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SCHEDULE 14A/A AMENDMENT NO. 1
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [_]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Decade Companies Income Properties - A Limited Partnership
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(Name of Registrant as Specified in Its Charter)
Arnold K. Leas and Wellington Management Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
Not Applicable
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(4) Proposed maximum aggregate value of transaction:
Not Applicable
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(5) Total fee paid:
Not Applicable
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[_] Fee paid previously with preliminary materials.
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[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(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:
Not Applicable
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(2) Form, Schedule or Registration Statement no.:
Not Applicable
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(3) Filing Party:
Not Applicable
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(4) Date Filed:
Not Applicable
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January __, 1997
Dear Limited Partner: Re: Decade Companies Income
Properties - A Limited Partnership
(the "Partnership")
In 1986 and 1987, as Executive Vice President of Decade Securities, I
recommended to my clients that they invest in the Partnership and many of you
followed my recommendation. Since leaving Decade in 1988 to start my own
company, I have, as a limited partner myself, become increasingly disappointed
with the Partnership's performance. I know many of you feel the same, because
you have communicated your disappointment to me. Because of the responsibility I
feel for recommending the Partnership investment to my family, friends and
clients, I am attempting to offer the limited partners the opportunity to change
management of the Partnership.
I have enclosed a proxy statement describing my recommendation that Decade
Companies ("Decade") be removed as the general partner of the Partnership and
replaced with Wellington Management Corporation ("WMC"). If you are unsatisfied
with the way Decade has managed the Partnership or do not trust Decade to act in
your best interest, I urge you to exercise your right to remove Decade and
appoint WMC as the new general partner of the Partnership.
What WMC Proposes To Do
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As detailed in the attached proxy statement, which I urge you to read carefully,
if WMC is appointed as the new general partner of the Partnership, it intends to
take the following actions:
1. WMC will terminate the Partnership's current property management agreements
with Decade Properties, Inc. and will enter into new agreements with WMC
Realty, Inc. These new agreements will provide for a lower property
management fee than the current agreements. For example, if WMC Realty had
managed the Partnership's properties during 1995, the Partnership would have
paid $172,904 less fees in that year alone.
2. WMC will thoroughly review the operating procedures at each of the
Partnership's properties to identify and eliminate any excessive or
nonessential expenses. During 1995, Decade and Decade Properties charged the
Partnership a total of $1,019,845 for expense reimbursements. These expense
reimbursements were in addition to the $449,205 of property management fees
paid by the Partnership. Because Decade has failed to respond to our request
for a detailed substantiation of these reimbursements, WMC is not able to
determine the extent, if any, that these expenses can be eliminated or
reduced. However, if WMC is appointed general partner, if will thoroughly
evaluate these expenses and eliminate or reduce any that it deems
unnecessary or excessive.
3. To the extent that reduced property management fees and/or reductions in
expenses result in additional cash available for distribution, WMC will
distribute that cash to investors in accordance with the Partnership
Agreement. I believe that any reductions in the Partnership's expenses which
are achieved will also likely enhance the ultimate sale prices of the
properties.
4. After gaining control of the expenses, WMC will prepare each property for
sale and begin marketing the properties. WMC's objective is to sell the
properties within two to four years, market conditions permitting.
5. After the properties have been sold and the net sales proceeds have been
distributed to the partners, WMC will cause the Partnership to be dissolved.
I believe the above plan is our best chance to maximize the value of our
interests in the Partnership within a reasonable period of time.
What You Should Do
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To remove Decade and appoint WMC as general partner of the Partnership, please
mark the "FOR" box on the enclosed Notification Form, sign, date and return the
form to Arnold K. Leas, c/o Wellington Management Corporation, 18650 West
Corporate Drive, Brookfield, Wisconsin 53045 by March 1, 1997. Also enclosed is
a Limited Power of Attorney which I urge you to sign making me and Robert F.
Rice (an officer of WMC) your attorney-in-fact to take the following actions on
your behalf: (1) request that a meeting of the partners be called for the
purpose of amending the Partnership Agreement to remove Decade's proposed "Fair
Price Provision," if it is adopted (the "Amendment"); (2) vote all of your
Partnership interests at such meeting and any adjournments thereof in favor of
the Amendment; and (3) take any other actions which Mr. Leas and/or Mr. Rice
deem reasonably necessary to effect the Amendment, the removal of Decade and the
designation of WMC as the new general partner.
You have received several letters from Decade which, I believe, were intended to
dissuade you from considering our proposal. Please do not be deterred by such
"scare tactics." Rather, we urge you to read and carefully consider the proposal
set forth in the attached proxy statement and make your own conclusions as to
what is in your best interests.
I believe the time has come for new leadership at the Partnership. Please vote
"FOR" removal of Decade and appointment of WMC as the new general partner on the
enclosed Notification. IT IS IMPORTANT THAT YOU SIGN AND RETURN THE ENCLOSED
NOTIFICATION AND LIMITED POWER OF ATTORNEY AS SOON AS POSSIBLE. Thank you for
your support of our proposal.
Best personal regards,
Arnold K. Leas
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DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP
250 PATRICK BOULEVARD, SUITE 140
BROOKFIELD, WISCONSIN 53045-5864
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PROXY STATEMENT OF ARNOLD K. LEAS AND WELLINGTON MANAGEMENT CORPORATION
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This Proxy Statement dated January __, 1997 ("Proxy Statement") and
the enclosed notification form (the "Notification") are furnished to holders of
limited partnership interests (the "Interests") of Decade Companies Income
Properties - A Limited Partnership, a Wisconsin limited partnership (the
"Partnership"), in connection with the solicitation of Notifications by Arnold
K. Leas, a record and beneficial holder of 49.64 Interests, and his affiliate,
Wellington Management Corporation, a Wisconsin corporation ("WMC"), for use to
remove the current general partner of the Partnership, Decade Companies, a
Wisconsin general partnership ("Decade"), and replace Decade with WMC. WMC will
not accept the appointment as the Partnership's new general partner if the
Partnership's Amended and Restated Agreement of Limited Partnership dated
September 30, 1996 (the "Partnership Agreement") includes section 8.6, the "Fair
Price Provision" proposed by Decade in its proxy statement dated as of January
4, 1997 (or such other section or portion thereof to the extent it contains the
Fair Price Provision. Therefore, also enclosed for your execution is a limited
power of attorney (the "Limited Power of Attorney"). By executing the Limited
Power of Attorney, you will appoint each of Arnold K. Leas and Robert F. Rice
(an officer of WMC) your attorney-in-fact to take the following actions on your
behalf:
1. Request that a meeting of the partners be called for the purpose of
amending the Partnership Agreement (the "Amendment") to remove Decade's proposed
Fair Price Provision, if it is adopted;
2. Vote all of your Interests at such meeting and any adjournments thereof in
favor of the Amendment; and
3. All other actions on your behalf which Mr. Leas and/or Mr. Rice deem
reasonably necessary or proper to accomplish the Amendment, the removal of
Decade and the designation of WMC as the new general partner of the
Partnership, including, without limitation, requesting that a meeting of the
partners be called, voting all of your Interests, implementing amendments to the
Partnership Agreement as necessary to change the references from Decade as
general partner to WMC as general partner and executing, acknowledging,
delivering, verifying, filing and/or recording documents in appropriate public
offices.
This Proxy Statement and the enclosed Notification and Limited Power
of Attorney are being first sent or given to the limited partners of the
Partnership (the "Limited Partners") beginning on or about January __, 1997.
Limited Partners are requested to complete and sign both the Notification and
Limited Power of Attorney and return both to Arnold K. Leas c/o Wellington
Management Corporation, 18650 West Corporate Drive, Brookfield, Wisconsin 53045.
Mr. Leas will accumulate returned signed Notifications and Limited Powers of
Attorney until March 1, 1997, unless extended by Mr. Leas. Immediately after
Limited Partners owning more than 50% of the currently outstanding Interests
have returned to Mr. Leas signed Notifications in favor of the removal of Decade
and appointment of WMC, Mr. Leas will deliver all such Notifications (together
with certain required legal opinions) to Decade and the Partnership effectuating
the removal of Decade as the general partner of the Partnership and the
appointment of WMC as the new general partner. Accordingly, a Limited Partner's
signed Notification will become effective, if ever, when so delivered to the
Partnership. Notifications should be returned to Mr. Leas by March 1, 1997,
unless extended by Mr. Leas.
Notwithstanding the foregoing, WMC will not deliver the Notifications
to the Partnership if the Partnership Agreement then includes the Fair Price
Provision proposed by Decade. Accordingly, if the Partnership Agreement includes
the Fair Price Provision and Limited Partners owning more than 50% of the
Interests have returned their signed Limited Powers of Attorney, before
delivering the Notifications to the Partnership, Mr. Leas and/or Mr. Rice will
first act pursuant to the Limited Power of Attorney to notify the Partnership of
their appointment as attorneys-in-fact by such Limited Partners and will request
that the Partnership call a meeting of the Limited Partners for the purpose of
amending the Partnership Agreement to remove the Fair Price Provision (the
"Amendment"). Within ten days after receipt of this request, Article XII,
section 12.1.B. of the Partnership Agreement requires Decade to provide all
Limited Partners with written notice of the meeting and the purpose of the
meeting. The meeting must be held on a date not less than 15 nor more than 60
days after receipt of the request, at a time and place convenient to the Limited
Partners. At the meeting, Mr. Leas and Mr. Rice will appear on behalf of the
Limited Partners who delivered executed Limited Powers of Attorney and will vote
the Interests owned by such Limited Partners in favor of the Amendment. Pursuant
to Article XII, section 12.2 of the Partnership Agreement, the Amendment will be
adopted if Limited Partners owning more than 50% of the Interests vote in favor
of such adoption. If at the time of such meeting the removal of Decade has not
yet been accomplished, Mr. Leas and/or Mr. Rice will further vote such Interests
to remove Decade and designate WMC as replacement general partner.
The principal executive offices of the Partnership are located at 250
Patrick Boulevard, Suite 140, Brookfield, Wisconsin 53045-5864. The address and
telephone number of Arnold K. Leas and WMC are: Wellington Management
Corporation, 18650 West Corporate Drive, Brookfield, Wisconsin 53045 (414) 792-
8900.
THE PROPOSALS
Arnold K. Leas and WMC believe it is in the Limited Partners' best
interests to take the following actions:
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1. Pursuant to section 8.4 of the Partnership Agreement, remove
Decade Companies as the general partner of the Partnership and,
concurrently therewith, designate Wellington Management
Corporation as the new general partner.
2. Amend the Partnership Agreement to remove Decade's "Fair Price
Provision," if it has been adopted and not rescinded.
This Proxy Statement and the enclosed Notification and Limited Power
of Attorney are being furnished to Limited Partners to seek their support in the
adoption of both of the above proposals. WMC will not accept the appointment as
the new general partner of the Partnership if the "Fair Price Provision" is
adopted and not revoked or rescinded.
ARNOLD K. LEAS AND WMC URGE ALL LIMITED PARTNERS TO TAKE THE FOLLOWING
ACTIONS: (1) CHECK THE BOX ON THE NOTIFICATION MARKED "FOR" THE PROPOSAL AND
DATE AND SIGN THE NOTIFICATION, (2) DATE AND SIGN THE LIMITED POWER OF ATTORNEY
AND (3) RETURN THE ENCLOSED NOTIFICATION AND LIMITED POWER OF ATTORNEY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE.
Each Limited Partner has the power to revoke his or her signed
Notification and/or Limited Power of Attorney at any time prior to the date when
Mr. Leas has collected signed Notifications "FOR" the proposal from Limited
Partners owning in excess of 50% of the Interests. To revoke a prior returned
Notification and/or Limited Power of Attorney, the Limited Partner must give
notice to Mr. Leas in writing.
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IMPORTANT
PLEASE SIGN, DATE AND MAIL BOTH THE NOTIFICATION AND LIMITED POWER OF
ATTORNEY TO MR. LEAS C/O WELLINGTON MANAGEMENT CORPORATION, 18650 WEST CORPORATE
DRIVE, BROOKFIELD, WISCONSIN 53045 TODAY.
YOUR EXECUTION OF BOTH THE NOTIFICATION AND LIMITED POWER OF
ATTORNEY IS IMPORTANT NO MATTER HOW MANY OR HOW FEW INTERESTS YOU OWN.
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BACKGROUND OF THE PROPOSALS
During 1986 and 1987, Mr. Leas and several investment representatives
currently licensed as sales representatives with WMC's brokerage subsidiary (the
"Wellington Sales Representatives") were licensed as sales representatives with
Decade and sold Partnership Interests to some of their customers for a price of
$1,000 per Interest. Over the past ten years, the Wellington Sales
Representatives received numerous complaints from their clients expressing
dissatisfaction with the performance of the Partnership. After the Partnership
distributed its tender offer documents to the Limited Partners, the Wellington
Sales Representatives received additional complaints from their clients who
expressed their opinion that the $402 per Interest offer was inadequate. These
complaints and the responsibility Mr. Leas feels towards the clients to whom he
sold interests have prompted Mr. Leas to offer the Limited Partners the
opportunity to change general partners of the Partnership.
After Decade became aware of Mr. Leas' proposal to change general
partners of the Partnership, it prepared its own proxy statement asking that
Limited Partners vote to amend the Partnership Agreement to add what it termed a
"Fair Price Provision." This Fair Price Provision would require any new general
partner of the Partnership who was not approved by Decade to purchase all of the
Interests of the Limited Partners who did not vote in favor of the appointment
of the new general partner and who elect to sell. The purchase price for these
Interests would be the greater of their fair market value or an amount equal to
their original purchase price, plus a 6% annual (noncompounded) return, less any
prior distributions made by the Partnership with respect to such Interests. As a
result, if this Fair Price Provision is adopted and not repealed and WMC were
appointed as the new general partner of the Partnership, WMC would be forced to
purchase Interests at a price well in excess of the Partnership's current net
asset value per Interest. WMC believes that this provision is not in the best
interests of the Limited Partners and is not willing to become the new general
partner of the Partnership if the Fair Price Provision is adopted and not
subsequently repealed. Therefore, this Proxy Statement also seeks Limited
Partner action to amend the Partnership Agreement to remove the Fair Price
Provision, if it has been adopted and not repealed. WMC will only accept the
appointment as the general partner of the Partnership if the Partnership
Agreement does not then include the Fair Price Provision. In addition, WMC will
not pursue the Amendment unless it has received Notifications "FOR" the removal
of Decade and appointment of WMC as the new general partner from Limited
Partners owning more than 50% of the outstanding Interests.
RECOMMENDATIONS
Mr. Leas and WMC recommend that the Limited Partners sign and return
the enclosed Notification and Limited Power of Attorney to Mr. Leas to remove
Decade as the general partner of the Partnership and, concurrently therewith,
appoint WMC as the new general partner and to cause the Partnership Agreement to
be amended to remove the Fair Price Provision if it has been adopted and not
rescinded.
REASONS FOR THE RECOMMENDATIONS
As a result of prior discussions with clients who are Limited
Partners, Mr. Leas believes that many of the Limited Partners are unsatisfied
with the Partnership's financial performance. Through these discussions, Mr.
Leas believes that many of the Limited Partners would prefer that the
Partnership proceed in a reasonable fashion to sell its properties and
thereafter dissolve, distributing the net sales proceeds to the Limited
Partners. Mr. Leas and WMC believe that Decade does not presently intend to sell
the Partnership's properties in the near term. This belief is based, in part,
upon the following language from the section entitled "Conduct of the
Partnership After the Offer" contained in the Partnership's tender offer
document dated October 24, 1996:
The General Partner has no plans to seek a sale of the Partnership's
property until, in its opinion, such sale is necessary or appropriate.
The timing of such events cannot be predicted, but the General Partner
does not anticipate such a sale for at least two years, and perhaps much
longer. (emphasis added)
If WMC is appointed as the new general of the Partnership, it intends
to take the following actions:
1. WMC will terminate the Partnership's current property management
agreements with Decade Properties, Inc. (the "Current Agreements") and will
enter into new agreements with WMC Realty, Inc. Pursuant to the Partnership
Agreement, the Current Agreements must be terminable by the Partnership on not
more than 60 days' prior written notice. Under the new agreements, Realty will
charge the Partnership a flat management fee of 5% of the Partnership's gross
rental revenues. Currently, Decade Properties, Inc. charges the Partnership both
this 5% fee plus an additional fee of one-half of the first month's rent on all
new leased apartment units. If Realty had managed the Partnership's property
during 1995, it would have charged the Partnership $276,301 of property
management fees. Decade Properties, Inc. charged the Partnership $449,205 of
property management fees during 1995. Accordingly, the savings to the
Partnership would have been $172,904 in 1995 alone. Obviously, the amount of
savings in the future will vary based on the number of newly-leased apartment
units each year.
2. WMC will thoroughly review the books, records and operating procedures
at each of the Partnership's properties with the objective of finding and
eliminating any excessive or nonessential expenses. Currently, the Partnership
reimburses Decade and Decade Properties for the expenses those entities incur
related to the Partnership's operations. During 1995, the Partnership made
reimbursement payments to Decade Properties and Decade Companies in the amounts
of $929,883 and $89,962, respectively, for an aggregate 1995 reimbursement of
$1,019,845. These reimbursements were in addition to the $449,205 of property
management fees which the Partnership paid Decade Properties. Because Decade has
failed to respond to WMC's request for a detailed substantiation of these
reimbursements, WMC is not able to determine the extent, if any, that these
expenses can be reduced. However, if appointed general partner, WMC will
thoroughly evaluate these expenses and eliminate or reduce any it deems
unnecessary or excessive.
3. To the extent that reduced property management fees and/or reductions in
expenses result in additional cash available for distribution, WMC will
distribute that cash to investors in accordance with the Partnership Agreement.
WMC believes that any reductions in the Partnership's expenses which are
achieved will likely enhance the ultimate sale prices of the properties.
4. After thoroughly understanding and gaining control of the Partnership's
expenses, WMC will prepare each property for sale and begin marketing the
properties. WMC's objective is to sell the properties within two to four years,
market conditions permitting.
5. After the properties have been sold and the net sales proceeds have been
distributed, WMC will cause the Partnership to be dissolved.
Accordingly, Limited Partners who favor the sale of the Partnership's
properties and the receipt of liquidating distributions within a reasonable
period of time and Limited Partners who are dissatisfied with the current
management of the Partnership and who would prefer a change in management should
vote to remove Decade and appoint WMC as the new general partner.
As indicated in "Background of the Proposals," WMC is not willing to
become the new general partner of the Partnership if the Partnership Agreement
then includes the Fair Price Provision. Accordingly, Limited Partners who desire
to have WMC appointed as the new general partner of the Partnership should
execute and return to Mr. Leas both the Notification (marking the "FOR" box on
the Notification) and the Limited Power of Attorney. The Limited Power of
Attorney will be used by Mr. Leas and Mr. Rice to call a meeting of the partners
of the Partnership for the purpose of amending the Partnership Agreement to
remove the Fair Price Provision it has been adopted.
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DESCRIPTION OF WELLINGTON MANAGEMENT CORPORATION
WMC, which was formed on July 8, 1988, is a diversified financial
services firm, principally engaged in the organization, distribution and
management of investment programs and in providing financial planning and other
financial investment services and products. WMC presently manages approximately
$42 million of investment real estate and $16 million of aerial lift equipment
and has offices located in Brookfield and Madison, Wisconsin, and Oak Brook,
Illinois. Attached hereto is an audited balance sheet of WMC for the year ended
March 30, 1996.
WMC and its affiliates have grown from two employees at their
inception to their present staff of 125 managerial, sales and administrative
personnel.
Since 1990, WMC has raised approximately $35 million in 19 investment
programs. The investment programs are all structured to produce income for
distribution to investors and to preserve the investors' capital contributions.
Among the 19 investment programs WMC has sponsored, five are real
estate investment programs. Of these programs, two are limited partnerships, two
are limited liability companies and one is a real estate investment trust. As
such, WMC is experienced regarding the administrative and tax reporting
functions a general partner is required to perform in a real estate limited
partnership.
During April 1996, the interests in Wellington Properties Trust, WMC's
affiliated real estate investment trust, began publicly trading on the Nasdaq
Stock Market under the ticker symbol "WLPT." The trust exclusively owns
apartment communities, with two properties located in Madison, Wisconsin (the
location of the Partnership's "Meadows" property). As the manager of a publicly-
traded real estate investment trust, Mr. Leas and WMC believe WMC is qualified
to administer and manage a widely held partnership such as the Partnership.
WMC's key staff members in the real estate area are:
Arnold K. Leas (age 62) has been the President and a director of WMC
since 1988. Mr. Leas is a 1958 graduate of Spencerian College with a B.B.A.
degree. Since 1969, Mr. Leas has been involved in various aspects of the real
estate industry, including acting as Sales Director of Wauwatosa Realty and
President of Wellington Realty Company. In addition, Mr. Leas holds the real
estate designation of graduate of the Realtor Institute (GRI). Mr. Leas has been
involved, directly and indirectly,
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in real estate acquisitions and sales totalling in excess of $150 million. From
1984 to 1988, Mr. Leas was Executive Vice President of one of Decade's
affiliates which was involved primarily in the syndication of entities,
including the Partnership, owning multi-family apartment complexes.
Gregory S. Leas (age 35), attorney, has served as WMC's Vice President
since 1990 and actively participates in the management of the operational WMC-
sponsored partnerships. Mr. Leas graduated from Marquette High School in 1979
and from the University of Wisconsin-Madison in 1983. Mr. Leas received his J.D.
degree in 1990 from Brooklyn Law School. From 1986 to 1990, Mr. Leas was
employed as a legal assistant in the litigation department of the New York City
law firm of Fried, Frank, Harris, Shriver & Jacobson.
Robert F. Rice (age 45), attorney, joined WMC in 1993 as its Vice
President and General Counsel. He provides legal and other advice to WMC, its
affiliates and the operational WMC partnerships. Mr. Rice is also responsible
for oversight of all real estate activities of WMC. Mr. Rice received a B.S.
degree from the University of Wisconsin-Milwaukee in 1973 and a J.D. degree from
Marquette University Law School in 1976. Mr. Rice is a member of the Wisconsin
Bar Association and has a broad range of experience in both the private practice
of law and as in-house counsel. From 1984 until 1989, he served as a member of
the Board of Directors, officer and in-house counsel for various affiliates of a
Milwaukee-based financial institution. The affiliates included a real estate
development company, a real estate syndication firm and a property management
company. In 1989, Mr. Rice formed Resource Alternatives, Inc., which provided
legal and consulting services to the real estate industry and served as an RTC
contractor.
Garrett T. Nakama (age 52) is the Chief Financial Officer for WMC, its
affiliates and the 12 operational WMC-sponsored partnerships. Mr. Nakama is a
1970 graduate of California State University of Los Angeles and received his CPA
designation in 1981. Mr. Nakama has had a broad range of financial experience
in private and public accounting. From 1986 to 1991, he was employed as
Controller of Nassco, Inc., a New Berlin, Wisconsin, supplier of equipment.
Joe Griese (age 40) joined WMC in 1996 as its Vice President of
Acquisitions. Mr. Griese is responsible for identifying, originating,
analyzing, negotiating and closing real estate equity investments. He is a
senior real estate development and investment manager with 19 years of
experience with companies which owned, developed and managed over 25,000
residential units and 3 million square feet of commercial real estate with an
aggregate value in excess of $3 billion. From 1984 to 1985, he worked for
Citibank in Chicago where his responsibilities included restructuring and
completing numerous development projects and investments throughout the nation.
From 1980 to 1984, he worked for Balcor/American Express in acquisitions,
project management and asset management. Mr. Griese holds an MBA from DePaul
University and a B.S. Agricultural Engineering-Construction Administration from
the University of Wisconsin-Madison.
Dale Pinkalla (age 39) joined WMC as Director of Real Estate in 1993.
Mr. Pinkalla actively participates in all aspects of property management with
respect to investment real estate owned by WMC affiliates and partnerships. He
received a B.A. in finance from the University of Wisconsin-Madison in 1980.
Mr. Pinkalla has a broad base of experience in real estate and business. In
1981 and
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1982, he worked as a broker/salesperson for Louis Gral Investment Real Estate.
From 1983 to 1989, he worked as a Mortgage Banking Officer/Vice President for
Wells Fargo Bank, Realty Finance. In 1989, Mr. Pinkalla joined Blueport
Development Corporation and was a partner/project manager of a $25 million
neighborhood shopping center. Upon completion of that project in 1992, he
rejoined Wells Fargo Bank as an account officer for the Real Estate Group.
PROCEDURE TO REMOVE DECADE AND APPOINT WMC
The procedure for removing the general partner of the Partnership is
set forth in section 8.4 of the Partnership Agreement. Section 8.4 provides that
"a majority in Interest of the Limited Partners may remove a General Partner by
notification to the effect that such General Partner is removed." Section 8.4
also provides that "concurrently with serving such notification . . . a majority
in Interest of the Limited Partners may designate a new General Partner (if
after such removal there is no general partner)."
According to the Partnership's Proxy Statement dated as of January 4,
1997, as of December 30, 1996, the Partnership had 13,400.274 Interests
outstanding held by 1,428 Limited Partners. Accordingly, as of such date,
Notifications in favor of the removal of Decade and appointment of WMC must be
signed by Limited Partners who collectively own at least 6,700.138 Interests.
The power of the Limited Partners to remove Decade by notification is
conditioned under section 8.4 of the Partnership Agreement upon meeting the
following two prerequisites:
1. There must be either (a) a declaratory judgment in a court action
on behalf of the Limited Partners or (b) an opinion of counsel for the Limited
Partners; to the effect that the exercise of the removal right will not result
in the loss of the Limited Partners' limited liability; and
2. Either (a) an Internal Revenue Service Private Letter Ruling or
(b) an opinion of counsel for the Limited Partners; to the effect that the
exercise of their removal right will not cause the Partnership to lose its tax
status as a partnership for federal income tax purposes.
Mr. Leas and WMC will obtain legal opinions on behalf of the Limited
Partners to satisfy these requirements. Mr. Leas and WMC have discussed these
opinions with counsel and have been advised that counsel will be able to provide
the necessary legal opinions. Accordingly, Mr. Leas and WMC believe that
adoption of the proposal will not result in the loss of the Limited Partners'
limited liability nor will it cause the Partnership to lose its tax status as a
partnership for federal income tax purposes. A Limited Partner who returns a
signed Notification "FOR" the proposal is also authorizing Mr. Leas and an
officer of WMC to obtain and accept on behalf of the Limited Partners the legal
opinions required by 1 and 2 above. A draft of the form of such legal opinion is
attached as Exhibit A hereto.
Based on the above-discussed provisions of the Partnership Agreement,
Mr. Leas and WMC believe that Decade will be removed as the general partner of
the Partnership and replaced with WMC upon the delivery to the Partnership of
(a) Notifications "FOR" the proposal signed by Limited Partners owning greater
than 50% of the outstanding Interests and (b) the above-reference legal
opinions.
CONDITION TO WMC'S APPOINTMENT AS
THE NEW GENERAL PARTNER
WMC will not accept the appointment as the Partnership's new general
partner if the Partnership Agreement then includes the "Fair Price Provision"
proposed by Decade in its Proxy Statement dated as of January 4, 1997.
Accordingly, the removal of Decade and appointment of WMC as the new general
partner of the Partnership is conditioned upon the Fair Price Provision not
being adopted by the Limited Partners or, if so adopted, that it is repealed.
Therefore, if you desire to remove Decade as the general partner of the
Partnership and appoint WMC as the new general partner, you should mark
"AGAINST" on the Consent supplied to you by Decade in its Proxy Statement, sign
the Consent and return it to Decade. If you have already voted "FOR" adoption of
the Fair Price Provision but you desire to remove Decade and appoint WMC as the
new general partner, you should immediately revoke your Consent by delivering
written notice to such effect to Decade. Because the proposed Fair Price
Provision may become effective before Limited Partners have a chance to revoke
their prior Consents, please also sign and return to Mr. Leas the enclosed
Limited Power of Attorney. By executing this Limited Power of Attorney, you will
appoint each of Mr. Leas and Mr. Rice as your attorneys-in-fact to take the
following actions on your behalf:
1. Request that a meeting of the partners be called for the purpose of
amending the Partnership Agreement (the "Amendment") to remove the Fair Price
Provision, if it is adopted;
2. Vote all of your Interests at such meeting and any adjournments thereof for
the Amendment; and
3. All other actions which Mr. Leas and/or Mr. Rice deem reasonably necessary
or proper to effectuate the Amendment, the removal of Decade and the designation
of WMC as the new general partner of the Partnership, including, without
limitation, requesting that a meeting of the partners be called, voting all of
your Interests, implementing amendments to the Partnership Agreement as
necessary to change the references from Decade as general partner to WMC as
general partner and executing, acknowledging, delivering, verifying, filing
and/or recording documents in appropriate public offices.
If the Partnership Agreement has been amended to add the proposed Fair
Price Provision, before delivering the Notifications to the Partnership with the
required legal opinions to effectuate the removal of Decade as the general
partner and appointment of WMC as the new general partner of the Partnership,
Mr. Leas and/or Mr. Rice will first deliver written notice to the Partnership
pursuant to Article XII, section 12.1.A of the Partnership Agreement requesting
that the Partnership call a meeting of the Limited Partners for the purpose of
voting on the Amendment. Pursuant to Article XII, section 12.1.B of the
Partnership Agreement, within ten days after receipt of this written request,
Decade must provide all Limited Partners with written notice of the meeting and
the purpose of the meeting. The meeting must be held on a date not less than 15
nor more than 60 days after receipt of the written request, at a time and place
convenient to the Limited Partners. At this meeting, Mr. Rice and/or Mr. Leas
will vote the Interests of the Limited Partners who have signed and returned the
Limited Powers of Attorney in favor of adoption of the Amendment. Pursuant to
Article XII, section 12.2 of the Partnership Agreement, the Amendment will be
adopted if Limited Partners owning more than 50% of the Interests vote in favor
of its adoption. After the Amendment has been adopted, Mr. Leas and/or Mr. Rice
will then deliver the signed Notifications to the Partnership, together with the
required legal opinions, effectuating the removal of Decade as the general
partner of the Partnership and the appointment of WMC as the new general
partner.
6
<PAGE>
RAMIFICATIONS OF THE REMOVAL OF
DECADE AND APPOINTMENT OF WMC
Upon the removal of any general partner, section 8.5.A of the
Partnership Agreement provides that the remaining general partner (which
presumably would include WMC as the new general partner) is required to accept
an assignment of the removed general partner's interest in profits and losses.
Under the Partnership Agreement, this assignment is automatic with no further
documentation required. Accordingly, if WMC replaces Decade as the general
partner of the Partnership, WMC will automatically receive an assignment of
Decade's interest in the Partnership's profits and losses.
Section 8.5.B of the Partnership Agreement requires that the removed
general partner be paid the appraised value of the general partner's interest in
"distributions of Sale Proceeds." This payment is to be made by a promissory
note bearing interest at 2% above the prime rate and payable in not less than
five years in equal annual installments. "Sale Proceeds" are defined in section
3.50 of the Partnership Agreement to mean "all cash funds resulting from a sale
or refinancing of Partnership Property, plus established Reserves, less: (a)
expenses incurred in the transaction; (b) debts and obligations related to the
transaction; and (c) other payments for Partnership expenses (not including fees
deferred by the General Partner and Affiliates), costs of improvements or
additions to Properties and amounts as may be required to purchase underlying
land or joint venture interests or Reserves established by the General Partner."
The general partner's interest in Sale Proceeds is determined by
section 6.1 of the Partnership Agreement. This section provides, in part, that
net Sale Proceeds are to be distributed first to Limited Partners until their
capital investments are reduced to zero; second to Limited Partners in an amount
necessary to provide them with their Priority Return (as defined in the
Partnership Agreement) after taking into account prior distributions of net Sale
Proceeds in excess of the Limited Partners' original capital contributions; and
third to the general partner in an amount equal to the greater of (a) the excess
of its initial capital contribution over the sum of all prior distributions of
net Sale Proceeds to the general partner or (b) 1% of the net Sale Proceeds. The
appraised value is to be determined by an appraisal conducted by an appraiser
selected by mutual agreement of the general partner and the Partnership;
provided, however, that if the parties cannot agree upon an appraiser within 30
days, American Appraisal Company must be used. Based on the valuations discussed
in the Tender Offer documents, Mr. Leas and WMC believe the general partner's
interest in distributions of Sale Proceeds would likely be a nominal amount.
The removal of Decade may necessitate payments of accrued fees and
interest to Decade. The Partnership's balance sheet dated September 30, 1996,
reflects a liability of $3,533,836 payable to affiliates which represents
accrued fees and interest due to Decade. The Partnership may be requested to pay
Decade all or a portion of this amount at or shortly after Decade's removal. The
September 30, 1996 balance sheet also reflects cash of $4,197,207. Accordingly,
Mr. Leas and WMC believe the Partnership could make this payment without
materially adversely affecting the Partnership. However, as indicated, the above
amounts are as of September 30, 1996. Accordingly, these amounts may now be more
or less than those indicated.
The removal of Decade may also cause an acceleration of the
Partnership's various mortgages and loans. These mortgages and loans have a
current principal balance of approximately $23.3 million. Each of the loan
agreements contains a provision that allows the lender to declare the loan due
and payable upon the removal of the general partner of the Partnership. In
addition, three of the loans, which have an aggregate principal balance of
approximately $16.6 million, contain provisions allowing the lender to declare
the loan due and payable upon a change in the Partnership's property
manager.
Mr. Leas and WMC intend to negotiate with the Partnership's lenders to
determine whether they will permit the replacement of Decade and/or the property
manager, as the case may be, without declaring the loans due and payable. If
such negotiations are unsuccessful, it will be necessary to either refinance the
loans with the current lenders or obtain alternative financing. There can be no
assurance that a refinancing or alternative financing will be available or, if
available, that the terms of such financing will be as favorable as the existing
financing.
As of the date hereof, WMC representatives have had preliminary
conversations with three of the four lenders and are attempting to arrange
discussions with the other lender. Although the three lenders with whom WMC has
had conversations indicated that they could not now provide any assurance that
they will not ultimately accelerate the loans, two of the lenders did indicate
that they would not automatically accelerate the loans upon a change in the
general partner or the property manager but, rather, would evaluate the
situation at the time of any such change. The third lender indicated that it
could not give WMC any indication of the actions it would take. Mr. Leas and WMC
believe that the lenders' ultimate decision as to whether to (a) leave the loans
in place, (b) refinance the loans on negotiated terms, or (c) accelerate the
loans, will be based upon a number of factors, including the lenders' perception
of WMC as a substitute for Decade as general partner, the relationship between
the current loan rates and the market rates for similar loans and general
economic conditions in the area.
Mr. Leas and WMC believe that two of the Partnership's four loans,
which have an aggregate principal balance of approximately $10.4 million, are at
interest rates at or near current market interest rates. The remaining two
loans, which have an aggregate principal balance of approximately $13 million,
are at interest rates which Mr. Leas and WMC believe are somewhat more favorable
than current market rates. One of these loans, which has a current principal
balance of approximately $3 million and a term extending until 2021, is at a
fixed interest rate of 7.5% per annum. The other loan, which has a principal
balance of approximately $10 million, bears interest until December 1, 1998 at
7% per annum. The loan is due and payable on December 1, 1998, unless extended
for five years. If extended, the interest rate becomes variable at either prime
plus 1% or the five year treasury rate plus 300 basis points. Although Mr. Leas
and WMC believe the current interest rate on this loan is more favorable than
current market rates, Mr. Leas and WMC believe the extension interest rate is
substantially in excess of current market rates. Accordingly, unless market
interest rates substantially increase, it is unlikely the Partnership would
elect to extend this loan after December 1, 1998. Accordingly, it may be
desirable for the Partnership to refinance this loan in the near future
regardless of whether there is a change in the general partner. Although
interest rates vary widely based, in part, upon the property involved, the term
of the loan and general economic conditions and there can be no assurance that,
if necessary, the Partnership could refinance all or any of these loans, Mr.
Leas and WMC believe that current market interest rates for similar properties
are between 7.75% and 8.25% for a term loan with a fixed interest rate of
between 5 and 7 years and an amortization period of between 20 and 30 years.
If it is necessary to replace the existing financing, the Partnership
will incur additional costs, including Florida documentary taxes of
approximately $81,550 if all of the properties must be refinanced and legal and
other fees associated with the refinancing.
PROPOSED PROPERTY MANAGEMENT AGREEMENT
If Decade is removed as the general partner of the Partnership and WMC
is appointed as the new general partner, WMC will cause the Partnership to
terminate its existing Management
7
<PAGE>
Consulting Agreement and Property Management Agreement. According to section
7.2.A.(vii) of the Partnership Agreement, such agreements must be terminable by
the Partnership without penalty upon 60 days' written notice. Accordingly, Mr.
Leas and WMC believe that these existing agreements to which the Partnership is
a party may be terminated by the Partnership on not less than 60 days' prior
written notice. After such termination, WMC will cause the Partnership to enter
into a property management agreement with WMC Realty, Inc., WMC's wholly owned
subsidiary.
Current Property Management Agreement
The Partnership's properties are presently being managed by Decade
Properties, Inc. (the "Decade Property Manager") under property management
agreements (the "Current Agreements"). The Current Agreements require the
Partnership to pay the Decade Property Manager a management fee equal to 5% of
the Partnership's rental income received from the properties plus any
miscellaneous income received from the operation of the properties plus an
amount equal to one-half of the first month's rent on any newly leased apartment
unit. According to the notes to the audited financial statements of the
Partnership, the Partnership paid property management fees of $449,205 in
1995, $489,960 in 1994 and $399,221 in 1993.
The Current Agreements also require the Partnership to reimburse the
Decade Property Manager for costs incurred by it in performing services for the
Partnership. The notes to the audited financial statements of the Partnership
reveal that the total amount of the reimbursements paid or to be paid by the
Partnership to the Decade Property Manager were $929,883 in 1995, $878,934 in
1994 and $772,494 in 1993. In addition, the Partnership made reimbursement
payments to Decade of $89,962 in 1995, $84,471 in 1994 and $68,678 in 1993. As
of the date of this Proxy Statement, Decade has failed to respond to WMC's
request to produce a detailed substantiation of these charges. Accordingly, WMC
is unable to advise you as to the reasonableness of these reimbursements or as
to the likelihood that they can be reduced, or will not increase, in the future.
Proposed Property Management Agreement
If WMC replaces Decade as the general partner of the Partnership, WMC
will cause the Partnership to terminate the Current Agreements and enter into
new property management agreements with Realty. Pursuant to the Partnership
Agreement, the Current Agreements must be terminable by the Partnership on not
more than 60 days' prior written notice. Under these new agreements, Realty will
charge the Partnership a property management fee of 5% of the Partnership's
gross rental revenues. Unlike the Decade Property Manager, however, Realty will
not charge the Partnership an additional fee related to the rental of
newly-leased apartment units.
The table below compares the fees charged by the Decade Property
Manager with the fees that would have been charged by Realty for the years
indicated. Because the differences in the fees result at least in part from the
fee charged by the Decade Property Manager related to the rental of newly-leased
apartment units, which will not be charged by Realty, the amount of savings in
the future will depend upon the turnover of the Partnership's apartment units.
As a result, the proposed savings indicated in the table below may be greater
than or less than the amount of savings which will be realized in the future.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Decade Property Manager $449,205 $489,960 $399,221
Realty 276,301 297,081 250,970
-------- -------- --------
Proposed Savings $172,904 $192,879 $148,251
======== ======== ========
</TABLE>
Like the Current Agreements, the new property management agreements
will also require the Partnership to reimburse Realty for expenses incurred by
Realty in the performance of its services under the agreements and will contain
other standard terms and conditions. Since Decade has failed to provide WMC and
Mr. Leas with detailed substantiation for the $2,824,422 that Decade and the
Decade Property Manager received, or are to receive, in reimbursed costs for the
years 1993 through 1995, no meaningful comparison of projected reimbursable
expenses can be made. However, if possible WMC will reduce these reimbursable
costs so as to improve the cash flow and ultimately the value of the properties.
There can be no assurance that such efforts will be successful, however, until
WMC and Realty have the opportunity to examine these costs in detail.
SOLICITATION OF NOTIFICATIONS
AND LIMITED POWERS OF ATTORNEY
Notifications and Limited Powers of Attorney will be solicited by
mail, telephone, telefax and in person. Solicitation will be conducted by Arnold
K. Leas and by employees of WMC who will not be paid any additional compensation
for their solicitation services.
FEES AND EXPENSES OF THE SOLICITATION
Fees and expenses of the solicitation will initially be borne by WMC.
Theses fees and expenses will include administrative expenses and attorneys'
fees related to the solicitation, the litigation brought by the Partnership (see
"Litigation" below) and the consummation of the proposals. If Mr. Leas and WMC
are successful in consummating the transactions contemplated by the proposals,
WMC intends to cause the Partnership, without a vote of the limited partners, to
reimburse WMC for all amounts which it contributed to the fees and expenses
associated with the solicitation and the actions necessary to cause the removal
of Decade as the general partner of the Partnership and the appointment of WMC
as the new general partner. To date, WMC estimates that it has incurred
approximately $100,000 of fees and expenses in connection with this
solicitation, the majority of which relates to the litigation. At present, Mr.
Leas and WMC believe that the total fees and expenses in connection with this
solicitation will be approximately $105,000.
LITIGATION
The efforts by Mr. Leas and WMC to remove Decade as General Partner of
the Partnership and replace Decade with WMC has been the subject of litigation
initiated by Decade. Following the November 12, 1996 letter from Mr. Leas and
WMC to Limited Partners, in which Mr. Leas and WMC responded to the October 24,
1996 tender offer of the Partnership, Decade wrote to the Limited Partners
complaining that Mr. Leas and WMC had failed to include in the November 12, 1996
letter material information relating to the ramifications of removing Decade as
the general partner of the Partnership. Mr. Leas subsequently requested that
Decade provide information relating to these ramifications so that Mr. Leas and
WMC could communicate the information to the Limited Partners. Mr. Leas and WMC
also filed a preliminary proxy statement with the Securities and Exchange
Commission as a required follow-up to its November 12 letter. Decade
reacted by bringing litigation on behalf of itself and the Partnership, alleging
that both the November 12 letter and the preliminary proxy statement failed to
provide material information. Decade also requested that the court enter a
temporary restraining order and preliminary injunction preventing Mr. Leas and
WMC from distributing the preliminary proxy statement to the Limited Partners.
Mr. Leas and WMC voluntarily agreed to the issuance of a temporary restraining
order with respect to the preliminary proxy statement in return for Decade's
agreement to provide the information necessary to complete the proxy statement,
and to address the omissions that Decade had alleged. While the parties
exchanged information, Decade filed a preliminary proxy statement with the SEC
proposing an amendment to the Partnership Agreement that has been described as
the "Fair Price Provision." Mr. Leas and WMC filed a counterclaim against Decade
and the Partnership requesting a temporary restraining order and preliminary
injunction to prevent Decade from distributing that preliminary proxy statement
to Limited Partners because it was allegedly incomplete and misleading. After a
mutual exchange of information, all parties agreed to drop the pending motions
for temporary restraining orders and preliminary injunctive relief to allow each
other to proceed unimpeded with the proxy contest.
8
<PAGE>
VOTING INFORMATION
According to the Partnership's Proxy Statement dated as of
January 4, 1997, as of December 30, 1996 the partnership had 13,400.274
Interests outstanding. According to the Partnership Agreement, each Interest is
entitled to one vote for the proposals set forth in this Proxy Statement. Mr.
Leas and WMC will rely on the Partnership's records for purposes of determining
the Limited Partners and number of Interests owned by each Limited Partner.
Decade will be removed and WMC will be appointed as the new general
partner of the Partnership if (a) Limited Partners owning greater than 50% of
the outstanding Interests sign the enclosed Notification voting "FOR" the
proposals; (b) Arnold K. Leas and/or an officer of WMC receives the required
legal opinions on behalf of the Limited Partners; and (c) such Notifications and
the legal opinions are delivered to the Partnership. Accordingly, any Limited
Partner who does not sign and return the Notification voting "FOR" the proposal
set forth in this Proxy Statement will, in effect, have voted against the
proposal. The Partnership Agreement will be amended to remove the Fair Price
Provision if Limited Partners owning more than 50% of the outstanding Interests
vote in favor of such amendment.
CERTAIN INFORMATION ABOUT ARNOLD K. LEAS AND WMC; CONFLICT OF INTEREST
Arnold K. Leas, who owns beneficially and of record 49.64 Interests in
the Partnership, is also an officer, director and approximately 40% shareholder
of WMC and is an officer and director of Realty, WMC's wholly-owned subsidiary.
Accordingly, Mr. Leas may benefit, other than simply as a Limited Partner of the
Partnership, if Decade is removed and replaced with WMC. In addition, if this
solicitation is successful, WMC and its subsidiary, Realty, will receive
compensation from the Partnership for property management and other services
thereafter rendered to the Partnership. Neither WMC nor Mr. Leas is, or was
within the past year, a party to any contract, arrangement or understanding with
any person with respect to any securities of the Partnership. Except for Joe
Griese (an officer of WMC), who owns 2.04 Interests, and certain family members
of Mr. Leas, who own 16.19 Interests, no associate of Mr. Leas or WMC (other
than Mr. Leas and Mr. Griese) owns any Interests in the Partnership. Except for
the appointment of WMC as the general partner of the Partnership and the
appointment of Realty as the property manager of the Partnership's properties as
disclosed in this Proxy Statement, neither Mr. Leas nor WMC has any arrangement
or understanding with any person with respect to any future employment by the
Partnership or its affiliates or with respect to any future transactions to
which the Partnership or any of its affiliates will or may be a party.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF THE PARTNERSHIP
According to the Partnership's Form 10-K for the year ended December
31, 1995, no person owns of record or is known by the Partnership to own
beneficially more than 5% of the outstanding Interests. According to such Form
10-K, Decade and its partners as a group owned 193.04 Interests as of December
31, 1995, representing 1.105% of the Interests outstanding. In addition, the
Form 10-K indicates that as of December 31, 1995, relatives and affiliates of
Decade owned an additional 35.69 Interests.
ARNOLD K. LEAS
Brookfield, Wisconsin
Dated: __________, 1997
9
<PAGE>
INDEX TO FINANCIAL STATEMENTS
F-1 Report of Independent Certified Public Accountants
F-2 Consolidated Balance Sheet
F-3 Notes to Consolidated Financial Statement
F-I
<PAGE>
REPORT OF
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
Board of Directors
WELLINGTON MANAGEMENT CORPORATION
We have audited the accompanying consolidated balance sheet of Wellington
Management Corporation (a Wisconsin corporation) and subsidiaries as of March
31, 1996. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the consolidated financial position of Wellington Management
Corporation and subsidiaries as of March 31, 1996, in conformity with generally
accepted accounting principles.
/S/ GRANT THORNTON LLP
Appleton, Wisconsin
May 3, 1996
F-1
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 286,122
Accounts receivable
Partnerships 446,783
Affiliates and employees 158,078
Other, less allowance for bad debts of $25,000 811,404
-----------
1,416,265
Inventory 181,292
Prepaid expenses 60,757
Notes receivable 27,500
-----------
Total current assets 1,971,936
INVESTMENTS (notes A2 and B) 471,610
DEFERRED INCOME TAX BENEFIT (note F) -
PROPERTY AND EQUIPMENT - AT COST (notes A3, C and D)
Golf course and related facilities 5,048,810
Equipment held for lease (note A8) 3,264,819
Office furniture and equipment 798,075
Leasehold improvements 87,073
Building 131,855
-----------
9,330,632
Less accumulated depreciation and amortization 1,064,987
-----------
8,265,645
Land 22,079
-----------
8,287,724
OTHER ASSETS
Restricted cash (note G) 100,835
Bond issue costs (note A4) 266,853
Accounts receivable - partnerships, less allowance for bad
debts of $119,000 119,706
Organization cost (note A5) 17,720
Unamortized financing costs (note A6) 21,384
Other 18,604
-----------
545,102
-----------
Total assets $11,276,372
===========
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt (note C) $ 718,651
Accounts payable 607,109
Accrued liabilities 587,153
Income taxes -
-----------
Total current liabilities 1,912,913
LONG-TERM DEBT, less current maturities (note C) 3,354,212
BONDS PAYABLE (note D) 4,631,250
DEFERRED INCOME TAXES (note F) -
COMMITMENTS AND CONTINGENCIES (note G) -
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY (note G) -
STOCKHOLDERS' EQUITY (note E)
Common stock 10 cents par value - authorized 10,000,000
shares; issued and outstanding 4,263,484 shares 426,348
Additional paid in capital 1,570,460
Treasury stock (717)
Excess of purchase price over net assets of an affiliated
company acquired (203,774)
Accumulated earnings (deficit) (414,320)
-----------
1,377,997
-----------
Total liabilities and stockholders' equity $11,276,372
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-2
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
March 31, 1996
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Wellington Management Corporation (the Company or WMC) manages limited
partnerships, a limited liability corporation and a real estate investment
trust, which it syndicates through its wholly-owned broker/dealer Wellington
Investment Services Corporation. A summary of the Company's significant
accounting policies applied in the preparation of the accompanying
consolidated balance sheet follows.
1. PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes all the accounts of Wellington
Management Corporation and its wholly-owned subsidiaries, Wellington
Investment Services Corp. (WISC), Wellington Investment Advisors, Inc. (WIAI),
Wellington Insurance Services, Inc. (WISI), WMC Realty, Inc. (WRI), Wellington
Equipment Corporation (WEC), and its majority-owned subsidiary, Wellington
Golf Corporation (WGC). All intercompany accounts and transactions have been
eliminated in the preparation of the consolidated balance sheet.
2. INVESTMENTS
The Company is the general partner in several limited partnerships, a limited
liability corporation and a real estate investment trust. These investments
are accounted for using the equity method of accounting.
3. DEPRECIATION AND AMORTIZATION
Property and equipment are stated at cost, including capitalized interest
costs of approximately $388,000 incurred during the period of asset
construction and preparation for use, less accumulated depreciation and
amortization.
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of the depreciable assets to operations over their estimated service
lives, principally on a straight-line basis. The estimated lives used range
from five to forty years.
The straight-line method of depreciation is followed for substantially all
assets for financial reporting purposes. Accelerated methods are used for tax
purposes.
Leasehold improvements are amortized over the life of the respective lease or
the service life of the improvement, whichever is shorter.
4. BOND ISSUE COST
The costs incurred in connection with the issuance of bonds of Wellington
Equipment Corporation, Wellington Golf Corporation and Wellington Management
Corporation are being amortized over the life of the respective bonds.
Accumulated amortization is $99,023 at March 31, 1996.
F-3
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued
5. ORGANIZATION COST
The costs incurred in connection with the formation of the Company are being
amortized on the straight-line basis over a period of five years. Accumulated
amortization is $34,908 at March 31, 1996.
6. UNAMORTIZED FINANCING COSTS
Costs incurred in connection with Wellington Golf Corporation obtaining debt
financing to fund the development and construction of an eighteen-hole golf
course are being amortized over the life of the loan. Accumulated amortization
is $12,087 at March 31, 1996.
7. COMMISSION REVENUE
The Company's wholly-owned subsidiary, Wellington Investment Services Corp. is
engaged in the sale of limited partnership, limited liability corporation
(LLC) units and real estate investment trust shares of common stock of related
parties and the sale of securities of third parties. For contingent
offerings, revenue is recognized at the time the investments' escrow agent
distributes sales commission to Wellington Investment Services Corp. All
other commission revenue and related expense is recognized on a trade date
basis.
8. EQUIPMENT RENTAL REVENUE
Wellington Equipment Corporation acquires aerial lift equipment for the
purpose of renting such equipment to customers throughout North America. The
typical rental agreement is for three months to one year in duration. The
customer is responsible for the insurance and property taxes on the equipment.
9. FINANCIAL INSTRUMENTS
The carrying amount of financial instruments at March 31, 1996 approximates
fair value.
10. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-4
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE B - INVESTMENTS
The Company's investments consist of the following:
<TABLE>
<CAPTION>
Wellington
Management
Corporation's
Percent Owned
--------------------------
Before After Carrying Value
Return of Return of --------------
Capital Capital March 31, 1996
---------- -------------- --------------
<S> <C> <C> <C>
Wellington Realty Income Limited
Partnership 91-2 (WR 91-2) 10% 20% $(12,671)
Wellington Security Income Fund
Limited Partnership (WSIF) 10 25 (19,465)
Wellington Equipment Income
Limited Partnership II (W-II) 10 15 (8,271)
Wellington Equipment Income
Limited Partnership III (W-III) 10 15 (33,625)
Wellington Equipment Income
Limited Partnership IV (W-IV) 10 20 (11,921)
Wellington Equipment Income
Limited Partnership V (W-V) 10 20 4,852
Wellington Equipment Income
Limited Partnership VI (W-VI) 10 20 (4,831)
Wellington Equipment Income
Limited Partnership VII (W-VII) 10 25 (3,219)
Wellington Equipment Income
Limited Partnership VIII (W-VIII) 10 25 (12,924)
Wellington Equipment Income
Limited Partnership IX (W-IX) 10 25 (17,111)
Wellington Equipment Income
Limited Partnership X (W-X) 10 5 26,634
Wellington Development
Corp. LLC (W-D) 40 40 237,599
Wellington Properties Trust (WPT) 12 12 326,563
--------
$471,610
========
</TABLE>
F-5
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE B - INVESTMENTS - Continued
Total distributions to the Company from the limited partnerships were $200,784
during 1996.
The following is a summary of the condensed combined unaudited financial
information pertaining to these investments:
<TABLE>
<CAPTION>
December 31, 1995
------------------
<S> <C>
Current assets $ 4,251,475
Non-current assets 30,695,181
-----------
Total assets $34,946,656
===========
Current liabilities $11,108,112
Non-current liabilities 9,620,621
Equity 14,217,923
-----------
Total liabilities and equity $34,946,656
===========
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1995
-----------------------------
<S> <C>
Net revenue $5,691,838
Gross profit $3,094,091
Net earnings $1,193,226
</TABLE>
F-6
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE C - LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1996.
<TABLE>
<S> <C>
WELLINGTON MANAGEMENT CORPORATION
---------------------------------
Wellington Management Corporation notes payable to former
shareholders of WMC Realty, Inc. common stock; payable in
annual installments of $70,000 plus interest accrued at the
bank's prime rate as adjusted quarterly beginning on October 31,
1993 (effective rate of 8.25% at March 31, 1996); final payment
of principal and accrued interest paid April 1996 $ 70,000
Note payable to Milwaukee Western Bank in one principal
payment plus accrued interest on July 31, 1996. Interest at 1%
above prime rate (effective rate of 9.25% at March 31, 1996) 100,000
--------
170,000
WELLINGTON GOLF CORPORATION
---------------------------
10.5% note payable to Tri-City National Bank in monthly
installments of $25,226 including interest; final balloon
payment due March 15, 1998; collateralized by certain real estate
and guaranteed by Wellington Management Corporation. 2,462,402
</TABLE>
F-7
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE C - LONG-TERM DEBT - Continued
<TABLE>
<CAPTION>
WELLINGTON EQUIPMENT CORPORATION
--------------------------------
<S> <C>
8% note payable to U.S. Aerials, Inc. in one principal installment
of $154,860 plus accrued interest due on July 1, 1995; thereafter
principal installments of $41,760 plus accrued interest due on
each July 1 beginning in 1996, until paid in full. The note is
guaranteed by Wellington Management Corporation. $ 146,698
Note payable to Security Bank in monthly installments of
$15,500 plus interest at .5% above the prime rate (effective
rate of 8.75% at March 31, 1996) with a final payment
due on June 21, 1999; collateralized by equipment. 624,513
Note payable to Security Bank in monthly installments of
$5,833 plus interest at .5% above the prime rate (effective
rate of 8.75% at March 31, 1996) with a final payment
due on July 28, 1999; collateralized by equipment. 237,747
Note payable to Security Bank in monthly installments of $5,240
plus interest at .5% above the prime rate (effective rate of 8.75%
at March 31, 1996) with a final payment due on March 1, 2000;
collateralized by equipment. 259,242
8.75% note payable to Associated Bank in monthly installments of $955
including interest with a final balloon payment due on March 31, 1997;
collateralized by real estate. 88,731
Other 83,530
----------
1,440,461
----------
4,072,863
Less current maturities 718,651
----------
$3,354,212
==========
</TABLE>
Aggregate maturities of long-term debt after March 31, 1996 are as follows:
1997 $ 718,651
1998 2,788,282
1999 379,638
2000 186,292
----------
$4,072,863
==========
F-8
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE D - BONDS PAYABLE
During the years ended March 31, 1994 and 1993, Wellington Golf Corporation
sold $2,700,000 of subordinated debentures to fund the development and
construction of an eighteen-hole golf course and related facilities. The
debentures are payable as to principal on March 31, 2003, and bear interest
from issuance until maturity or redemption at a rate of 11% per annum. Payment
of interest on the debentures from issuance through December 31, 1993 was
deferred; accumulated interest for such period is payable (without additional
interest on such accumulated amounts) in three equal annual installments on
October 15, 1994, 1995 and 1996. From January 1, 1994 until maturity or
redemption, interest on the debentures is payable currently, as earned, on
April 15th and October 15th of each year and upon maturity or redemption. The
debentures are not secured. At any time after March 31, 1996, the debentures
are redeemable in whole or in part at the option of the Company, upon 15 days
notice, at the principal amount thereof plus accrued interest. At March 31,
1996, the balance of these debentures was $2,688,750.
During the year ended March 31, 1994, Wellington Management Corporation sold
$1,650,000 of 10% convertible secured debentures to fund the purchase of
equipment to be held for rental purposes. Wellington Equipment Corporation
assumed the liability on the debentures from Wellington Management Corporation
on July 1, 1994. The debentures are payable as to principal on September 30,
2003, and bear interest from issuance until maturity or redemption at a rate of
10% per annum. Payment of interest on the debentures from issuance until
maturity or redemption is payable semi-annually and at maturity or redemption.
The debentures (a) are secured by equipment purchased with the proceeds of the
offering, (b) are convertible into common stock of the Company at prices
ranging from $5 to $10 per share, and (c) may be redeemed at the option of the
Company at anytime after September 30, 1996, at the principal amount thereof
plus accrued interest.
During the year ended March 31, 1996, Wellington Equipment Corporation sold
$292,500 of $2,000,000 10% debentures to fund the purchase of aerial lift
equipment, which will be leased to unaffiliated parties. The debentures are
payable as to principal on January 31, 2001, and bear interest from issuance
until maturity or redemption at a rate of 10% per annum. Payment of interest on
the debentures from issuance until maturity or redemption is payable quarterly
and at maturity or redemption. The debentures are (a) unsecured, and (b) may be
redeemed in whole or in part at any time prior to maturity at the option of the
Company. In the event of a redemption prior to January 31, 1999, the Company
will pay 100.25% of face value.
F-9
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE E - STOCKHOLDERS' EQUITY
PREFERRED STOCK
The shareholders of the Company have authorized the issuance of 2,000,000
shares of preferred stock with a par value of $.10. Such preferred stock is
issuable upon filing of amended Articles of Incorporation and the payment of
required fees; no further shareholder action is required. Should the Company
issue its preferred stock, it is anticipated that the Articles of
Incorporation, as amended to provide for such stock, will vest the Board of
Directors of the Company with authority to divide the preferred stock into
series and to fix and determine the relative rights and preferences of shares
of any such series so established.
NOTE F - INCOME TAXES
Deferred taxes are provided under the liability method. Under this method,
deferred tax assets and liabilities are determined based on temporary
differences between the financial statement and tax basis of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse.
A deferred income tax asset results from a benefit related to net operating
loss carryforwards. A deferred income tax liability results from using an
accelerated depreciation method for tax purposes versus the straight-line
method for financial reporting purposes. At March 31, 1996, the total of all
deferred tax liabilities is $578,300 and the total of all deferred tax assets
is $647,700, resulting in a net deferred tax asset of $69,400. The Company has
provided a valuation allowance at March 31, 1996 of $69,400 for the net
deferred tax asset due to the uncertainty in the future utilization of the net
operating loss carryforwards.
At March 31, 1996, the Company had federal and state net operating loss
carryforwards of approximately $1,550,000 and $2,050,000, respectively, which
expire in varying amounts through 2010.
NOTE G - COMMITMENTS AND CONTINGENCIES
WELLINGTON GOLF CORPORATION
In connection with the formation of Wellington Golf Corporation, Edgehill
Consulting Group (Edgehill), who manages the golf course, obtained an option
to acquire 59,000 shares of Class A common stock of Wellington Golf
Corporation for $22.88 per share. The option period is from April 1, 1994
through December 31, 1999. At March 31, 1996, the Company owned 80% of
Wellington Golf Corporation. If Edgehill exercises its options, the Company's
ownership will be 58%. Due to losses incurred by WGC, the minority interest
basis at March 31, 1996 is $0. For the year ended March 31, 1996, 100% of the
net loss of WGC was recognized by the Company.
F-10
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
March 31, 1996
NOTE G - COMMITMENTS AND CONTINGENCIES - Continued
CLEARING AGREEMENT
On January 13, 1992, Wellington Investment Services Corp. entered into an
agreement with another broker/dealer whereby that broker/dealer will execute
and clear security transactions for Wellington Investment Services Corp. on a
fully disclosed basis. The term of the agreement was for two years and is
automatically renewable for additional one year terms thereafter. Under the
terms of the agreement, Wellington Investment Services Corp. is prohibited
from entering into a similar agreement with another broker/dealer while this
agreement is in effect. Wellington Investment Services Corp. has also agreed
to regulatory arbitration and waived its right to court remedies regarding
disputes between Wellington Investment Services Corp. and the clearing
broker/dealer. Wellington Investment Services Corp. has deposited $100,000
with the clearing broker/dealer to assure Wellington Investment Services
Corp.'s performance under the agreement.
LEASES
The Company conducts its operations in leased office facilities and leases two
vehicles, all of which are operating leases which expire at various dates
through March 2001.
The minimum rental commitments under operating leases are as follows:
<TABLE>
<CAPTION>
Year ended
March 31,
----------
<S> <C>
1997 $159,367
1998 158,517
1999 158,656
2000 158,656
2001 158,656
-------
$793,852
=======
</TABLE>
F-11
<PAGE>
EXHIBIT A
, 1997
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties -
A Limited Partnership
(the "Partnership"), on behalf of the
Limited Partners of the Partnership
c/o Wellington Management Corporation
18650 West Corporate Drive
Brookfield, WI 53045
Dear Limited Partners: Re: Removal of Decade Companies, a Wisconsin
general partnership ("Decade") as General
Partner of the Partnership
In accordance with section 8.4 of the Amended and Restated Agreement
of Limited Partnership of Decade Companies Income Properties - A Limited
Partnership entered into September 30, 1996 (the "Partnership Agreement"), you
have requested our opinion concerning the following:
1. That your exercise of the removal right set forth in section 8.4
of the Partnership Agreement will not be deemed to be taking part in control of
the business of the Partnership or result in the loss of any Limited Partner's
limited liability; and
2. That the removal right set forth in section 8.4 of the Partnership
Agreement will not result in the Partnership's not being considered a
partnership for federal income tax purposes.
It is our understanding that these opinions are being requested in
connection with the removal of Decade as General Partner of the Partnership and
the concurrent designation and appointment of Wellington Management Corporation,
a Wisconsin corporation ("WMC") as the new General Partner of the Partnership in
accordance with section 8.4 of the Partnership Agreement.
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
, 1997
Page 2
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of all such records of the Partnership,
agreements and other instruments, the certificate of WMC, the new General
Partner of the Partnership attached hereto as Attachment 1 (the "Certificate")
and other documents which we have deemed necessary as a basis for the opinions
hereinafter expressed. For purposes of these opinions, we have assumed the
accuracy of the representations set forth in the Certificate.
In addition, consistent with the statements set forth in the "Offer to
Purchase Interests of Decade Companies Income Properties - A Limited
Partnership" dated October 24, 1996 prepared by the Partnership, it is our
understanding, and we have assumed for purposes of this opinion, that:
1. The Partnership is a limited partnership formed under the Wisconsin
Uniform Limited Partnership Act;
2. The Partnership is currently classified as a partnership for federal
income tax purposes; and
3. Prior to January 1, 1997, the Partnership claimed partnership tax
classification under Treas. Reg. sections 301.7701-1 through 301.7701-3 as in
effect on December 31, 1996.
Terms not defined herein have the meaning assigned to them in the
Partnership Agreement.
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
, 1997
Page 3
OPINIONS
I. LIMITED LIABILITY OF LIMITED PARTNERS.
Section 179.23(1) of the Wisconsin Statutes provides:
"Except as provided in sub. (4), a limited partner is not liable
for the obligations of a limited partnership unless he or she is
also a general partner or, in addition to the exercise of his or
her rights and powers as a limited partner, he or she
participates in the control of the business. If the limited
partner participates in the control of the business, he or she is
liable only to persons who transact business with the limited
partnership reasonably believing, based upon the limited
partner's conduct, that the limited partner is a general
partner".
Section 179.23(4) provides that a limited partner who knowingly permits his or
her name to be used in the name of the limited partnership may be liable to
creditors of the limited partnership. Section 179.23(2)(e)5, provides that a
limited partner does not participate in the control of the business solely by
proposing, approving or disapproving, by voting or otherwise, the removal of a
general partner or the admission of an additional general partner.
Based upon the foregoing, it is our opinion that the exercise by the
Limited Partners of the removal right set forth in section 8.4 of the
Partnership Agreement and the concurrent designation and appointment of WMC as a
new general partner following the removal of Decade will not be deemed to be
taking part in control of the business of the Partnership or result in the loss
of any Limited Partner's limited liability for the obligations of the
Partnership.
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
, 1997
Page 4
II. CLASSIFICATION AS PARTNERSHIP FOR FEDERAL INCOME TAX PURPOSES.
The term "partnership" is defined in sections 761(a) and 7701(a)(2) of
the Internal Revenue Code of 1986 (the "Code") (hereinafter all section
references will refer to the Code as amended to date unless otherwise indicated)
to include a syndicate, group, pool, joint venture or other unincorporated
organization which is not a corporation within the meaning of the Code. Treas.
Reg. section 1.761-1(a) refers to the regulations under section 7701 for a
description of those unincorporated organizations taxable as partnerships.
On December 18, 1996, the Internal Revenue Service issued new
regulations under section 7701 on the tax classification of business entities,
replacing the regulations that were in effect at the time the Partnership
Agreement was drafted. The new regulations provide a simple elective
classification system that generally allows an eligible entity the option to be
taxed as either a partnership or a corporation.
Treas. Reg. section 301.7701-3 provides certain default
classifications for business entities. Treas. Reg. section 301.7701-3(b)(1)(i)
provides that unless it affirmatively elects otherwise, a newly formed domestic
"eligible entity" is a partnership if it has two or more members. With respect
to entities in existence prior to January 1, 1997 (the effective date of the new
regulations), such as the Partnership, Treas. Reg. section 301.7701-3(b)(3)
provides that unless it affirmatively elects otherwise, an "eligible entity" in
existence prior to January 1, 1997 will have the same tax classification that
the entity claimed on the date prior to January 1, 1997. Treas. Reg. section
301.7701-3(a) provides that an eligible entity whose classification is
determined under the default classification rule as described above retains that
classification until the entity makes a formal election to change that
classification.
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
, 1997
Page 5
Treas. Reg. section 301.7701-3(a) defines the term "eligible entity"
as a "business entity" that is not classified as a corporation under Treas. Reg.
sections 301.7701-2(b)(1), (3), (4), (5), (6), (7), or (8). Treas. Reg. section
301.7701-2(a) defines a "business entity" as any entity recognized for federal
tax purposes that is not properly classified as a trust or otherwise subject to
special treatment under the Internal Revenue Code.
Based upon our review of the definitions contained in the foregoing
regulations, it is our opinion that the Partnership is an eligible entity and
that, given its claimed existence as a partnership for federal tax purposes
prior to January 1, 1997, by reason of the default rules contained in the
regulations, the Partnership will continue to be taxable as a partnership after
such date absent an affirmative election to the contrary or some other action
taken by the Partnership that would cause it to cease to be an eligible entity.
It is further our opinion that the exercise of the removal rights set forth in
section 8.4 of the Partnership Agreement will not result in the Partnership
ceasing to be an eligible entity.
Therefore, based upon the foregoing, it is our opinion that the
removal right set forth in section 8.4 of the Partnership Agreement will not
result in the Partnership's not being considered a partnership for federal
income tax purposes. Furthermore, it is our opinion that the removal of Decade
and the designation and appointment of WMC as the new General Partner will not
result in the Partnership's not being considered a partnership for federal
income tax purposes.
All opinions expressed herein are conditioned upon the continuing
accuracy of the representations and assumptions set forth herein, the removal of
Decade and the concurrent designation and appointment of WMC as the new General
Partner of the Partnership in accordance with section 8.4 of the Partnership
Agreement, the written acceptance by WMC of the duties and responsibilities of
General Partner within 30 days after designation and appointment in accordance
with section 8.4 of the Partnership Agreement, the continuation and operation of
the Partnership pursuant to and in accordance with
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
, 1997
Page 6
the terms of the Partnership Agreement without material changes being made to
that document or any related documents which we have reviewed in connection with
the issuance of this opinion, and the continued compliance by the Partnership
with the Wisconsin Revised Uniform Limited Partnership Act. All opinions
expressed herein are based upon existing statutes, regulations and precedents.
We express no opinion as to the possible effect on the classification of limited
partnerships for federal income tax purposes of subsequent statutes, regulations
and precedents which may be adopted by the IRS or established by the courts. We
undertake no obligation to update the opinions expressed herein after the date
of this letter.
With certain exceptions, we are qualified to practice law only in the
State of Wisconsin and we do not purport to be experts on, or to express any
opinion herein concerning, any law other than the State of Wisconsin and the
federal law of the United States. These opinions are rendered solely for your
information and assistance in connection with the transaction described above
and may not be relied upon by any other person or for any other purpose without
our prior written consent. We express no opinions with respect to any tax
matters other than those specifically addressed above.
Yours very truly,
REINHART, BOERNER, VAN DEUREN,
NORRIS & RIESELBACH, s.c.
BY
Gary A. Hollman
<PAGE>
NOTIFICATION
THIS NOTIFICATION IS BEING SOLICITED BY ARNOLD K. LEAS, A LIMITED
PARTNER OF DECADE COMPANIES INCOME PROPERTIES - A LIMITED PARTNERSHIP
(THE "PARTNERSHIP"), AND BY MR. LEAS' AFFILIATE, WELLINGTON MANAGEMENT
CORPORATION ("WMC"). The undersigned hereby acknowledges receipt of the
proxy statement to which this Notification relates.
The undersigned, who is a limited partner of the Partnership
owning limited partnership interests (the "Interests"), hereby votes all
of the undersigned's Interests as set forth below and, if the undersigned
votes "FOR" the proposal below, the undersigned also appoints Arnold K.
Leas and Robert F. Rice, an officer of WMC, or either of them, with full
power of substitution and resubstitution, as the undersigned's true and
lawful agent and attorney-in-fact, to (a) elect to accept and to receive
such legal opinions as may be necessary to validate the removal power
exercised in this Notification; (b) deliver this Notification and the
legal opinions to the Partnership and Decade Companies; and (c) take all
other necessary or appropriate actions on behalf of the undersigned to
effectuate the proposal set forth below under the Partnership Agreement
of the Partnership:
PROPOSAL
[CHECK THE APPROPRIATE BOX TO INDICATE YOUR VOTE]
Notification is hereby given that Decade
Companies is hereby removed as the general
partner of the Partnership and, concurrently
therewith, Wellington Management Corporation
is hereby appointed as the new general partner
of the Partnership.
[__] FOR [__] AGAINST [__] ABSTAIN
THIS NOTIFICATION WILL BECOME EFFECTIVE UPON WMC'S RECEIPT OF
NOTIFICATION FORMS THAT HAVE BEEN VOTED "FOR" THE PROPOSAL FROM LIMITED
PARTNERS WHO OWN MORE THAN 50% OF THE OUTSTANDING INTERESTS AND UPON THE
SUBSEQUENT DELIVERY OF SUCH NOTIFICATIONS AND CERTAIN REQUIRED LEGAL
OPINIONS TO THE PARTNERSHIP. NOTWITHSTANDING THE FOREGOING, WMC WILL NOT
CAUSE THIS NOTIFICATION TO BECOME EFFECTIVE IF THE LIMITED PARTNERSHIP
AGREEMENT IS AMENDED TO ADOPT THE PROPOSED FAIR PRICE PROVISION AND
SUCH AMENDMENT HAS NOT BEEN REMOVED BY FURTHER AMENDMENT OR RESCISSION.
[Name of Owner and Number of Interests Owned]
__________________________________ __________________________________
* Signature Date
__________________________________ ___________________________________
* Signature (If jointly held) Date
PLEASE COMPLETE ALL BLANKS ABOVE
* Please sign as name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
include full title. If a corporation, please sign in full corporate name
by an authorized officer and include title of officer. If a partnership,
please sign in full partnership name by an authorized person and include
title of person signing.
Please check a box and sign, date and return this Notification to:
Arnold K. Leas
c/o Wellington Management Corporation
18650 West Corporate Drive
Brookfield, Wisconsin 53045
<PAGE>
LIMITED POWER OF ATTORNEY
THIS LIMITED POWER OF ATTORNEY IS BEING SOLICITED BY ARNOLD K. LEAS, A LIMITED
PARTNER OF DECADE COMPANIES INCOME PROPERTIES-A LIMITED PARTNERSHIP (THE
"PARTNERSHIP"), AND BY MR. LEAS' AFFILIATE, WELLINGTON MANAGEMENT CORPORATION
("WMC").
The undersigned, who is a limited partner of the Partnership owning limited
partnership interests (the "Interests") hereby constitutes and appoints Arnold
K. Leas and Robert F. Rice, an officer of WMC, or either of them, with full
power of substitution and resubstitution, as the undersigned's true and lawful
attorney-in-fact and agent with full power and authority in the name, place and
stead of the undersigned to take the following actions:
(i) exercise the undersigned's rights as a limited partner of the Partnership,
pursuant to section 12.1.A of the Amended and Restated Agreement of Limited
Partnership of the Partnership dated September 30, 1996 (the "Partnership
Agreement") to call a meeting of the Partnership for the purpose of amending the
Partnership Agreement to delete section 8.6 of the Partnership Agreement (or
such other section to the extent it contains the "Fair Price Provision
Amendment" described in the January 4, 1997 proxy solicitation issued by the
current general partner), to the extent such section has been added to the
Partnership Agreement;
(ii) exercise the undersigned's rights pursuant to section 12.2(i) to amend the
Partnership Agreement by removing section 8.6 of the Partnership Agreement (or
such other section or portion thereof to the extent it contains the "Fair Price
Provision Amendment" described in the January 4, 1997, proxy solicitation issued
by the general partner of the Partnership);
(iii) to the extent not already accomplished by "Notification" pursuant to
section 8.4 of the Partnership Agreement, exercise the undersigned's right under
section 12.2(iv) of the Partnership Agreement to vote to remove Decade Companies
as general partner of the Partnership and to elect WMC as replacement general
partner of the Partnership; and
(iv) such other actions that any of the attorneys-in-fact deem necessary or
proper to accomplish the matters set forth in parts (i), (ii) and (iii) above
including, without limitation, acting at any subsequent meeting of the
Partnership following the adjournment of a meeting called for the foregoing
purposes, consenting to any amendments to the Partnership Agreement necessary to
change the references from Decade as general partner to WMC as general partner
and executing, acknowledging, delivering, verifying, filing and/or recording in
appropriate public offices any documents necessary or appropriate to carry out
the foregoing purposes.
This Limited Power of Attorney may be exercised by Arnold K. Leas and Robert F.
Rice, or either of them, acting alone for the undersigned, or by listing all
limited partners of the Partnership who have executed a similar Limited Power of
Attorney with a single signature as an Attorney-in-Fact for all of them.
<PAGE>
The appointment by the undersigned of Messrs. Leas and Rice, as attorney-in-
fact, shall be deemed to be a power coupled with an interest in recognition of
the fact that at such time as limited partners of the Partnership owning more
than 50% of the outstanding Interests have executed and delivered to Mr. Leas
and WMC notifications regarding the removal and replacement of the current
general partner, such limited partners will be relying upon the power of Messrs.
Leas and Rice to act as contemplated by this Limited Power of Attorney, and this
Limited Power of Attorney shall survive the bankruptcy, death, adjudication of
incompetence or insanity or dissolution of the undersigned and the transfer or
assignment of all or any part of the undersigned's Interest.
[Name of Owner and Number of
Interests Owned]
____________________________ __________
Signature* Date
____________________________ __________
Signature* (Joint Owner) Date
* Please sign as name appears herein. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
include full title. If a corporation, please sign in full corporate name by
and authorized officer and include title of officer. If a partnership, please
sign in full partnership name by an authorized person and include the title of
the person signing.
