net to the
seller in cash, without interest thereon, less the aggregate
amount of any distributions per Unit declared or made by the
Partnership after October 18, 1996 and the date of payment of the
Apollo Purchase Price for the Units by Apollo, upon the terms and
subject to the conditions set forth in the Apollo Offer to
Purchase and the related Letter of Transmittal and (2) extend the
expiration date under the Amended Apollo Tender Offer to 12:00
midnight, New York City time, on December 24, 1996, unless
further extended.
Item 2(b) of the Schedule 14D-9 is amended to add the following
information:
On December 9, 1996, PIP General, pursuant to Amendment No. 2 to
the PIP General Schedule 14D-1 dated December 9, 1996, further
amended the Amended PIP General Tender Offer to (1) increase the
PIP General Purchase Price to $485 per unit, net to the seller in
cash, without interest thereon, less the aggregate amount of any
distributions per Unit declared or made by the Partnership after
November 8, 1996 and the date of payment of the PIP General
Purchase Price for the Units by PIP General, upon the terms and
subject to the conditions set forth in the PIP General Offer to
Purchase, and the related Letter of Transmittal and (2) extend
the expiration date under the Amended PIP General Offer to
Purchase to 12:00 midnight, New York, New York time, on December
23, 1996.
On December 12, 1996, PIP General, pursuant to Amendment No. 3 to
the PIP General Schedule 14D-1 dated December 12, 1996, further
amended the Amended PIP General Tender Offer to (1) increase the
PIP General Purchase Price to $490 per unit, net to the seller in
cash, without interest thereon, less the aggregate amount of any
distributions per Unit declared or made by the Partnership after
November 8, 1996 and the date of payment of the PIP General
Purchase Price for the Units by PIP General, upon the terms and
subject to the conditions set forth in the PIP General Offer to
Purchase, and the related Letter of Transmittal and (2) extend
the expiration date under the Amended PIP General Offer to
Purchase to 12:00 midnight, New York, New York time, on January
3, 1997.
Item 4. The Solicitation or Recommendation
Item 4(b) of the Schedule 14D-9 is amended by adding the
following information:
On December 5, 1996 after receiving the Amended Apollo Tender
Offer, the Special Committee met to review and discuss the
Amended Apollo Tender Offer. Thereafter, the Special Committee
inquired of PIP General whether it would amend the PIP General
Tender Offer to increase the PIP Purchase Price. The Special
Committee urged PIP General to increase the PIP Purchase Price to
$485 per Unit. On December 6, 1996, a representative of PIP
General informed the Special Committee that PIP General would
amend the PIP General Tender Offer to increase the PIP Purchase
Price to $485 per Unit. On December 6, 1996, the Special
Committee met to review and discuss the Amended Apollo Tender
Offer and the proposed amended PIP General Tender Offer and
determined, for the reasons set forth in this Item 4(b), to
reiterate the recommendations set forth in Item 4(a) above. On
December 9, 1996 the Partnership sent a letter to PIP General
consenting to and approving the amended PIP General Tender Offer.
On December 11, 1996 after receiving the Amended Apollo
Tender Offer, the Special Committee met to review and discuss the
Amended Apollo Tender Offer. Thereafter, the Special Committee
inquired of PIP General whether it would amend the PIP General
Tender Offer to increase the PIP Purchase Price. The Special
Committee urged PIP General to increase the PIP Purchase Price to
$495 per Unit. On December 11, 1996, a representative of PIP
General informed the Special Committee that PIP General would
amend the PIP General Tender Offer to increase the PIP Purchase
Price to $490 per Unit. On December 11, 1996, the Special
Committee met to review and discuss the Amended Apollo Tender
Offer and the proposed amended PIP General Tender Offer and
determined, for the reasons set forth in this Item 4(b), to
reiterate the recommendations set forth in Item 4(a) above. On
December 12, 1996 the Partnership sent a letter to PIP General
consenting to and approving the amended PIP General Tender Offer.
On December 12, 1996, the Partnership sent a letter to the
Limited Partners in which it reiterated its recommendations set
forth in this Schedule 14D-9 and summarized the reasons
therefore. Such letter, which is filed as Exhibit (a)(6) hereto,
is hereby incorporated herein by reference thereto.
Item 7. Certain Negotiations and Transactions by the Subject
Company
Item 7(a) of the Schedule 14D-9 is amended by incorporating the
information contained under Item 4 of this Amendment by this
reference thereto.
Item 8. Additional Information to be Furnished
Item 8 of the Schedule 14D-9 is amended by adding the following
information:
On November 22, 1996, the Partnership and Apollo entered into an
agreement providing that Apollo's time to answer the
Partnership's complaint was extended until five business days
after Apollo's counsel receives written notice from the
Partnership's counsel demanding service of an answer to the
Partnership's complaint.
On November 26, 1996, a lawsuit (the "Suit") was filed by J/B
Investment Partners, on behalf of all Limited Partners of the
Partnership, in California Superior Court for the County of Santa
Clara (the "Limited Partner Class Action Lawsuit") against the
General Partner, PIP General, Stanford N. Diller, Vicki R.
Mullins, John Murphy and certain entities affiliated with the
foregoing (collectively, the "Defendants"). The Suit is styled
as a derivative and class action suit; no demand was made upon
the Partnership to bring the Suit, and it is too early to know if
the class will be certified. The Partnership is not a defendant
in the class action, and is named as a nominal plaintiff in the
derivative action. The Suit alleges, among other things, that:
(i) Mr. Diller and Ms. Mullins and Mr. Murphy (the latter two as
members of the Special Committee) have exercised their control of
the Partnership to pursue "a common plan and scheme by which they
have and are continuing to waste and misappropriate hundreds of
thousands of dollars of the Partnership assets;" (ii) the Special
Committee is not independent and is "flawed in that it consists
only of two employees of the General Partner and its affiliates;"
(iii) the Defendants breached their fiduciary duties to the
Partnership and the Limited Partners; (iv) the Defendants
breached the Partnership Agreement; and (v) the General Partner
and PIP General have been unjustly enriched.
The Partnership believes that the Suit is based upon inaccurate
and erroneous allegations, fails to state a claim for relief, and
is without merit. The Partnership believes that, among other
things, as a result of the actions taken by Special Committee to
date, including its Agreement to Make Tender Offer with PIP
General, the tender offer price to all limited partners has
increased from Apollo's original price of $405 per Unit to the
current offer price of $490 by PIP General and by Apollo. This
represents a benefit of $85 per Unit, or an aggregate of
$765,000, to limited partners if the maximum number of Units for
which the tender offers are being made, i.e., 9,000 Units, are
tendered to PIP General.
Item 9. Material to be Filed as Exhibits.
Item 9 of the Schedule 14D-9 is amended to add the following
Exhibits:
(a)(6) Form of Letter to Limited Partners, dated December 12,
1996
(a)(7) Letter regarding Agreement to Make Tender Offer, dated
December 9, 1996
(a)(8) Letter regarding Agreement to Make Tender Offer, dated
December 12, 1996
SIGNATURE
After reasonable 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.
PROMETHEUS INCOME PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: Prometheus Development Co., Inc.,
a California corporation
By:______________________________
Name: Vicki R. Mullins
Title: Chief Financial Officer
Dated: December 12, 1996
Exhibit (a)(6)
Prometheus Income Partners
350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5393
December 12, 1996
Dear Limited Partners:
We know you have received a significant amount of information
from many different sources over the past few weeks. In an
effort to keep you informed, the Special Committee of the General
Partner wants to report the following information:
PIP Partners-General, LLC, an affiliate of your General Partner
("PIP General"), has agreed to increase its tender offer price to
$490 per Unit in response to the Special Committee's request that
PIP General increase its offer price. This request was made
after an affiliate of Apollo Realty Advisors, Prom Income
Partners, L.L.C. ("Apollo"), raised its bid from $475 to $480
then $490 per Unit (the "Apollo Tender Offer") in response to the
$475 then $485 bids previously made by PIP General.
THE SPECIAL COMMITTEE RECOMMENDS THAT THOSE LIMITED PARTNERS WITH
A CURRENT OR ANTICIPATED NEED OR DESIRE FOR LIQUIDITY SHOULD
TENDER THEIR UNITS TO PIP PARTNERS-GENERAL, LLC, AN AFFILIATE OF
THE GENERAL PARTNER, PURSUANT TO ITS INCREASED OFFER. ALL
LIMITED PARTNERS SHOULD REJECT THE APOLLO TENDER OFFER, AND THOSE
LIMITED PARTNERS WHO DO NOT HAVE A CURRENT OR ANTICIPATED NEED OR
DESIRE FOR LIQUIDITY SHOULD HOLD ONTO THEIR UNITS UNTIL THE
PARTNERSHIP'S HARDBOARD SIDING PROBLEM HAS BEEN RESOLVED.
The Special Committee understands that PIP General's increased
offer of $490 per Unit will be mailed to all Limited Partners on
approximately December 13, 1996. Limited Partners who have
tendered in response to the Apollo Tender Offer must withdraw
their tender by delivering a completed Notice of Withdrawal to
The Herman Group, Inc., at 2121 San Jacinto Street, 26th Floor,
Dallas, Texas 75201, fax nos. (214) 999-9348 and (214) 999-9323,
no later than midnight December 24, 1996, New York City time if
they wish to withdraw their prior tender. The Special Committee
also understands that, for the convenience of the Limited
Partners, such a Notice of Withdrawal will be included in the PIP
General Tender Offer materials mailed December 13, 1996.
Please feel free to contact PIP General's information agent,
Georgeson & Company Inc., at (800) 223-2064, for assistance,
forms or with any questions. They will be happy to help you.
The Special Committee is of the opinion that certain key concerns
exist for the Partnership which should lead Limited Partners
either to tender their Units to PIP General or hold onto their
Units:
1. The Special Committee is of the opinion that the Partnership
must be extremely careful in dealing with the hardboard siding
problem since it could have a major impact on the value and
marketability of the Partnership Properties, and hence the value
of the Units. Mr. Sanford N. Diller and his affiliates, who
beneficially own the General Partner and the Purchaser have
substantial knowledge, skill, and experience in managing the many
business and legal aspects of this problem, including managing
litigation against manufacturers, insurers, subcontractors and
others as a result thereof. The Partnership recently commenced
such litigation as a result of the Partnership's hardboard siding
problem.
2. While the Special Committee understands that Mr. Diller
explained the nature of the hardboard siding problem to
representatives of Apollo, the Apollo Tender Offer does not
address the importance to the Partnership and the limited
partners of (1) handling the hardboard siding problem as
described above, or (2) the skill, knowledge, and experience
possessed by affiliates of the General Partner, including Maxim
Property Management, which manages the Partnership Properties, in
dealing the hardboard siding problem.
We thank you for your attention and will keep you advised of
material developments.
Sincerely,
The Special Committee
Exhibit (a)(7)
PROMETHEUS INCOME PARTNERS
350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5393
December 9, 1996
Mr. Sanford N. Diller
PIP Partners - General, LLC
350 Bridge Parkway
Redwood City, CA 94065-1517
Re: PIP Partners - General, LLC Tender Offer
Dear Sanford:
We hereby consent to and approve the amended tender offer of PIP
Partners - General, LLC described in its Amended Offer to
Purchase, dated December 9, 1996, and confirm that the terms of
the agreement to Make Tender Offer, dated as of November 4, 1996,
are applicable to such amended offer.
Sincerely,
PROMETHEUS INCOME PARTNERS, a California limited partnership
By: PROMETHEUS DEVELOPMENT CO., INC., a California corporation,
its general partner
By: /s/ Vicki R. Mullins
Vicki R. Mullins, Chief Financial Officer
Exhibit (a)(8)
PROMETHEUS INCOME PARTNERS
350 Bridge Parkway
Redwood City, CA 94065-1517
(415) 596-5393
December 12, 1996
Mr. Sanford N. Diller
PIP Partners - General, LLC
350 Bridge Parkway
Redwood City, CA 94065-1517
Re: PIP Partners - General, LLC Tender Offer
Dear Sanford:
We hereby consent to and approve the amended tender offer of PIP
Partners - General, LLC described in its Amended Offer to
Purchase, dated December 12, 1996, and confirm that the terms of
the agreement to Make Tender Offer, dated as of November 4, 1996,
are applicable to such amended offer.
Sincerely,
PROMETHEUS INCOME PARTNERS, a California limited partnership
By: PROMETHEUS DEVELOPMENT CO., INC., a California corporation,
its general partner
By: /s/ Vicki R. Mullins
Vicki R. Mullins, Chief Financial Officer
