Company Name: TDL Country Club, Inc.
Public Availability Date: 02-13-1984

INQUIRY LETTER

PEPER, MARTIN, JENSEN, MAICHEL AND HETLAGE
TWENTY-FOURTH FLOOR, 720 OLIVE STREET
ST. LOUIS, MISSOURI 68101
TELEPHONE(314) 421-3850

December 13, 1983

1933 Act 2(1), 5

Securities and Exchange Commission
Office of Chief Counsel
Division of Corporate Finance
450 5th Street, N.W.
Judiciary Plaza
Washington, D.C. 20549

Re: TDL Country Club, Inc.

Gentlemen:

TDL Country Club, Inc. (the "Club") is a not-for-profit corporation organized to acquire, own and operate a country club in St. Francois and Washington Counties, Missouri for the pleasure and recreation of its members. The Club proposes to offer memberships without registration under the Securities Act of 1933, as amended (the "Act"). We are requesting your concurrence in our view concerning the status of Club memberships under the Act and further request that the Staff advise that it will not recommend any enforcement action to the Commission if Club memberships are offered and sold without compliance with the registration requirements of the Act.

The Club is a Missouri not-for-profit corporation organized for the purpose of acquiring, owning and operating a country club and related grounds and facilities for participation in the sports of golf, tennis, swimming and other athletic and outdoor sports and for the promotion of recreation, good fellowship and social intercourse among its members. The Club proposes to acquire most of the assets of the Terre du Lac Country Club consisting of approximately 280 acres of land, including approximately seventy acres allocated for an additional golf course, and improvements and facilities constructed thereon (the "Existing Club"). The Existing Club is located within a 5,200 acre residential development known as Terre du Lac Development, Bonne Terre, Missouri, in which approximately 800 single-family homes have been built. The Existing Club's facilities consist of a twenty-seven hole golf course, tennis courts, outdoor swimming pool, pro shop, pavilion, club house and three chalets.

The Existing Club is currently operated as a privately owned non-proprietary membership club principally for owners of residences and lots in the Terre du Lac Development. The owners of the Existing Club are TDL Country Club Associates, a Missouri limited partnership, and Terre du Lac, Inc., a Missouri corporation, and neither of such entities is affiliated with the Club.

The purchase price payable by the Club for the Existing Club is expected to be approximately Two Million Five Hundred Thousand Dollars ($2,500,000). The purchase price will likely be paid through a combination of cash proceeds from the sale of Club memberships ("New Memberships") and debt. All proceeds from the sale of the New Memberships will be held in escrow under an escrow agreement with a bank until such time as at least $950,000 has been obtained from such sales. Once at least $950,000 has been obtained, such funds will be transferred to the Club to allow the Club to complete the purchase of the Existing Club. In the event at least $950,000 is not obtained from the sale of New Memberships by June 30, 1984, unless extended, then all such funds will be returned to the subscribers of the New Memberships.

The Club is a not-for-profit corporation under Missouri law and is presently applying for tax exempt status under Section 501(c)(7) of the Internal Revenue Code of 1954, as amended. The Club was not formed for pecuniary gain or profit and no part of the income or property of the Club is distributable to its members, directors or officers, who will have no interest in or title to any of the Club's assets or properties. The sole purpose of the Club is to acquire, own and operate the Club for the pleasure and recreation of its members.

The control and management of the property, funds and affairs of the Club will be vested in its Board of Directors. The initial Board consists of six members who will serve until the first annual meeting of the Club at which time members holding New Memberships will elect directors.

The Club will offer New Memberships to the current members of the Existing Club for an initiation fee of $3,000. The Club will honor current memberships in the Existing Club and adopt membership classifications substantially similar to the classifications of the Existing Club; however, the current memberships in the Existing Club may expire on December 31, 1986, and thereafter it is expected that the persons holding existing memberships in the Existing Club may be required to become New Members if they wish to continue to use the Club's facilities. A New Membership will entitle the holder to use certain facilities of the Club so long as the holder remains a member in good standing in compliance with the Club's Bylaws and rules and regulations. Further, during the first three years of a New Membership, a New Member will be entitled to receive a 30% discount on food and beverage purchased at the Club, but not more than $250 per annum discount will be allowed. New Members will pay annual dues in an amount to be determined by the Club's Board of Directors from time to time.

Members will not be entitled to resell their memberships for a profit. The Club retains a right of first refusal with respect to each New Membership, which allows the Club to acquire the New Membership, less a transfer fee, if any. In the event the Club does not exercise its right of first refusal, the New Member may transfer the New Membership to a third party previously approved for membership by the Club at a price not to exceed the price which the transferring New Member paid for his New Membership plus a transfer fee paid to the Club.

Based upon the foregoing facts, it is our view that the New Memberships will not constitute "securities" within the meaning of Section 2(1) of the Act and, accordingly, will not be subject to the registration requirements of Section 5 of the Act.

In SEC v. W. J. Howey Co., 328 U.S. 293, 298-9 (1946), the Supreme Court of the United States held that an "investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party...." As set forth above, it is impossible for a purchaser of a New Membership to resell a membership for a profit and, thus, he can have no expectation of profit at the time he purchases his New Membership. Further, the Club is a not-for-profit corporation. In exchange for their initiation fees and annual dues, members will receive the right to use the club's facilities and certain other rights as described above; such members will not receive any title to or any interest in any of the income or property of the Club, other than distributions not representing pecuniary profits or gains upon distribution or final liquidation of the Club, as provided by the Missouri Not-for-Profit Corporation Law.

We are aware that the Staff has issued previous "no action" responses regarding the offering of club memberships in non-profit corporations formed for the same purposes as the Club. (See, e.g., Boca Lago Country Club, available October 14, 1981; Sailfish Point Golf Club, Inc., available November 2, 1981; and Rams Hill Country Club, Inc., available December 1, 1982.) In our opinion, the facts presented here are substantially the same as those in previous situations in which "no action" determinations have been made.

In view of the foregoing, we respectfully request your confirmation that the Staff will not recommend any action to the Commission if the Club offers and sells memberships without registration under Section 5 of the Act.

Sincerely,

John R. Short

JRS/pd

STAFF REPLY LETTER

January 13, 1984

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE

Re: TDL Country Club ("TDL")
Incoming letter dated December 13, 1983

On the basis of the facts presented, this Division will not recommend any enforcement action to the Commission if TDL, in reliance upon your opinion as counsel that registration is not required, offers club memberships in the manner described in your letter without compliance with the registration requirements of the 1933 Act. In arriving at this position, we have noted particularly that: (1) members will not be entitled to resell their memberships for a profit, and (2) members will not share in the profits or losses of the club.

Because this position is based upon the representations made to the Division in your letter, it should be noted that any different facts or conditions might require a different conclusion. Further, this response only expresses the Division's position on enforcement action and does not purport to express any legal conclusion on the questions presented.

Sincerely,

Barry T. Mehlman
Attorney Adviser