<PAGE>
SCHEDULE 14A
(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:
[ ] Preliminary Proxy Statement
[_] Confidential, For Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 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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<PAGE>
January 27, 1997
Re: Decade Companies Income
Properties--A Limited Partnership
(the "Partnership")
Dear Limited Partner:
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 over the past ten
years 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
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 1993 through 1995,
the Partnership would have saved $514,034 in those years alone as the
result of charging the lower fees proposed by WMC Realty.
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 that these expenses
can be eliminated or reduced. However, if WMC is appointed general partner,
it 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 or less, market conditions permitting.
<PAGE>
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. As you know,
Decade has recently sent you several letters regarding our proposal. In a
letter dated January 18, 1997, Decade indicated that as a result of
suggestions it received from Limited Partners, it would now increase its
efforts over the next several months to attract offers for the properties.
Decade did not, however, indicate what efforts it would make in this regard.
WMC, on the other hand, has been clear with its intent. If appointed general
partner, WMC will take the actions specified above. Accordingly, if you
question whether Decade is truly committed to selling the properties and
dissolving the Partnership, you should vote to remove Decade and appoint WMC
as the new general partner. Remember what they have done over the past ten
years.
What You Should Do
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
limited 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 "WMC
Amendment"); (2) vote all of your Partnership interests at such meeting and
any adjournments thereof in favor of the WMC Amendment (accordingly Limited
Partners who sign and return the Limited Powers of Attorney will not need to
attend the meeting); and (3) take any other actions which Mr. Leas and/or Mr.
Rice deem reasonably necessary to effect the WMC 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 consider your
experience with this investment over the past ten years and make your own
conclusions as to what is in your best interests. Specifically, with respect
to the financing currently in place on the Partnership's properties, we
believe that the current lenders will not automatically accelerate the
existing loans in the event of Decade's removal. Rather, we believe the
lenders will base their financing decisions on a number of factors, including
the lenders' perception of WMC as a replacement general partner, the
relationship between the current loan rates and the market rates for similar
loans and general economic and conditions in the area.
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 to those who have returned the "Non-Binding Indication of Interest" forms
included in our letter to you dated January 10, 1997. Please note, however,
that those forms have no effect on the outcome of this proxy solicitation and
will not be used for that purpose. The enclosed Notification and Limited Power
of Attorney forms are the forms upon which your vote will be counted. As such,
we request that you not return any more of the Non-Binding Indication of
Interest forms. We look forward to receiving your response. Your response is
important no matter how many interests in the Partnership you own. You have my
word that I personally, and WMC, will work diligently to accomplish the goals
described above. If you have any questions or wish to talk with me, call me at
1-800-394-9355 or (414) 792-8900, Monday-Saturday, 8:00 a.m.-6:00 p.m. Central
Time. Thank you for your support of our proposal.
Best personal regards,
Arnold K. Leas
<PAGE>
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
----------------
GENERAL
This Proxy Statement dated January 27, 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, 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 (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 "WMC 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 WMC Amendment; and
3. All other actions on your behalf which Mr. Leas and/or Mr. Rice deem
reasonably necessary or proper to accomplish the WMC 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. (Accordingly, Limited Partners who
sign and return a Limited Power of Attorney will not need to attend the
meeting.)
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 27, 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.
<PAGE>
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 "WMC 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 WMC Amendment. Accordingly, Limited Partners who sign and return
the Limited Power of Attorney will not need to attend the Meeting. Pursuant to
Article XII, section 12.2 of the Partnership Agreement, the WMC 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.
Mr. Leas and WMC will not pursue the WMC Amendment unless they have 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.
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:
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.
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 WMC 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.
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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 newly 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. However,
because changing tenants has the potential to increase operating expenses,
Mr. Leas and WMC believe that the property manager should not have a
financial incentive to prefer new tenants over maintaining and renewing
existing leases.
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 or less, 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.
4
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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 if it has been adopted.
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 and its affiliates presently manage
approximately $42 million of investment real estate and $16 million of aerial
lift equipment and have offices and operations located in Brookfield, Grafton,
Neenah, Wausau and Madison, Wisconsin, Waterloo, Iowa 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 130 managerial, sales and administrative personnel.
Since 1990, WMC has sponsored five 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, CEO 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 is a Wisconsin
licensed real estate broker and holds the real estate designation of graduate
of the Realtor Institute (GRI). Mr. Leas has been involved, directly and
indirectly 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 Executive 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. Mr. Leas
is a member of the Wisconsin Bar Association.
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
5
<PAGE>
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.
Garrett T. Nakama (age 52) joined WMC in 1991 and is the Chief Financial
Officer for WMC and its affiliates. 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 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
6
<PAGE>
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 have obtained a legal opinion on behalf of the Limited
Partners to satisfy these requirements. Such legal opinion is attached as
Exhibit A hereto. 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.
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 "WMC 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 WMC Amendment; and
3. All other actions which Mr. Leas and/or Mr. Rice deem reasonably
necessary or proper to effectuate the WMC 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 WMC 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
7
<PAGE>
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 WMC
Amendment. Accordingly, Limited Partners who have signed and returned Limited
Powers of Attorney will not need to attend this meeting. Pursuant to Article
XII, section 12.2 of the Partnership Agreement, the WMC Amendment will be
adopted if Limited Partners owning more than 50% of the Interests vote in
favor of its adoption. After the WMC 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.
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 will not relieve the Partnership of the obligation to
ultimately make 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. Mr. Leas and WMC have requested details concerning these
accruals, but Decade has not provided the requested information. Accordingly,
while Mr. Leas and WMC believe that, under the terms of the original
prospectus of the Partnership, some or all of these accruals may be
subordinated to a return to Limited Partners of an amount equal to (a) 100% of
their original capital contribution plus (b) six percent of their capital
investment per annum, cumulative, less (c) prior distributions, they are not
able at this time to determine how much of the accruals are subordinated. The
Partnership may be requested to pay Decade all or a portion of this amount at
or shortly after Decade's removal, however, WMC and Mr. Leas are not aware of
any right of Decade to accelerate the payment of this liability. The September
30, 1996 balance sheet also reflects cash of $4,197,207. Since that date, Mr.
Leas and WMC believe that the Partnership's cash position has changed due,
among other things, to operating income and expense and to payments of
approximately $1,600,000 made to former Limited Partners in connection with
the tender offer. If the Partnership does not have adequate cash to pay
amounts owed to Decade when they become due, the Partnership may be required
to borrow any funds necessary to cover the shortfall. Although there can be no
assurance that the necessary financing would be available, Mr. Leas and WMC
believe the Partnership could make payments as they become due to Decade
without a material adverse effect on the Partnership.
8
<PAGE>
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 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,
9
<PAGE>
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 WMC 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, WMC
Realty will charge the Partnership a property management fee of 5% of the
Partnership's gross rental revenues. Unlike the Decade Property Manager,
however, WMC 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 WMC 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 WMC Realty, the amount of
savings in the future will depend upon the turnover of the Partnership's
apartment units. As a result, the estimated 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
WMC Realty.................................... 276,301 297,081 250,970
-------- -------- --------
Estimated Savings if WMC Realty Had been the
Property Manager............................. $172,904 $192,879 $148,251
======== ======== ========
Total Three-Year Estimated Savings............ $514,034
========
</TABLE>
Like the Current Agreements, the new property management agreements will
also require the Partnership to reimburse WMC Realty for expenses incurred by
WMC 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,
10
<PAGE>
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 WMC 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. These
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
and in reducing the Partnership's property management fees, 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. WMC will cause such reimbursement only to the extent that fees
payable to WMC Realty under the proposed property management agreements are
lower than the fees that would have been paid to the Decade Property Manager
under the Current Agreements. 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.
11
<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 (a) Limited Partners owning more than 50% of the outstanding
Interests sign the enclosed Limited Power of Attorney; and (b) Arnold K. Leas
and/or WMC vote for such amendment on behalf of all such Limited Partners at a
meeting of the Partnership.
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, (representing approximately 0.37% of the outstanding Interests) is
also an officer, director and approximately 40% shareholder of WMC and is an
officer and director of WMC 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, WMC 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 WMC 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: January 27, 1997
12
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.......................... F-1
Consolidated Balance Sheet.................................................. F-2
Notes to Consolidated Financial Statement................................... F-3
</TABLE>
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
===========
<CAPTION>
LIABILITIES
<S> <C>
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
Deffered 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 STATEMENTS
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.
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.
F-3
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
NOTE B--INVESTMENTS
The Company's investments consist of the following:
<TABLE>
<CAPTION>
WELLINGTON
MANAGEMENT
CORPORATION'S
PERCENT OWNED CARRYING VALUE
------------------- --------------
BEFORE AFTER
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-4
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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
===========
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net revenue.......................... $ 5,691,838
Gross profit......................... $ 3,094,091
Net earnings......................... $ 1,193,226
</TABLE>
NOTE C--LONG-TERM DEBT
Long-term debt consists of the following at March 31, 1996.
<TABLE>
<CAPTION>
WELLINGTON MANAGEMENT CORPORATION
---------------------------------
<S> <C>
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)......... 100,00
----------
170,000
<CAPTION>
WELLINGTON GOLF CORPORATION
---------------------------
<S> <C>
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
<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
</TABLE>
F-5
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<S> <C>
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:
<TABLE>
<S> <C>
1997................................. $ 718,651
1998................................. 2,788,282
1999................................. 379,638
2000................................. 186,292
----------
$4,072,863
==========
</TABLE>
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-6
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-7
<PAGE>
WELLINGTON MANAGEMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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-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>
Wellington Management Corporation
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1996 and 1995
NOTE C - LONG-TERM DEBT - Continued
<TABLE>
<CAPTION>
1996 1995
--------- ---------
WELLINGTON EQUIPMENT CORPORATION
- --------------------------------
<S> <C> <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 $ 318,115
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. 624,513 808,306
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. 237,747 307,336
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. 259,242 150,000
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 92,894
Other 83,530 3,338
--------- ---------
1,440,461 1,679,989
--------- ---------
4,072,863 4,319,989
Less current maturities 718,651 618,867
--------- ---------
$3,354,212 $3,701,122
========= =========
</TABLE>
<TABLE>
<CAPTION>
Aggregate maturities of long-term debt after March 31, 1996 are as follows:
<S> <C>
1997 $ 718,651
1998 2,788,282
1999 379,638
2000 186,292
---------
$4,072,863
=========
</TABLE>
F-12
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1996 and 1995
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-13
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1996 and 1995
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 and 1995, the
total of all deferred tax liabilities is $578,300 and $353,000, respectively
and the total of all deferred tax assets is $647,700 and $630,000,
respectively, resulting in net deferred tax asset of $69,400 and $277,000,
respectively. The Company has provided a valuation allowance at March 31, 1996
and 1995 of $69,400 and $277,000, respectively, 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.
A summary of the 1996, 1995 and 1994 income taxes is presented below:
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1996 1995 1994
-------- --------- -------
<S> <C> <C> <C>
Current
Federal $72,679 $ - $ -
State 1,100 1,900 33,627
------- -------- -------
73,779 1,900 33,627
Deferred
Federal - (33,000) 33,000
State - - -
------- -------- -------
- (33,000) 33,000
------- -------- -------
$73,779 $(31,100) $66,627
======= ======== =======
</TABLE>
F-14
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1996 and 1995
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.
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>
Rental expense for the years ending March 31, 1996, 1995 and 1994 was
$259,980, $132,348 and$96,572, respectively.
F-15
<PAGE>
WELLINGTON MANAGEMENT CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 1996 and 1995
NOTE H - RELATED PARTY TRANSACTIONS
Transactions with unconsolidated related parties consist of the following:
Wellington Management Corporation purchased a 34 unit apartment complex
located in Fitchburg, Wisconsin on May 19, 1993, at a total cost of
$1,890,000. On March 31, 1994, the Company then sold the apartment complex
to Wellington Properties Trust (WPT) at a cost of $1,890,000 which includes
commission income of $115,000 and property acquisition and analysis fees of
$47,250 earned by the Company's subsidiary, WMC Realty, Inc. Wellington
Management Corporation received an 8% note receivable from WPT for
approximately $400,500, secured by a mortgage on the property and an
assignment of leases and rents; interest due in monthly installments
beginning May 1, 1994; principal due in one balloon payment on March 31,
1995. WMC Realty, Inc. received an 8% note receivable from WPT for
$162,250; interest due in monthly installments beginning May 1, 1994;
principal paid in one balloon payment on March 31, 1995. WPT assumed the
mortgage note outstanding on the complex in the amount of $1,321,751.
On July 18, 1994, Wellington Management Corporation subscribed for 70,000
common shares of WPT. In exchange, Wellington Management Corporation reduced
its 8% note receivable by $300,000. The remaining $100,500 was paid during
the year ended March 31, 1995.
F-16
<PAGE>
EXHIBIT A
[LETTERHEAD OF REINHART, BOERNER, VAN DEUREN, NORRIS & RIESELBACH, S.C.]
January 21, 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
Re:
Removal of Decade Companies, a Wisconsin
general partnership ("Decade") as General
Partner of the Partnership
Dear Limited Partners:
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.
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.
A-1
<PAGE>
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.
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.
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
A-2
<PAGE>
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 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 consent to the filing of this opinion with the
Proxy Statement of Arnold K. Leas and Wellington Management Corporation dated
January 21, 1997. 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.
/s/ Gary A.
Hollman
By __________________________________
Gary A. Hollman
A-3
<PAGE>
ATTACHMENT 1
CERTIFICATE OF WELLINGTON MANAGEMENT
CORPORATION RELATED TO
DECADE COMPANIES INCOME PROPERTIES--
A LIMITED PARTNERSHIP
Wellington Management Corporation ("WMC"), on its own behalf and on the
behalf of Decade Companies Income Properties--A Limited Partnership (the
"Partnership"), hereby certifies, warrants and represents to Reinhart,
Boerner, Van Deuren, Norris and Rieselbach, s.c. ("Reinhart") that following
the removal of Decade Companies and the designation and appointment of WMC as
the new General Partner of the Partnership:
1. The Partnership will be continued and operated pursuant to and in
accordance with the Amended and Restated Agreement of Limited Partnership
entered into September 30, 1996.
2. The Partnership will, at all times, be operated in accordance with the
provisions of the Wisconsin Revised Uniform Limited Partnership Act and any
other applicable state statutes relating to limited partnerships.
3. Within 30 days after the designation and appointment of WMC as the new
General Partner of the Partnership, WMC will execute a written acceptance
of the duties and responsibilities of the General Partner of the
Partnership.
4. WMC will be actively involved as General Partner in the management and
operation of the Partnership.
WMC acknowledges that Reinhart will rely on this Certificate in rendering
certain opinions to the Limited Partners of the Partnership and hereby
consents to such reliance.
This Certificate is dated as of January 21, 1997.
WELLINGTON MANAGEMENT CORPORATION
/s/
By: _________________________________
Robert F. Rice,
Vice President and General
Counsel
<PAGE>
Arnold K. Leas, a Limited Partner of
Decade Companies Income Properties
January 27, 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
January 27, 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 consent to the filing of this opinion with the
Proxy Statement of Arnold K. Leas and Wellington Management Corporation dated
January 27, 1997. 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 /s/ Gary A. Hollman
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. If you are the beneficial owner of Interests held of record in
another name (for example, in the name of an IRA or other trust account), your
signature above will constitute your direction to the record owner to execute
this Notification in the manner you vote and to deliver the executed
Notification as directed herein.
1
<PAGE>
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
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.
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.
2
<PAGE>
[Name of Owner and Number of
Interests Owned]
- ------------------------------------- -------------------------------------
*Signature Date
- ------------------------------------- -------------------------------------
*Signature (If jointly held) 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. If you are the beneficial owner of Interests held of
record in another name (for example, in the name of an IRA or other trust
account), your signature above will constitute your direction to the record
owner to execute this Limited Power of Attorney and to deliver the executed
Limited Power of Attorney as directed herein.
3
