UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to ss.240.14a-12
INCOME GROWTH PARTNERS, LTD. X
________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
1. Title of each class securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11(c)(2):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
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INCOME GROWTH PARTNERS, LTD. X
11230 SORRENTO VALLEY ROAD, SUITE 220
SAN DIEGO, CALIFORNIA 92121
February 3, 2004
SOLICITATION OF VOTE OF LIMITED PARTNERS
Dear Limited Partner:
As discussed more fully in the attached Solicitation Statement, we are
soliciting the vote of Limited Partners to authorize the sale of the
Partnership's Mission Park Property. Please read the Solicitation Statement
carefully before filling out the enclosed Ballot.
The Partnership Agreement provides that Holders of more than 50% of the
outstanding Units must approve the sale of all or substantially all of the
Partnership's assets. Although this Solicitation Statement is soliciting the
vote of Limited Partners in connection with the sale of only one of the
Partnership's two remaining properties, the General Partner believes that it is
important to obtain the consent of the Limited Partners to such sale. Only
Limited Partners of record at the close of business on December 31, 2003 will be
entitled to notice of, and to participate in, the vote.
If Limited Partners holding a majority of outstanding Units approve the sale, we
will move forward with the sale of the Mission Park Property and anticipate that
escrow will close in or about March 2004 upon the terms discussed in the
Solicitation Statement. There can be no assurance that the escrow for the sale
of the Mission Park Property will close by the estimated time, or even that the
Mission Park Property will be sold at all.
YOUR VOTE IS VERY IMPORTANT. The General Partner believes it is important to
receive as many Ballots as possible with respect to such an important decision.
Please sign and date the enclosed Ballot and return it promptly to the
Partnership in the enclosed return envelope or via fax to (858) 457-3104.
RETURNING A SIGNED BALLOT WITHOUT INDICATING YOUR VOTE ON THE PROPOSED
TRANSACTION WILL BE CONSIDERED A VOTE FOR THE PROPOSED TRANSACTION. FAILURE OF A
LIMITED PARTNER TO RETURN A BALLOT BY FEBRUARY 20, 2004 WILL CONSTITUTE A VOTE
AGAINST THE PROPOSED TRANSACTION.
Very truly yours,
INCOME GROWTH PARTNERS, LTD. X
a California limited partnership
By its General Partner:
INCOME GROWTH MANAGEMENT, INC.
a California corporation
By: /s/ David W. Maurer
---------------------------------
David W. Maurer, President
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INCOME GROWTH PARTNERS, LTD. X
11230 SORRENTO VALLEY ROAD, SUITE 220
SAN DIEGO, CALIFORNIA 92121
SOLICITATION STATEMENT
February 3, 2004
This Solicitation Statement is being furnished to the Limited Partners of Income
Growth Partners, Ltd. X, a California limited partnership (the "Partnership"),
in connection with the Partnership's solicitation of the votes of the Limited
Partners to approve the sale of the Partnership's Mission Park Property (the
"Proposed Transaction"). This authorization is the only authorization that will
be solicited by the General Partner in connection with the sale of the Mission
Park Property (as defined herein below). No meeting will be held in connection
with this solicitation of votes from the Limited Partners. To be counted, a
properly completed Ballot must be received by the General Partner at 11230
Sorrento Valley Road, Suite 220, San Diego, California 92121 on or before
FEBRUARY 20, 2004. RETURNING A SIGNED BALLOT WITHOUT INDICATING YOUR VOTE ON THE
PROPOSED TRANSACTION WILL BE CONSIDERED A VOTE FOR THE PROPOSED TRANSACTION.
FAILURE OF A LIMITED PARTNER TO RETURN A BALLOT BY FEBRUARY 20, 2004 WILL
CONSTITUTE A VOTE AGAINST THE PROPOSED TRANSACTION. Ballots will not be deemed
to have been returned until actually received by the General Partner at the
foregoing address.
This Solicitation Statement is made by the General Partner, Income Growth
Management, Inc., a California corporation (the "General Partner"), on behalf of
the Partnership. Solicitation of votes other than by mail may be made by
telephone, facsimile, or in person by regularly employed officers, agents and
employees of the General Partner who will not receive additional compensation
for their efforts. The total cost of soliciting votes will be borne by the
Partnership.
The General Partner has set December 31, 2003 as the record date for determining
the Limited Partners entitled to a Ballot and to vote on the Proposed
Transaction. Only the Limited Partners of record at the close of business on
December 31, 2003 will be entitled to vote on the Proposed Transaction.
As of December 31, 2003, the total number of outstanding Class A Units ("Class A
Units") was 8,100 held by 770 Class A Unit holders, and the total number of
outstanding Original Units ("Original Units") was 18,826.5 held by 1,034
Original Unit holders. The total number of Class A and Original Units as of
December 31, 2003 was 26,926.5 ("Units") held by a total of 1,804 Class A Unit
holders and Original Unit holders (collectively "Limited Partners"). Each
Limited Partner is entitled to cast one vote for each Unit owned of record on
the record date.
Robert Green, the Vice President of the General Partner, is the owner of 37
Original Units. Other than Robert Green, neither the General Partner, nor any of
its directors or other officers, is the beneficial owner of any Units. There is
no established trading market for the Units.
A Limited Partner may revoke its Ballot at any time prior to February 20, 2004
by mailing a properly executed Ballot bearing a later date or by mailing a
signed, written notice of revocation to the attention of the General Partner.
Revocation of a Ballot will be effective upon receipt by the General Partner.
This Solicitation Statement and Ballot were first mailed to Limited Partners on
or about February 3, 2004. Votes will be tallied on or about February 23, 2004
and the General Partner will notify each of the Limited Partners of the outcome
of the vote by mail on or about February 27, 2004.
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INTRODUCTION
GENERAL INFORMATION
The General Partner proposes to sell the Mission Park Property. On August 7,
2003, the Partnership listed the Mission Park Property for sale for a sales
price of $35.5 million. On or about December 2, 2003, the Partnership entered
into a purchase and sale agreement and escrow instructions with Pacifica
Enterprises, LLC, a California limited liability company, for the sale of the
Mission Park Property for $36 million.
If the Partnership is successful in selling the Mission Park Property for the
anticipated sales price of $36 million, it will result in a sales price that
exceeds the listing price by approximately $500,000, before deducting any
expenses incurred to close the transaction. See "Terms and Conditions" for the
terms and conditions of the Proposed Transaction. The General Partner will not
receive any fees in connection with the Proposed Transaction, other than its
management fee for management of the Partnership through the sale of the Mission
Park Property.
There can be no assurance that the Mission Park Property will be sold at the
projected sales price of $36 million, or that the Mission Park Property will be
sold at all. The sale of the Mission Park Property is conditioned upon a number
of factors, including without limitation the approval of a majority of the
outstanding Units, as well as the satisfaction of the terms and conditions by
the Partnership and by the buyer of the purchase and sale agreement and escrow
instructions for the Mission Park Property.
The Partnership's Amended and Restated Agreement of Limited Partnership
("Partnership Agreement") provides in Section 5.3.2 that the General Partner may
not sell or dispose of all, or substantially all, of the Partnership's assets
without the approval of a majority of the outstanding Units. Although this
Solicitation Statement is soliciting the vote of Limited Partners in connection
with the sale of only one of the Partnership's two remaining properties, the
General Partner believes that it is important to obtain the consent of the
Limited Partners to such sale. For purposes hereof, "Mission Park Property"
means the Mission Park Property, including without limitation the real estate,
together with the buildings, improvements, equipment, furniture, fixtures, and
personal property associated therewith.
There can be no assurance that the estimated amounts, figures or dates presented
above are accurate and the actual amounts, figures or dates may differ
substantially.
FORWARD-LOOKING STATEMENTS
This Solicitation Statement contains forward-looking statements. Discussions
containing such forward-looking statements may be found in the material set
forth under "Description of the Proposed Transaction" and "Unaudited Pro Forma
Consolidated Financial Data," as well as within this Solicitation Statement
generally. In addition, when used in this Solicitation Statement, the words
"believe," "anticipate," "expect," "may," "will," "estimate," "plan," "should,"
"intend," or the negation thereof and similar expressions are intended to
identify forward-looking statements; however, not all forward-looking statements
will contain such expressions. Such statements are subject to a number of risks
and uncertainties. Actual results or events in the future could differ
materially from those described in the forward-looking statements as a result of
the inability of the General Partner to find a suitable buyer for the Mission
Park Property, the inability to agree on acceptable purchase price or contract
terms, the inability of the Partnership to comply with the terms of the purchase
agreement for the Mission Park Property, the failure of the buyer to go through
with the purchase of the Mission Park Property, a decrease in the financial
performance of the Mission Park Property, the discovery of an environmental or
other condition impacting the Mission Park Property, an economic downturn in the
market in which the Mission Park Property is located, and other factors set
forth in this Solicitation Statement. These risks and uncertainties are beyond
the ability of the General Partner to control. In many cases, the General
Partner cannot predict the risk and uncertainties that could cause actual
results to differ materially from those indicated by the forward-looking
statements. The Partnership undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect any future events or
circumstances.
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DESCRIPTION OF THE PROPOSED TRANSACTION
BACKGROUND AND RECOMMENDATION OF THE GENERAL PARTNER
The Partnership was formed in 1988 with the primary purpose of acquiring,
developing, investing in, holding, managing, selling, disposing of and otherwise
acting with respect to residential real property. The Partnership's investment
objectives at formation were to acquire, hold and operate for the production of
income and distributable cash, and sell, exchange, or otherwise dispose of
parcels of income-producing multi-family, residential real property. In 1989,
the Partnership purchased the Mission Park Property for a purchase price of
$17.1 million. See "The Mission Park Property" below.
The Partnership Agreement provides the term of the Partnership will, unless
previously terminated, continue until February 25, 2021.
The General Partner has periodically evaluated the desirability of sale of the
Mission Park Property. The potential to sell the Mission Park Property generally
has been enhanced by recent improvements in the national and local real estate
investment markets. Pension funds, real estate investment trusts and other
institutional buyers are now actively seeking new investment properties, as
compared to the early 1990's, when these same institutional buyers were fewer
and less active. The emergence of securitized mortgage financing and lower
mortgage interest rates have also contributed to an improved market for real
estate such as the Mission Park Property, as entrepreneurial buyers who require
debt financing to purchase properties are able to borrow funds at attractive
rates.
More specifically, improvements in the real estate capital markets and in the
operating performance of the Mission Park Property have enhanced the prospects
for selling the Mission Park Property at an attractive price. Further, a
resurgence in development in the San Diego County area has also increased the
marketability of the Mission Park Property. During the early 1990's, the Mission
Park Property experienced devaluation due to a nationwide slump in real estate
values. Although future economic conditions are difficult to predict, the
General Partner believes that it is unlikely that continuing to hold the Mission
Park Property would significantly enhance the Partnership's ultimate realization
on sale of the Mission Park Property, or that the relative economic benefits of
continued ownership would justify the risks of such continued ownership.
On August 7, 2003, the Partnership listed the Mission Park Property for sale for
a sales price of $35.5 million. On or about December 2, 2003, the Partnership
entered into a purchase and sale agreement and escrow instructions with Pacifica
Enterprises, LLC, a California limited liability company, for the sale of the
Mission Park Property for $36 million.
If the Partnership is successful in selling the Mission Park Property for the
anticipated sales price of $36 million, it will result in a sales price that
exceeds the listing price of the Mission Park Property by approximately $500,000
and the original purchase price of the Mission Park Property by approximately
$18.9 million, before deducting any expenses incurred to close the transaction.
See "Terms and Conditions" for the terms and conditions of the Proposed
Transaction.
Copies of the purchase and sale agreement and escrow instructions for the sale
of the Mission Park Property will be made available to the Limited Partners upon
request.
It should be noted that the sale of the Mission Park Property will eliminate
certain future liability of the General Partner for Partnership liabilities and
risks to the Partnership which could arise from continued ownership of the
Mission Park Property. The General Partner will receive no fees in connection
with the sale of the Mission Park Property. It is not anticipated the General
Partner will receive any distributions from the proceeds of the sale under the
distribution provisions of the Partnership Agreement.
THE MISSION PARK PROPERTY
The Mission Park Property is a 264 unit apartment complex located at 201-230
Woodland Parkway, San Marcos, California. It is an apartment building built in
two phases, with 120 one-bedroom units and 144 two-bedroom units. The Mission
Park Property was acquired in 1989 for $17.1 million. The Mission Park Property
had an appraised value of $23.8 million as of May 8, 2002.
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The Mission Park Property is subject to a security interest securing a loan with
a balance of approximately $9,300,700 as of September 30, 2003 and a loan
balance of approximately $9,261,000 as of December 31, 2003. The amount of the
loan balance as of September 30, 2003 and December 31, 2003 represent estimates.
The actual amount of the loan balance will vary depending upon the date the
Mission Park Property is sold and the loan paid off. The loan terms require
monthly payments in the amount of $73,145, including interest at 7.76% until
paid in full. The loan terms also contain a prepayment penalty that will require
a penalty to be paid to the lender in the event the Mission Park Property is
sold prior to the maturity date of the loan in January 2006. Based upon the
relevant loan documents, this prepayment penalty was estimated to be
approximately $308,000 as of December 15, 2003. The amount of the prepayment
penalty is calculated, in part, upon a percentage of the principal amount to be
prepaid. Therefore the amount of the prepayment penalty will vary depending upon
when the Mission Park Property is sold. The amount of any prepayment penalty is
an estimate only and the actual prepayment penalty may vary. It should be noted
that the prepayment penalty estimate is as of December 15, 2003 and therefore
the amount indicated could be substantially different from the actual amount.
The occupancy rate and average annual base rent per square foot at December 31
for the past two years were as follows:
2003 2002
Occupancy Rate 95.75% 97.30%
Average Rent Per Square Foot $14.64 $14.66
TERMS AND CONDITIONS
The buyer for the Mission Park Property is Pacifica Enterprises, LLC, a
California limited liability company. The principal executive offices of the
buyer for the Mission Park Property are located at 12780 High Bluff Drive, Suite
160, San Diego, California 92130. To the knowledge of the General Partner, the
buyer of the Mission Park Property and its affiliates are unrelated to the
Partnership and its affiliates.
Pursuant to the terms and conditions of the purchase and sale agreement and
escrow instructions dated December 2, 2003 for the sale of the Mission Park
Property, the Partnership has agreed to sell the Mission Park Property to the
buyer upon approval of a majority of the outstanding Units. Subject to the
anticipated adjustments described below, the purchase price for the Mission Park
Property is anticipated to be $36 million.
All income and expenses of the Mission Park Property shall be apportioned
between the buyer and the Partnership as of the closing date. The prorated items
include without limitation, rents for the month in which the closing takes
place, taxes and assessments on the Mission Park Property, utility charges, and
other operating expenses. At closing, all principal and interest on indebtedness
relating to the Mission Park Property will be repaid, which is estimated to
total approximately $9,294,000. See "Distribution Upon Sale of the Mission Park
Property."
Upon closing, a sales commission will be paid to Hendrix & Partners (the
"Broker"), the Partnership's exclusive listing agent for the sale of the Mission
Park Property. Under the listing agreement, the Broker will be paid
approximately 2.5% of the purchase price. Based upon the estimated $36 million
purchase price of the Mission Park Property, the sales commission is anticipated
to be approximately $900,000. The Broker is unrelated to the Partnership or its
affiliates.
In accordance with the purchase and sale agreement and escrow instructions, the
buyer deposited $250,000 into escrow on or about December 11, 2003 and an
additional $250,000 was deposited by buyer as of December 22, 2003 for a total
earnest money deposit of $500,000. The buyer completed its due diligence review
of the Mission Park Property and according to the terms of the purchase and sale
agreement and escrow instructions, its earnest money deposit became
"non-refundable" on or about December 22, 2003, unless the purchase and sale
agreement and escrow instructions is terminated for (i) a failure of a condition
precedent to the buyer's obligation, (ii) or a failure of other conditions
specified in the purchase and sale agreement and escrow instructions.
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Because the closing of the purchase and sale agreement and escrow instructions
is conditioned upon, among other factors, the approval of a majority of the
outstanding Units, there can be no assurance that the proposed sale of the
Mission Park Property will occur. The buyer's further obligations under the
purchase and sale agreement and escrow instructions are subject to, among other
things, approval of the transaction by a majority of the outstanding Units, and
the buyer's payment of the purchase price for the Mission Park Property.
GENERAL
If the Proposed Transaction is consummated for the Partnership's Mission Park
Property as is anticipated and described above, the consideration is anticipated
to be approximately $36 million, before deducting all closing fees and costs,
sales commissions, necessary expenses, repayment of certain indebtedness of the
Mission Park Property, payment of prepayment penalties on the Mission Park
Property mortgage and payment of certain accounts payable and accrued
liabilities of the Partnership, the sum of which is estimated at approximately
30.7% of the sales price or approximately $11,058,000.
If the Proposed Transaction is approved, the General Partner has established the
following estimated time-line goals for completion of the Proposed Transaction:
February 20, 2004 - Deadline for receipt of Ballots
March 31, 2004 - Closing of Proposed Transactions
June 30, 2004 - Initial distributions to Limited Partners (less the contingency
and capital allowance reserves)
The foregoing are the General Partner's goals for and estimates of the time
required for each step of the Proposed Transaction. Various delays may be
encountered which could result in a later closing date or distribution dates.
There can be no assurance that (i) the Mission Park Property can be sold at the
projected sales price of $36 million, or that it will be sold at all, (ii) that
if sold, the escrow for the sale of the Mission Park Property will close by the
estimated time, or (iii) that the estimated amount of the prepayment penalties
and other costs associated with the sale of the Mission Park Property are
accurate. The actual figures, numbers and dates regarding the foregoing may
differ substantially.
ADVANTAGES TO THE LIMITED PARTNERS
The General Partner reasonably believes the Proposed Transaction is fair to the
Limited Partners and recommends its approval. On May 8, 2002, an appraisal of
the Mission Park Property was obtained appraising its value at approximately
$23.8 million. The anticipated sales price of the Mission Park Property is
approximately $12.2 million higher than the May 8, 2002 appraised value.
Additionally, the anticipated sale price for the Mission Park Property exceeds
the listing price by approximately $500,000 and the original purchase price by
approximately $18.9 million. It should be noted, however that the May 8, 2002
appraisal is more than one and a half years old and therefore the appraised
value could be drastically different from the actual value. A recent appraisal
has not been done on the Mission Park Property.
On February 24, 2003, a market study report was obtained from Integra Realty
Resources - San Diego (the "Report") for the Mission Park Property, a copy of
which was attached as Exhibit 3 to the Partnership's Amended Schedule 14D-9
filed with the United States Securities and Exchange Commission (the "SEC") on
July 14, 2003. The purpose of the Report was to compare the rental market and
"for sale" market in San Diego County as of February 24, 2003. The Integra
Report compared the rental and sales markets in San Diego and provided supply
and demand comparisons, rental rates, pricing levels, and absorption and
competition levels relating to the Mission Park Property. Based upon an analysis
of supply and demand comparisons, rental rates, pricing levels, absorption and
competition levels, and general economic conditions, the Report concluded that
as of the date of the Report, the Mission Park Property had an indicated value
of $25.4 million based upon an overall capitalization rate of 8.5%. The
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capitalization rate was derived from comparable projects that had sold in the
Vista, San Marcos, and Oceanside areas. The range of overall capitalization
rates was 7.97% to 9.28%. The Report concluded that based upon the factors
referenced above, the demand for housing was expected to continue at reasonable
levels in the San Marcos area as the region was poised for further growth.
Additionally, the Report concluded that the North County East market and the San
Marcos submarket were experiencing strong demand for apartment units, thereby
further supporting the indicated value of $25.4 million. It should be noted that
the February 24, 2003 Report is approximately a year old and therefore the value
indicated could be drastically different from the actual value of the Mission
Park Property. A recent market study has not been done on the Mission Park
Property.
No independent evaluation of the fairness of the Proposed Transaction to Limited
Partners has been made.
In reaching its conclusion to recommend approval of the Proposed Transaction,
the General Partner considered the following factors:
(1) the Mission Park Property has now been held for substantially
longer than its originally anticipated holding period, which
militates in favor of a sale of the Mission Park Property at
this time;
(2) increased availability of investor capital, increased
purchasing activity and a favorable interest rate environment,
which may not continue in the future, also militate in favor
of sale;
(3) improved occupancies and revenues in recent years, which
contribute to realization of a higher sale price for the
Mission Park Property than the prior appraisal would indicate
and which may not be sustained militate in favor of sale;
(4) the potential for future operating performance increases and a
possible increase in the value of the Mission Park Property,
due to increasing development activity in the San Marcos area
might militate in favor of holding the Mission Park Property,
but which also might enhance its current marketability and
sales price;
(5) the current physical condition of the Mission Park Property
and the increasing likelihood there may be a higher need for
expenditures for repairs, replacements and improvements to be
incurred in the future, which militates in favor of a sale
now;
(6) the presence of competition and the possibility of increased
future competition, which suggest a sale now may be advisable;
(7) the relative illiquidity of the Units, which militates in
favor of sale;
(8) the potential for additional distributions by continuing to
hold the Mission Park Property, which might otherwise militate
in favor of holding the Mission Park Property, if such future
distributions would represent a rate of return equivalent to
that available in other investments;
(9) it is anticipated aggregate distributions from the
Partnership, including proceeds from the Proposed Transaction
and any eventually remaining reserves may equal or exceed the
capital contributions of the Limited Partners, which might
militate in favor of holding the Mission Park Property for
additional future appreciation, but which might also militate
in favor of a current sale in order to mitigate the potential
for losses;
(10) the sale of the Mission Park Property will eliminate certain
risks inherent in the ownership of real property, including,
among other things, the decline in value that could occur as a
result of rising interest rates, increasing real estate
investor expectations and changing competition factors in
local rental markets; and
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(11) the sale of the Mission Park Property will eliminate the
Partnership's ability to benefit from possible future
improvements in economic and market conditions, which possibly
could produce increased cash flow and enhance the market value
of the Mission Park Property.
Neither California law nor the Partnership Agreement afford dissenter's or
appraisal rights to the Limited Partners in connection with the Proposed
Transaction. If the Proposed Transaction is approved by the Limited Partners
holding a majority of the outstanding Units, the Limited Partners will receive a
distribution in accordance with the procedures prescribed by the Partnership
Agreement.
THE SHADOWRIDGE MEADOWS PROPERTY
On August 7, 2003, the Partnership also listed its Shadowridge Meadows property
("Shadowridge Meadows Property") for sale. On December 8, 2003, the Partnership,
subject to the approval of a majority of the outstanding Units, entered into a
purchase and sale agreement and escrow instructions with a prospective buyer of
the Shadowridge Meadows Property. Pursuant to the terms and conditions of the
purchase and sale agreement and escrow instructions, the Partnership had agreed
to sell the Shadowridge Meadows Property to the buyer upon approval of a
majority of the outstanding Units.
The prospective buyer subsequently raised a number of issues relating to the
condition of the Shadowridge Meadows Property and whether certain disclosures
were properly made by the Partnership in accordance with the purchase and sale
agreement and escrow instructions. The prospective buyer requested that the
initially agreed upon purchase price be renegotiated and reduced to provide for
the repair of certain property conditions. In addition to the requested
reduction in the purchase price, the prospective buyer also threatened to bring
a lawsuit against the Partnership and the General Partner for an unknown amount
of damages to address the issues it had raised about the condition of the
Shadowridge Meadows Property and representations made regarding such conditions.
In accordance with the purchase and sale agreement and escrow instructions, the
buyer deposited $250,000 into escrow as of December 29, 2003. An additional
$250,000 was to have been deposited by buyer no later than February 2, 2004 for
a total earnest money deposit of $500,000. The deposit of the additional
$250,000 is a condition precedent to the seller's obligation. The prospective
buyer failed to deposit the additional $250,000 as of February 2, 2004. As a
result, the General Partner, upon advice of counsel, has terminated the purchase
and sale agreement and escrow instructions.
Notwithstanding the termination of the purchase and sale agreement and escrow
instructions the prospective buyer may nevertheless continue with its attempt to
purchase THE SHADOWRIDGE MEADOWS PROPERTY AND may still bring a lawsuit in an
attempt to set aside the termination of the purchase and sale agreement and
escrow instructions. The General Partner believes that the claims raised by the
prospective buyer are without merit and it will vigorously defend any lawsuit
brought by the prospective buyer. While the Partnership currently believes that
it will ultimately be successful in defending against any claims brought by the
prospective buyer, litigation is subject to inherent uncertainties and
unfavorable rulings could occur. Depending on the amount and timing, an
unfavorable outcome of a claim brought by the prospective buyer could have a
material adverse effect on the Partnership's cash flow, distributions, business,
results of operations or financial position. Additionally, an unfavorable
outcome may also have a material impact on the amount and timing of
distributions available to the Limited Partners from the proceeds of the sale of
the Mission Park Property.
Notwithstanding the current situation, the General Partner is currently seeking
other suitable buyers for the Shadowridge Meadows Property and has received a
number of offers that it is investigating. Any sale of the Shadowridge Meadows
Property will be contingent upon the approval of a majority of the outstanding
Units.
FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTION
The purpose of the following discussion of the income tax consequences of the
Proposed Transaction is to inform the Limited Partners of the Partnership of the
federal and state income tax consequences to the Partnership and to its Limited
Partners arising from the sale of the Mission Park Property and the liquidation
and dissolution of the Partnership. The tax information included herein was
prepared by the General Partner. The tax information is taken from tax data
compiled by the General Partner in its role as the Partnership's tax
administrator and is not based upon the advice or formal opinion of counsel. The
tax discussion that follows is merely intended to inform the Limited Partners of
factual information and should not be considered tax advice. The following
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information should not be viewed as a substitute for careful tax planning,
particularly since the income tax consequences of an investment in a limited
partnership such as the Partnership are often uncertain and complex. Also, the
tax consequences will not be the same for all Limited Partners. You should be
aware that the following information is condensed and eliminates many details
that might adversely affect some Limited Partners who are subject to special tax
treatment. The General Partner recommends that the Limited Partners consult with
their own tax advisor.
The following discussion of tax consequences is based on laws and regulations
presently in effect. You should be aware that new administrative, legislative,
or judicial action could significantly change the tax aspects of the
Partnership. In addition to the federal income tax consequences described
herein, you should consider the state tax consequences of the Proposed
Transaction.
PASSIVE ACTIVITY LOSSES
Application of the passive activity loss limitation may have limited deductible
losses in prior years and created passive loss carryovers to the year of sale.
The sale will trigger the deduction of all prior passive losses disallowed under
the loss limitations.
SALE OF PROPERTY
Any gain or loss on sale generally will constitute Section 1231 gain or Section
1231 loss (i.e., gains or losses from disposition of real property or
depreciable personal property used in a trade or business and held for more than
one year, other than property held for sale to customers in the ordinary course
of business). A Limited Partner's share of the gains or losses from the sale
would be combined with any other Section 1231 gains or Section 1231 losses of
the Limited Partners for the year. Net Section 1231 gains or net Section 1231
losses generally would be treated as long-term capital gain or ordinary loss, as
the case may be. However, a Limited Partner's net Section 1231 gains would be
treated as ordinary income rather than capital gain to the extent of his or her
net Section 1231 losses, if any, incurred in the five preceding years.
Furthermore, in the event that the Mission Park Property is sold at a gain, the
depreciation expense may be recaptured as ordinary income under Section 1245 or
Section 1250 of the Internal Revenue Code of 1986, as amended (the "Code"), to
the extent of the realized gain. In general, under Section 1250, if real
property is depreciated on an accelerated basis rather than on a straight-line
basis, then the lessor of (i) any gain realized on disposition of the property
or (ii) the excess of accelerated depreciation over straight-line depreciation
as of the date of sale will be treated as ordinary income in the year the
Mission Park Property is sold. The Partnership does not expect to have any gain
from the sale of the Mission Park Property subject to recapture under Section
1250 of the Code. Limited Partners classified as corporations for federal income
tax purposes may be required, under Section 291(a) of the Code, to treat 20% of
the gain from the sale of the Mission Park Property attributable to depreciation
expense not subject to recapture under Section 1250 as ordinary income instead
of Section 1231 gain.
Under Section 702(a)(3) of the Code, a Partnership is required to state
separately, and the Partners are required to account separately for, their
distributive share of all gains and losses of their Partnership. Accordingly,
each Limited Partner's allocable share of the gains or losses from the sale
(including each Limited Partner's allocable share of Section 291(a) gain,
Section 1245 gain, Section 1231 gain or Section 1231 loss) will be separately
stated and reflected on the applicable Schedule K-1 forms provided to the
Limited Partners by the Partnership.
CAPITAL GAINS TAX
Any net Section 1231 gain not treated as ordinary income as discussed above will
be taxed at the capital gains tax rate. With respect to individuals, trusts and
estates, the Jobs and Growth Tax Relief Reconciliation Act of 2003 ("EGTRRA")
generally reduces the maximum tax rate on net capital assets held for more than
12 months to 15%. EGTRRA does not affect the taxation of capital gains realized
by corporations. Substantially all of the Partnership's assets have been held
for longer than 12 months. Accordingly, a substantial portion of any Section
1231 gains of the Partnership realized on the sale of assets and allocable to
Limited Partners who are individuals, trusts and estates may be taxed at a
maximum federal income tax rate of 15% (if such gains are not recharacterized as
ordinary income as described above under "Sale of Property," or are not subject
to the special tax rate described in the next paragraph).
10
Individuals, trusts and estates are taxed on unrecaptured Section 1250 gain at a
maximum federal income tax rate of 25%. Unrecaptured Section 1250 gain generally
equals the excess of (i) the lesser of the gain realized on disposition of
depreciable real property or depreciation allowed or allowable on the property
through the date of disposition, over (ii) the amount of depreciation recapture
realized upon the disposition (as described above under "Sale of Property").
Limited Partners who are non-resident aliens or foreign corporations ("foreign
persons") are subject to a withholding tax on their share of the Partnership's
income from the sale of the Mission Park Property. The tax withheld will be
remitted to the Internal Revenue Service and the foreign person will receive a
credit on their U.S. tax return for the amount of the tax withheld by the
Partnership. The tax withheld will be treated as a distribution to the Limited
Partner.
Limited Partners classified as corporations are taxed on capital gains at the
same rates as ordinary income on taxable income below $10,000,000. A corporate
Limited Partner can deduct capital losses only to the extent of capital gains,
with any unused capital losses generally being carried back three years and
forward five years.
CALIFORNIA INCOME TAX WITHHOLDING
Because the Mission Park Property is located in the State of California, Limited
Partners who are not resident in California are required to report their
allocable gain to California. California law requires the Partnership to
withhold a portion of a nonresident partner's distribution and to remit such
amounts withheld to the California Franchise Tax Board. The amount withheld will
be separately stated on the stub of the distribution check and the General
Partner will provide additional documentation of the amount of the withheld
California taxes by January 31 following the year of sale. The amount of tax
withheld will be treated as a distribution to the Limited Partner. The withheld
taxes will be allowed as a credit against any California income tax. Limited
Partners may or may not have a tax refund after the filing of the required
California tax return.
FUTURE TAX ISSUES
Limited Partners should understand that there is the possibility that the
Internal Revenue Service could challenge the tax treatment of the Partnership's
activities for the year of the sale of the Mission Park Property or any prior
year for which the statute of limitations for making adjustments has not
elapsed. If any adjustments are made to the Partnership's income tax return, the
General Partner will so notify the Limited Partners. Any tax audit or
adjustments could result in assessment of additional tax liabilities upon the
Limited Partners which would be payable from their own funds and would not be
reimbursable by the General Partner or the Partnership.
THE FOREGOING ANALYSIS CANNOT BE, AND IS NOT INTENDED AS, A SUBSTITUTE FOR
CAREFUL TAX PLANNING. LIMITED PARTNERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR OWN TAX SITUATIONS AND THE EFFECTS OF THE
PROPOSED TRANSACTION AS TO FEDERAL, STATE, LOCAL AND FOREIGN TAXES, INCLUDING
WITHOUT LIMITATION, INCOME AND ESTATE TAXES.
DISTRIBUTION UPON SALE OF THE MISSION PARK PROPERTY
Upon completion of the Proposed Transaction, the Partnership will distribute the
proceeds of the sale of the Mission Park Property in accordance with the
Partnership Agreement.
The General Partner estimates that if the Mission Park Property is sold at the
anticipated sales price of $36 million, after deducting certain expenses
associated with this solicitation and the sale of the Mission Park Property,
certain other liabilities, and the establishment of the contingency and capital
allowance reserves, the sale will result in a distribution to the Unit A Holders
of approximately $364 per Class A Unit and to the Original Unit Holders of
approximately $1,043 per Original Unit which will be distributed to the Limited
Partners in accordance with the Partnership Agreement. For additional
information regarding the calculation of the estimated distributions, if any,
upon the sale of the Mission Park Property at the sale price of $36 million, see
the "Notes to Unaudited Pro Forma Consolidated Financial Data" below.
11
With the exception of the contingency reserve which is expected to be
approximately $1,000,000 and the capital allowance reserve which is expected to
be approximately $52,300, the General Partner anticipates distributing the net
proceeds available for distribution to the Limited Partners within approximately
ninety (90) days after the closing of the sale of the Mission Park Property. The
$1,000,000 contingency reserve will be used to cover any remaining liabilities
and unexpected claims, including any claims that may be brought in connection
with the Shadowridge Meadows Property; any remaining amounts after remaining
liabilities and unexpected claims have been paid will be distributed to the
Limited Partners. Depending upon the outcome of the issue involving the sale of
the Shadowridge Meadows Property as well as any other issues which may arise,
the General Partner anticipates that the remaining amount of the sale proceeds,
if any, will be distributed to the Limited Partners within approximately twelve
(12) to sixteen (16) months after the close of the sale of the Mission Park
Property. There can be no assurance that there will be any funds available from
the contingency reserve or the capital allowance reserve or that if funds are
available that they will be distributed to the Limited Partners within the time
frame indicated above.
AVAILABLE INFORMATION
The Units are registered pursuant to Section 12(g) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). As such, the Partnership is
subject to the informational filing requirements of the Exchange Act, and in
accordance therewith, is obligated to file reports and other information with
the SEC relating to its business, financial condition and other matters.
Comprehensive financial information is included in the Partnership's Annual
Report on Form 10-KSB, Quarterly Reports on Form 10-QSB and other documents
filed by the Partnership with the SEC, including the 2002 Annual Report on Form
10-KSB and the Quarterly Report on Form 10-QSB for the quarter ended September
30, 2003. Such reports and other information should be available for inspection
and copying at the public reference facilities of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies should be available by mail upon payment of
the SEC's customary charges by writing to the SEC's principal offices at 450
Fifth Street, N.W., Washington D.C. 20549. In addition, the SEC maintains an
Internet Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The Partnership's electronic filings are publicly available on the Internet at
http://www.sec.gov/. Limited Partners may also request copies of such reports
and other information by contacting the General Partner at 11230 Sorrento Valley
Road, Suite 220, San Diego, California 92121, (858) 457-2750.
The General Partner, Income Growth Management, Inc., is a privately held company
and is not subject to the reporting requirements of the Exchange Act.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated balance sheet assumes that as of
September 30, 2003, the Partnership had sold the Mission Park Property for a
sales price of $36,000,000. Such funds will be used to repay certain
indebtedness, make any prepayment penalties, and pay off other liabilities. The
balance of such funds will be distributed pursuant to the terms of the
Partnership Agreement, which generally will be as follows: First, each Class A
Unit is to receive a 12% cumulative noncompounded annual return on the balance
of actual funds invested in Class A Units; Second, each Class A Unit is to
receive a total return of original invested capital; Third, each Class A unit is
to receive a $500 bonus; Fourth, each Original Unit holder is to receive an
amount equal to the adjusted balance of original invested capital; Fifth, the
general partner is to receive any non-subordinated debts payable to it; Sixth,
each Original Unit holder is to receive a 10% cumulative return on the adjusted
balance of original invested capital (the "Preferred Return"); and thereafter,
distributions of cash from sale or refinancing is to be made 85% to the Original
Units holders and 15% to the General Partner.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION IS
BASED UPON AMOUNTS AS OF SEPTEMBER 30, 2003 AND CERTAIN ESTIMATES OF LIABILITIES
AT THE CLOSING OF THE MISSION PARK PROPERTY. FINAL RESULTS MAY BE SUBSTANTIALLY
DIFFERENT FROM SUCH INFORMATION, INCLUDING WITHOUT LIMITATION THE AMOUNT OF ANY
LOAN BALANCES AND PREPAYMENT PENALTIES ON THE MISSION PARK PROPERTY, AND THE
AMOUNTS, IF ANY, OF DISTRIBUTIONS MADE TO LIMITED PARTNERS SINCE SEPTEMBER 30,
2003.
Pro forma adjustments giving effect to the sale of the Mission Park Property in
the unaudited pro forma consolidated balance sheet at September 30, 2003 reflect
the following:
12
The following table sets forth our:
1. actual balance sheet as of September 30, 2003;
2. as adjusted balance sheet as of September 30, 2003 giving effect to:
a. the sale of the Mission Park Property for $36,000,000 and
payment of all costs associated with the sale of the Mission
Park Property;
b. the repayment of all indebtedness of the Mission Park
Property, payment of the prepayment penalty on the Mission
Park Property mortgage and payment of all accounts payable and
accrued liabilities of the Mission Park Property ;
c. the establishment of a capital allowance reserve in the amount
of approximately $52,300;
d. the establishment of a contingency reserve in the amount of
approximately $1,000,000; and
e. estimated available amounts for the initial distribution of
approximately $22,582,400.
13
Income Growth Partners, Ltd. X and subsidiaries
Unaudited pro forma consolidated balance sheet
September 30, 2003
September 30, 2003 Proforma September 30, 2003
Actual Adjustments As Adjusted
------------- ------------- -------------
Rental Properties:
Land $ 7,078,365 $ (4,484,105) $ 2,594,260
Buildings and improvements 23,205,083 (8,692,763) 14,512,320
------------- ------------- -------------
30,283,448 (13,176,868) 17,106,580
Less accumulated depreciation (13,591,958) 3,368,054 (10,223,904)
------------- ------------- -------------
16,691,490 (9,808,814) 6,882,676
Cash and cash equivalents 782,374 25,103,010 25,885,384
Deferred loan fees 293,421 (81,989) 211,432
Prepaid expenses and other assets 345,417 (161,217) 184,200
------------- ------------- -------------
$ 18,112,702 $ 15,050,990 $ 33,163,692
============= ============= =============
Mortgage notes payable $ 18,490,268 $ (9,300,701) $ 9,189,567
Other liabilities:
Accounts payable and accrued liabilities 283,486 (109,727) 173,759
Accrued interest payable 122,317 (61,790) 60,527
Contingency and capital allowance reserve -- 1,052,300 1,052,300
Security deposits 303,119 (197,989) 105,130
------------- ------------- -------------
Total liabilities 19,199,190 (8,617,907) 10,581,283
------------- ------------- -------------
Partners' capital:
Limited partners' (deficit) capital (396,823) 22,979,232 22,582,409
General partners' deficit (679,665) 679,665 --
Note receivable from general partner (10,000) 10,000 --
------------- ------------- -------------
Total partners' (deficit) capital (1,086,488) 23,668,897 22,582,409
------------- ------------- -------------
Total liabilities and partners' capital $ 18,112,702 $ 15,050,990 $ 33,163,692
============= ============= =============
14
Pro forma adjustments giving effect to the sale of the Mission Park Property in
the unaudited pro forma consolidated statements of operations for the nine
months ended September 30, 2003 and the year ended December 31, 2002 reflect the
sale of the Mission Park Property as of the first day of the period presented
resulting in rental operations for the Shadow Ridge Property only and general
partnership administrative expenses, in such period.
Income Growth Partners, Ltd. X and subsidiaries
Unaudited pro forma consolidated statement of operations
For the nine months ended September 30, 2003
September 30, 2003 Proforma September 30, 2003
Actual Adjustments As Adjusted
--------------- --------------- ---------------
Revenues
Rents $ 4,212,938 $ (2,363,784) $ 1,849,154
Other 232,333 (130,090) 102,243
--------------- --------------- ---------------
Total revenues 4,445,271 (2,493,874) 1,951,397
--------------- --------------- ---------------
Expenses
Operating expenses 2,016,399 (1,083,228) 933,171
Depreciation and amortization 750,204 (297,423) 452,781
Interest 1,071,569 (544,996) 526,573
--------------- --------------- ---------------
Total expenses 3,838,172 (1,925,647) 1,912,525
--------------- --------------- ---------------
Net income $ 607,099 $ (568,227) $ 38,872
=============== =============== ===============
BASIC AND DILUTED PER LIMITED PARTNERSHIP UNIT DATA
Net income per limited partnership unit $ 19.16 $ (17.94) $ 1.22
=============== =============== ===============
Distributions per Class A limited unit holder $ 90.00 $ (85.00) $ 5.00
=============== =============== ===============
Weighted average limited partnership units 26,926 26,926 26,926
=============== =============== ===============
15
Income Growth Partners, Ltd. X and subsidiaries
Unaudited pro forma consolidated statement of operations
For the year ended December 31, 2002
December 31, 2002 Proforma December 31, 2002
Actual Adjustments As Adjusted
--------------- --------------- ---------------
Revenues
Rents $ 5,355,976 $ (2,998,159) $2,357,817
Other 306,113 (166,867) 139,246
--------------- --------------- ---------------
Total revenues 5,662,089 (3,165,026) 2,497,063
--------------- --------------- ---------------
Expenses
Operating expenses 2,427,176 (1,350,059) 1,077,117
Depreciation and amortization 966,308 (344,378) 621,930
Interest 1,445,424 (736,532) 708,892
--------------- --------------- ---------------
Total expenses 4,838,908 (2,430,969) 2,407,939
--------------- --------------- ---------------
Net income $ 823,181 $ (734,057) $ 89,124
=============== =============== ===============
BASIC AND DILUTED PER LIMITED PARTNERSHIP UNIT DATA
Net income per limited partnership unit $ 25.98 $ (23.17) $ 2.81
=============== =============== ===============
Distributions per Class A limited unit holder $ 100.00 $ (89.00) $ 11.00
=============== =============== ===============
Weighted average limited partnership units 26,926 26,926 26,926
=============== =============== ===============
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(1) Basis of Presentation
The pro forma financial statements have been prepared under the assumption that
the Limited Partners have approved the Proposed Transaction. Accordingly, the
realized amounts of assets and settlement amounts of liabilities have been
estimated by management. The preparation of these unaudited pro forma financial
statements include significant assumptions by management, including assumptions
regarding the amount that creditors would agree to accept in settlement of
obligations due them, and the resolution of certain contingent liabilities. The
amount and timing of distributions will depend upon a variety of factors
including, but not limited to, the actual proceeds from the realization of the
Company's assets, the ultimate settlement amounts of certain of the Company's
liabilities and obligations and actual costs incurred in connection with the
contingency and capital allowance reserves. There may be differences between the
assumptions and the actual results because events and circumstances frequently
do not occur as expected. Upon the consummation of the Proposed Transaction
management does not believe the Partnership will continue to incur operating
expenses for the Mission Park property except as in accordance with the
Partnership Agreement.
16
(2) The following table presents the estimated effect to the Limited Partners'
capital account of the adjustments described above:
Limited partners' deficit at September 30, 2003 $ (396,823)
Write off of deferred loan fees as of September 30, 2003 (81,989)
Estimated gain on sale to Limited Partners from
sale of Mission Park Property 24,113,521
Establish contingency and capital allowance reserves (1,052,300)
--------------
Estimated Limited Partners' capital available
for initial distribution $ 22,582,409
==============
(3) The following table presents the estimated effect to cash and cash
equivalents of the adjustments described above:
Cash and cash equivalents balance at September 30, 2003 $ 782,374
Estimated proceeds from the Proposed Transaction after
settlement of escrow adjustments for prepaid rent,
security deposits, insurance, taxes and other operational
items, commissions and closing costs and loan prepayment
penalty (See Note (4) below) 34,575,228
Payoff of mortgage balance as of September 30, 2003 (9,300,701)
Payoff of accounts payable and estimated interest
payable as of September 30, 2003 (171,517)
--------------
Estimated cash and cash equivalents balance
after Proposed Transaction $ 25,885,384
==============
(4) The following table presents the estimated proceeds from the Proposed
Transaction:
Estimated selling price of the Mission Park Property $ 36,000,000
Estimated commission (900,000)
Estimated closing costs (180,000)
Estimated loan prepayment penalty (308,000)
Estimated escrow adjustments for operational items (36,772)
--------------
Estimated proceeds to the Partnership from
the Proposed Transaction $ 34,575,228
==============
17
VALID ONLY WHEN SIGNED AND DATED
INCOME GROWTH PARTNERS, LTD. X
11230 SORRENTO VALLEY ROAD, SUITE 220
SAN DIEGO, CALIFORNIA 92121
BALLOT
The undersigned Limited Partner acknowledges receipt of the Solicitation
Statement dated February 3, 2004 respecting the proposed sale of the
Partnership's Mission Park Property. The undersigned Limited Partner understands
that the General Partner is seeking the approval of the Limited Partners to a
sale of the Partnership's Mission Park Property upon the terms and conditions as
described in the Solicitation Statement. The General Partner recommends a vote
FOR sale of the Partnership's Mission Park Property.
THE PARTNERSHIP AGREEMENT PROVIDES THAT HOLDERS OF MORE THAN 50% OF THE
OUTSTANDING UNITS MUST APPROVE THE SALE OF ALL OR SUBSTANTIALLY ALL OF THE
PARTNERSHIP'S ASSETS. ALTHOUGH THE SOLICITATION STATEMENT IS SOLICITING THE VOTE
OF LIMITED PARTNERS IN CONNECTION WITH THE SALE OF ONLY ONE OF THE PARTNERSHIP'S
TWO REMAINING PROPERTIES, THE GENERAL PARTNER BELIEVES THAT IT IS IMPORTANT TO
OBTAIN THE CONSENT OF THE LIMITED PARTNERS TO SUCH SALE.
PLEASE CHECK THE APPROPRIATE BLANK BOX BELOW IN BLUE OR BLACK INK TO INDICATE
YOUR VOTE ON THIS MATTER.
Vote regarding the sale of the Mission Park Property. Proposal to authorize the
General Partner to sell the Mission Park Property as described in the
Solicitation Statement.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Date:___________________________ _______________________________________
Signature of Unit Holder
_______________________________________
Print Name
Date:___________________________ _______________________________________
Signature of Unit Holder (joint owner)
_______________________________________
Print Name
When properly signed, this Ballot will be voted in the manner directed herein by
the undersigned Limited Partner with regard to all Units held by the
undersigned.
THIS BALLOT MUST BE RECEIVED BY THE GENERAL PARTNER ON OR BEFORE FEBRUARY 20,
2004. RETURNING A SIGNED BALLOT WITHOUT INDICATING YOUR VOTE ON THE PROPOSED
TRANSACTION WILL BE CONSIDERED A VOTE FOR THE PROPOSED TRANSACTION. ALL BALLOTS
NOT RECEIVED, OR RECEIVED AFTER FEBRUARY 20, 2004, SHALL BE CONSIDERED A VOTE
AGAINST THE PROPOSED TRANSACTION.
Please sign exactly as your name appears on the above label representing your
partnership interest(s) and return this Ballot in the enclosed envelope or via
fax to (858) 457-3104. When such interest(s) are held by joint tenants, both
should sign. When signing as an attorney, executor, administrator, trustee, or
guardian, please give full titles as such. If signing as a corporation, please
have signed in full corporate name by the President or other authorized officer.
If signing as a partnership, please have signed in the partnership's name by an
authorized person.
18