As filed with the Securities and Exchange Commission on July 14, 1998.
Registration File No. 333-_________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Mount Vintage Plantation Golf Club, LLC
108-1/2 Courthouse Square (overnight delivery)
P.O. Box 706
Edgefield, South Carolina 29824
(803) 637-5304
--------------------------------------------------------
(Address, Including Zip Code, and
Telephone Number, Including Area Code
of Principal Executive Offices)
Bettis C. Rainsford
108-1/2 Courthouse Square (overnight delivery)
P.O. Box 706
Edgefield, South Carolina 29824
(800) 637-5304
--------------------------------------------------------
(Name, Address, Including Zip Code,
and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Eric K. Graben, Esq.
Wyche, Burgess, Freeman & Parham, P.A.
Post Office Box 728
Greenville, South Carolina 29602-0728
(864) 242-8200
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Approximate date of commencement of proposed sale to the public: as
soon as possible after effectiveness. If this form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, check the following box and list the Securities Act registration
statement number of earlier effective registration statement for the same
offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
Proposed Maximum Proposed Maximum
Title of Securities Amount to Offering Price Aggregate Amount of
to be Registered be Registered Per Unit Offering Price Registration Fee(1)
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Membership Units 150 units $20,000 $3,000,000 $885.00
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(1) Calculated pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Preliminary Prospectus (SUBJECT TO COMPLETION) July 14, 1998
Mount Vintage Plantation Golf Club, LLC
(A South Carolina Limited Liability Company)
150 Membership Units
$20,000 per Membership Unit
150 Membership Unit Aggregate Minimum Subscription
Subscription Deadline: September 30, 1998
Mount Vintage Plantation Golf Club, LLC (the "Company") is a
manager-managed, term limited liability corporation organized under the laws of
the State of South Carolina. The Company was formed to develop and operate a
single golf course (the "Golf Course") at Mount Vintage Plantation, a
residential and equestrian community located between Edgefield, South Carolina
and Augusta, Georgia. The manager of the Company is MV Development Company, LLC,
a South Carolina limited liability company (the "Manager"). The Company is
hereby offering (the "Offer" or "Offering") up to 150 membership units at a
price of $20,000 each (the "Membership Units"), with an aggregate minimum
subscription of 150 Membership Units. A Membership Unit is a member's share of
the profits and losses of the Company and a member's right to receive
distributions of the Company's assets. The Company expects to be classified as a
partnership for federal income tax purposes. Investors must subscribe prior to
September 30, 1998 (the "Subscription Deadline") and must pay $1,000 per
Membership Unit to be purchased upon subscribing to the Offering, which amount
shall be placed in escrow. If the minimum subscription of 150 Membership Units
(the "Minimum Subscription") is achieved by the Subscription Deadline and other
conditions are met as described herein, see "The Offering," subscribers must pay
the balance due by October 16, 1998. If the Minimum Subscription is not achieved
by the Subscription Deadline, subscribers' funds will be returned with interest
as described herein. Subscribers must purchase at least one and may purchase
more than one Membership Unit; however, no partial Membership Units will be
offered or sold. The Offering terminates on the day of the Subscription
Deadline. The Manager and/or its affiliates may, but are not required to,
purchase Membership Units offered hereby in order to meet the Minimum
Subscription or otherwise.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriters Proceeds To
Price to Discount And Issuer Or
Public Commissions Other Persons
------ ----------- -------------
Per Membership Unit $20,000 -0- $20,000
Total $3,000,000 -0- $3,000,000
No underwriter is being used in connection with the Offering, and the
Company will bear all expenses of the Offering.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY INVESTORS WITH RESPECT TO THE MEMBERSHIP UNITS. Below is a partial
list of some of the risks involved in an investment in the Membership Units:
- -> The Company is recently organized and has no operating history, and
management has no operating experience related to the golf industry.
- -> The proceeds of the offering are insufficient to meet the requirements
necessary to achieve the Company's business objective of constructing
and operating the Golf Course. The Company expects to obtain a credit
facility to help finance the development and operation of the Golf
Course; however, there can be no assurance that the Company will be
able to obtain a satisfactory credit facility.
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- -> The Company does not currently have title to the land on which the Golf
Course will be constructed (the "Land"). The Company expects to receive
such title free and clear of all liens except for a possible lien
imposed under the credit facility; however, there can be no assurance
that the Company will be able to obtain the Land free of
non-credit-facility-related liens.
- -> The Company may be unable to obtain various regulatory permits
necessary to construct the Golf Course.
- -> Construction delays could cause the Company to miss the first growing
season for the Golf Course grass which could substantially delay
development of the Golf Course.
- -> There are several material income tax risks associated with the
Offering including (1) the risk that the Company could be classified as
a publicly-traded partnership and taxed as a corporation, (2) tax
liabilities could exceed cash distributions resulting in out-of-pocket
tax expenses to investors, (3) upon disposition of an investor's
Membership Units, the investor's tax liabilities may exceed cash
received resulting in out-of-pocket tax expenses, (4) a variety of
limitations on the deductibility of the losses, (5) an audit of the
Company's information return could result in an audit of an investor's
tax return, (6) the risk that certain anti- abuse rules could be
applied to the Company and its Members, (7) the risk of applicability
of alternative minimum tax to Members, (8) various risks associated
with state and local taxation, and (9) risks of new legislation or
regulatory action adversely changing applicable tax rules.
- -> The operation of the Company involves transactions between the Company
and its manager or the manager's affiliates which may involve conflicts
of interest.
In addition to an equity interest in the Company, purchasers of the
Membership Units will also receive the right to a waiver of the initiation fee
for either an individual or a family club membership in the Golf Course (a "Club
Membership"). The Company expects initiation fees initially to range up to
approximately $2,500 for individuals and $3,500 for families. Purchasers of the
Membership Units wishing to obtain Club Memberships will be required to pay
monthly dues which the Company expects to initially range up to approximately
$125 per month for both individual and family Club Memberships. Non-resident
Members (defined as Members living 50 miles or more from the Golf Course) may
opt to receive a waiver of the initiation fee for an individual non-resident
Club Membership (which the Company expects to initially range up to $1,000) and
would be required to pay monthly dues, initially of $50, in order to obtain such
non-resident Club Memberships.
MV Development Co., LLC, also a South Carolina limited liability
company, will serve as Manager of the Company. The Manager will also be a member
of the Company and will contribute approximately 243 acres comprising the Land
located within Mount Vintage Plantation to the Company in exchange for 48
Membership Units. There is currently no public market for the Membership Units,
and the Company does not expect a public market for the Membership Units to
develop, and in order to preserve the Company's partnership status for federal
income tax purposes, the Manager will seek to prevent a public market for the
Membership Units from developing. Membership Units issued to the Manager will be
restricted securities within the meaning of Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). See, "Capital Stock
- -- The Membership Units -- Restrictions on Alienation." The Manager may, but is
not required to, purchase Membership Units offered by this Prospectus. The
Manager may resell Membership Units purchased; however, the Manager has not
determined at this time whether it will sell any Membership Units so purchased
or how long it would hold such Membership Units prior to sale.
The Company will use the proceeds of the Offering to repay debt to the
Manager which has been incurred to develop the Land, to further the development
of the Golf Course and to provide operating income for the Golf Course once
development is completed and it opens for play. The Golf Course will be designed
by Tom Jackson and will encompass substantially all of the Land. The Golf Course
will be a semi-private course offering both memberships for private play and
daily fee play for the general public.
THE OFFER IS NOT BEING MADE IN ANY JURISDICTION IN WHICH THE OFFER OR
THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE
SKY LAWS OF SUCH JURISDICTION. THIS OFFERING IS BEING MADE ONLY IN THE STATES OF
GEORGIA AND SOUTH CAROLINA AND ONLY TO RESIDENTS OF GEORGIA AND SOUTH CAROLINA.
ii
<PAGE>
No person is authorized in connection with the Membership Units to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company. The delivery of this Prospectus
shall under no circumstances create any implication that the information
contained herein is correct as of any date subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-11 (together with all
amendments and exhibits thereto, the "Registration Statement") under the
Securities Act with respect to the Membership Units offered hereby. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company and
the Membership Units, reference is hereby made to the Registration Statement,
including the exhibits and schedules filed or incorporated as a part thereof.
Statements contained herein concerning the provisions of any document are not
necessarily complete and in each instance reference is made to the copy of the
document filed as an exhibit or schedule to the Registration Statement. Each
such statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the Commission. In addition, after effectiveness
of the Registration Statement, the Company will file periodic reports and other
information with the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
The Registration Statement, including the exhibits and schedules
thereto, and the periodic reports and other information filed in connection
therewith, may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Seven World Trade
Center, Suite 1300, New York, New York 10048 and Northwest Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. Such reports, proxy and information statements and other
information may be found at the Commission's Website address,
http://www.sec.gov.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request of such person, a copy of the Registration Statement.
Requests should be made to:
Mount Vintage Plantation Golf Club, LLC
P.O. Box 706
Edgefield, South Carolina 29824
Attention: Don Howard
Tel. (803) 637-5304
The Company will furnish to its Members annual reports containing
audited financial statements examined by its independent public accountants.
Copies of such reports can be obtained by written or telephonic request to the
address or phone number of the Company provided above.
iii
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WHO SHOULD INVEST -- SUITABILITY STANDARDS
Investment in the Company involves a high degree of risk. It may be
difficult to resell Membership Units due to the restrictions on transferability
contained in the Company's operating agreement and because no public market for
the Membership Units currently exists or is likely to develop. The Manager may
actively seek to prevent a public market for the Membership Units from
developing to the extent necessary to preserve the Company's partnership status
for federal income tax purposes. Investors who are able to sell their Membership
Units at all will likely be able to sell such Membership Units only at a
discount. See "Risk Factors -- Lack of Market; Substantial Transfer
Restrictions," and "Capital Stock -- The Membership Units -- Restrictions on
Alienation." The Membership Units are suitable only for persons who have
adequate financial means and desire a relatively long-term investment with
respect to which they do not anticipate any need for immediate liquidity.
If the investor is an individual (including an individual beneficiary
of a purchasing IRA), or if the investor is a fiduciary (such as a trustee of a
trust or corporate pension or profit sharing plan, or other tax-exempt
organization, or a custodian under a Uniform Gifts to Minors Act), such
individual or fiduciary, as the case may be, must represent that he meets
certain requirements, as set forth in the Subscription Agreement attached as
Exhibit "B" to this Prospectus, including the following:
(i) that such individual (or, in the case of a fiduciary, that
the fiduciary account or the donor who directly or indirectly supplies
the funds to purchase the Membership Units) has a minimum annual gross
income of $45,000 and a net worth (excluding home, furnishings and
automobiles) of not less than $45,000; or
(ii) that such individual (or, in the case of a fiduciary,
that the fiduciary account or the donor who directly or indirectly
supplies the funds to purchase the Units) has a net worth (excluding
home, furnishings and automobiles) of not less than $150,000.
As used in the above items (i) and (ii), "net worth" means the excess of total
assets over total liabilities as determined according to generally-accepted
accounting principles. If assets have been depreciated, then the amount of
depreciation relative to any particular asset may be added back in to the
depreciation cost of that asset up to the extent of the current fair market
value of that asset for purposes of determining net worth. See "Glossary -- Net
Worth." Calculations of net worth in the above items (i) and (ii) must exclude
the value of the investor's home, home furnishings and automobiles.
Transferees will also be required to comply with applicable standards,
except for intra-family transfers and transfers made by gift, inheritance or
family dissolution.
iv
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TABLE OF CONTENTS
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AVAILABLE INFORMATION..............................................................................iii
WHO SHOULD INVEST -- SUITABILITY STANDARDS..........................................................iv
SUMMARY ............................................................................................1
The Company.................................................................................1
Business ...................................................................................2
The Offering................................................................................3
Summary of Terms of Membership Units and Operating Agreement................................4
Summary of Affiliate Compensation...........................................................5
Summary of Risk Factors.....................................................................6
Use of Proceeds.............................................................................7
COMPENSATION AND FEES TO THE MANAGER AND AFFILIATES..................................................8
CONFLICTS OF INTEREST................................................................................8
Certain Relationships and Transactions with Affiliates and Beneficial Owners................9
Policies With Respect to Certain Transactions...............................................9
FIDUCIARY RESPONSIBILITY OF THE MANAGER.............................................................10
Manager's Fiduciary Duties under the LLC Act...............................................10
Limitations on a Manager's Liability.......................................................10
Indemnification of Management..............................................................10
RISK FACTORS........................................................................................11
Newly Organized Company....................................................................11
The Company May be Unable to Obtain a Credit Facility on Acceptable Terms..................11
The Company May be Unable to Obtain the Land Free and Clear of Liens and Encumbrances......11
The Company May be Unable to Obtain Environmental and Other Regulatory Permits.............11
Delays up to One Year as a Result of Missed Grass-Growing Season...........................11
Construction Cost Overruns.................................................................12
Limited Liability Company as an Untested Entity............................................12
Lack of Market; Substantial Transfer Restrictions..........................................12
Risks Related to Federal Income Tax Consequences...........................................12
Potential Conflicts of Interest............................................................14
Competition for Management Time............................................................14
Risk of Borrowing..........................................................................14
Golf Industry Risks........................................................................14
Dependence Upon Key Personnel..............................................................15
Environmental Laws and Regulations.........................................................16
Risks of Leverage; No Limitation on Indebtedness...........................................16
Risks Related to Illiquidity of Real Estate Investments and Changing Circumstances.........16
FORWARD-LOOKING STATEMENTS..........................................................................17
PRIOR PERFORMANCE OF THE MANAGER AND AFFILIATES.....................................................18
THE COMPANY.........................................................................................21
General ..................................................................................21
Limited Liability Company Form.............................................................21
Purpose ..................................................................................21
The Golf Course............................................................................21
Federal Income Tax Treatment of the Company................................................23
Legal Proceedings..........................................................................23
BUSINESS ...........................................................................................24
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v
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The Golf Industry in General...............................................................24
Competition in the Golf Course Business....................................................25
Golf Course Development....................................................................25
Environmental and Regulatory Matters.......................................................26
General Plan of Operation of Golf Course...................................................26
Summary of Projected Results of Operations.................................................28
Company Policy with Respect to Investments, Debt and Certain Other Activities..............31
Insurance..................................................................................31
Description of Company Indebtedness........................................................31
THE OFFERING........................................................................................33
Membership Units...........................................................................33
Club Memberships...........................................................................34
PLAN OF DISTRIBUTION................................................................................35
SUMMARY OF PROMOTIONAL AND SALES MATERIAL...........................................................35
USE OF PROCEEDS.....................................................................................36
CAPITAL STOCK -- THE MEMBERSHIP UNITS...............................................................37
Distributions, Redemption, Liquidation, and Pre-emptive Rights.............................37
Voting Rights..............................................................................38
Restrictions on Alienation.................................................................38
Capital Accounts and Capital Contributions in General......................................39
Limitations on Changes in Control..........................................................39
CLUB MEMBERSHIP INITIATION FEE WAIVER...............................................................41
CERTAIN PROVISIONS OF THE LLC ACT AND THE OPERATING AGREEMENT.......................................42
General ..................................................................................42
Federal Income Tax Classification..........................................................42
Classes of Members.........................................................................42
Meetings of Members; Voting................................................................42
Dissolution................................................................................44
Limitations on Liability...................................................................45
Amendment Or Modification of the Operating Agreement.......................................45
REPORTS TO MEMBERS..................................................................................46
MANAGEMENT..........................................................................................47
Management Duties and Selection of Managers................................................47
The Manager................................................................................47
Officers ..................................................................................48
Executive Compensation.....................................................................49
Security Ownership of Management and Certain Beneficial Owners.............................49
Advisory Board.............................................................................49
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.............................................................51
The Offering...............................................................................51
Partnership Status.........................................................................51
Publicly-Traded Partnership Rules..........................................................51
Taxation of Members of the Company.........................................................52
Members' Federal Tax Basis.................................................................53
Other Limits on Losses.....................................................................53
Depreciation and Recapture.................................................................54
Risk of Taxable Income Without Cash Distributions..........................................54
Sale or Other Disposition of Membership Units..............................................55
Sale or Other Disposition of Partnership Property..........................................56
Section 183 "Tax Shelter" Rules............................................................56
Liquidation or Termination of the Company..................................................56
State and Local Taxes......................................................................57
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vi
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Tax Returns and Tax Information............................................................58
Alternative Minimum Tax....................................................................58
Anti-Abuse Rules...........................................................................58
LEGAL MATTERS.......................................................................................58
GLOSSARY ...........................................................................................59
EXHIBIT A: OPERATING AGREEMENT OF THE COMPANY..................................................... A-1
EXHIBIT B: SUBSCRIPTION AGREEMENT................................................................. B-1
EXHIBIT C: FIVE YEAR PROJECTIONS.................................................................. C-1
FINANCIAL STATEMENTS.............................................................................. F-1
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vii
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SUMMARY
The following is a summary of certain information appearing elsewhere
in this Prospectus. As this summary is necessarily incomplete, reference is made
to, and this summary is qualified in its entirety by, the more detailed
information appearing elsewhere in this Prospectus and the Appendices hereto.
This Prospectus contains certain forward-looking statements. Actual results
could differ materially from those projected in the forward-looking statements
as a result of, among other things, the matters discussed in the cautionary
statements contained herein, including, without limitation, the factors set
forth below under "Risk Factors." The information set forth below under "Risk
Factors" should be considered carefully in evaluating the Offer.
For a definition of certain terms used in this Prospectus, see the
Glossary beginning on page 59.
The Company
The Company is a newly-formed, manager-managed, term limited liability
company ("LLC") organized under the laws of the State of South Carolina and has
never conducted any business. Its term of existence ends on December 31, 2050.
The Company was formed solely to develop and operate the Golf Course at Mount
Vintage Plantation, a residential and equestrian community located between
Edgefield, South Carolina and Augusta, Georgia. The Company will be managed by
officers selected by the Manager. The Company's headquarters and sole location
of business will be at Mount Vintage Plantation. The Company will be managed by
MV Development Company, LLC, 108-1/2 Courthouse Square, Post Office Box 388,
Edgefield, South Carolina 29824, telephone 803-637-5304. The Manager is owned by
Mount Vintage Property Co., Inc., Bettis C. Rainsford and Talmadge Knight.
Messrs. Rainsford and Knight are the sole shareholders of Mount Vintage Property
Co., Inc. Messrs. Rainsford and Knight will make all investment decisions for
the Company.
The Golf Course, which will be called Mount Vintage Plantation Golf
Club, will be located in the center of Mount Vintage Plantation (the
"Plantation"), the common areas of which are owned and managed by the Manager.
The Plantation is located approximately 10 miles south of Edgefield, South
Carolina, 13 miles north of Augusta, Georgia and 16 miles west of Aiken, South
Carolina. The Golf Course will be located on the Land, which comprises
approximately 243 acres in the western portion of Mount Vintage Plantation. The
Golf Course will be an 18-hole championship course with what the Company expects
will be a maximum play of 6,835 yards from the back tees. The Company intends
for the facilities of the Golf Course to include a clubhouse, cart storage
facility, maintenance facility, parking lot and course improvements, including
signage, tee markers and cart paths. The main core of the clubhouse facility is
a 2,500 square foot 1840's vintage Southern plantation house that currently
stands on the Land. The overall atmosphere and architectural style of the
facilities will be consistent with the old structure.
Title to the Land is currently held by Mount Vintage Property Co.,
Inc., which owns a majority interest in the Manager. Prior to or at consummation
of the Offering on September 30, 1998, the Company expects that Mount Vintage
Property Co., Inc. will cause the Land to be transferred to the Manager, which
will in turn contribute the Land to the Company free and clear of all liens and
encumbrances other than any lien imposed by a credit facility, which the Company
intends to enter into to help finance the development and operation of the Golf
Course. See "Business -- Description of Company Indebtedness." In the event that
the Manager is unable to contribute the Land to the Company on September 30,
1998 free and clear of all liens and encumbrances other than any lien imposed
under the Credit Facility (as defined herein), then the Company will not
consummate the Offering, and all subscription funds received by the Company will
be returned to subscribers with interest as described in "The Offering."
The Company will be classified and treated as a partnership for federal
income tax purposes as described more fully below. As a partnership, the Company
will not be subject to federal income tax, but will pass through items of
income, gain, deduction, loss and credit to its members. (A purchaser of the
Membership Units offered by this Prospectus will be a "Member" of the Company.
Future initial purchasers of Membership Units and transferees of existing
Members in certain circumstances as provided in the Operating agreement will
also be Members.) Generally items of income, gain, loss, deduction or credit of
the Company will be allocated to Members in accordance with their proportionate
ownership of Membership Units for tax purposes and will have to be reported by
Members on their individual income tax returns. As partners for tax purposes,
Members may be subject to tax on their distributive share of income or gain,
without regard to whether they receive a distribution from the Company.
1
<PAGE>
The Company hopes to make distributions to its Members; however, the
Company cannot predict when it will be able to begin making distributions to its
Members.
Business
The Company's primary areas of competition will be the Aiken/North
Augusta area of South Carolina and Augusta area of Georgia. The area within a
thirty to fifty mile radius of the Golf Course has the equivalent of
approximately 40, 18-hole golf courses. The Company believes that its area of
competition is highly competitive, but that there are adequate rounds of play
remaining to be captured for the Company to compete successfully. The Company
believes that the beauty of the terrain of the Golf Course will be one of its
primary competitive advantages. The Company believes that the Golf Course will
compete most directly with the more high-quality or up-scale golf properties in
the area including Jones Creek, the River Club, the North Augusta Country Club,
the Pine Ridge Country Club and Forest Hills Golf Club. The Company expects to
compete with these up-scale clubs by charging greens fees comparable to the low
end of range fees charged by up-scale competitors. The Company also expects to
compete with lower-priced clubs to some degree, and expects to do so by offering
a higher-quality golf experience than these lower-priced clubs offer.
The Golf Course will be designed by Tom Jackson, President of Tom
Jackson, Inc. Mr. Jackson has designed numerous well-known golf courses,
including the Cliffs of Glassy in Gowensville, South Carolina, Hunters Creek
Plantation in Greenwood, South Carolina, the Fairfield Ocean Ridge at Edisto
Island, South Carolina, the Hyland Hills Golf Club at Southern Pines, North
Carolina, The River Club at Litchfield, South Carolina and the Sandestin Beach
Resort at Destin, Florida. The Manager is obtaining golf course construction
permits on behalf of the Company, and the Company plans to begin construction in
September of 1998. The Company hopes to complete construction of the course in
May of 1999 and begin seeding at that time so that the course will be ready for
play by September of 1999. The Company expects that construction of the Golf
Course club house will begin in November 1998 and continue for approximately one
year. The Company expects to open the Golf Course for play prior to completion
of the club house.
The Company expects that total cost of development of the Golf Course
will be approximately $6.3 million. Development of the Golf Course is currently
being financed by the Manager. Proceeds of the Offering will be used first to
reimburse the Manager for development financed by the Manager prior to the
Offering, and then remaining funds will be used to help finance completion of
development of the Golf Course. See "Use of Proceeds." Completion of development
will also be financed through a credit facility with a commercial bank. See "--
Description of Company Indebtedness." The Company will use proceeds from
operations to make payments on the bank credit facility.
The Company expects to operate the Golf Course as a
semi-private/high-end daily fee golfers' club, offering a combination of
membership and daily fee play. The Company expects to offer both family and
individual memberships. Initiation fees are expected to initially range up to
approximately $3,500 and $2,500 respectively for family and individual
memberships, and monthly dues are expected to initially range up to
approximately $125.00 for both family and individual memberships. The Company
expects to offer individual non-resident Memberships to persons living 50 miles
or more from the Golf Course. Nonresident club members would pay initiation fees
that could initially range up to approximately $1,000 and monthly dues that
could initially range up to approximately $50.00. The Company expects to offer
daily fee play initially ranging from approximately $34.00 for 18 holes on a
weekday to $40.00 for 18 holes on a weekend, which prices include cart rental
currently estimated to be approximately $12.00. All fees stated in this
Prospectus are estimates and are subject to change and are expected to increase
over time.
The Company expects that its golf operations will be run under the
direct supervision of a club manager (the "Club Manager," who is not the same as
the LLC Manager defined in this Prospectus, which is MV Development Company,
LLC). The Company expects to retain a Pro Golfers Association ("PGA")
professional who will have the title of Head Professional. The Company also
expects a qualified Greens Superintendent to provide additional on-site
management. The Company hopes to involve the Greens Superintendent in the early
grass planting process in order to help manage a grow-in period. The Company has
yet to select the Club Manager, the Head Professional or the Greens
Superintendent. One person may hold more than one of these three positions. The
Company does not anticipate difficulty in finding qualified personnel; however,
there can be no assurance that qualified persons can be found.
2
<PAGE>
The Company believes that the overall success of the Golf Course
depends on aggressive, proactive marketing to yield the highest possible average
daily green fees in the market. The initial primary marketing effort will be
directed to the daily fee player, representing the vast majority of play the
Company expects for the Golf Course during its first year.
Development of the Golf Course is currently being conducted by the
Manager. If the Minimum Subscription to the Offering is achieved on September
30, 1998 such that the offering will be consummated, some of the Offering
proceeds will be used to purchase all assets related to such development from
the Manager at a price equal to the expenses incurred by the Manager in relation
to such development along with accrued interest at an annual rate equal to the
prime rate as reported in the Wall Street Journal. See, "The Offering." The
Company expects the total price for such assets to be approximately $200,000,
including accrued interest.
The Company expects to enter into a credit facility (the "Credit
Facility") with a bank or other financial institution to help finance
development of the Golf Course and to provide operating capital for the Golf
Course. The Company is currently in the process of selecting the Credit Facility
provider. The Company expects to have the Credit Facility in place before or on
September 30, 1998. In the event that the Company is unable to procure the
Credit Facility, the Company will not consummate the Offering and will return
all subscription funds it has received to the subscribers as described in "The
Offering." The Company expects to make payments due under the Credit Facility
from operating profits from the Golf Course and from proceeds of the Offering.
The Company expects the Credit Facility to be secured by a mortgage on the Land.
The Company expects the Credit Facility to be a construction and permanent loan
of approximately $3.5 million, to bear an interest rate of approximately 8% to
10% and to have a time to maturity of approximately 12 to 15 years from the date
of inception. The estimates contained in this paragraph are based on the
expectations of the Company. There can be no assurance that the Company will be
able to obtain a Credit Facility with the expected terms.
The Company expects to take depreciation on improvements to the Golf
Course, buildings, normal furniture, fixtures and equipment and computers and
short-lived assets but not on the actual Golf Course itself. The tax basis will
be the cost of the assets depreciated to the Company. The life-time for
depreciation will range from 5 to 39 nine years for federal income tax purposes
and 10 to 40 years for financial purposes, depending on the type of property
depreciated. The straight-line method of depreciation will be used for financial
purposes. For federal income tax purposes, the Company expects to use the
straight-line method for buildings and improvements to the Golf Course and the
double-declining balance method for furniture, fixtures and equipment and for
computers and other short-lived assets.
The Offering
The Company intends to offer a minimum of 150 Membership Units (the
"Minimum Subscription") to the general public in this offering. If the Minimum
Subscription is not achieved by September 30, 1998 (the "Subscription
Deadline"), then the Offering will be canceled and all subscription funds
received by the Subscription Deadline will be returned to the subscribers with
interest as described below. The Manager and/or affiliates of the Manager may,
but are not required to, purchase Membership Units offered by this Prospectus in
order to achieve the Minimum Subscription or otherwise. The Manager or its
affiliates may resell Membership Units purchased; however, neither the Manager
nor its affiliates has determined at this time whether they will sell any
Membership Units so purchased or how long they would hold such Membership Units
prior to sale. The price per Membership Unit is $20,000. There is no public
market for the Membership Units, and the Company will seek to prevent a public
market for the Membership Units or any distributional interest related thereto
from developing in order to preserve the Company's partnership status for
federal income tax purposes.
48 Membership Units will be received by the Manager in a private
placement separate from this Offering in exchange for the Land on which the Golf
Course will be built. The number of Membership Units the Manager will receive
will equal the fair market value of the Land, as determined by independent
appraisal to be $4,000 per acre, divided by $20,000 and rounded down to the
nearest integer. The Manager also purchased one Membership Unit for $20,000 upon
formation of the Company. If the Manager receives Membership Units only in
exchange for the Land and does not purchase any Membership Units in this
Offering, the Manager will own approximately 24.5% of the Membership Units, and
other investors will own 75.5% of the Membership Units.
3
<PAGE>
Offerees subscribing to the Offering will be required to pay in $1,000
upon signing the subscription agreement included as Exhibit B to this Prospectus
(the "Subscription Agreement") making the subscriber a party to the Company's
LLC operating agreement included as Exhibit A to this Prospectus (the "Operating
Agreement"). Funds received by the Company from subscribers ("Subscription
Funds") will be held in escrow by the Manager, pending achievement of the
Minimum Subscription. All subscriptions are irrevocable by the subscriber. If
the Minimum Subscription is attained by the Subscription Deadline, the Company
will issue Membership Units to the subscribers and cause the transfer of the
Subscription Funds (together with any earnings thereon) to the Company's own
accounts for use as described in "Use of Proceeds." If the Minimum Subscription
is not attained by the Subscription Deadline, the Company will cancel the
Offering and return all Subscription Funds within 30 days after the Subscription
Deadline, along with the earnings thereon accrued through the Subscription
Deadline, net of escrow costs, which will be allocated among subscribers on a
pro rata basis based on the amount of their subscription and the length of time
their subscription funds were held in escrow.
The Membership Units offered hereby are being offered only in the
States of Georgia and South Carolina.
Pursuant to the terms of the Operating Agreement, if the Minimum
Subscription is attained by the Subscription Deadline, offerees will be required
to pay the remaining $19,000 due on their Membership Units by October 16, 1998.
Failure to pay the balance due within 60 days of this due date will result in
forfeiture of the Membership Unit and the initial payment. In the event that a
Member's membership and Membership Unit are revoked as provided in this
paragraph, the Company waives any right to proceed against that Member for the
balance due.
In addition to an equity interest in the Company, purchasers of the
Membership Units will also receive the right to a waiver of the initiation fee
for either a family or an individual Club Membership at no additional cost.
Members will be required to pay monthly dues in order to maintain their Club
Memberships. Members living 50 miles or more from the Golf Course may elect to
receive the right to a waiver of the individual non-resident initiation fee.
Non-resident club members are expected to be charged lower monthly dues than
regular family or individual club members.
The Membership Units offered hereby are being sold directly to the
public by officers of the Company. Such persons will receive no sales
commission. All of the costs of the Offering will be born by the Company and
will be paid for out of the proceeds of the Offering. The Company does not
intend to engage any underwriters, brokers or dealers for the distribution of
the Membership Units offered hereby.
Summary of Terms of Membership Units and Operating Agreement
The Membership Units offered by this Prospectus are the only securities
of the Company. Purchase of a Membership Unit pursuant to this Offering makes
one a member of the Company (a "Member"). The Articles of Organization set no
limit on the number of Membership Units that may be issued by the Company. The
par value of a Membership Unit is $20,000. The Operating Agreement permits the
Manager, at its sole discretion, to create and issue other classes of membership
units for the Company and to admit new members. The Articles of Organization
place no restriction on the classes of securities that may be issued by the
Company. The Manager does not, however, have any current intention to create
other classes of membership interests for the Company. There is no public market
for the Membership Units, nor does the Company expect a public market for the
Membership Units to develop. In addition, the interests represented by the
Membership Units may not be readily accepted by lenders as collateral for a
loan. The Manger and the Company will seek to prevent a market for the
Membership Units or the distributional interests pertaining to the Membership
Units from developing in order to preserve the Company's partnership status for
federal income tax purposes. See "-- Restrictions on Alienation."
Net profits, net losses and other items of income, gain, loss,
deduction and credit for the Company will be apportioned among the Members in
accordance with their proportionate ownership of Membership Units. The Company
will establish and maintain a capital account ("Capital Account") for each
Member. From time to time, the Manager will determine in its reasonable judgment
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs, including, without limitation, needs for operating expenses,
debt service including service of debt owed to the Manager, capital
expenditures, reserves, and mandatory distributions, if any. To the extent such
excess exists, the Manager may make
4
<PAGE>
distributions to the Members in accordance with their proportionate ownership of
Membership Units. The Company does not expect to make distributions to Members
in the foreseeable future.
Each Member shall be entitled to one vote for each Membership Unit
owned. It is possible for a Member to transfer his distributional interest under
his Membership Unit without transferring his membership rights; thus it is
possible for voting rights to be separated from distributional rights. Holders
of such separated distributional rights are not entitled to any vote.
Membership and transferability of Membership Units in the Company are
substantially restricted. Neither record title nor beneficial ownership of a
Membership Unit may be transferred or encumbered without the consent of the
Manager at the time of transfer. An unauthorized transfer of a Membership Unit
could create a substantial hardship to the Company and jeopardize its capital
base. These restrictions upon ownership and transfer are not intended as a
penalty, but as a method to protect and preserve the Company's capital and its
financial ability to continue. A Disposition of a Membership Unit in the Company
may not be effected without the consent of the Manager at the time of
Disposition. Under the Operating Agreement, the Company has a
right-of-first-refusal with respect to any transfer of the distributional
interest pertaining to a Membership Unit. The Company may, in its sole
discretion, exercise its right-of-first-refusal to prevent a market for the
distributional interests from developing in order to preserve the Company's
partnership status for federal income tax purposes.
The Operating Agreement provides that there shall only be one manager,
which is the Manager, and that the Manager shall serve as manager for the
duration of the term of the Company's existence. The Manager may be removed only
for cause by the affirmative vote of holders of a majority of the membership
interests in the Company entitled to vote but only upon the condition that the
Manager, and/or any affiliate of the Manager, are also previously or
simultaneously released from any guarantee(s) of any obligations of the Company.
If this offering is fully subscribed, the Manager will own 24.5% of the
Membership Units. Except for situations in which the approval of Members is
required by the Operating Agreement or by nonwaivable provisions of applicable
law, the Manager exercises all of the powers of the Company. The Company will
not hold annual meetings of the Members; however, special meetings of the
Members may be called by the Manager or by holders of at least 25% of the
membership interests in the Company entitled to vote at such a meeting.
Under the South Carolina Uniform Limited Liability Company Act of 1996
(the "LLC Act") and the provisions of the Operating Agreement, Members of the
Company are not liable for the debts, obligations or liabilities of the Company
beyond their contributions to the Company that they gave in exchange for their
Membership Units except as provided by applicable law or except to the extent
that a Member agrees otherwise in writing. A Member is responsible for acts or
omissions to the extent those acts or omissions would be actionable in contract
or tort against the Member if the Member were acting in an individual capacity.
The Company will indemnify the Members, Manager, and agents for all costs,
losses, liabilities, and damages paid or accrued by such Members, Manager or
agents in connection with the business of the Company, to the fullest extent
provided or allowed by the laws of the State of South Carolina.
The Operating Agreement provides that except as otherwise provided
therein or by applicable law, the Operating Agreement may be amended and
modified from time to time only by a written instrument adopted and executed by
a majority of the Members. No Member or Manager will have any vested rights in
the Operating Agreement.
Summary of Affiliate Compensation
The Company expects that it will pay the Manager a fee for its services
of $1,000 per month commencing in October of 1999.
The President and Chief Executive Officer of the Company will initially
be Don Howard. Mr. Howard will be paid $100,000 on closing of the Offering in
compensation for his services to the Company relating to its formation. The
Company has not yet determined what the President's compensation will be
following consummation of the Offering.
Talmadge Knight will be the Vice President of the Company, and Bettis
Rainsford will be Secretary, Treasurer and Chief Financial Officer of the
Company. Mr. Knight and Mr. Rainsford are the sole shareholders of Mount Vintage
Property Co., Inc. which holds a majority ownership interest in the Manager.
5
<PAGE>
Mr. Knight and Mr. Rainsford own the minority ownership interests in the Manager
and are the principal officers of the Manager. Mr. Knight and Mr. Rainsford will
receive no compensation for their service as officers of the Company.
Summary of Risk Factors
Investment in the Membership Units involves a high degree of risk. The
Company is subject to several risk factors, which are summarized below. This
summary is subject to and qualified in its entirety by the full discussion of
risk factors contained herein under the heading "Risk Factors," which discussion
is incorporated herein by reference.
The Company is recently organized and has no operating history. It is
subject to the risks generally associated with the formation of any new
business. The Manager has limited experience in operating a golf course.
The proceeds of this Offering will not be sufficient to fully finance
the development and operation of the Golf Course. The Company expects to obtain
a credit facility with a commercial bank or other financial institution (the
"Credit Facility") prior to or at consummation of the Offering on September 30,
1998. There can be no assurance that it will be able to obtain a Credit Facility
on acceptable terms. If the Company is unable to obtain an acceptable Credit
Facility by September 30, 1998, it will not consummate the Offering and all
subscription funds will be returned to subscribers with interest.
Mount Vintage Property Co., Inc. intends to pass title to the Land to
the Manager, which will in turn pass title to the Company free and clear of all
liens, except for any lien imposed under the Credit Facility, upon consummation
of the Offering on September 30, 1998. There can be no assurance that the
Manager will be able to contribute the Land to the Company free and clear of all
liens other than a lien imposed under the Credit Facility. In the event that the
Company is unable to obtain the Land free and clear of all liens by September
30, 1998, other than a lien imposed under the Credit Facility, it will not
consummate the Offering and all subscription funds will be returned to
subscribers with interest.
In order to construct the Golf Course, the Company must obtain a
variety of permits from various federal, state and local regulatory agencies
including, without limitation, permits from the U.S. Corps of Engineers
pertaining to wetlands and permits from the South Carolina Department of Health
and Environmental Control. The Company will apply for these permits; however,
there can be no assurance the Company will be successful in obtaining any or all
necessary permits. If the Company is unable to obtain the required permits,
construction of the Golf Course could be substantially delayed or require
substantial modification that could have a material adverse effect on the
Company.
The development schedule of the Golf Course is dictated by factors such
as the growing season for grass which are beyond the ability of the Company to
adjust. If delays in construction of the Golf Course were to occur such that the
Company could not seed the Golf Course in time to take advantage of the growing
season for grass in a particular year, the development of the Golf Course or the
commencement of operations could be delayed by as much as a year until the next
growing season arrives.
The Company has not yet entered into any contracts for construction of
the Golf Course and/or Golf Course facilities and cannot predict the final terms
of such contracts. The Company expects that such construction contracts will be
on a "cost plus" basis such that there will be no absolute cap on the cost of
construction, so construction costs could be substantially higher than the
estimates contained herein, which could have an adverse effect on the Company's
financial situation.
There are several material income tax risks associated with the
Offering including (1) the risk that the Company could be classified as a
publicly-traded partnership and taxed as a corporation, (2) tax liabilities
could exceed cash distributions resulting in out-of-pocket tax expenses to
investors, (3) upon disposition of an investor's Membership Units, the
investor's tax liabilities may exceed cash received resulting in out-of-pocket
tax expenses, (4) a variety of limitations on the deductibility of the losses,
(4) an audit of the Company's information return could result in an audit of a
Member's tax return, (5) the risk that certain anti-abuse rules could be applied
to the Company and its Members, (6) the risk of applicability of alternative
minimum tax to Members, (7) various risks associated with state and local
taxation, and (8) risks of new legislation or regulatory action adversely
changing applicable tax rules.
6
<PAGE>
In addition to the risk factors summarized above, the Company is
subject to a variety of other risk factors detailed below including risks
pertaining to (1) the new and relatively untested nature of the limited
liability company as a legal entity, (2) the lack of a public market for the
Membership Units offered hereby and the existence of restrictions on the
transfer of the Membership Units, (3) potential conflicts of interest on the
part of the Manager, (4) competition for management's time, (5) risks associated
with borrowing by the Company, (6) a variety of risks related to the nature of
the golf industry, (7) the dependance of the Company on certain key personnel,
(8) risks associated with environmental laws and regulations, (9) risks
associated with leverage and the lack of limitation on the Company's ability to
borrow money, and (10) risks associated with the illiquid nature of real estate
investments and changing conditions.
Use of Proceeds
The following table reflects the estimated application of the net
proceeds from the sale of the Membership Units offered hereby.
<TABLE>
<CAPTION>
<S> <C>
Maximum
Dollar Amount Percent
---------------------- ----------------
Gross offering proceeds....................... $3,000,000 100%
Public offering expenses
Underwriting discount and commissions ..... -- --
Organization expenses ..................... $100,000 3%
---------------------- ----------------
Amount available for investment............... $2,900,000 97%
====================== ================
Purchase of Assets from the Manager........... $200,000 7%
====================== ================
Development of the Golf Course................ $2,700,000 90%
====================== ================
Total application of proceeds................. $3,000,000 100%
</TABLE>
The Company intends to use the net offering proceeds for the following
purposes in the order of priority in which they are listed. Proceeds will first
be used to purchase all assets from the Manager related to the development of
the Golf Course prior to consummation of the Offering. The price of the assets
will equal the expenses incurred by the Manager in the development of the Golf
Course prior to consummation of the Offering plus interest at an annual rate
equal to the prime rate as quoted in the Wall Street Journal. Remaining Proceeds
will be used to directly finance development of the Golf Course. Completion of
the development of the Golf Course will also be financed by the Bank Credit
Facility. See "Business -- Description of Company Indebtedness." In the event
that net offering proceeds remain after completion of the development of the
Golf Course or if the Company deems it necessary in order to service the Credit
Facility, proceeds will be used by the Company to make payments due under the
Credit Facility or otherwise pay down the outstanding balance under the Credit
Facility. In the event that any proceeds remain after being used for the
purposes described above, such remaining proceeds will be used for operating
capital of the Company. The Company does not expect any net offering proceeds to
remain after completion of development of the Golf Course.
7
<PAGE>
COMPENSATION AND FEES TO THE MANAGER AND AFFILIATES
The table below provides summary disclosure of the compensation and
fees to be received by the Manager and affiliates of the Manager in connection
with the Offering and the operations of the Company to the extent determined to
date.
<TABLE>
<CAPTION>
<S> <C>
Recipient of Fee or Compensation Description of Fee or Compensation Amount of Fee or Compensation
- -------------------------------- ---------------------------------- -----------------------------
MV Development Company, LLC Monthly Management Fee $1,000/month
Company Manager Commencing October 1999
MV Development Company, LLC Membership Units to be received in $960,000
Company Manager return for contribution of the Land 48 Membership Units
MV Development Company, LLC Purchase price of assets related to $200,000
Company Manager development of Golf Course prior to
consummation of the Offering
Donald P. Howard, President & CEO Services rendered in fostering $100,000
Agent of Manager (1) organization and development of the
Company
</TABLE>
(1) In addition to his service as President and CEO of the Company, Mr.
Howard performs services unrelated to the Company for MV Development
Company, LLC.
The Manager will participate in distributions to the Company's Members
in the same fashion as other Members to the extent of its ownership interest in
the Company. The Company cannot predict at this time when it may make
distributions to its Members.
CONFLICTS OF INTEREST
The Manager is MV Development Company, LLC, a South Carolina LLC
("Development"). A majority of the interests in Development is owned by Mount
Vintage Property Co., Inc., a South Carolina corporation ("Property"). Property
is primarily engaged in the business of owning and managing the approximately
4,000 acres of property which comprise Mount Vintage Plantation. Development is
primarily engaged in the business of developing lots within Mount Vintage
Plantation for residential use. See "The Company -- The Golf Course -- Mount
Vintage Plantation." The Golf Course will be located in Mount Vintage
Plantation. Property is owned in equal shares by Bettis C. Rainsford and
Talmadge Knight. Messrs. Rainsford and Knight own the minority interests in and
have managerial control over Development. Donald P. Howard, in addition to his
service as the Company's President and CEO, performs services for the Manager
related to its property development activities.
Bettis C. Rainsford Talmadge Knight
- ----------------------------- ------------------------------
Mount Vintage
Property Co., Inc.
-------------------------
MV Development Company, LLC
---------------------------
Mount Vintage Plantation
Golf Course, LLC
-------------------------
8
<PAGE>
Certain Relationships and Transactions with Affiliates and Beneficial Owners
The Manager will receive 48 Membership Units in a private placement
separate from this Offering in exchange for its contribution of the Land for the
Golf Course to the Company. The number of Membership Units to be received by the
Company will be determined by dividing the fair market value of the Land, as
determined by independent appraisal to be $4,000 per acre, by $20,000 and
rounding down to the nearest integer. The Manager also purchased one Membership
Unit for $20,000 upon formation of the Company.
The Manager is developing the Golf Course prior to consummation of the
Offering. If the Minimum Subscription to the Offering is achieved on September
30, 1998 such that the offering will be consummated, some of the Offering
proceeds will be used to purchase all assets related to such development from
the Manager at a price equal to the expenses incurred by the Manager in relation
to such development along with accrued interest at an annual rate equal to the
prime rate as reported in the Wall Street Journal. See, "The Offering." The
Company expects the total price for such assets to be approximately $200,000,
including accrued interest.
The Operating Agreement permits the Manager to make loans to the
Company in the future on terms that are at least as favorable to the Company as
the terms the Company could be reasonably expected to receive from unrelated
third parties in arm's length transactions.
The Operating Agreement provides that the Manager may designate a
stated compensation for itself subject to the approval of holders of a majority
of the membership interests in the Company entitled to vote. The Company expects
to pay the Manager a fee for its services of $1,000 per month beginning in
October, 1999.
Mr. Howard provides various marketing services to the Manager in
connection with matters unrelated to the Company for which he receives
compensation. Mr. Howard also expects to purchase a tract of real estate in
Mount Vintage Plantation from the Manager in connection with his services to the
Manager on matters unrelated to the Company.
Policies With Respect to Certain Transactions
The Manager will not be required to manage the Company as its sole and
exclusive function and it (or any Member) may have other business interests and
may engage in other activities in addition to those relating to the Company.
Neither the Company nor any Member will have any right by virtue of the
Operating Agreement to share or participate in such other investments or
activities of a Manager or Member or to the income or proceeds derived
therefrom. The Manager or Member will incur no liability to the Company or to
any of the Members as a result of engaging in any other business or venture
except as required by non-waivable provisions of applicable law and as otherwise
provided in the Operating Agreement. Participation by the Manager or any officer
of the Company in any business activity, including without limitation,
developing, owning, investing in, or operating another golf course shall not be
a violation of the Manager's or any officer's duty of loyalty to the Company
solely because the Manager or officer participates in such business activity.
No contract or transaction (i) between the Company and the Manager or
one or more officers, or (ii) between the Company and any other limited
liability company, corporation, partnership, association, or other organization
in which one or more of its managers, directors or officers are also officers of
the Company or officers or members of the Manager or have a financial interest
in the Company or the Manager, will be void or voidable solely because the
Manager or officer authorizes the contract or transaction if:
(1) The material facts as to the relationship or interest and as
to the contract or transaction are disclosed or are known to
the Members entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of
a majority of the Members; or
(2) The contract or transaction is fair as to the Company as of
the time it is authorized, approved, or ratified by the
Manager or the Members. A contract or transaction is deemed
fair to the Company if its terms are comparable to those which
would result from arm's length
9
<PAGE>
negotiations with unrelated third parties regarding matters
similar to those covered by the contract or transaction in
question.
Notwithstanding the preceding paragraph and any other provisions of the
Operating Agreement and to the extent permitted by applicable law, the Manager
and/or affiliates of the Manager are expressly permitted by the Operating
Agreement, without prior approval of the Members, to make loans and advances to
the Company for the purpose of developing the Land for use as the Golf Course,
for the operating expenses of the Golf Course and for other purposes reasonably
related to the business of the Company provided the terms of such loans or
advances are either comparable to, or more favorable to the Company than, terms
which would result from arm's length negotiations with unrelated third parties
for loans or advances to the Company for similar purposes. Upon dissolution of
the Company, any such debt to the Manager will have the same priority of payment
as debt to any other creditor of the Company.
FIDUCIARY RESPONSIBILITY OF THE MANAGER
Manager's Fiduciary Duties under the LLC Act
A manager of a South Carolina LLC is accountable to an LLC as a
fiduciary and under the LLC Act owes the LLC and its members a duty of loyalty
and a duty of care. Such a manager is required by the LLC Act to discharge its
duties and to exercise any rights it may have consistently with an obligation of
good faith and fair dealing to the Company and its Members. This is a rapidly
developing and changing area of the law, and Members who have questions
concerning the duties of the Manager should consult with their counsel.
Limitations on a Manager's Liability
Section 33-44-303 of the LLC Act provides that the Manager is not
personally liable for a debt, obligation or liability of the Company solely by
reason of being or acting as a Member or Manager. Thus the Manager is only
responsible for acts or omissions to the extent those acts or omissions would be
actionable in contract of tort against the Manager if the Manager were acting in
its individual capacity. Section 33-44-302 of the LLC Act provides that the
Company is liable for loss or injury caused to a person or for a penalty
incurred, as a result of a wrongful act or omission, or other actionable
conduct, of the Manager acting in the ordinary course of business of the Company
or with the authority of the Company.
See also, "Conflicts of Interest -- Policies with Respect to Certain
Transactions" for further limitations on the Manager's liability, which is
incorporated herein by reference.
Indemnification of Management
The Operating Agreement provides that the Company shall indemnify the
Manager and agents of the Company for all costs, losses, liabilities, and
damages paid or accrued by the Manager or such agent in connection with the
business of the Company to the fullest extent provided or allowed by applicable
law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
10
<PAGE>
RISK FACTORS
Newly Organized Company
The Company is recently organized, and has no operating history. The net
proceeds of this Offering, as described under "Use of Proceeds," will be used to
develop a new Golf Course, so there is no operating history or financial track
record for the Company. The Company is also subject to the risks generally
associated with the formation of any new business. The Manager has limited
experience in operating a golf course. Accordingly, there can be no assurance
that the Golf Course will generate sufficient revenue from operations to make
any distributions to Members.
The Company May be Unable to Obtain a Credit Facility on Acceptable Terms
The proceeds of this Offering will not be sufficient to fully finance
the development and operation of the Golf Course. The Company expects to obtain
the Credit Facility prior to or at consummation of the Offering on September 30,
1998. The Company is currently engaged in selecting an institution to provide
the Credit Facility; however, there can be no assurance that it will be able to
obtain a Credit Facility on acceptable terms. If the Company is unable to obtain
an acceptable Credit Facility by September 30, 1998, it will not consummate the
Offering and all subscription funds will be returned to subscribers with
interest. See "Business -- Description of Company Indebtedness" and "The
Offering."
Credit facilities generally contain various covenants, conditions and
commitment obligations which bind and restrict the activities of the debtor
thereunder. The Company cannot predict how restrictive such covenants,
conditions and obligations will be. Such restrictions could have a materially
adverse effect on the operations of the Company. In addition, the Credit
Facility may contain provisions providing for a balloon payment. Such provisions
may, for example, amortize payments on a 20 year schedule but require repayment
at the end of a much shorter period such as seven years. The Company cannot
predict whether the Credit Facility will contain any sort of balloon provision.
The existence of a balloon provision in the Credit Facility could materially
restrict the Company's latitude in managing its finances and could have a
material adverse effect on the Company.
The Company May be Unable to Obtain the Land Free and Clear of Liens and
Encumbrances
Title to the Land for the Golf Course is currently held by Mount
Vintage Property Co., Inc., which owns a majority interest in the Manager. Mount
Vintage Property Co., Inc. intends to pass title to the Land to the Manager,
which will in turn pass title to the Company free and clear of all liens, except
for any lien imposed under the Credit Facility, upon consummation of the
Offering on September 30, 1998. There can be no assurance that the Manager will
be able to contribute the Land to the Company free and clear of all liens other
than a lien imposed under the Credit Facility. In the event that the Company is
unable to obtain the Land free and clear of all liens by September 30, 1998,
other than a lien imposed under the Credit Facility, it will not consummate the
Offering and all subscription funds will be returned to subscribers with
interest. See "The Company -- The Golf Course" and "The Offering."
The Company May be Unable to Obtain Environmental and Other Regulatory Permits
In order to construct the Golf Course, the Company must obtain several
federal and state permits, approvals and authorizations, including, without
limitation, a permit from the U.S. Corps of Engineers for dredging and filling
wetlands containing a mitigation plan as required by federal environmental laws
and regulations, a storm water management and erosion control permit (also known
as a grading permit) from the South Carolina Department of Health and
Environmental Control ("DHEC"), and approval of other matters such as installing
a water line and septic tanks or sewage lines. The Company will apply for these
permits and/or approvals. There can be no assurance that the Company will obtain
any or all of the necessary permits and approvals. Failure to obtain one or more
of these permits or approvals could delay construction of the Golf Course and/or
require substantial modification in the plans for construction of the Golf
Course, which could have a material adverse effect on the Company. See "Business
- -- Environmental and Regulatory Matters."
Delays up to One Year as a Result of Missed Grass-Growing Season
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The development schedule of the Golf Course is dictated by factors such
as the growing season for grass which are beyond the ability of the Company to
adjust. If delays in construction of the Golf Course were to occur such that the
Company could not seed the Golf Course in time to take advantage of the growing
season for grass in a particular year, the development of the Golf Course or the
commencement of operations could be delayed by as much as a year until the next
growing season arrives.
Construction Cost Overruns
The Company has not yet entered into any contracts for construction of
the Golf Course and/or Golf Course facilities and cannot predict the final terms
of such contracts. The Company expects that such construction contracts will be
on a "cost plus" basis such that there will be no absolute cap on the cost of
construction. Construction costs are likely to change in response to constant
interplay between on-going construction and planning. Consequently, the Company
may have to pay substantially more to complete construction than initial
estimates indicate, which could have a material adverse impact on the Company's
financial situation.
Limited Liability Company as an Untested Entity
A limited liability company is a new form of business organization that
is intended to combine the benefits of corporate flexibility and limited
liability with the advantages of partnership taxation. Because of the relative
absence of developed law or judicial decisions regarding the operation and
management of limited liability companies, there is no assurance all the
intended benefits will be achieved. See "Certain Provisions of South Carolina
Law and the Company's Articles of Organization and Operating Agreement."
Lack of Market; Substantial Transfer Restrictions
There is no present market for the Membership Units, and the Company
believes none will develop. Consequently, holders of Membership Units may not be
able to liquidate their investments. In addition, the interests may not be
readily accepted by lenders as collateral for a loan. The Company does not
intend to apply for listing or quotation of the Membership Units on any
securities exchange, nor does the Company intend to seek admission of the
Membership Units to trading on NASDAQ or any other automated quotation system.
If a market were to develop, the Membership Units could trade at prices lower
than the initial offering price of the Membership Units.
The transfer of membership interests is subject to certain limitations.
In particular, a Member may transfer his distributional interest in Membership
Units to a transferee without transferring the other rights of a Member. A
transferee of a Member's distributional interest receives only the rights of a
Member if the Member transfers those rights to the transferee with the consent
of the Manager.
Risks Related to Federal Income Tax Consequences
The Company Could be Classified as a Publicly-Traded Partnership and
Taxed as a Corporation
The Company expects to be treated as a partnership for federal income
tax purposes. See "Certain Federal Income Tax Consequences -- Partnership
Status." However, if a market for the Membership Units were to develop, the IRS
could treat the Company as a publicly-traded partnership, which would be treated
as a corporation for federal income tax purposes. In this case, the company
would be taxed directly on items of gain, loss, income and deduction directly,
and holders of the Membership Units would be taxed in the event of a
distribution with respect to their Membership Units or upon disposition of their
Membership Units. The tax consequences in this event could be substantially
different from the tax consequences described herein and could be substantially
less advantageous to investors. See "Certain Federal Income Tax Consequences --
Publicly- Traded Partnership Rules."
Tax Liabilities Could Exceed Cash Distributions Resulting in
Out-of-Pocket Tax Expenses to Investors
The Company expects that Members will be treated as partners in a
partnership for federal income tax purposes. Generally, tax treatment of a
partnership's operations are determined at the partnership level but
"passed-through" and assessed to its partners; therefore, generally, Members
will be taxed on the gains and income of the Company when earned by the Company
in proportion to their equity interest in the Company (and correspondingly,
Members will be allocated losses and deductions when accrued by the
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Company). Thus Members may be allocated gain or income in a tax year even though
they have not received a distribution from the Company. Consequently, Members
will be required to pay such tax liability with personal funds. See "Certain
Federal Income Tax Consequences -- Taxation of Members of the Company."
Upon Disposition of an Investor's Membership Units, the Investor's Tax
Liabilities may Exceed Cash Received Resulting in Out-of-Pocket Tax
Expenses
In the event that a Member sells his or her Membership Units, the
selling Member will realize gain or loss equal to the difference between the
gross sale price or proceeds received from sale and the Member's adjusted tax
basis in the Membership Units. Assuming the Member is not a "dealer" with
respect to such Membership Units and has held the Membership Units for more than
one year, his gain or loss will be long-term capital gain or loss, except for
that portion of any gain attributable to such Member's share of the Company's
"unrealized receivables" and "substantially appreciated inventory," which would
be taxable as ordinary income. Generally, a Member's portion of the Company's
liabilities are included in the Member's basis in his or her Membership Units,
and relief from such liability is treated as part of the amount realized upon
the disposition of Membership Units. If the Member has a negative capital
account balance, the Member's gain on sale could be greater than the amount of
consideration received by the Member from the purchaser excluding the assumption
of Company debt by the purchaser. Thus, the Member could have a taxable gain
that does not reflect cash or property received in the sale, and that Member
would be required to pay tax out of personal funds other than those received
upon the disposition of Membership Units. Similarly, making a gift of Membership
Units could result in taxable gain to the donor because of an accompanying
relief from the donor's share of Company liabilities by the donee. See "Certain
Federal Income Tax Consequences -- Sale or Other Disposition of Membership
Units."
Limitations on the Deductibility of Losses
There are several provisions of the Code and Regulations that may
prevent Members from deducting all of the losses of the Company allocated to
them. Generally, a Member's share of the Company's losses is limited to a
Member's adjusted basis in his or her Membership Units. The deductibility of a
Member's allocable share of the Company's losses is also subject to "at risk"
limitations which limit deductible losses based on the amount a Member has at
risk of loss in the Company and to passive loss limitations which limit the
losses an investor can claim related to certain passive activities. See "Certain
Federal Income Tax Consequences -- Members' Federal Tax Basis -- Limits on
Losses" and "Certain Federal Income Tax Consequences -- Other Limitations on
Losses."
An Audit of the Company's Information Return Could Result in an Audit
of Members' Income Tax Returns
The Company is required to file a federal partnership information
return even though it does not itself pay federal income tax. Such information
return may be audited by the IRS, and such audit may result in adjustments or
proposed adjustments. Any adjustment of the Company's partnership information
return normally will result in adjustments or proposed adjustments of Members'
returns. As a consequence, the IRS could audit some or all Members' income tax
returns as well. Any audit of a Member's return could result in adjustments of
non-partnership as well as partnership income and losses. See "Certain Federal
Income Tax Consequences -- Tax Returns and Tax Information."
Risk of Applicability of Anti-Abuse Rules
In December 1994, the IRS adopted regulations setting forth
"anti-abuse" rules under Code provisions applicable to partnerships which rules
authorize the Commissioner of Internal Revenue to recast transactions involving
the use of partnerships to either reflect the underlying economic arrangement or
to prevent the use of a partnership to circumvent the intended purpose of a
provision of the Code. These rules generally apply to all transactions relating
to a partnership occurring on and after May 12, 1994, and thus would be
applicable to the Partnership's activities. In this regard, the Company is
unaware of any facts or circumstances which would cause the IRS to exercise its
authority to recast any transaction entered into by the Company; however, the
applicability of such rules to the Company's activities is very uncertain, and
no assurance can be given that the Commissioner would not, in the future,
attempt to recast or restructure certain of the Partnership's activities or
transactions. See "Certain Federal Income Taxes -- Anti-Abuse Rules."
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Risk of Applicability of Alternative Minimum Tax
The application of the alternative minimum tax to a Member could reduce
certain tax benefits associated with the purchase of Membership Units. The
effect of the alternative minimum tax upon a Member depends upon his particular
overall tax situation, and each Member should consult with and must rely upon
his or her own tax advisor with respect to the possible application of the
alternative minimum tax provisions of the Code. See "Certain Federal Income Tax
Consequences -- Alternative Minimum Tax."
Risks Associated With State and Local Taxation
Members of the Company will be subject to South Carolina state income
taxation regardless of whether Members are residents of South Carolina. The
Company is required by South Carolina law to withhold income tax for
non-resident Members' allocable shares of the Company's South Carolina taxable
income and gains. Non-South Carolina resident Members may also be subject to
income taxes in their home states on their allocable share of the Company's
income and gains. There may be other state and local income tax consequences of
investing in the Membership Units in addition to those described herein.
Investors are urged to consult their own tax advisors regarding their individual
tax consequences before making a decision to invest in the Membership Units.
Risk of Legislative or Regulatory Action
In recent years, numerous legislative, judicial and administrative
changes have been made in the provisions of the federal income tax laws
applicable to investments similar to an investment in the Membership Units. Such
changes are likely to continue to occur in the future, and no assurances can be
given that any such changes will not adversely affect the taxation of a Member.
Any such changes could have an adverse effect on an investment in the Membership
Units or on the market value of Company property. Each potential investor is
urged to consult with his or her own tax advisor with respect to the status of
legislative, regulatory or administrative developments and proposals and their
potential effect on an investment in the Membership Units.
Potential Conflicts of Interest
The Operating Agreement permits the Manager to engage in business
activities of the type conducted by the Company so long as a majority of the
members approve each specific act or transaction of the Manager that competes
with the Company after full disclosure of all material facts. Accordingly,
certain conflicts of interest may arise in the event that the Manager is
permitted to engage in activities that compete with the Company. Such
competition could adversely affect the operations of the Company.
Competition for Management Time
Officers of the Company devote significant time to other business
interests, including in many instances, resort and residential development on
property adjacent to the Golf Course. As a result, such officers are subject to
competing demands on their time and may not devote sufficient time to the
operations of the Golf Course, which may result in less revenue being generated
from the Golf Course than if they devoted full time to the Golf Course.
Risk of Borrowing
The Company may borrow for various purposes. The effect of any such
borrowing could be to increase the risk of loss to and diminish the net income
of the Company.
Golf Industry Risks
Operating Risks
The Golf Course will be subject to all operating risks common to the
golf industry. These risks include, among other things, (i) increases in
operating costs due to inflation and other factors, which increases may not be
offset by increased dues and fees; (ii) dependence on non-member players, which
may fluctuate and is seasonal; and (iii) adverse effects of general and local
economic conditions. These factors
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could adversely affect the Golf Course's ability to generate revenues and, in
turn, the Company's ability to make expected distributions to the Company's
Members.
Competition; Supply of Golf Courses
The Golf Course faces competition for golfers from other golf courses.
A substantial number of new golf courses have opened in recent years and a
number of new courses currently are under development, or planned for
development, including golf courses located near the Golf Course. These new golf
courses could increase the competition faced by the Golf Course and reduce the
rounds played and revenues associated with the Golf Course. Any such decrease in
revenues may adversely affect the net operating income of the Golf Course.
Investment in Single Business Activity
The Company's current strategy is to acquire only one golf course and
related facilities. As a result, the Company will be subject to risks inherent
in investments in a single business. The effects on cash available for
distribution to stockholders resulting from a downturn in the golf industry will
be more pronounced than if the Company had diversified its investments.
Seasonality
The golf industry is seasonal. Seasonal variations in revenue at the
Golf Course could cause the Golf Course to have insufficient cash to make
scheduled payments under any debt it may have, adversely affecting the ability
of the Company to make distributions to Members. It could also directly reduce
cash available for distribution to Members.
Adverse Weather Conditions
Several climatological factors beyond the control of the Golf Course
may influence the revenues at the Golf Course, including adverse weather such as
hurricanes, heat waves, frosts and floods. In the event of adverse weather or
destruction of the turf grass at the Golf Course, the number of rounds played at
the Golf Course could decrease, which could have a negative impact on revenues
and the results of operations of the Company. The Golf Course may be susceptible
to damage from hurricanes or tornadoes, which damage (including loss of revenue)
is not generally insurable at commercially reasonable rates. Consequently, a
hurricane or tornado may adversely affect the revenues and results of operations
for the Company. Additionally, hurricanes or tornadoes may damage local
accommodations such as hotels and condominiums, thereby limiting play,
particularly at the Golf Course.
Factors Affecting Golf Participation
The success of efforts to attract and retain members at private country
clubs and the number of rounds played at public golf courses historically has
been dependent upon discretionary spending by consumers, which may be adversely
affected by regional and economic conditions. A decrease in the number of
golfers or their rates of participation or in consumer spending on golf could
have an adverse effect on the Company's revenues and results of operations.
Course Conditions
General turf grass conditions must be satisfactory to attract play on
the Golf Course. Severe weather or other factors, including disease and insect
infestation, could adversely affect the turf grass conditions at the Golf
Course. Turf grass conditions at the Golf Course also depend to a large extent
on the quality and quantity of water available. The quality and quantity of
water available is affected by various factors, many of which are beyond the
control of the Company. There can be no assurance that certain conditions,
including drought, governmental regulation or environmental concerns, which
could adversely affect the supply of water to the Golf Course, may not arise in
the future.
Dependence Upon Key Personnel
The Company's success depends to a large extent upon the experience and
abilities of its President, Don Howard, and on the Company's ability to attract
a high quality Club Manager, Head Professional and
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Greens Superintendent and other qualified supervisory personnel. The loss of or
inability to obtain the services of any of these individuals could have a
material adverse effect on the Company, its operations and its business
prospects. The Company's success is also dependent upon its ability to attract,
retain and motivate sufficient qualified personnel. There can be no assurance
that the Company will be able to attract and retain sufficient qualified
personnel to meet its business needs. See "Management."
Environmental Laws and Regulations
The Company is subject to various federal, state and local
environmental laws and regulations governing development of land, particularly,
but not exclusively, laws and regulations pertaining to wetlands. There can be
no assurance that environmental laws and regulations (or the interpretation of
existing regulation) will not become more stringent in the future, that the
Company will not incur substantial costs in the future to comply with such
requirements, or that the Company will not discover currently unknown
environmental problems or conditions. The Company has engaged a contractor to
conduct an initial environmental study on the Land for, among other reasons,
determining if any hazardous waste or other problems or hazards are likely to
exist on the Land; however, such study is not complete, and the Company cannot
predict the results of the study and such study will not be able to provide
complete assurance that the Land is free of any hazardous waste or other
problems. Any such event described above could have a material adverse effect on
the Company. See "Business -- Environmental and Regulatory Matters."
Risks of Leverage; No Limitation on Indebtedness
The Company's Articles of Organization and Operating Agreement do not
limit its ability to incur indebtedness. The Company expects to incur debt under
existing lines of credit or from other lenders in the future, or may issue debt
securities in public or private offerings. Certain of such additional borrowings
may be secured by the Golf Course owned by the Company. There can be no
assurance that the Company, upon the incurrence of debt, will be able to meet
its debt service obligations and, to the extent that it cannot, the Company
risks the loss of some or all of its assets, including the Golf Course, securing
such debt to foreclosure, which could result in a financial loss to the Company.
Adverse economic conditions could result in higher interest rates on variable
rate debt, increasing the risk of loss upon a sale or from a foreclosure.
Risks Related to Illiquidity of Real Estate Investments and Changing
Circumstances
The Company intends to invest in one piece of real estate, the Land for
the Golf Course. Real estate investments tend to be long-term and illiquid.
Consequently, the Company will have minimal ability to vary its portfolio in
response to changing economic, financial and investment conditions. Real estate
values are affected by various factors, including (i) changes in tax laws, (ii)
operating and construction costs, (iii) the location and the attractiveness of
the properties, (iv) changes in interest rates or the availability of long-term
mortgage funds, (v) the ability of the owner to provide adequate maintenance and
insurance of its properties, (vi) adverse changes in general economic
conditions, (vii) increases in operating costs, and (viii) changes in zoning
laws or other governmental regulations. In addition, owners and operators of
real estate may have potential liabilities under environmental and other such
laws. In the event that there is a substantial change in one of the factors
listed above or other factors affecting the value of the Land, the Company has
minimal ability to respond by replacing the Land with another investment.
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FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Such forward-looking statements are based on the beliefs of the Company's
management as well as on assumptions made by and information currently available
to the Company at the time such statements were made. When used in this
Prospectus, the words "anticipate," "believe," "estimate," "expect," "intend"
and similar expressions, as they relate to the Company, are intended to identify
such forward-looking statements. Although the Company believes these statements
are reasonable, prospective purchasers should be aware that actual results could
differ materially from those projected by such forward-looking statements as a
result of the risk factors set forth above or other factors. Prospective
purchasers should consider carefully these factors, as well as the other
information and data included in this Prospectus. The Company cautions the
reader, however, that this list of factors may not be exhaustive and that these
or other factors, many of which are outside of the Company's control, could have
a material adverse effect on the Company and its ability to service its
indebtedness. Furthermore, the Company may not update or revise the
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Prospective
purchasers are cautioned not to place undue reliance on any of the
forward-looking statements included herein. All forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the cautionary statements set forth above. The
safe harbor for forward-looking statements contained in Section 27A of the
Securities Act and Section 21E of the Exchange Act, which limits the liability
of certain persons for forward-looking statements, does not apply to initial
public offerings such as this Offering.
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PRIOR PERFORMANCE OF THE MANAGER AND AFFILIATES
Neither the Manager nor its affiliates have engaged in any prior real
estate investment programs, either public or private, and as a consequence,
neither the Manager nor its affiliates have a "track record" with respect to
real estate investment programs.
The Manager, however, is a South Carolina LLC with three members that
is engaged in the development of Mount Vintage Plantation as a residential
community. See "The Company -- The Golf Course -- Mount Vintage Plantation." The
members of the Manager are Mount Vintage Property Co., Inc., Mr. Talmadge
Knight, and Mr. Bettis C. Rainsford. Mr. Knight and Mr. Rainsford are the only
shareholders of Mount Vintage Property Co., Inc. See "Conflicts of Interest --
Certain Relationships and Transactions with Affiliates and Beneficial Owners."
Mr. Knight is the Vice President of the Company, and Mr. Rainsford is the
Secretary, Treasurer and Chief Financial Officer ("CFO") of the Company. See
"Management." The Plantation currently includes 25 lots of 2 to 5 acres each and
several 8 to 15 acre mini- farms. It is expected that upon completion of
development, the Plantation will comprise in excess of 400 lots. The Plantation
has its own fox hunt facility including a twenty-stall stable and kennels. As of
June 24, 1998, 15 lots had been sold in the Plantation, and one additional lot
is expected to be sold by the end of July. The Manager anticipates that 20 to 24
lots will be sold by September 1998.
In addition to the foregoing, Mr. Rainsford is a general partner in
several small limited partnerships and a shareholder and officer in a
corporation all which have invested in real estate. None of these entities have
more than three investors total, and none of them have raised more than $3.25
million or purchased more than five pieces of real estate. In addition, Mr.
Rainsford has been a general partner or an officer and shareholder in similar
entities in the past. Donald P. Howard, the President and CEO of the Company is
a partner in one general partnership with six partners that invested $350,000 in
one piece of real estate located in South Carolina. Mr. Knight has never been a
general partner in any partnership or limited partnership other than a family
limited partnership, nor a member or manager in an LLC other than the Manager.
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[this page reserved for Map 1 showing location of Mount Vintage Plantation]
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THE COMPANY
Mount Vintage Plantation Golf Club, LLC
P.O. Box 706
Edgefield, South Carolina 29824
(803) 637-5304
General
The Company is a newly-formed manager-managed, term LLC organized under
the laws of the State of South Carolina and has never conducted any business.
The Company was formed solely to develop and operate the Golf Course at Mount
Vintage Plantation, a residential and equestrian community located between
Edgefield, South Carolina and Augusta, Georgia. The Company will be managed by
officers selected by the Manager (MV Development Company, LLC, also a South
Carolina LLC). The Company's headquarters and sole location of business will be
at Mount Vintage Plantation.
Limited Liability Company Form
The Company is a limited liability company formed under the LLC Act.
Its Articles of Organization became effective on May 26, 1998. The LLC Act is
relatively new, and as a consequence, there are many uncertainties as to how its
provisions will be interpreted by courts of law and regulatory bodies, both
federal and local. See, "Risk Factors -- Limited Liability Company as an
Untested Entity." The Company is a term LLC, which means that its existence will
terminate on December 31, 2050, the date specified in its Articles of
Organization; however, its existence may be terminated at the written request of
the Manager or in other events required by the LLC Act or the Operating
Agreement. See "Operating Agreement & the South Carolina LLC Act." The Company
is managed by a manager rather than by its members which means that the Manager
conducts the Company's business. The Manager is thus an agent of the Company,
for purposes of its business, and an act of the Manager, including the signing
of an instrument in the Company's name, for carrying on in the ordinary course
the Company's business or business of the kind carried on by the Company
generally binds the Company. Because the Company is manager-managed, non-
manager members are not agents of the Company and may not bind the Company by
the non-manager members' acts.
Purpose
The sole purpose of the Company is to develop and operate the Golf
Course for a profit. There can be no assurance that this purpose will be
realized or that the Company will be able to provide a return to its Members.
The Operating Agreement permits holders of a majority of the membership
interests in the Company entitled to vote to amend the provisions of the
Operating Agreement defining the purpose of the Company. The Operating Agreement
also permits the merger of the Company, the sale of substantially all assets of
the Company and other change-in-control transactions that could result in a
change in the investment objectives of the Company. See "Capital Stock - The
Membership Units -- Limitations on Changes in Control."
The Golf Course
Mount Vintage Plantation
The Golf Course, which will bear the name of "Mount Vintage Plantation
Golf Club," will be located in the center of Mount Vintage Plantation (the
"Plantation"), the common areas of which are owned and managed by the Manager.
The Plantation is located approximately 10 miles south of Edgefield, South
Carolina, 13 miles north of Augusta, Georgia and 16 miles west of Aiken, South
Carolina. See Map 1. The Plantation encompasses approximately 4,000 acres of
land between Sweetwater Road (S.C. Highway 34) and U.S. Highway 25. Some of this
land constituted the home of Judge Richard Gantt (1767-1850), a prominent South
Carolina judge, who took up residence there in 1796 and who named this
plantation "Mount Vintage." Other persons of historical significance who lived
within the present bounds of Mount Vintage include Christian Breithaupt
(1781-1835), a German immigrant who was a pioneer in the textile industry in
South Carolina, and Benjamin Ryan Tillman (1847-1918), a South Carolina Governor
and United States Senator, who was arguably the most powerful political leader
in South Carolina history. The Plantation encompasses many sites and landmarks
of local historical significance.
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Mount Vintage Plantation is a residential and equestrian community.
Portions of the Plantation are being developed into housing and recreational
areas consistent with maintaining the natural beauty of the property. The
Plantation currently includes 25 lots of 2 to 5 acres each, some located around
a pond and several 8 to 15 acre mini-farms. It is expected that upon completion
of development, the Plantation will comprise in excess of 400 lots. A live fox
hunt hunts on the Plantation and adjacent territory. The Plantation has its own
hunt facility, including a twenty-stall stable and kennels. The Plantation
aspires to be a highly desirable destination for fox hunters on the East Coast.
All properties sold within the Plantation are subject to restrictions designed
to protect its natural beauty. As of June 24, 1998, 15 lots had been sold in the
Plantation, and it is expected that one additional lot will be sold by the end
of June. It is anticipated that 20 to 24 lots will be sold by September 1998.
Golf Course Real Estate
The Golf Course will be located on the Land, which comprises
approximately 243 acres located in the western portion of Mount Vintage
Plantation. The topography of the Land varies from level to undulating or
rolling terrain with several small, meandering creeks and branches, which
provide sources of irrigation ponds for the Golf Course. Much of the acreage is
covered with old, massive hardwoods and southern pines with many unusual rock
outcroppings.
The Golf Course will be an 18-hole championship course with what the
Company expects will be a maximum play of 6,835 yards from the back tees. The
Company expects the course to offer four sets of tees at a variety of lengths to
provide an enjoyable experience to a broad range of golfers with the play from
the shortest tees at about 5,245 yards. The Company expects the course to have
bent grass greens and Bermuda tees and fairways, with a seasonal overseed of rye
grass. The Company intends for the course to have a traditional mix of holes
with 4 par 3's, 4 par 5's and 10 par 4's. The current plan design includes a
traditional "returning nines" concept with holes one and ten beginning, and
holes nine and eighteen returning near the clubhouse facility. The Company
intends to locate a practice range (including target greens and practice
bunkers) and a practice putting green adjacent to the clubhouse. Current plans
include "Clubhouse to Clubhouse" eight-foot wide concrete cart paths throughout
the golf course with quality signage, markers and ball washers.
The Company expects the quality of the greens to meet USGA
specifications. The company intends for the irrigation system to be designed to
provide a fully independent water supply for the Golf Course. Water will be
pumped from on-site lakes. Bulkheading, stonework, bridges and related woodwork
are expected to be constructed and installed for bank stabilization, erosion
control and aesthetics.
The Company intends for the facilities of the Golf Course to include a
clubhouse, cart storage facility, maintenance facility, parking lot and course
improvements, including signage, tee markers and cart paths. The clubhouse, cart
storage and other out-buildings are currently being designed to follow an old
Southern plantation theme. The planned clubhouse is expected to be approximately
5,500 square feet of which 3,000 square feet will be of new construction. The
main core of the clubhouse facility is a currently- existing 2,500 square foot
1840's vintage Southern plantation house. The overall atmosphere and
architectural style of the facilities will be consistent with the old structure.
The new construction will include a pro shop which will be approximately 1,000
square feet, with modern shelving and displays, and a dining facility. In
addition, the clubhouse will have bathrooms/locker rooms of moderate size, small
offices for administrative activities and storage. In addition to the planned
clubhouse, cart storage facility and maintenance facility, the Golf Course may
also include a pool, pool pavilion and tennis facilities; however, no decision
has been made on these matters at this time.
The Company believes that the Land is suitable for the development of a
high-quality golf course. The Company believes that the aesthetic appeal of
Mount Vintage Plantation, home pricing, quality of construction, and
restrictions regarding construction provide a suitable setting for the Golf
Course. The fairways and greens would be situated adjacent to an up-scale
neighborhood with rolling terrain of woodlands and pasture land. There is an
abundance of water available to the site for irrigation, since there are various
streams and branches meandering through the Land. The climate in the Augusta,
Georgia - Edgefield, South Carolina area makes the Golf Course suitable for
year-round play.
Title to the Land is currently held by Mount Vintage Property Co.,
Inc., which owns a majority interest in the Manager. Prior to or at consummation
of the Offering on September 30, 1998, the Company expects that Mount Vintage
Property Co., Inc. will cause the Land to be transferred to the Manager, which
22
<PAGE>
will in turn contribute the Land to the Company free and clear of all liens and
encumbrances other than any lien imposed by the Credit Facility. See "Business
- -- Description of Company Indebtedness." In the event that the Manager is unable
to contribute the Land to the Company on September 30, 1998 free and clear of
all liens and encumbrances, other than any lien imposed under the Credit
Facility, then the Company will not consummate the Offering, and all
subscription funds received by the Company will be returned to subscribers with
interest as described in "The Offering."
Federal Income Tax Treatment of the Company
It is anticipated that the Company will be classified as a partnership
for federal income tax purposes, and as such it generally will be treated as a
"pass-through" entity that is not subject to federal income tax. Items of
income, deduction, gain, loss or credit generally will be allocated
proportionately to the Company's members, which will be treated as partners for
tax purposes. Members may be subject to tax on allocated items, without regard
to whether they receive a distribution from the Company. See "Material Federal
Income Tax Considerations."
Legal Proceedings
The Company is not currently involved in any legal actions; however,
the Company may be involved in legal actions arising in the ordinary course of
its business, including, but not limited to, tort claims resulting from golfing
activities. The Company believes that it will be adequately insured so that
legal actions arising in the ordinary course of business should not have a
material adverse effect on the Company. There can be no assurance, however, that
extraordinary legal actions will not arise. Such extraordinary legal actions
could have a material adverse effect on the Company.
23
<PAGE>
BUSINESS
The Golf Industry in General
Golf's Existing and Increasing Popularity
The Company believes that golf in the United States has shown dramatic
increases in popularity, particularly during the past couple of decades. The
Company expects the rounds-of-golf played to continue to increase over the
long-term, although year-to-year variations have occurred and will occur.
Nature of the "Golf Customer" and the Market
While golfers may tend to be very discriminating both as to price and
quality, the Company believes that the typical customer for play at higher
quality golf courses is willing to regularly pay for a good golfing experience
and is not likely to be easily discouraged from playing golf by economic cycles
or short-term changes in disposable income. Also, the Company believes that the
overall demographics support a strong future market for golf. With the moving of
the "baby boom" generation through middle age, the continued increases in life
expectancies, and the expanding participation by females, minorities, and lower
income individuals, the Company believes that the market for golf is growing
even broader and deeper.
Economic Model of For-Profit Golf
The Company believes that a suitable economic model for a for-profit
golf course operation is that of a cash flow service business. For-profit golf
course operations are not even similar to real estate development as is often
incorrectly expected. It does not depend on the sale of the primary assets to
generate revenue. Also, the primary assets of a golf course operation are not
"used up" (as with other businesses that rely on substantial facilities and
machinery or other equipment that wear out) to produce revenues. In fact, the
Company believes that a bonus for golf courses compared to many businesses is
that the main capital asset, the golf course itself, usually appreciates from
being used by customers instead of being converted into cost of sales or
otherwise being depleted or depreciating in value.
The Company believes that creditors often consider the underlying real
estate of a golf course as secondary collateral to the cash flow from operations
and that the long-term value depends upon (1) attracting and maintaining
customers, (2) maximizing revenues from those customers, and (3) controlling and
effectively using expense dollars to produce net operating income. The net
operating income ("cash flow from operations" or "EBITDA," which means earnings
before interest, taxes, depreciation and amortization) is then used to (1)
service and pay off debt financing, (2) maintain and replace certain assets, and
(3) make distributions to owners/investors.
The Company believes that customers for high-quality golf course
operations, whether daily fee players, semi-private members, or private members
can be motivated to make "buy decisions" by varying degrees of (1) quality
service, (2) quality conditions, and (3) challenging and/or unique course
layouts. Proactive marketing to those customers is an extremely critical, yet
commonly misunderstood or underestimated, element of a successful golf course
business.
Components of Revenues and Expenses
Revenues in the typical for-profit golf course operation include golf
revenues, merchandise sales and food and beverage sales. The Company believes
that golf revenues are by far the most important. Golf revenues include greens
fees, golf cart fees, members' dues, if applicable, members' initiation fees, if
applicable, practice range fees, if applicable, and to varying degrees,
miscellaneous other fees from locker rentals, golf club rentals, outing
administration, limited teaching, etc.
Although it may vary somewhat, the prototypical food and beverage
operation is focused on supporting the golf customer, typically is delivered
from a moderately sized "grille and bar operation" and is profitable.
Merchandise operations may also initially vary somewhat, but the typical pro
shop is focused on support products for the daily fee customer such as balls,
gloves, visors, etc., and other high-margin soft goods. Merchandise sales also
can be both supportive and profitable.
24
<PAGE>
Operating expenses are labor intensive with personnel generally
organized and managed in three functional areas, including "pro shop," golf
course maintenance, and food and beverage. It is not the purpose of this section
to specifically analyze each category of expenses. In general, however, the
Company believes that golf course operations typically have (1) material costs
that, other than costs of merchandise and food and beverage sales, are focused
primarily in the golf course maintenance area, (2) significant lease or purchase
costs for golf carts and maintenance equipment, (3) substantive marketing and
advertising expenses, (4) varying, but often significant, real estate taxes and
insurance costs because of the real estate and facilities involved, and (5) many
of the other costs typically associated with small business operations.
Conclusion
Discussion of the basic aspects of for-profit golf courses and "golf as
a business" is intended to provide an overview to the reader of this Prospectus.
None of the discussions, opinions or implications contained in this section
should be relied on or used as a basis for making an investment, extending a
loan or other decisions without first reading and considering information
relevant to the specific transaction. The information included in this section
represents the opinions of the Company and such opinions are, therefore, not
independent perspectives on "golf as a business."
Competition in the Golf Course Business
The Company's primary areas of competition will be Aiken and North
Augusta, both in South Carolina, and Augusta, Georgia. The area within a thirty
to fifty mile radius of the Golf Course has the equivalent of approximately 40,
18-hole golf courses. The Company believes that its area of competition is
highly competitive, but that there are adequate rounds of play remaining to be
captured for the Company to compete successfully.
The primary modes of competition in the golf industry are quality of
the course, price, convenience of location and aesthetics. Courses in the
greater Augusta market are more conveniently located to a larger population base
compared to the Golf Course. The Golf Course will be highly dependant on
attracting golf rounds from the Aiken and Augusta markets. The Company believes
that the beauty of the terrain of the Golf Course will be one of its primary
competitive advantages. The Company believes that the Golf Course will compete
most directly with the more high-quality or up-scale golf properties in the area
including, Jones Creek, the River Club, the North Augusta Country Club, the Pine
Ridge Country Club and Forest Hills Golf Club. The Company expects to compete
with these up-scale clubs by charging greens fees comparable to the low end of
range fees charged by up-scale competitors. The Company also expects to compete
with lower-priced clubs, which it will do by offering a higher-quality golf
experience. All of the golf clubs with which the Company will compete offer some
type of membership in the form of either an annual greens fee or initiation fee
with monthly dues. The Company believes that rounds played in the area of
competition are roughly equally divided between public rounds on the one hand
and member rounds and outing rounds on the other hand. The Company will offer
semi-private play, which combines memberships based on an initiation fee with
annual dues and daily-fee play for non-members.
Golf Course Development
The Golf Course will be designed by Tom Jackson, President of Tom
Jackson, Inc. Mr. Jackson has designed numerous well-known golf courses
including the Cliffs of Glassy in Gowensville, South Carolina, Hunters Creek
Plantation in Greenwood, South Carolina, the Fairfield Ocean Ridge at Edisto
Island, South Carolina, the Hyland Hills Golf Club at Southern Pines, North
Carolina, The River Club at Litchfield, South Carolina and the Sandestin Beach
Resort at Destin, Florida. Mr. Jackson has been actively designing and building
golf courses since 1965. Prior to starting his own firm in 1971, he worked for
two of the country's leading golf course architects, Robert Trent Jones and
George W. Cobb. During the past 30 years, Mr. Jackson has been involved with
over 100 golf course projects, the majority being located in the Southeast.
These projects include private and semi-private courses, resort courses and
public courses.
The Manager is obtaining golf course construction permits on behalf of
the Company, and the Company plans to begin construction in September of 1998.
The Company hopes to complete construction of the course in May of 1999 and
begin seeding at that time so that the course will be ready for play by
September of 1999. If the Company is unable to begin seeding in the Spring of
1999, development and commencement of operations could be delayed for as much as
a year while the Company waits for the 2000 growing season to begin seeding. See
"Risk Factors -- Delays up to One Year as a Result of Missed Grass-
25
<PAGE>
Growing Season." The Company expects that construction of the Golf Course club
house will begin in November 1998 and continue for approximately one year. The
Company expects to open the Golf Course for play prior to completion of the
clubhouse. Prior to August 1998, development will be limited to architectural
and market studies, surveying, legal consultation and similar activities. Water
for the Golf Course will be obtained from ponds located on the Land. Aiken
Electric Cooperative, Inc. will provide electrical power for the Golf Course.
The Company has not yet entered into a contract with a contractor for
construction of the Golf Course. Several contractors are being considered. The
Company intends to chose a contractor with experience in building golf courses
in the Carolinas and Georgia that can demonstrate adequate financial and other
resources. The Company may select one or multiple contractors to construct the
Golf Course.
The Company expects that total cost of development of the Golf Course
will be approximately $6.3 million. The Company cannot predict what the actual
terms of the construction contracts will be. The Company expects that such
construction contracts will be on a "cost plus" basis such that there will be no
absolute cap on the cost of construction. Construction costs are likely to
change in response to constant interplay between on-going construction and
planning. Consequently, the Company may have to pay substantially more to
complete construction than initial estimates indicate. See "Risk Factors -
Construction Cost Overruns."
Development of the Golf Course is currently being financed by the
Manager. Proceeds of the Offering will be used first to reimburse the Manager
for development financed by the Manager prior to the Offering, and then
remaining funds will be used to help finance completion of development of the
Golf Course. See "Use of Proceeds." Completion of development will also be
financed through a credit facility with a commercial bank. See "-- Description
of Company Indebtedness." The Company will use proceeds from operations to make
payments on the Credit Facility.
Environmental and Regulatory Matters
In order to construct the Golf Course, the Company will need to obtain
several permits, approvals and authorizations from various federal, state and
local regulatory authorities including, without limitation, a permit from the
U.S. Corps of Engineers to dredge and fill wetlands, including a mitigation
plan, a storm water management and erosion control permit (or "grading permit")
from DHEC, DHEC approval to run a waterline from public water mains to the Golf
Course, and the approval of local regulatory officials to install septic tanks
on the property or to connect sewage lines to local public sewage lines. Whether
the Company can obtain a grading permit for part of the Golf Course is
contingent upon prior receipt of the Corp of Engineers permit described above.
The Company will apply for these permits and approvals. The Company is unaware
of any reason why it will be unable to obtain these permits and approvals;
however, there can be no assurance that the Company will be able to obtain any
or all of these permits and approvals. Failure to obtain any of these permits or
approvals could delay development of the Golf Course and/or require substantial
modification in the plans for construction of the Golf Course, which could have
a material adverse effect on the Company. See "Risk Factors -- The Company May
be Unable to Obtain Necessary Environmental and Other Regulatory Permits."
General Plan of Operation of Golf Course
The Company expects to operate the Golf Course as a
semi-private/high-end daily fee golfers' club, offering a combination of
membership and daily fee play. The Company expects to offer both family and
individual memberships. Initiation fees are expected to range up to $3,500 and
$2,500 respectively for family and individual memberships, and monthly dues are
expected to range up to $125 for both family and individual club memberships.
Family memberships are expected to be transferable to subsequent purchasers of
homes located in Mount Vintage Plantation. The Company will also offer
individual non-resident club memberships to potential members living 50 miles or
more from the Golf Course. The Company expects that initiation fees for
individual non-resident club members will range up to $1,000 and monthly dues
will range up to $50.00. The Company may offer Club Memberships with refundable
or partially-refundable initiation fees for persons who may for business or
other reasons need to move away from the area after being a club member for only
a relatively short period; however, the Company has not made a decision on this
matter at this time. The Company expects to offer club members a variety of
privileges; however, the Company has not determined the precise nature of these
privileges at this time. The Company expects to offer daily fee play initially
ranging from approximately $34.00 for 18 holes on a weekday to $40.00 for
26
<PAGE>
18 holes on a weekend, which costs include cart rental which the Company
estimates will initially be approximately $12.00. All dollar amounts of fees
described herein are estimates and are subject to change and are expected to
increase over time. The Company also expects to develop various membership and
annual players' programs for residents of the surrounding Mount Vintage
Plantation residential community and the general public.
The Company expects that its golf operations will be run under the
direct supervision of a club manager (the "Club Manager," which is not the same
as the LLC Manager defined in this Prospectus, which is MV Development Company,
LLC). The Company expects to retain a PGA professional who will have the title
of "Head Professional." The Company also expects a qualified Greens
Superintendent to provide additional on-site management. The Company hopes to
involve the Greens Superintendent in the early grass planting process in order
to help manage a grow-in period. The Company has yet to select a Club Manager,
Head Pro or Greens Superintendent. One person may fill more than one of these
positions. The Company does not anticipate difficulty in finding qualified
personnel; however, there can be no assurance that qualified persons can be
found. See "Risk Factors -- Dependance Upon Key Personnel."
The Company may provide the Golf Course pro shop and food services
operations itself, or it may lease its facilities to outside providers at the
discretion of Company management. The Company expects that all golf course
equipment, other than small tools, will be obtained from major equipment vendors
and may be financed through capital leases or installment notes or some other
method at the discretion of Company management.
The Company believes that the overall success of the Golf Course
depends on aggressive, proactive marketing to yield the highest possible average
daily green fees in the market. The Company expects to retain an experienced
golf niche marketing agency to develop and coordinate the initial marketing
efforts of the Golf Course. The Company also expects to receive initial
marketing support from the Manager, including provision of on-site management
with respect to marketing strategies, programs and projects. The Company's
President, Don Howard, Assistant Professor of Management and Marketing at
Augusta State University, expects to provide marketing advice to the Head
Professional. The initial primary marketing effort will be to the daily fee
player, representing the vast majority of play the Company expects for the Golf
Course during its first year. The Company hopes that marketing techniques
emphasizing unique facilities, quality conditions and superior customer service
will help differentiate the Golf Course in the market place. The Company expects
to interact with local referral sources such as hotels, travel agencies and golf
merchandising stores. The Company expects to focus its advertising efforts
during the prime season months of April through October on local publications
and certain golf periodicals. The Company anticipates developing mutually
beneficial relationships with local businesses in the market area for the
potential development of corporate outings, leagues and tournaments for local
charities. The majority of such play will be scheduled during the slower
weekday, late afternoon and off-season times.
The Company does not know what its real estate taxes will be at this
time because the Company understands that golf course real estate tax rates are
unique to individual courses and are arrived at by negotiations between course
operators and tax authorities. The Company understands that the 1997 real estate
taxes for the neighboring golf courses of Pine Ridge and North Augusta were
$13,216.64 and $19,822, respectively. The Company believes that its real estate
taxes will be comparable to these figures. The Company expects to take
depreciation on improvements to the Golf Course, buildings, normal furniture,
fixtures and equipment and computers and short-lived assets but not on the Golf
Course itself. The following table indicates the life, rate and method of
depreciation the Company expects to take:
27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Federal Income Tax Purposes Financial Purposes
--------------------------- ------------------
Asset Life (years) Method Life (years) Method
- ----- ------------ ------ ------------ ------
Buildings 39 straight-line 40 straight-line
Golf Course Improvements 15 straight-line 15 straight-line
Normal Furniture, Fixtures & 7 double-declining 7 straight-line
Equipment balance
Computers & Short-Lived 5 double-declining 5 straight-line
Assets balance
</TABLE>
The tax basis for all depreciable assets will be the cost of the asset to the
Company, which have not been determined at this time.
Summary of Projected Results of Operations
The summary projections contained in this subsection are derived from
the projections included in this Prospectus as Exhibit C and are qualified in
their entirety by the actual projections contained in Exhibit C. These
projections are the Company's good faith estimates of the results of the
Company's future operations, taking into account all material factors known to
the Company. A variety of risk factors could cause the actual results to be
substantially worse than the results contained in this summary and the full
projections contained in Exhibit C. See "Risk Factors." There can be no
assurance that actual results of operations will resemble the projected results
of operations summarized below and contained in Exhibit C.
Pre-Closing Projections (Through September 30, 1998)
By the Closing Date of this Offering (September 30, 1998), the Company
will have incurred approximately $271,000 of expenses related to the initial
development of the Golf Course. Approximately $200,000 of this amount represents
the purchase of assets from the Manager related to the development of the Golf
Course prior to consummation of the Offering. See "Conflicts of Interest --
Certain Relationships and Transactions with Affiliates and Beneficial Owners."
$20,000 will be covered by funds received from the Manager from its purchase of
the first Membership Unit of the Company at the organization of the Company. The
remaining $51,000 will be expenses accrued in September 1998 which will be paid
out of proceeds of the Offering. Approximately $232,000 of these expenses are
related to the cost of designing the Golf Course, market research, legal,
accounting and offering fees and pre-opening marketing costs, and $39,000 is
related to Golf Course construction, primarily wetlands delineation and
surveying.
Post-Closing Construction Period (October 1, 1998 to September 30, 1999)
The Company expects the proceeds of this Offering to cover all of its
expenditures through February of 1999, after which it will require borrowing
under the Credit Facility to continue to finance expenditures. The Company
expects to acquire title to the Land for the Golf Course on the Closing Date.
The Company expects to commence substantial Golf Course construction in October
1998. The Company expects to commence construction of the club house for the
Golf Course in November 1998. The Company expects total expenditures from
October 1, 1998 to September 30, 1999 to be approximately $5,331,000. Of this
amount, the Company expects that approximately $174,000 will be related to the
cost of designing the Golf Course, market studies, legal, accounting and
offering fees and pre-opening marketing costs. The Company expects that,
approximately $3,700,000 will be related to construction of the Golf Course,
approximately $373,000 will be related to the purchase, lease or maintenance of
equipment, approximately $835,000 will be related to the construction of the
Golf Course club house, cart storage and maintenance facilities, and grounds,
$184,000 will be related to construction interest, and $65,000 will be a reserve
for operating losses. The Company expects to borrow approximately $2,582,000
under the Credit Facility, and use $2,749,000 out of the expected $3,000,000 of
gross Offering proceeds to finance these expenditures.
28
<PAGE>
Five Year Projections (October 1, 1999 to December 31, 2003)
The Company does not expect to began to show a positive cash flow until
the calendar year 2002. The Company expects to expend a total of approximately
$9,257,000 (excludin depreciation) through the end of the calendar year 2001.
(The Company expects to use the calendar year as its fiscal year). The Company
expects to meet this expenditure with the $3,000,000 Offering Proceeds, the
$20,000 it received from the sale of the first Membership Unit to the Manager,
total expected operating income for the period January 1, 2000 to December 31,
2001 of $2,858,000, and borrowings under the Credit Facility of approximately
$3,379,000 (excluding depreciation). The table below summarizes the projected
results of operations for the period October 1, 1999 to December 31, 2003.
<TABLE>
<CAPTION>
<S> <C> <C>
Oct. 1 to Dec. 31 Calendar Year Calendar Year Calendar Year Calendar Year
1999 2000 2001 2002 2003
-------------------- ------------------- ------------------ ------------------ ----------------
Operating Income $ 223,697 $1,362,440 $1,495,618 $1,759,444 $1,880,563
Total Expenses $506,900 $1,520,700 $1,574,110 $1,612,081 $1,642,801
Net Income ($283,203) ($158,260) ($78,492) $147,363 $237,762
Net Change in Cash ($259,870) ($88,260) ($8,492) $16,176 $94,738
</TABLE>
Assumptions Underlying Five-Year Projections
The projected Golf Course expenses are management's estimates of the
costs that will be associated with Golf Course operations. The estimates are
based on management's knowledge of the industry and comparable operating results
of other local golf courses. The projections assume an increase in operating
expenses of 5% for the year 2001 and 4% for the years 2002 and 2003. Projected
additions to buildings, machinery and equipment, and furniture and fixtures are
approximately $1.3 million. Depreciation is projected on a straight-line basis
over forty years for buildings and seven years for machinery and equipment and
furniture and fixtures.
Club membership (not to be confused with Company Membership)
assumptions are based on net annual club membership growth of 100% in year 2000,
50% in year 2001, 25% in year 2002, and 20% in year 2003, and an 8% attrition of
annual club membership each year.
<TABLE>
<CAPTION>
<S> <C> <C>
Oct. 1 to Dec. 31 Calendar Year Calendar Year Calendar Year Calendar Year
1999 2000 2001 2002 2003
--------------------- ------------------- ------------------ ------------------ ----------------
Total Members 100 200 276 318 352
Initiated
Memberships Lapsing (--) (16) (22) (25) (28)
------ ---- ---- ---- ----
Net Total Members 100 184 254 293 324
</TABLE>
Assumptions with respect to total rounds played for each year are
management estimates. The total club member rounds played in the years 2000
through 2003 is determined by assuming that each club member plays on average 35
rounds a year. Non-club member weekend and weekday rounds are allocated on a
three-to-one ratio, respectively. The Masters Golf Tournament is a unique event
for local golf, and management believes that the demand for golf play during
that week will be much higher than usual. Management's projected increase for
rates and usage during that week are based on information and course activity in
the local area for that week.
<TABLE>
<CAPTION>
<S> <C> <C>
Oct. 1 to Dec. 31 Calendar Year Calendar Year Calendar Year Calendar Year
1999 2000 2001 2002 2003
--------------------- ------------------- ------------------ ------------------ ----------------
Member Rounds 800 6,440 8,890 10,255 11,340
Non-Member Rounds
29
<PAGE>
Weekend Rounds 2,869 10,920 10,958 12,184 13,245
Weekday Rounds 956 3,640 3,652 4,061 4,415
-------- -------- -------- -------- --------
Total 3,825 14,560 14,610 16,245 17,660
------- ------- ------- ------- -------
Total Regular Rounds 4,625 21,000 23,500 26,500 29,000
Masters Week Rounds N/A 1,120 1,120 1,120 1,120
======= ======== ======== ======== ========
Total Rounds Played 4,625 22,120 24,620 27,620 30,120
</TABLE>
Management expects that club member monthly fees will be collected for
three months in 1999. Management assumes that cart fees will be included in the
average Masters week green fee. Cart fees, practice range fees, grill and
beverage income, and other income are based on management's knowledge of the
industry and comparable operating results of local golf courses.
The projections assume that the Company will obtain a long-term loan of
$3.5 million, bearing interest at an annual rate of 9% with interest only paid
for the first three years of the term of the loan.
<TABLE>
<CAPTION>
<S> <C> <C>
Oct. 1 to Dec. 31 Calendar Year Calendar Year Calendar Year Calendar Year
1999 2000 2001 2002 2003
--------------------- ------------------- ------------------ ------------------ ----------------
Initiation Fees (waived) $2,500 $2,500 $2,500 $2,500
(Average)
Member Monthly Fee $125 $125 $125 $140 $140
(Average)
Weekend Fees $28 $28 $28 $33 $33
(Average)
Weekday Fees $22 $22 $22 $24 $24
(Average)
Cart Fees (Average) $12 $12 $12 $14 $14
Master Week Fees $80 $80 $80 $100 $100
(Average, incl. cart
fee)
</TABLE>
The following table indicates the total number of employees management
expects the Company to have in the years indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Oct. 1 to Dec. 31 Calendar Year Calendar Year Calendar Year Calendar Year
1999 2000 2001 2002 2003
--------------------- ------------------- ------------------ ------------------ ----------------
Full-Time Employees 24 24 24 24 24
(year round)
Full-Time Employees 7 7 7 7 7
(seasonal)
Part-Time Employees 3 3 3 4 5
(year round) _____ _____ _____ _____ _____
Total Employees 34 34 34 35 36
</TABLE>
30
<PAGE>
Company Policy with Respect to Investments, Debt and Certain Other Activities
The Company is borrowing money from the Manager to finance initial
development of the Golf Course. The Company expects to complete development of
the Golf Course and provide initial working capital through a bank credit
facility with a commercial bank. The Company has no plans to engage in further
borrowing at this time. The Company will invest in the Land. The Company does
not expect to invest in any other real estate. The Company does not expect to
engage in any of the following activities: making loans to other persons or
entities, investing in the securities of other entities in order to exercise
control, underwriting the securities of other issuers, engaging in the purchase
or sale of investments, investing in mortgages or investing in other securities.
The Company does not expect, at this time, to issue any securities senior to the
Membership Units, though the Operating Agreement does permit the Manager to
create, set the terms of and issue securities of classes other than the
Membership Units which could be senior to the Membership Units. The Company will
issue 48 Membership Units to the Manager in a private placement separate from
this Offering in exchange for the Land for the Golf Course. The Manager will
also purchase one Membership Unit for $20,000 upon formation of the Company. The
Company does not expect to issue any further Membership Units in exchange for
property. The Company does not expect to purchase or reacquire its own
securities. Membership Units are not transferable without the permission of the
Manager; however, there is no absolute prohibition on the transfer of the
distributional interests associated with the Membership Units. Under the
Operating Agreement, the Company has a right-of-first-refusal with respect to
the distributional interests associated with the Membership Units. The Company
will use its right- of-first-refusal to prevent a market in the Membership Units
or the distributional interest associated with the Membership Units from
developing in order to preserve the Company's partnership status for federal
income tax purposes.
Insurance
The Company expects to purchase liability and casualty insurance
tailored for a golf course from a commercial insurance provider. The Company
expects such insurance to include the following types of coverage: (i) general
liability coverage protecting the Company from liability for bodily injury and
property damage arising from the Golf Course premises, (ii) pesticide and
herbicide liability coverage providing pollution liability coverage for bodily
injury and property damage due to the application of pesticides and herbicides,
(iii) liquor liability coverage to protect the Company from restaurant and bar
exposure, (iv) inland marine coverage providing fire, theft and vandalism
coverage for maintenance equipment and golf carts, (v) property coverage to
protect Company buildings and building contents from loss due to fire,
lightning, theft and vandalism, (vi) workers compensation coverage providing
employers liability and medical benefits to a Company employee injured on the
job, and (vii) umbrella coverage to provide an extra layer of business liability
protection over the underlying coverage described above. The Company may also
purchase coverage protecting against employee dishonesty, burglary and robbery
as it deems necessary. The Company believes that the insurance it will purchase
will adequately protect it and its property from loss due to liability or
casualty.
Description of Company Indebtedness
The Company expects to enter into the Credit Facility with a bank or
other financial institution to help finance development of the Golf Course and
to provide operating capital for the Golf Course. The Company is currently in
the process of selecting the Credit Facility provider. The Company expects to
have the Credit Facility in place before or on September 30, 1998. In the event
that the Company is unable to procure the Credit Facility by the Subscription
Deadline, the Company will not consummate the Offering and will return all
subscription funds it has received to the subscribers as described in "The
Offering." The Company expects to make payments due under the Credit Facility
from operating profits from the Golf Course and from proceeds of the Offering.
The Company expects the Credit Facility to be secured by a mortgage on
the Land. The Company expects the Credit Facility to be a construction and
permanent loan of approximately $3.5 million, to bear a per annum interest rate
of approximately 8% to 10% and to have a time to maturity of approximately 12 to
15 years from the date of inception. The estimates contained in this paragraph
are based on the expectations of the Company. The Company expects that the
Credit Facility will contain a variety of restrictions on the Company's freedom
to manage its financial affairs including covenants, conditions and commitment
obligations typical of commercial credit facilities. The Company cannot predict
what these restrictions will be at this time. Also, the Credit Facility may
contain provisions for a "balloon payment."
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Under such provisions, amortization is determined under one time period, but
outstanding principal is due in a much shorter period. There can be no assurance
that the Company will be able to obtain a Credit Facility with the expected
terms. See "Risk Factors -- The Company May be Unable to Obtain a Credit
Facility on Acceptable Terms." In the event that the Company can obtain a Credit
Facility only with terms other than the expected terms described in this
paragraph, the Company will decide whether to proceed with such Credit Facility
based on its assessment of the best interests of the Company at the time such
terms become known. The Company has not determined at this time whether or not
it would accept a Credit Facility with terms different from those described in
this paragraph and, therefore, whether it would proceed to consummate the
Offering with a Credit Facility having terms different from those described in
this paragraph.
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THE OFFERING
Membership Units
The Company intends to offer a minimum of 150 Membership Units to the
general public in this offering. If the minimum subscription of 150 Membership
Units (the "Minimum Subscription") is not achieved by September 30, 1998 (the
"Subscription Deadline"), then the Offering will be canceled and all
subscription funds received by the Subscription Deadline will be returned to the
subscribers with interest as described below. In addition, if the Company is
unable to procure a Credit Facility on acceptable terms by the Subscription
Deadline, see "Risk Factors -- The Company May be Unable to Obtain a Credit
Facility on Acceptable Terms," or if the Company is unable to obtain title to
the Land free and clear of all liens other than a lien or encumbrance imposed by
the Credit Facility, see "Risk Factors -- The Company May be Unable to Obtain
the Land Free and Clear of Liens and Encumbrances," then the Offering will be
canceled and all subscription funds received by the Subscription Deadline will
be returned to the subscribers with interest as described below. There can be no
assurance that the Minimum Subscription will be achieved by the Subscription
Deadline. The Manager and/or its affiliates may, but are not required to,
purchase Membership Units offered by this Prospectus in order to achieve the
Minimum Subscription or otherwise. The Manager or its affiliates may resell
Membership Units purchased; however, neither the Manager nor its affiliates has
determined at this time whether they will sell any Membership Units so purchased
or how long they would hold such Membership Units prior to sale.
The price per Membership Unit is $20,000. The price was determined by
the Company based on the amount of capital the Company desires to raise and the
number of Members the Company wishes to have. There is no public market for the
Membership Units, and the Company will seek to prevent a public market for the
Membership Units or any distributional interest related thereto from developing
in order to preserve the Company's partnership status for federal income tax
purposes. See "Risk Factors -- Lack of Public Market." 48 Membership Units will
be received by the Manager in a private placement separate from this Offering in
exchange for the Land on which the Golf Course will be built. The number of
Membership Units the Manager will receive will equal the fair market value of
the Land, as determined by independent appraisal to be $4,000 per acre, divided
by $20,000 and rounded down to the nearest integer. Thus the Company believes
that Manager will purchase Membership Units for the same price that Membership
Units are being offered to the public hereby. The Manager also purchased one
Membership Unit for $20,000 upon formation of the Company. For a description of
the Membership Units, see "Membership Units."
Offerees subscribing to the Offering will be required to pay in $1,000
upon signing the Subscription Agreement contained in Exhibit B to this
Prospectus which makes the subscriber a party to the Operating Agreement
contained in Exhibit A to this Prospectus. Prior to the Subscription Deadline,
funds received by the Company from subscribers ("Subscription Funds") will be
held in escrow by the Manager, pending achievement of the Minimum Subscription.
Subscription Funds held in escrow will be invested in securities issued or
guaranteed by the United States Government or its agencies, bank certificates of
deposit or in similar securities or investments or will be deposited in an
interest-bearing account with a commercial depository institution. All
subscriptions are irrevocable by the subscriber. If the Minimum Subscription is
attained by the Subscription Deadline, the Company will issue Membership Units
to the subscribers and cause the transfer of the Subscription Funds (together
with any earnings thereon) to the Company's own accounts for use as described in
"Use of Proceeds."
If the Minimum Subscription is not attained by the Subscription
Deadline, the Company will cancel the Offering and return all Subscription Funds
within 30 days after the Subscription Deadline, along with the earnings thereon
accrued through the Subscription Deadline, net of escrow costs, which will be
allocated among subscribers on a pro rata basis based on the amount of their
subscription and the length of time their subscription funds were held in
escrow. The Company may suspend, limit or terminate this offering at any time.
If the Offering is terminated prior to the Subscription Deadline, all
Subscription Funds received by the date of termination will be distributed to
subscribers within 30 days after the termination date, along with earnings
thereon accrued through the date of termination, net of escrow costs, allocated
among subscribers on a pro rata basis based on the amount of their subscription
and the length of time their subscription funds were held in escrow.
The Membership Units offered hereby are being offered only in the
States of Georgia and South Carolina.
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<PAGE>
Pursuant to the terms of the Operating Agreement, if the Minimum
Subscription is attained by the Subscription Deadline, offerees will be required
to pay the balance due on their Membership Units by October 16, 1998. Failure to
pay the balance due within 60 days of this due date will result in forfeiture of
the Membership Units subscribed to and all the initial payment. In the event
that a Member's membership and Membership Unit are forfeited as provided in this
paragraph, the Company waives any right to proceed against that Member for the
balance due.
Club Memberships
In addition to an equity interest in the Company, purchasers of the
Membership Units will also receive the right to a waiver of the initiation fee
for the Member's choice of either an individual or a family Club Membership at
no additional cost. Members will be required to pay monthly dues in order to
maintain their Club Memberships. The Company has yet to determine the amount of
monthly dues; however, the Company expects monthly dues to range up to $125.00
for both individual and family Club Memberships. Members living 50 miles or more
away from the Golf Course may opt to receive a right to the waiver of the
initiation fee for an individual non-resident Club Membership. The Company
expects monthly dues for individual non-resident Club Memberships to range up to
$50.00. Failure to pay monthly dues will result in loss of a Member's Club
Membership. For more information on Club Memberships, see "Business -- General
Plan of Golf Course Operation."
Failure to pay the balance due with respect to the price of the
Membership Units as detailed above in "-- Membership Units" will result in loss
of Club Membership as well.
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<PAGE>
PLAN OF DISTRIBUTION
The Membership Units offered hereby are being sold directly to the
public by officers of the Company. Such persons will receive no sales
commission. All of the costs of the Offering will be born by the Company and
will be paid for out of the proceeds of the Offering. The Company does not
intend to engage any underwriters, brokers or dealers for the distribution of
the Membership Units offered hereby.
The Membership Units offered hereby are being offered only in the
States of Georgia and South Carolina.
No person has been authorized to give any information or to make any
representations in connection with the Offering other than those contained in
this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus, nor the issuance of any Membership Units, shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the respective dates as of which information is
given herein. The Offering is not being made to persons in any jurisdiction in
which the offer or sale of the securities offered hereby would not be in
compliance with the laws of such jurisdiction.
SUMMARY OF PROMOTIONAL AND SALES MATERIAL
Prior to effectiveness of the Registration Statement of which this
Prospectus is a part, the Company expects that its President, Don Howard, and
possibly some or all of its other officers, will hold several sales meetings for
informational purposes only. The Company expects that approximately a dozen
potential investors will be invited to each meeting. Invitees will be provided
with copies of this Prospectus (or possibly an updated preliminary prospectus
depending on the date of the meeting). Mr. Howard expects to show investors a
short video on information contained in this Prospectus, or an updated version
thereof, which may feature some or all of the following: Mount Vintage
Plantation, the property on which the Golf Course is to be constructed, Tom
Jackson, who is the Golf Course designer, and the background of the Golf Course.
Because the Company expects to conduct the sales meetings prior to the
effectiveness of the Registration Statement, the Company will make no sales of
Membership Units nor will it accept any offers to buy Membership Units at the
sales meetings. The sales meetings will be for informational purposes only. Upon
the effectiveness of the Registration Statement, the Company will provide final
prospectuses to all persons who have previously received a preliminary
prospectus such as this Prospectus. The Company will not sell Membership Units
to anyone, nor will it accept offers to buy the Membership Units from anyone,
until five business days after such person has received a copy of the final
prospectus.
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USE OF PROCEEDS
The following table reflects the estimated application of the net
proceeds from the sale of the Membership Units offered hereby.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Maximum
Dollar Amount Percent
-------------------- ----------------
Gross offering proceeds . . . . . . . . . . . . $3,000,000 100%
Public offering expenses
Underwriting discount and commissions . . . -- --
Organization expenses . . . . . . . . . . . $100,000 3%
-------------------- ----------------
Amount available for investment . . . . . . . $2,900,000 97%
==================== ================
Purchase of assets from the Manager . . . . . $200,000 7%
==================== ================
Development of the Golf Course. . . . . . . . $2,700,000 90%
==================== ================
Total application of proceeds . . . . . . . . $3,000,000 100%
</TABLE>
The Company intends to use the net offering proceeds for the following
purposes in the order of priority in which they are listed. Proceeds will first
be used to purchase all assets from the Manager related to the development of
the Golf Course prior to consummation of the Offering. The price of the assets
will equal the expenses incurred by the Manager in the development of the Golf
Course prior to consummation of the Offering plus interest at an annual rate
equal to the prime rate as quoted in the Wall Street Journal. Remaining proceeds
will be used to directly finance development of the Golf Course. Completion of
the development of the Golf Course will also be financed by the Bank Credit
Facility. See "Business -- Description of Company Indebtedness." In the event
that net offering proceeds remain after completion of the development of the
Golf Course or if the Company deems it necessary in order to service the Credit
Facility, proceeds will be used by the Company to make payments due under the
Credit Facility or otherwise pay down the outstanding balance under the Credit
Facility. In the event that any proceeds remain after being used for the
purposes described above, such remaining proceeds will be used for operating
capital of the Company. The Company does not expect any net offering proceeds to
remain after completion of the development of the Golf Course.
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<PAGE>
CAPITAL STOCK -- THE MEMBERSHIP UNITS
The Membership Units offered by this Prospectus are the only securities
of the Company. The Articles of Organization set no limit on the number of
Membership Units that may be issued by the Company. The par value of a
Membership Unit is $20,000. 48 Membership Units will be issued to the Manager in
a private placement separate from this Offering in return for the Manager's
contribution of the Land to the Company. The number of Membership Units to be
issued to the Manager will be determined by dividing the fair market value of
the Land, as determined by independent appraisal to be $4,000 per acre, by
$20,000 and rounding down to the nearest integer. The Manager also will purchase
one Membership Unit for $20,000 upon formation of the Company. If the Offering
is fully subscribed to, there will be 199 Membership Units outstanding upon
completion of the Offering. The Operating Agreement permits the Manager, at its
sole discretion, to create and issue other classes of membership units for the
Company and to admit new members. The Articles of Organization place no
restriction on the classes of securities that may be issued by the Company.
There is no public market for the Membership Units, nor does the
Company expect a public market for the Membership Units to develop. In addition,
the interests represented by the Membership Units may not be readily accepted by
lenders as collateral for a loan. The Company does not intend to apply for
listing or quotation of the Membership Units on any securities exchange, nor
does the Company intend to seek admission of the Membership Units to trading on
NASDAQ or any other automated quotation system. The Manager and the Company will
seek to prevent a market for the Membership Units or the distributional
interests pertaining to the Membership Units from developing in order to
preserve the Company's partnership status for federal income tax purposes. See
"-- Restrictions on Alienation."
Distributions, Redemption, Liquidation, and Pre-emptive Rights
Net profits, net losses and other items of income, gain, loss,
deduction and credit for the Company will be apportioned among the Members in
accordance with their proportionate ownership of Membership Units. The Company
will establish and maintain a capital account ("Capital Account") for each
Member. Each Member's Capital Account shall be increased by (1) the amount of
any money actually contributed by the Member to the capital of the Company, (2)
the fair market value of any property contributed, as determined by the Company
and the contributing Member at arm's length at the time of contribution, or in
the case of property contributed by the Manager, as determined by independent
appraisal (net of liabilities assumed by the Company or subject to which the
Company takes such property, within the meaning of ss. 752 of the Internal
Revenue Code (the "Code")), and (3) the Member's share of net profits and of any
separately allocated items of income or gain. Each Member's Capital Account
shall be decreased by (1) the amount of money actually distributed by the
Company to the Member, (2) the fair market value of any property distributed to
the Member, as determined by the Company and the Member at arm's length at the
time of distribution (net of liabilities of the Company assumed by the Member or
subject to which the Member takes such property within the meaning of ss. 752 of
the Code), and (3) the Member's share of net losses and of any separately
allocated items of deduction or loss. Certain special allocations will be made
in accordance with the terms of the Operating Agreement. See "Article V --
Allocations and Distributions" in the Operating Agreement contained in Exhibit A
to this Prospectus.
From time to time, the Manager will determine in its reasonable
judgment to what extent, if any, the Company's cash on hand exceeds the current
and anticipated needs, including, without limitation, needs for operating
expenses, debt service, including service of debt owed to the Manager,
acquisitions, reserves, and mandatory distributions, if any. To the extent such
excess exists, the Manager may make distributions to the Members in accordance
with their proportionate ownership of Membership Units. The Company does not
expect to make distributions to Members in the foreseeable future.
The Company will have no right of redemption with respect to the
Membership Units; however, the Company may repurchase Membership Units at market
prices or at prices negotiated between the Company and individual Members.
Following the death, expulsion, bankruptcy or dissolution of a Member
or the occurrence of any other event that terminates the continued membership of
a Member in the Company, the disassociating Member will be entitled to receive
any distribution which the disassociating Member was entitled to receive prior
to the death, expulsion, bankruptcy or dissolution of the Member or the
occurrence of any other event which terminates the continued membership of the
Member in the Company. The Company will have the option
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<PAGE>
to acquire the disassociating Member's Membership Units following
disassociation, but the Company will have no obligation to purchase a
disassociating Member's Membership Units until the date of the expiration of the
specified term of the Company that existed on the date of the disassociation if
the expiration of the specific term does not result in the dissolution and
winding up of the Company's business under Section 33- 44-801 of the LLC Act.
The date of payment, if any, and fair market value of the disassociating
Member's Membership Units will be determined by the Manager pursuant to the
provisions of Section 33-44-701(b) of the LLC Act.
Pursuant to Section 33-44-701 of the LLC Act, if a Member dissociates
from the Company, the Company must offer to purchase the disassociating Member's
distributional interest in accordance with the terms of the LLC Act. Within 30
days of a Member's disassociation, the Company must deliver to that person a
purchase offer accompanied by (i) a statement of the Company's assets and
liabilities as of the date of disassociation, (ii) the Company's latest
available balance sheet and income statement, and (iii) an explanation of how
the estimated value of the disassociating Member's distributional interest was
calculated. If the Company and the disassociating Member do not conclude a
purchase agreement for the Member's distributional interest within 120 days
after his disassociation, then the Member may commence a court action within 120
days to enforce the purchase. The court would then determine the fair value of
the Member's distributional interest and the other terms of the repurchase. Any
damages for wrongful disassociation and any other amounts owing by the Member to
the Company must be offset against the purchase price.
Members will have no pre-emptive rights with respect to new Membership
interests or other securities issued by the Company.
In the event the Company is liquidated, all assets of the Company would
first be applied to discharge its obligations to creditors, including any
Members who are creditors. The Manager will also set up a reserve as may be
reasonably necessary to provide for contingent and other liabilities of the
Company. Any surplus remaining after creditors are paid would be distributed to
Members consisting of a return of all contributions by Members which have not
previously been returned and a distribution of any remainder in equal shares.
Voting Rights
Each Member shall be entitled to one vote for each Membership Unit
owned. Shareholders who are not Members are not entitled to any vote. It is
possible for a Member to transfer his distributional interest without
transferring his Membership Unit; thus, it is possible for voting rights to be
separated from distributional rights. The Company does not have a classified
Board of Directors or similarly classified governing body.
Restrictions on Alienation
Membership and transferability of Membership Units in the Company are
substantially restricted. Neither record title nor beneficial ownership of a
Membership Unit may be transferred or encumbered without the consent of the
Manager at the time of transfer. An unauthorized transfer of a Membership Units
could create a substantial hardship to the Company and jeopardize its capital
base. These restrictions upon ownership and transfer are not intended as a
penalty, but as a method to protect and preserve the Company's capital and its
financial ability to continue. A disposition of a Membership Unit in the Company
may not be effected without the consent of the Manager at the time of
disposition. Any attempted disposition by a person of an interest or right, in
or in respect of the Company other than in accordance with the terms of the
Operating Agreement will be null and void ab initio. The Manager may use, in its
sole discretion, its right to withhold permission for the transfer of Membership
Units to prevent a market for the Membership Units from developing in order to
preserve the Company's partnership status for federal income tax purposes.
Under the Operating Agreement, the Company has a right-of-first-refusal
with respect to any transfer of the distributional interest pertaining to a
Membership Unit. The Company may, in its sole discretion, exercise its
right-of-first-refusal to prevent a market for the distributional interests from
developing in order to preserve the Company's partnership status for federal
income tax purposes.
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<PAGE>
Membership Units received by the Manager in exchange for its
contribution of the Land to the Company are restricted securities within the
meaning of Rule 144 promulgated under the Securities Act and may only be
transferred by the Manager if they are registered under the Securities Act,
transferred in accordance with the restrictions of Rule 144, or otherwise exempt
from the registration requirements of the Securities Act.
Capital Accounts and Capital Contributions in General
Except as otherwise provided in the Operating Agreement, no interest
will accrue on any capital contribution or any Member's Capital Account, and no
Member will have the right to withdraw or be repaid any capital contribution.
Subsequent capital contributions beyond the initial capital contribution
provided by a Member through the purchase of the Membership Units offered hereby
may only be required of Members if the Members unanimously determine subsequent
capital contributions are necessary to enable the Company to cause the assets of
the Company to be properly operated and maintained and to discharge its costs,
expenses, obligations and liabilities. An unrepaid capital contribution is not a
liability of the Company or of any Member. A Member is not required to
contribute or to lend any cash or property to the Company to enable the Company
to return any Member's capital contributions.
Limitations on Changes in Control
The Operating Agreement provides that there shall only be one manager,
which is the Manager, and that the Manager shall serve as manager for the
duration of the term of the Company's existence. The Manager may be removed by
Members only for cause and only by the affirmative vote of holders of a majority
of the Membership interests in the Company entitled to vote; provided, however,
that the Manager may be removed by a vote of the Members only if the Manager,
and/or any affiliate of the Manager, are also previously or simultaneously
released from any guarantee(s) of any obligations of the Company. If this
offering is fully subscribed, the Manager will own 24.5% of the Membership
Units. Membership Units may not be transferred without the consent of the
Manager, and new Membership Units may be created and new Members admitted to the
Company only at the discretion of the Manager. See "-- Restrictions on
Alienation." Except for situations in which the approval of Members is required
by the Operating Agreement or by nonwaivable provisions of applicable law, the
Manager exercises all of the powers of the Company. The Company will not hold
annual meetings of the Members; however, special meetings of the Members may be
called by the Manager or by holders of at least 25% of the Membership interests
in the Company entitled to vote at such a meeting.
The Operating Agreement permits the Company to merge or consolidate
with another business entity only upon the affirmative vote of holders of a
majority of the Membership interests in the Company entitled to vote subject to
the requirements of Sections 33-44-904 through 33-44-907 of the Act.
The Operating Agreement permits the Company to sell substantially all
of its assets only upon the affirmative vote of holders of a majority of the
Membership interests in the Company entitled to vote. A sale of substantially
all of the assets of the Company is deemed to include (i) the sale or transfer
of 10% or more of the Land, (ii) the sale or transfer of 50% or more of the
Company's entire assets, or (iii) the sale or transfer of any assets which would
prevent the Company from being able to conduct the business in which it was
engaged immediately prior to such sale or transfer in substantially the same
form and volume in which it was conducting such business immediately prior to
such sale or transfer. Also, a sale of substantially all of the assets of the
Company will be deemed to have occurred if any of the sales or transfers
described in this paragraph occur in one or more related transactions.
The Operating Agreement permits the Company to issue or deliver, in any
one transaction or series of related transactions, any Membership interests or
other securities of its issue aggregating more than 20% of the beneficial
ownership of the Company in exchange or payment for any properties or assets of
any other business entity, or securities issued by any other business entity, or
in a merger of any subsidiary of the Company (50% or more of the ownership
interests of which is held by the Company) with or into any other business
entity only upon the affirmative vote of holders of a majority of the Membership
interests in the Company entitled to vote.
The Operating Agreement provides that additional persons may be
admitted to the Company as Members, and Membership Units may be created and
issued to those persons and to existing Members at the discretion of the Manager
so long as the total number of Membership Units issued by the Company does
39
<PAGE>
not exceed 250. The Manager may issue new Membership Units to either new or
existing Members beyond the total of 250 units with the approval of holders of a
majority of the outstanding membership interests in the Company entitled to
vote. The Operating Agreement also provides that the Manager, in its sole
discretion, may create different classes of Membership Units; provided, however,
that the approval of holders of a majority of the Membership interests in the
Company entitled to vote is required to issue any new class of Membership Units
having more than either 20% of the voting power or 20% of the dollar value of
distributional rights of the Company initially authorized by this Operating
Agreement or previously approved by a Required Interest of the Members.
40
<PAGE>
CLUB MEMBERSHIP INITIATION FEE WAIVER
The Company will give Members the right to a waiver of the initiation
fees for their choice of either family or individual Club Memberships along with
the Membership Units they purchase. Members must still pay the monthly dues
associated with Club Memberships. The Company has not yet determined the amount
of monthly dues, but it expects them to range up to approximately $125.00 for
both family and individual Club Memberships. Members who live 50 miles or more
from the Golf Course may opt to receive the right to a waiver of the initiation
fee for an individual non-resident Club Membership. The Company expects that the
monthly dues for an individual non-resident Club Membership will range up to
approximately $50.00. The Company expects to offer holders of Club Memberships a
variety of privileges; however, it has not at this time determined what those
privileges will be. Club Membership privileges granted to Members subscribing to
the Offering will be the same as the privileges granted to non-Members who
purchase Club Memberships not related to the Offering. See "Business -- General
Plan of Operation of Golf Course."
41
<PAGE>
CERTAIN PROVISIONS OF THE LLC ACT AND THE OPERATING AGREEMENT
The following summary of certain provisions of South Carolina law and
of the Articles of Organization and Operating Agreement of the Company does not
purport to be complete and is subject to and qualified in its entirety by
reference to South Carolina law and the Articles of Organization and Operating
Agreement of the Company. A copy of the Operating Agreement is included in this
Prospectus as Exhibit A. Copies of the Articles of Organization and, in the
event the Operating Agreement is amended or revised, amended or revised copies
of the Operating Agreement may be obtained from the Company as described under
"Available Information."
General
An LLC is a business organization that is generally intended to be
taxed as a partnership for federal income taxation purposes, while providing
limited liability protection as a corporation for its members. The owners of the
equity interests in an LLC are called "members." For federal income tax
purposes, an LLC, like a partnership, is a pass-through entity, and generally
its income and losses are taxed only at the member level. The business affairs
of an LLC are governed by an operating agreement which is analogous to a
partnership agreement.
The Company has been formed under the South Carolina Uniform Limited
Liability Company Act of 1996 (the "LLC Act") which contains many provisions
that may be varied by agreement among members, and as a result, provides a great
deal of flexibility in structuring a customized business organization.
Federal Income Tax Classification
It is intended that the Company will be classified as a partnership for
federal income tax purposes.
Classes of Members
The Company initially will only have one class of Membership Units, and
unless and until the Manager creates different classes of Membership Units, the
Membership Units offered by this Prospectus will have all voting power on all
matters on which Members are entitled to vote pursuant to the terms of
applicable law, the Articles, and the Operating Agreement.
The Manager, in its sole discretion, may create different classes of
Membership Units; provided, however, that the approval of holders of a majority
of Membership Units entitled to vote is required to issue any new class of
Membership Units having more than either 20% of the voting power or 20% of the
dollar value of distributional rights of the Company initially authorized by
this Operating Agreement or previously approved by the Members. Additional
persons may be admitted to the Company as Members, and Membership Units may be
created and issued to those persons and to existing Members at the discretion of
the Manager so long as the total number of Membership Units issued does not
exceed the Initial Unit Count (as defined in the Operating Agreement). The
Manager may issue new Membership Units to either new or existing Members beyond
the Initial Unit Count with the approval of holders of a majority of the
outstanding Membership Units entitled to vote. The Manager will reflect the
creation of any new class of Membership Units in an amendment to the Operating
Agreement indicating the different rights, powers, and duties of any new class,
and such an amendment need be executed only by the Manager.
Meetings of Members; Voting
The Company will not hold annual meetings; however, special meetings of
the Members may be called at any time by the Manager. Special meetings of
Members will also be called by the Manager upon the written request of the
holders of at least twenty-five percent (25%) of the Membership Units entitled
to be voted at such meeting. Such request must state the purpose or purposes of
such meeting and the matters proposed to be acted on thereat.
All meetings of the Members will be held at such time and place, within
or without the State of South Carolina, as will be stated in the notice of the
meeting or in a duly executed waiver of notice thereof. Participation in a
meeting will constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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All meetings of the Members will be presided over by the chairman of
the meeting who will be the Manager (or representative thereof) or a person
delegated the role of chairman by the Manager. The chairman of any meeting of
Members will determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to him in order.
The Manager, officer, or agent having charge of the records reflecting
the Membership Units of each Member will make, at least ten (10) days before
each meeting of Members, a complete list of the Members entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order with the
address of and percentage of Membership Units of each Member, which list, for a
period of ten (10) days prior to such meeting, will be kept on file at the
registered office of the Company and will be subject to inspection by any Member
at any time during usual business hours. Such list will also be produced and
kept open at the time and place of the meeting and will be subject to the
inspection of any Member during the whole time of the meeting. The original
records reflecting the Membership Units of each Member will be prima facie
evidence as to who are the Members entitled to examine such list or records or
to vote at any meeting of Members. Failure to comply with this member list
requirement will not affect the validity of any action taken at such meeting.
Written or printed notice stating the place, day and hour of the
meeting and the purpose or purposes for which the meeting is called will be
delivered not less than ten (10) nor more than sixty (60) days before the date
of the meeting either personally or by mail, or at the direction of the officer
or person calling the meeting, to each Member entitled to vote at the meeting,
provided that such notice may be waived as provided in the Operating Agreement.
If mailed, such notice will be deemed to be delivered when deposited in the
United States mail addressed to the Member at the Member's address as it appears
on the records of the Company, with postage thereon prepaid. Any notice required
to be given to any Member hereunder or under the Articles of Organization need
not be given to the Member if (A) notice of two consecutive meetings of the
Company or (B) all (but in no event less than two) payments (if sent by first
class mail) of distributions during a twelve-month period have been mailed to
that person, addressed at his address as shown on the records of the Company,
and have been returned undeliverable. Any action or meeting taken or held
without notice to such person will have the same force and effect as if the
notice had been duly given.
Unless otherwise provided in the Articles or required by applicable
law, the holders of a majority of the Membership Units for each class entitled
to vote, represented in person or by proxy, will constitute a quorum at a
meeting of Members.
With respect to any matter when a quorum is present at the beginning of
any meeting, the majority vote of the holders of the Membership Units, present
in person or by proxy, of each class having voting power with respect to that
matter will decide such matter brought before such meeting, unless the matter is
one upon which an express provision of the Articles, the Operating Agreement, or
any applicable statute not overridden by the Articles or the Operating Agreement
requires a different vote, in which case such express provision will govern and
control the decision of such matter. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Members to leave less than a quorum.
Except as otherwise provided in the LLC Act, each Membership Unit will
entitle its holder to one vote on each matter submitted to a vote at a meeting
of Members, except to the extent that the voting rights of any class or classes
of Membership Units are limited or denied by the Articles or by the Operating
Agreement. Membership Units owned by another limited liability company or
corporation, the majority of the membership units or voting stock of which is
owned or controlled by this Company, and Membership Units held by this Company
in a fiduciary capacity will not be voted, directly or indirectly, at any
meeting, and will not be counted in determining the total Membership Units at
any given time.
A Member may vote either in person or by proxy executed in writing by
the Member or by his duly authorized attorney-in-fact. No proxy will be valid
after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. Each proxy will be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest.
Any action required by the LLC Act to be taken at a meeting of the
Members, or any action which may be taken at a meeting of the Members, may be
taken without a meeting, without prior notice, and without a vote, if a consent
or consents in writing, setting forth the action so taken, will have been signed
by the holder or holders of all the Membership Units for each class, if more
than one class, entitled to vote
43
<PAGE>
with respect to the action that is the subject matter of the consent, and such
consent will have the same force and effect as a unanimous vote of the Members.
Every written consent must be signed, dated and delivered in the manner required
by, and will become effective at the time and remain effective for the period
specified by, the LLC Act. A telegram, telex, cablegram, or similar transmission
by a Member, or a photographic, photostatic, facsimile, or similar reproduction
of a writing signed by a Member, will be regarded as signed by the Member.
Prompt notice of the taking of any action by Members without a meeting will be
given to those Members who did not consent in writing to the action. The taking
of the action includes amending the Operating Agreement or creating, under
provisions of the Operating Agreement, a class of Membership Units that was not
previously outstanding.
Dissolution
The Company will dissolve and its affairs will be wound up only upon
the first to occur of the following: (1) the written order of the Manager; (2)
the expiration of the period fixed for the duration of the Company set forth in
the Articles, which date is December 31, 2050; (3) upon an event that makes it
unlawful for all or substantially all of the business of the Company to be
continued, but any cure of illegality within ninety (90) days after notice to
the Company of the event is effective retroactively to the date of the event;
(4) upon entry of a judicial decree that: (i) the economic purpose of the
Company is likely to be unreasonably frustrated; (ii) another Member has engaged
in conduct relating to the Company's business that makes it not reasonably
practicable to carry on the Company's business with that Member; (iii) it is not
otherwise reasonably practicable to carry on the Company's business in
conformity with the Articles of Organization and the Operating Agreement; (iv)
the Company failed to purchase the Member's Distributional interest as required
by ss. 33-44-701 of the LLC Act; or (v) the Managers or Members in control of
the Company have acted, are acting, or will act in a manner that is illegal,
oppressive, fraudulent, or unfairly prejudicial to a Member; and (5) entry of a
decree of judicial dissolution of the Company under Section 33- 44-801 (b) of
the LLC Act or administrative dissolution as provided in Section 33-44-809 of
the LLC Act.
The Operating Agreement provides that generally the Company will
continue to exist and conduct business and shall not dissolve in the event of
the disassociation of any Member.
On dissolution of the Company, the Manager will act as liquidator or
may appoint one or more Members as liquidators. If there is no Manager, then
holders of a majority of the Membership interests in the Company entitled to
vote will appoint one or more Members as liquidator. The liquidator will proceed
diligently to wind up the affairs of the Company and make final distributions as
provided herein and in the LLC Act. The costs of liquidation will be borne as a
Company expense. Until final distribution, the liquidator will continue to
operate the Company properties with all of the power and authority of the
Manager. The steps to be accomplished by the liquidator are as follows:
(1) as promptly as possible after dissolution and again after
final liquidation, the liquidator will cause a proper
accounting to be made by a recognized firm of certified public
accountants of the Company's assets, liabilities, and
operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed
as applicable;
(2) the liquidator will cause the notice described in Section
33-44-807 of the LLC Act to be mailed to each known creditor
of and claimant against the Company and the notice described
in Section 33-44-808 of the LLC Act to be published in
accordance with the terms thereof;
(3) the liquidator will pay, satisfy or discharge from Company
funds all of the debts, liabilities and obligations of the
Company (including, without limitation, all expenses incurred
in liquidation, any advances by members as described in
Section 4.6 of the Operating Agreement and any loans or
advances from the Manager to the Company described in Section
6.16 of the Operating Agreement) or otherwise make adequate
provision for payment and discharge thereof (including,
without limitation, the establishment of a cash escrow fund
for contingent liabilities in such amount and for such term as
the liquidator may reasonably determine); and
(4) all remaining assets of the Company will be distributed to
Members in accordance with their proportionate ownership of
Membership Units.
44
<PAGE>
Limitations on Liability
Under the LLC Act and the provisions of the Operating Agreement,
Members of the Company are not liable for the debts, obligations or liabilities
of the Company beyond their contributions to the Company that they gave in
exchange for their Membership Units, except as provided by applicable law or
except to the extent that a Member agrees otherwise in writing. A Member is
responsible for acts or omissions to the extent those acts or omissions would be
actionable in contract or tort against the Member if the Member were acting in
an individual capacity.
The Company will indemnify the Members, Manager, and agents for all
costs, losses, liabilities, and damages paid or accrued by such Members, Manager
or agents in connection with the business of the Company to the fullest extent
provided or allowed by the laws of the State of South Carolina.
Neither the Articles of Organization, the Operating Agreement nor the
LLC Act place any restrictions on a Member's right (other than the Manager) to
engage in business activities that compete with the business activities of the
Company.
Amendment Or Modification of the Operating Agreement
The Operating Agreement provides that except as otherwise provided
therein or by applicable law, the Operating Agreement may be amended and
modified from time to time only by a written instrument adopted and executed by
a majority of the Members; provided, however, that adoption of any amendment or
modification creating, altering or removing a supermajority voting or quorum
provision must be approved by the higher of either the existing required vote or
quorum or the proposed required vote or quorum of the provision to be amended or
modified. No Member or Manager will have any vested rights in the Operating
Agreement.
45
<PAGE>
REPORTS TO MEMBERS
The Operating Agreement provides that the Company will provide Members
with an annual report (the "Annual Report") within 90 days of the close of the
Company's fiscal year. The Annual Report will contain financial statements
audited by an independent certified public accountant. Such financial statements
will be prepared on an accrual basis in accordance with generally accepted
accounting principles, with a reconciliation with respect to information
furnished to limited partners for income tax purposes. The Annual Report will
also contain a detailed statement of any transactions between the Company and
the Manager or affiliates of the Manager for the fiscal year to which the Annual
Report pertains, showing the amount paid or accrued to each recipient and the
services performed.
The Company will also provide Members with a copy of its annual report
on Form 10-K filed with the Commission within 90 days of the close of the
Company's fiscal year and with copies of its quarterly reports on Form 10-Q
filed with the Commission within 45 days after the close of each quarterly
fiscal period to the extent that the Company remains obligated under applicable
law and regulations to file such annual and quarterly reports with the
Commission.
46
<PAGE>
MANAGEMENT
Management Duties and Selection of Managers
The business and affairs of the Company shall be managed by its
Manager. Except for situations in which the approval of the Members is required
by the Operating Agreement or by nonwaivable provisions of applicable law,
generally the powers of the Company shall be exercised by or under the authority
of, and the business and affairs of the Company shall be managed under the
direction of, the Manager; and the Manager may make all decisions and take all
actions for the Company not otherwise provided for in the Operating Agreement.
The Manager may delegate authority to one or more committees composed of Members
or officers selected by the Manager as provided in the Operating Agreement.
The Manager is an agent of the Company for the purpose of its business
or affairs and the act of a Manager, including, but not limited to, the
execution in the name of the Company of any instrument for apparently carrying
on in the usual way the Company business or businesses of the kind carried on by
the Company, binds the Company, unless the Manager so acting has, in fact, no
authority to act for the Company in the particular matter, and the person with
whom the Manager is dealing has knowledge of the fact that the Manager has no
such authority.
There will only be one manager of the Company, MV Development Company,
LLC. It will serve as Manager of the Company for the entire term of existence of
the Company as specified in the Articles unless (i) it is removed as provided in
the Operating Agreement, (ii) it resigns as provided in the Operating Agreement,
(iii) it is dissolved, or (iv) it becomes a debtor in bankruptcy or seeks,
consents to or acquiesces in the appointment of a trustee, receiver or
liquidator of itself or substantially all of its assets.
The Manager may be removed for cause at any special meeting of Members
by the affirmative vote of holders of a majority of the Membership interests in
the Company entitled to vote; provided, however, that the Manager may be so
removed only upon the condition that the Manager, and/or any affiliate of the
Manager, are also previously or simultaneously released from any guarantee(s) of
any obligations of the Company. The notice calling such meeting must give notice
of the intention to act upon such matter and provide that the vacancy caused by
such removal may be filled at such meeting by vote of holders of a majority of
the Membership Units.
The Manager may resign at any time by sending, personally or by mail, a
written resignation letter to all Members. The resignation will be effective at
the time specified in the resignation letter, or if no time is specified, then
on the date the resignation letter is first delivered to Members. If mailed,
such notice will be deemed to be delivered when deposited in the United States
mail, addressed to the Member at his address as it appears on the records of the
Company, with postage thereon prepaid. The acceptance of the resignation will
not be necessary to make it effective, unless expressly so provided in the
resignation letter. The resignation letter must be accompanied by (i) notice of
a special meeting as provided in the Operating Agreement called for the purpose
of electing a new Manager, (ii) a voting list prepared in accordance with
relevant provisions of the Operating Agreement of Members entitled to vote at
such special meeting, and (iii) the name of a Member designated as chairman of
the special meeting, which Member may be the Manager, if still a Member, or a
representative thereof.
Any vacancy occurring in the position of Manager may be filled by an
affirmative vote of holders of a majority of the Membership Units. A Manager
elected to fill a vacancy will be elected for the unexpired term of its
predecessor in office. In any period during which no Manager holds office, a
majority of the Membership interests in the Company entitled to vote will
perform all of the functions of the Manager.
The Manager
The Manager is MV Development Company, LLC, a member-managed, term
South Carolina limited liability company, formed in 1995 ("Development"). Its
term expires on December 31, 2050. A majority of the interests in Development is
owned by Mount Vintage Property Co., Inc., a South Carolina corporation formed
in 1992 ("Property"). Property is primarily engaged in the business of owning
and managing the approximately 4,000 acres of property which comprise Mount
Vintage Plantation. Development is primarily engaged in the business of
developing lots within Mount Vintage Plantation for residential use. See "The
Company -- The Golf Course -- Mount Vintage Plantation."
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<PAGE>
Property is owned in equal shares by Bettis C. Rainsford and Talmadge
Knight. Messrs. Rainsford and Knight own the minority interests in Development,
and Mr. Rainsford has authority to conduct Developments's business. The
following table provides certain information with respect to Messrs. Rainsford
and Knight:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Positions with MV Development Co., LLC &
Name & Business Address Age Mount Vintage Property Company, Inc.
- ----------------------- --- ------------------------------------
Bettis C. Rainsford 47 Secretary and Treasurer and Director of Property and
P. O. Box 388 member of Development since their creation.
Edgefield, South Carolina 29824
Talmadge Knight 57 President and Director of Property and member of
310 South Main Street Development since joining both in January 1998.
Saluda, South Carolina 29138
</TABLE>
Bettis C. Rainsford has been a director, Executive Vice President and
Chief Financial Officer of Delta Woodside Industries, Inc. ("DWI") or its
predecessors from the founding of its predecessors in 1984. Mr. Rainsford has
served as Treasurer of DWI or its predecessors from 1984 to 1986, from August
1988 to November 1988 and from 1990 to the present. He is a director, Executive
Vice President, Chief Financial Officer and Treasurer of DWI's subsidiary Delta
Mills, Inc. He is also President of The Rainsford Development Corporation, which
is engaged in general business development activities in Edgefield, South
Carolina. Mr. Rainsford serves as a director of Martin Color-Fi, Inc. Mr.
Rainsford received his B.A. degree in 1973 from Harvard College and his J.D.
degree from the University of South Carolina School of Law in 1976.
Talmadge Knight is founder, President and a director of Knight Textile
Co., an apparel manufacturing company formed in 1971, which supplies private
label and branded merchandise to major department stores and specialty stores in
the United States. Knight Textile Co. is a private company with its headquarters
in Saluda, South Carolina.
The Operating Agreement provides that the Manager may designate a
stated compensation for itself subject to the approval of holders of a majority
of the Membership interests in the Company entitled to vote. The Company expects
that it will initially pay the Manager a fee for its services of $1,000 per
month commencing in October of 1999.
Officers
The Operating Agreement provides that the Manager may, from time to
time, designate one or more Persons to be officers of the Company who are not
Managers. The Manager has determined to appoint an officer with the combined
offices of President and Chief Executive Officer, a Vice President, and an
officer with the combined offices of Secretary, Treasurer and Chief Financial
Officer. These officers will have duties analogous to the duties of
similarly-titled officers in corporations.
Office Name
- ------ ----
President & CEO Donald Price Howard
Vice President Talmadge Knight
Secretary, Treasurer & CFO Bettis C. Rainsford
Donald Price Howard, 52, has been Assistant Professor of Management and
Marketing at the Augusta State University College of Business Administration
since 1996. He is founder, President, and a director of Genin Corporation,
formed in 1987 and located in Augusta, Georgia. He has served as Genin's
President since its formation. Genin formerly was a retail and wholesale apparel
brokerage and consulting firm and is now a real estate holding corporation. He
is also President and a director of Commercial Driver Training, Inc., formed in
1995 and located in Augusta, Georgia, and has been its President since its
formation. Mr. Howard worked for Belk Stores from 1968 to 1987, where he became
a director and Vice President in 1975 and Executive Vice President and a partner
in 1981. Mr Howard holds an MBA from the University of South Carolina.
48
<PAGE>
Executive Compensation
Mr. Howard will be paid $100,000 following closing of the Offering in
compensation for his services relating to formation of the Company. The Company
has not yet determined whether or how Mr. Howard will be compensated for his
services as President following closing of the Offering. Messrs. Knight and
Rainsford will receive no compensation for their service as officers of the
Company.
Security Ownership of Management and Certain Beneficial Owners
As of the date of this Offering, the Company has one Membership Unit
outstanding, which is owned by the Manager. The following table sets forth
certain pro forma information regarding the expected beneficial ownership of the
Company's Membership Units following consummation of the Offering on September
30, 1998 by (i) entity's owning in any case more than 5% of the Membership Units
of the Company, (ii) the Manager, (iii) the executive officers of the Company,
and (iv) the Manager and executive officers of the Company as a group. The data
in the following table is based on the assumption that the Manager has
contributed the Land to the Company in exchange for Membership Units as
described herein and that neither the Manager nor officers of the Company have
purchased any Membership Units in the Offering. The Manager and officers of the
Company are free to purchase Membership Units in the offering, so the actual
beneficial ownership of the entities shown in the table below after September
30, 1998 could vary substantially from the figures shown below. The Company
believes that the persons named in the table will have sole voting and
investment power with respect to all Membership Units shown as beneficially
owned by them.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name of Beneficial Owner Membership Units Beneficially Owned Percentage
- ---------------------------------------- ----------------------------------- ----------
MV Development Company, LLC (1) 49 24.5
P.O. Box 388
Edgefield, South Carolina, 29824
(Talmadge Knight & Bettis C. Rainsford)
Donald Price Howard 1 0.5
Manager and officers as a group 50 25
(4 persons)
</TABLE>
(1) MV Development Company, LLC is a majority-owned subsidiary of Mount
Vintage Property Co., Inc., which in turn is owned by Messrs. Bettis C.
Rainsford and Talmadge Knight, who are also the minority owners of MV
Development Company, LLC.
Advisory Board
The Company has an advisory board (the "Advisory Board") whose purpose
is to advise the Manager and the officers of the Company on matters pertaining
to the development and management of the Golf Course. The Advisory Board will
meet at times yet to be determined either in person or by telephonic conference
or both. Advisory Board members may also be requested to individually provide
advice to the Manager and the Officers from time to time. Advisory Board members
will not receive any compensation for serving and will not suffer any penalty
for failure to attend meetings or to provide advice when requested. They merely
promise to provide advice as they are able upon request from the Manager or an
officer of the Company.
Advisory Board members will serve for an initial term ending on
September 30, 1999. They may serve for additional one year terms thereafter upon
the request of the Company and upon their consent to serve. The Company reserves
the right to dissolve the Advisory Board at any time without penalty. Advisory
Board members may resign from membership on the Advisory Board at any time after
September 30, 1998.
The Company will indemnify Advisory Board members and hold them
harmless against any claim, liability, loss, damage, and/or expense (including
reasonable attorneys' fees) that may arise as a consequence of their service on
the Advisory Board unless such liability or claim arises out of their own gross
negligence, recklessness or willful wrongdoing or misconduct.
49
<PAGE>
The table below lists the current members of the Advisory Board. The
Manager may recruit any number of members for the Advisory Board at its sole
discretion.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Name Occupation
- ---- ----------
C. Noel Brown Founder and President, Brown & Co., North Augusta, SC
Dr. Randy Cooper General Surgeon, University Surgical of Augusta, GA
Bradley D. Covar Certified Public Accountant, Edgefield, SC
Roderick C. Godwin Partner, Southeastern Lab Apparatus, Inc.
David R. Hargrove President, Groves Wholesale Nursery, North Augusta, SC,
registered landscape architect
Phil Harrison Sr. Chairman, Harrison-Kerzic, Inc. Insurance Brokers
W.L. McCrary, III Retired petroleum products distributor executive
John L. Murray, III General Manager, Hilltop Auto Auction, North Augusta, GA
Jeffrey S. Pope Project Coordinator, CSRA Testing and Engineering Co.,
Augusta, GA
Jon Prince Owner, Prince Oil Co., Inc., Edgefield, SC
Dr. Robert L. Sawyer, Jr. Physician, Saluda, SC
Dr. Wyman Shealy Dentist, Saluda, SC
Douglas J. Stevens Controller & Assistant Secretary, Delta Woodside
Industries, Inc., Greenville, SC
O.W. Summers National Sales Manager, Mohawk, CDT, Past President, Building
Industry Consulting Service International Organization
Eric P. Thompson Director, Lower Savanah Council of Governments
J. William Thurmond Physician, North Augusta, SC
</TABLE>
50
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the opinion of Wyche, Burgess, Freeman &
Parham, P.A. ("Company Counsel") regarding the material federal income tax
consequences regarding this Offering and is based on current law. Much of this
discussion is general in nature and does not purport to deal with the tax
considerations of particular investors or all the ramifications of the Offering
for certain types of investors (including, for example, tax-exempt entities,
foreign investors, financial institutions, broker-dealers, etc.) who may receive
special treatment under the federal income tax laws. For purposes of the
discussion in this subsection of the Prospectus, capitalized terms not otherwise
defined in the Prospectus have the meaning of such terms as defined in the Code
and/or Internal Revenue Service regulations promulgated thereunder (the
"Regulations"). The following discussion is based on current law as of the date
of this Prospectus, and it may become inaccurate as the result of future
developments in applicable law.
EACH INVESTOR IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR REGARDING
THE SPECIFIC TAX CONSEQUENCES (INCLUDING FEDERAL, STATE, LOCAL AND FOREIGN
TAXES) OF THE OFFERING (INCLUDING THE ACQUISITION, OWNERSHIP AND SALE OF
MEMBERSHIP UNITS IN THE COMPANY) AND OF ANY POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
The Offering
The Company is offering its Membership Units in the Offering. The
Company currently only has one class of Membership interests which are the
Membership Units, though the Operating Agreement permits the Manager to create
and issue additional classes of Membership interests. If the Manager were to
create and issue an additional class or additional classes of Membership
interests, the tax consequences described below for holders of the Membership
Units offered hereby could change substantially.
Partnership Status
In the opinion of Company Counsel the Company will be classified and
treated as a partnership for federal income tax purposes, as described more
fully below. As a partnership, the Company will not be subject to federal income
tax, but will pass through items of income, gain, deduction, loss and credit to
Members.
Pursuant to Sections 301.7701-2(c) and 301.7701-3(b) of the
Regulations, the Company should be treated as a partnership for federal income
tax purposes because it will be a business entity that is not a corporation, it
will have two or more members following the Offering, and it will not have
elected to be taxed as a corporation. The Company has not requested an IRS
ruling on its partnership status for federal income tax purposes.
Publicly-Traded Partnership Rules
Even though the Company is classified as a partnership for purposes of
section 7701(a) of the Code, in order to be treated as a partnership for federal
income tax purposes, the Company cannot be subject to the publicly-traded
partnership rules in section 7704 of the Code. Generally, section 7704(a)
provides that a publicly-traded partnership ("PTP"), with certain exceptions,
will be treated as a corporation for purposes of Title 26. Under section
7704(b), an entity may be classified as a publicly-traded partnership ("PTP") if
interests in the entity are traded on an established securities market, or are
readily tradable on a secondary market (or the substantial equivalent thereof).
The Company will seek to retain its federal tax status as a partnership
by actively seeking to avoid being traded on an established securities market or
a secondary market. Under Section 1.7704-1(d), interests in a partnership are
not considered readily tradeable unless the partnership participates in the
establishment of the market or the inclusion of its interests thereon or
recognizes transfers on the market by redeeming the transferor partner or
admitting the transferee as a partner. The Operating Agreement prohibits
transfer of ownership of the Membership Units without the consent of the
Manager. The Operating Agreement also gives the Company a right-of-first-refusal
in the event a Member wishes to transfer the distributional rights associated
with the Member's Membership Units. Generally, the Manager may, in its sole
discretion, exercise its right to prohibit transfer of Membership Units, and the
Company may, in its sole discretion, exercise its right-of-first-refusal with
respect to transfer of the distributional interests associated with
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<PAGE>
Membership Units in order to prevent a market from developing for the Membership
Units. It is Company Counsel's opinion that such efforts will prevent the
Company from being considered a PTP.
If the Company were to be classified as a corporation for federal
income tax purposes, the Company would be subject to an entity level tax. If the
Company is classified as a corporation, the tax consequences of holding the
Membership Units would also be affected. Rather than reporting income, gain,
loss and deductions under the partnership tax rules, distributions by the
Company would be treated as corporate dividends to the extent they are paid from
corporate earnings and profits. Distributions in excess of earnings and profits
may be treated either as a return of capital or as a gain if the distributions
exceed a Member's tax basis in its Membership Interest. Such treatment may cause
a Member to realize a different amount of income for tax purposes than if it
were allocated income under the partnership tax rules.
Taxation of Members of the Company
Purchase of Membership Units. Generally, Members will not recognize any
gain or loss upon the purchase of their Membership Units. Section 721(a) of the
Code provides that generally, neither the partnership nor any of its partners
shall recognize a gain or loss upon the contribution of property (including
cash) to a partnership in exchange for a partnership interest.
Pass Through of Gain and Loss. Generally, items of income, gain, loss,
deduction or credit of the Company will be allocated to Members in accordance
with their proportionate ownership of Membership Units for tax purposes and will
have to be reported by Members on their individual income tax returns. As
partners for tax purposes, Members may be subject to tax on their distributive
share of income or gain, without regard to whether they receive a distribution
from the Company.
Allocation of income, gain, loss and deduction with respect to
contributed property. In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members, including the Manager, so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and the fair market value of such property at the time of
transfer to the Company. Generally, the Company's adjusted basis in contributed
property is the same as its adjusted basis in the hands of the contributing
Member immediately prior to contribution adjusted for any gain or loss
recognized by the contributing Member upon transfer. Any elections or other
decisions relating to such allocations pursuant to Section 704(c) will be made
by the Manager in any permissible manner which reflects the purpose and
intention of the Operating Agreement. Such allocations pursuant to Section
704(c) will not affect or be taken into account in connection with distributions
of cash or property to the Members under the terms of the Operating Agreement.
Code Section 704(b) Modifications. Section 4.10 of the Operating
Agreement provides that Article IV governing capital contributions will be
construed and, if necessary, modified to cause the allocations of profits,
losses, income, gain and credit pursuant to Article V of the Operating Agreement
to have substantial economic effect under the Regulations promulgated under
Section 704(b) of the Code, in light of the distributions made pursuant to
Articles V and X and the capital contributions made pursuant to Article IV of
the Operating Agreement.
Distributions with Respect to Membership Units. Generally, under Code
Section 731(a), in the event that the Company makes a distribution to its
Members, gain will not be recognized by Members unless the amount distributed
exceeds the Member's basis in his or her Membership Units prior to the
distribution. If the amount distributed exceeds the Member's basis, then the
Member will recognize gain to the extent of the excess. Also, generally under
Code Section 731(a), loss would not be recognized by a Member in the event the
Company makes a distribution with respect to the Membership Units unless the
distribution is in liquidation of the Member's interest in the Company and no
property other than cash, unrealized receivables, and inventory are received by
the Member, in which case, the Member would recognize loss to the extent that
the Member's basis in his or her Membership Units exceeds the amount of cash and
the basis of the unrealized receivables and inventory distributed. Any gain or
loss recognized as described above will be treated as gain or loss from the sale
or exchange of the Membership Units.
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Members' Federal Tax Basis
Initial Basis. A Member's initial federal income tax basis in his or
her Membership Units will equal the amount of cash paid for the Membership
Units. Pursuant to Code Section 722, a Member's initial basis in his or her
Membership Units equals the sum of the cash and the adjusted basis of any
property contributed to the Company in exchange for the Membership Units
increased by any gain recognized by the Member upon such contribution. Members
purchasing the Membership Units offered hereby will only be paying cash for
their Membership Units, so their initial basis in the Membership Units will
equal the amount paid for the Membership Units.
General Adjustments to Basis. In general, under Code Section 705, a
Member's basis in his or her Membership Units will be adjusted for the Member's
distributive share of the Company's taxable income, tax-exempt income, losses
and expenditures that are not otherwise taken into account in computing taxable
income. In addition, under Code Section 733, a Member's basis will be reduced
(but not below zero) for non-liquidating distributions by the amount of money
distributed to such Member and by the amount of the basis in the hands of the
Member of any property distributed to such Member.
Limits on Losses. Under Section 704(d) of the Code, a Member's
distributive share of losses of the Company (including capital losses) is
limited to such Member's adjusted basis in the Membership units, determined at
the end of the taxable year in which such loss occurred. A loss disallowed under
this provision may be deducted in the taxable year when it is repaid to the
Company by the Member.
Adjustments for Liabilities of the Company. A Member's basis will
generally be increased or decreased in proportion to the share of the Company's
liabilities attributable to the Member's Membership Units. The Company expects
to enter into a substantial Credit Facility. See "Business -- Description of
Company Indebtedness." Code Section 752 provides that any increase or decrease
in a partner's share of the liabilities of a partnership or any increase or
decrease in a partner's personal liability as a result of the assumption by the
partner of liabilities of the partnership will be treated as a contribution to
or distribution from the partnership. Such a deemed contribution or distribution
generally results in an increase or decrease in the partner's basis in the
partnership. (If a deemed distribution exceeds the partner's basis, then such
deemed distribution would be treated as gain to the partner to the extent of
such excess.)
As permitted by Section 33-44-303 of the LLC Act, Section 3.7 of the
Operating Agreement provides that no Member or Manager of the Company will be
personally liable for the liabilities of the Company. Therefore, pursuant to
Section 1.752-1(a)(2) of the Regulations, liabilities of the Company will be
considered non-recourse for purposes of determining a Member's basis. Under
Section 1.752-3 of the Regulations, non-recourse liabilities are allocated first
to the extent of a Member's Section 704(b) share of partnership minimum gain;
second, to the extent a Member would realize taxable gain under Section 704(c)
if all of the Company's property that is subject to non-recourse debt were sold
for the amount of the debt and no other consideration; and, third, in proportion
to the Member's share of profits of the Company. Partnership minimum gain is
defined in Section 1.704-2(b)(2) as the extent to which debt related to Company
property that is non-recourse to the Company exceeds the Company's basis in such
property.
The tax basis of a Membership Unit that is attributable to such
liabilities will be reduced as the result of the admission of new Members, since
the new Members will be entitled to their allocable share of liabilities in
accordance with their profits interests. To the extent liabilities are thus
shifted from a Member, such amount will be treated as a distribution to such
Member. This distribution is applied against and reduces the tax basis of such
Member's interest in the Company. To the extent such deemed distribution exceeds
a Member's basis, it could create taxable gain.
Other Limits on Losses
At Risk Limitations. The deductibility of allocable shares of Company
losses by Members is limited by the "at risk" limitations in Code Section 465.
Members who are individuals are not allowed to deduct Company losses in excess
of the amounts which such Members are determined to have "at risk" at the close
of the Company's tax year. Generally, a Member's amount "at risk" will include
the amount of his or her cash capital contribution to the Company. Pursuant to
Section 1.465-22 of the Regulations, a Member's amount "at risk" will be reduced
by his or her allocable share of Company losses and by distributions and
increased by his or her allocable share of Company income. Generally under Code
Section 465(b), a Member's allocable share of Company liabilities are not at
risk; however, certain qualifying non-recourse
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financing related to the holding of real property may be treated as at risk.
Pursuant to Code Section 465(a)(2), any deductions which are disallowed under
this limitation may be carried forward indefinitely and utilized in subsequent
years to the extent that a Member's amount "at risk" is increased in those
years.
Passive Loss Limitations. Section 469 of the Code substantially
restricts the ability of many taxpayers (including individuals, estates, trusts,
certain closely-held corporations and certain personal service corporations) to
deduct losses derived from so-called "passive activities." Passive activities
generally include any activity involving the conduct of a trade or business in
which the taxpayer does not materially participate (including the activity of a
limited partnership in which the taxpayer is a limited partner) and certain
rental activities (including the rental of real estate). In the opinion of
Counsel, it is more likely than not that a Member's interest in the Company will
be treated as a passive activity, if such issue were challenged by the IRS,
litigated and judicially decided. Accordingly, income and loss of the Company,
other than interest or other similar income earned on temporary investments and
working capital reserves (which would constitute portfolio income pursuant to
Code Section 469(e)(1)), will constitute passive activity income and passive
activity loss, as the case may be, to Members.
Generally, losses from passive activities are deductible only to the
extent of a taxpayer's income or gains from passive activities and will not be
allowed as an offset against other income, including salary or other
compensation for personal services, active business income or "portfolio
income," which includes nonbusiness income derived from dividends, interest,
royalties, annuities and gains from the sale of property held for investment.
Passive activity losses that are not allowed in any taxable year are suspended
and carried forward indefinitely and allowed in subsequent years as an offset
against passive activity income in future years. Upon a taxable disposition of a
taxpayer's entire interest in a passive activity to an unrelated party,
suspended losses with respect to that activity may then be deducted.
The Code provides that the passive activity loss rules will be applied
separately with respect to items attributable to each publicly-traded
partnership. Accordingly, if the Company were deemed to be a publicly-traded
partnership, Company losses, if any, would be available only to offset future
non-portfolio income of the Company.
Depreciation and Recapture
It is currently anticipated that the Company will take depreciation on
improvements to the Golf Course, buildings, normal furniture, fixtures and
equipment and computers and short-lived assets but not on the Golf Course
itself. The following table indicates the life, rate and method of depreciation
the Company expects to take based on Code Sections 167 and 168 and Rev. Proc.
87-56:
<TABLE>
<S> <C>
Asset Life (years) Method
- --------- ------------ -------------
Buildings 39 straight-line
Golf Course Improvements 15 straight-line
Normal Furniture, Fixtures & 7 double-declining
Equipment balance
Computers & Short-Lived 5 double-declining
Assets balance
</TABLE>
The tax basis for all depreciable assets will be the cost of the assets to the
Company, which have not been determined at this time.
Risk of Taxable Income Without Cash Distributions
Members are generally liable for federal income tax on the Company's
gains and income regardless of whether they receive a distribution from the
Company. Thus, a Member's tax liabilities could exceed cash distributions in
corresponding years. For example, the Company could elect to retain income for
future
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uses rather than distribute such income to Members. In this instance, Members
would be taxed on their proportional share of the gain without receiving any
cash distribution from the Company with which to pay such taxes. Investors are
urged to consult their personal tax advisors in this regard.
Sale or Other Disposition of Membership Units
Gain or Loss, Ordinary Income or Deduction. A Member may be unable to
sell any of his or her Membership Units by reason of the nonexistence of any
market therefor. In general, under Code Section 741, in the event that
Membership Units are sold, however, the selling Member will realize gain or loss
equal to the difference between the gross sale price or proceeds received from
sale and the Member's adjusted tax basis in the Membership Units. Assuming the
Member is not a "dealer" with respect to such Membership Units and has held the
Membership Units for more than one year, his gain or loss will be long-term
capital gain or loss, except for that portion of any gain attributable to such
Member's share of the Company's "unrealized receivables" and "substantially
appreciated inventory," as defined in Section 751 of the Code, which would be
taxable as ordinary income.
Relief of Share of Company Indebtedness. Sale of Membership Units will
result in the Member being relieved of his or her share of the Company's
non-recourse liabilities. Under Code Section 752(d) and the Supreme Court's
holdings in Crane v. Commissioner, 331 U.S. 1 (1947) and Tufts v. Commissioner,
461 U.S. 300 (1983), the amount of non-recourse liability from which the Member
is relieved will be included in the amount realized upon sale of the Membership
Unit. If the Member has a negative capital account balance, the Member's gain on
sale could be greater than the amount of consideration received by the Member
from the purchaser excluding the assumption of Company debt by the purchaser.
Thus, the Member could have a taxable gain that does not reflect cash or
property received in the sale.
Section 754 Election. The Company expects to make a Code Section 754
election, which means that the Company's basis in its property will be adjusted
upon the transfer of a Member's Membership Units. When a Member sells his or her
Membership Unit, the purchaser's basis in the Membership Unit will generally be
the price paid plus the proportional amount of Company liability assumed. If no
Section 754 election is made by the Company and the selling Member recognizes
gain or loss on the sale of his or her Membership Unit, the purchaser's basis in
the Membership Unit ("outside basis") will generally differ from the purchaser's
proportional share of the Company's basis in Company property ("inside basis").
If the Company then sells some Company property, the purchaser of the Membership
Unit will be allocated gain or loss from the sale by the Company, resulting in a
form of double taxation whereby both the seller and purchaser of a Membership
Unit are taxed in connection with the sale by the Company of Company property.
If a Section 754 election is made, Code Section 743(b) provides that the
Company's inside basis will be adjusted upwards or downwards in an amount that
reflects the difference between the Membership Unit purchaser's outside basis
and his or her proportionate share of the Company's inside basis. Such an
adjustment generally will eliminate or reduce the double taxation effect
described above. If the Company makes a Section 754 election, as expected, then
under Section 1.754-1(c) of the Regulations, the election can only be revoked
with the consent of the Internal Revenue Service.
Gift of Membership Units. If a Member makes a gift of his or her
Membership Unit, the Member may realize gain to the extent that the share of
Company liabilities allocated to the Membership Unit exceed the donor's basis in
the Membership Unit. Generally, the making of a gift is not a taxable event for
federal income tax purposes; however, under Section 1.1001-1(e) of the
Regulations and the holding in Diedrich v. Commissioner, 457 U.S. 191 (1982),
the gift of a Membership Unit will be deemed to include gain from sale to the
extent that the share of Company liabilities allocated to the Membership Unit
exceed the donor's basis in the Membership Unit. A donor Member may never
recognize a loss from the gift of a Membership Unit. The extent to which gain
realized by a donor Member is capital gain or ordinary income is governed by the
principals described above under "-- Gain or Loss, Ordinary Income of
Deduction."
A Member making a gift of his or her Membership Units may be liable for
federal gift tax depending on the value of the Membership Units donated and the
value of other gifts the donor Member has made. Investors must consult their own
tax advisor to determine the gift tax consequences of a potential gift of their
Membership Units in their specific circumstances.
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Sale or Other Disposition of Partnership Property
The Company does not expect to sell the Golf Course or buildings
erected on the Land in relation to the Golf Course. However, if the Company does
sell these properties or other Company property, the Company will recognize gain
or loss to the extent that the amount realized is more or less than the
Company's adjusted basis in the property sold. The amount realized upon the sale
of Company property will generally be equal to the sum of the cash received plus
the amount of indebtedness encumbering the property, if any, assumed by the
purchaser or to which the property remains subject upon the transfer of the
property to the purchaser. The Company's adjusted basis in its property will in
general be equal to the original cost of the property less depreciation and cost
recovery allowances allowed to the Company with respect to such property.
Assuming that the Company is not deemed to be a dealer with respect to
its properties (which the Company believes is the case, since it is not holding
property for the purpose of reselling it), such gain or loss will generally be
taxable under Section 1231 of the Code. A Member's share of the gains or losses
resulting from the sale of Company property would generally be combined with any
other Section 1231 gains or losses realized by the Member in that year from
sources other than the Company. Because Company property is generally property
used in trade or business and generally will be held for more than one year, the
net Section 1231 gain or loss is generally treated as long-term capital gain
(subject to depreciation or cost recovery allowance recapture, if any, which
results in ordinary income treatment pursuant to Code Sections 1245 and 1250) or
ordinary loss, as the case may be. Investors should be aware that the amount of
taxable gain allocated to a Member with respect to the sale of Company property
may exceed the cash proceeds received by such Member with respect to such sale.
Special allocations of gain, loss, income or deduction may be made if
the Company disposes of property contributed to it in exchange for Membership
Units and the fair market value of such property at the time of contribution
differed from the contributor's basis in such property. See "-- Taxation of
Members of the Company -- Allocation of income, gain, loss and deduction with
respect to contributed property."
Section 183 "Tax Shelter" Rules
Section 183 of the Code provides for the disallowance of certain
deductions attributable to activities "not engaged in for profit." The term
"activity not engaged in for profit" is defined as any activity other than an
activity that constitutes a trade or business or an activity that is engaged in
for the production or collection of income. In general, an activity will be
considered as entered into for profit where there is a reasonable expectation of
profit in the future. The determination of whether an activity is engaged in for
profit is based upon the facts and circumstances of each case.
Based upon the purpose of the Company to operate the Golf Course and
the assumption that the Manager will operate the Company in a business-like
manner in all material respects and strictly in accordance with the Operating
Agreement and this Prospectus, and assuming the determination as to whether the
activities of the Company are activities entered into for profit under Section
183 is made at the Company level, Company Counsel has concluded that it is more
likely than not that the activities contemplated by the Company will be
considered activities entered into for profit by the Company, if such issue were
challenged by the IRS, litigated and judicially decided. However, the IRS may
also apply Section 183 to Members notwithstanding any determination made with
respect to the Company in this regard, and since the test of whether an activity
is deemed to be engaged in for profit is based upon facts and circumstances that
exist from time to time, no assurance can be given that Section 183 of the Code
may not be applied in the future to disallow deductions allocable to Members
from Company operations. Investors should also be aware that Company Counsel in
the tax opinion filed with the Registration Statement gives no opinion as to the
application of Code Section 183 at the Member level. Accordingly, prospective
investors should consult with their own tax advisors regarding the impact of
Section 183 on their particular situations.
Liquidation or Termination of the Company
The dissolution and liquidation of the Company will involve the
distribution to the Members of the Company's cash and property, if any,
remaining after payment of all the Company's debts and liabilities. If a Member
receives cash in excess of the basis of his or her Membership Units, such excess
will be taxable as a gain pursuant to Code Section 731. If a Member were to
receive only cash, unrealized receivables and inventory (as defined in Section
751(d)(2) of the Code) upon dissolution and liquidation, he or she would
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recognize a loss to the extent, if any, that the adjusted basis of his or her
Membership Units exceeded the amount of cash, unrealized receivables and
inventory received. No loss would be recognized if a Member were to receive
property other than money, unrealized receivables and inventory. There are a
number of exceptions to these general rules.
State and Local Taxes
South Carolina Income Tax. All Members of the Company, whether or not
they are South Carolina residents, will be subject to South Carolina state
income taxes on their share of Company income, pursuant to South Carolina Code
("SC Code") Sections 12-6-600 and 12-6-1720(1)(d). The table below discloses the
individual income tax rates on South Carolina taxable income:
Amount of Taxable Income South Carolina Income Tax
- ------------------------ -------------------------
Not over $2,220 2.5% of taxable income
Over $2,220 but not over $4,440 $56 + 3% of excess over $2,220
Over $4,440 but not over $6,660 $123 + 4% of excess over $4,440
Over $6,660 but not over $8,880 $212 + 5% of excess over $6,660
Over $8,880 but not over $11,100 $323 + 6% of the excess over $8,880
Over $11,100 $456 + 7% of the excess over $11,100
The actual South Carolina income tax owed by individual investors in
any given year will vary depending on the financial situation and results of
operations of the Company and on the individual circumstances of the investor.
Investors are advised to consult their personal tax advisor to discuss the South
Carolina income tax consequences applicable to their individual situation.
Special Provisions for Members Who are Not South Carolina Residents.
Pursuant to SC Code Section 12-8-590(C), the Company will withhold income taxes
at a rate of 5% of a non-resident Member's share of Company South Carolina
taxable income, whether distributed or undistributed. Amounts so withheld can be
used as credit against South Carolina taxes due when the non-resident Member
files his or her South Carolina income tax return. SC Code Section
12-6-4910(1)(d) generally requires non-resident Members to file a South Carolina
income tax return if they have South Carolina gross income.
Where to Get South Carolina Income Tax Return Forms. According to South
Carolina Department of Revenue ("SCDOR") publications, South Carolina income tax
forms may be obtained by written or oral request to the SCDOR at: South Carolina
Department of Revenue, Forms, Columbia, South Carolina 29214-0402, tel. (803)
898-5320. SCDOR publications also indicate that South Carolina income tax forms
can be downloaded from SCDOR's website at: http://www.dor.state.sc.us.
Other State and Local Taxes. In addition to the federal and South
Carolina income taxes discussed herein, prospective investors should consider
the local tax consequences and other South Carolina state tax consequences of an
investment in the Company. Potential investors should also consider the tax
consequences under their own states' laws with respect to an investment in the
Company. While the Company does not, at this time, intend to conduct business in
any state other than South Carolina, the Company could acquire property or
conduct business in other states in the future, in which case investors might be
subject to state and local taxes in states other than South Carolina and their
home states. This Prospectus makes no attempt to summarize any state or local
tax consequences to an investor other than the South Carolina state income tax
consequences explicitly discussed above. Each investor is urged to consult his
or her own tax advisor on all matters relating to state and local taxation,
including, without limitation, whether the state in which he or she resides will
impose a tax upon his or her share of the taxable income of the Company. The
additional costs incurred in having to prepare various state and local tax
returns, as well as the additional state and local tax which may be payable,
should be considered by prospective investors in deciding whether to make an
investment in the Company.
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Tax Returns and Tax Information
The Company will provide each Member at least annually with a Schedule
K-1 (or such successor schedule or form as the IRS may require) indicating that
Member's allocable share of the Company's profits and losses, which will list
separately any partnership item that may be subject to special rules. Each
Member will then be required to report his or her allocable share of these items
on his or her individual return. The Company does not intend to provide such tax
information to anyone, including an assignee of the distributional rights
related to one or more Membership Units, unless such person is actually admitted
as a Member of the Company.
The Company is required to file a federal partnership information
return even though it does not itself pay federal income tax. Such information
return may be audited by the IRS, and such audit may result in adjustments or
proposed adjustments. Any adjustment of the Company's partnership information
return normally will result in adjustments or proposed adjustments of Members'
returns. Any audit of a Member's return could result in adjustments of
non-partnership as well as partnership income and losses.
Alternative Minimum Tax
Alternative minimum tax is payable to the extent that a taxpayer's
alternative minimum tax exceeds his regular federal income tax liability for the
taxable year. Alternative minimum tax for individual taxpayers is a percentage
of "alternative minimum taxable income" ("AMTI") in excess of certain exemption
amounts. The first $175,000 of AMTI in excess of the exemption amount is taxed
currently at 26%, and AMTI in excess of $175,000 over the exemption amount is
taxed currently at 28%. Alternative minimum taxable income is generally computed
by adding what are called "tax preference items" to the taxpayer's regular
taxable income, with certain adjustments. While it is not anticipated that an
investment in the Company will give rise to any specific tax preference items,
the amount of alternative minimum tax imposed depends upon various factors
unique to each particular taxpayer. Accordingly, each Member should consult with
his or her own personal tax advisor regarding the possible application of the
alternative minimum tax.
Anti-Abuse Rules
As noted above, partnerships as such are not liable for income taxes
imposed by the Code. In December 1994, however, the IRS adopted Regulation
Section 1.701-2 setting forth "anti-abuse" rules under the Code provisions
applicable to partnerships, which rules authorize the Commissioner of Internal
Revenue to recast transactions involving the use of partnerships either to
reflect the underlying economic arrangement or to prevent the use of a
partnership to circumvent the intended purpose of any provision of the Code.
These rules generally apply to all transactions relating to a partnership
occurring on or after May 12, 1994, and thus would be applicable to the
Company's activities. If any of the transactions entered into by the Company
were to be recharacterized under these rules, or the Company, itself, were to be
recast as a taxable entity under these rules, material adverse tax consequences
to all of the Members could occur. In this regard, the Company is not aware of
any fact or circumstance which could cause the IRS to exercise its authority
under these rules to recast any of the transactions to be entered into by the
Company or to restructure the Company itself.
The foregoing discussion of federal income tax consequences assumes
that the Company continues to maintain its current financial structure with one
class of membership units outstanding. The Operating Agreement permits the
Manager, in its sole discretion, to create, define the rights of, and issue new
classes of securities in addition to the Membership Units offered hereby. If
other classes of securities are issued by the Company in the future, tax
consequences of ownership of the Membership Units could be substantially
different for the consequences described herein.
LEGAL MATTERS
Certain legal matters in connection with the Offer will be passed upon
for the Company by Wyche, Burgess, Freeman & Parham, P.A., Greenville, South
Carolina. Members of Wyche, Burgess, Freeman & Parham, P.A. do not own any
Membership Units of the Company and have no other interest or connection to the
Company other than serving as the Company's legal counsel in various matters
from time to time for which it bills the Company at ordinary rates.
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EXPERTS
The interim financial statement of the Company dated June 3, 1998
included in this Prospectus has been audited by the accounting firm of Serotta
Maddocks Evans & Co., CPA's, of Augusta, Georgia. Such financial statement has
been included in reliance upon the report by Serotta Maddocks Evans & Co.,
CPA's.
The appraisal of the Land filed as an exhibit to the Registration
Statement containing this Prospectus was provided by Sherman & Hemstreet, Inc.
of Augusta, Georgia. References to the fair market value of the Land contained
herein have been included in reliance upon the appraisal of Sherman & Hemstreet,
Inc.
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GLOSSARY
"ADVISORY BOARD" means the board whose purpose is to advise the Manager
and the officers of the Company on matters pertaining to the development and
management of the Golf Course.
"AFFILIATE" means (i) any person directly or indirectly controlling,
controlled by or under common control with another entity, (ii) any person
owning or controlling 10% or more of the outstanding voting securities of
another entity , (iii) any officer, director or partner of another entity, and
(iv) if such other person is an officer, director or partner, any company for
which such person acts in any such capacity.
"ANNUAL REPORT" means a report prepared at the close of the Company's
fiscal year, containing financial statements audited by an independent certified
public accountant.
"AUDITED FINANCIAL STATEMENTS" means financial statements (balance
sheet, statement of income, statement of members' equity and statement of cash
flows) prepared in accordance with generally accepted accounting principles and
accompanied by an independent auditor's report containing (i) an unqualified
opinion, (ii) an opinion containing no material qualification, or (iii) no
explanatory paragraph disclosing information relating to material uncertainties
(except as to litigation) or going concern issues.
"CAPITAL ACCOUNT" means the account established for each Member
pursuant to Section 4.7 of the Operating Agreement. Each Member's Capital
Account shall be determined in accordance with Treasury Regulations Section
1.704-1(b). Capital accounts generally will be adjusted as follows. Each
Member's Capital Account shall be increased by (1) the amount of any money
actually contributed by the Member to the capital of the Company, (2) the fair
market value of any property contributed, as determined by the Company and the
contributing Member at arm's length at the time of contribution, or in the case
of property contributed by the Manager, as determined by independent appraisal
(net of liabilities assumed by the Company or subject to which the Company takes
such property, within the meaning of ss. 752 of the Code), and (3) the Member's
share of Net Profits and of any separately allocated items of income or gain.
Each Member's Capital Account shall be decreased by (1) the amount of money
actually distributed by the Company to the Member, (2) the fair market value of
any property distributed to the Member, as determined by the Company and the
Member at arm's length at the time of distribution (net of liabilities of the
Company assumed by the Member or subject to which the Member takes such property
within the meaning of ss. 752 of the Code), and (3) the Member's share of Net
Losses and of any separately allocated items of deduction or loss.
"CAPITAL CONTRIBUTION" means the gross amount of investment in the
Company by a Member, or all Members as the case may be.
"CASH AVAILABLE FOR DISTRIBUTION" means Cash Flow less the amount set
aside for restoration or creation of reserves.
"CASH FLOW" means cash funds derived from operations of the Company,
including, without limitation, interest and investment income, but excluding
Capital Contributions, and without deduction for depreciation or amortization,
after deducting funds used to pay or to provide for the payment of all operating
expenses of the Company and debt service, if any, capital improvements and
replacements.
"CLUB MEMBERSHIP" means either an individual or a family club
membership in the Golf Course.
"CODE" means the Internal Revenue Code.
"COMMISSION" means the U.S. Securities and Exchange Commission.
"COMPANY" means Mount Vintage Plantation Golf Club, LLC.
"CONSTRUCTION FEES" means a fee or other remuneration for acting as
general contractor and/or construction manager to construct improvements,
supervise and coordinate projects.
"COST OF PROPERTY" means the fair market value of the Land contributed
to the Company by the Manager as determined by an Independent Expert.
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"CREDIT FACILITY" means a credit agreement with a commercial bank or
other financial institution to help finance development of the Golf Course and
to provide operating capital for the Golf Course.
"DEVELOPMENT" refers to MV Development Company, LLC, a South Carolina
LLC.
"DHEC" means the South Carolina Department of Health and Environmental
Control.
"DWI" means Delta Woodside Industries, Inc.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FINANCING" shall be defined as all indebtedness encumbering Company
properties or incurred by the Company, the principal amount of which is
scheduled to be paid over a period of not less than 48 months, and not more than
50 percent of the principal amount of which is scheduled to be paid during the
first 24 months. Nothing in this definition shall be construed as prohibiting a
bona-fide pre-payment provision in the financing agreement.
"GOLF COURSE" means the Company's golf course to be developed at Mount
Vintage Plantation, a residential and equestrian community located between
Edgefield, South Carolina and Augusta, Georgia.
"GRADING PERMIT" means a storm water management and erosion control
permit issued by DHEC necessary in order to construct Golf Course.
"INDEPENDENT APPRAISAL" means an appraisal by a person with no material
current or prior business or personal relationship with the Company or an
affiliate or officer of the Company who is engaged to a substantial extent in
the business of rendering opinions regarding the value of assets of the type
held by the Company, and who is qualified to perform such work.
"LAND" refers to approximately 243 acres of land located within Mount
Vintage Plantation being contributed by the Manager to the Company in exchange
for 48 Membership Units. The Golf Course will be constructed on the Land.
"LLC" means limited liability company.
"LLC ACT" means the South Carolina Uniform Limited Liability Company
Act of 1996.
"MANAGER" refers to MV Development Co., LLC, a South Carolina limited
liability company, which will serve as manager of the Company.
"MEMBER" means one who has purchased a Membership Unit and become a
member of the Company.
"MEMBERSHIP UNIT" is a member's share of the equity interest in the
Company, which includes the Member's share of the profits and losses of the
Company, the Member's right to one vote on matters on which Members are
permitted to vote, and a member's right to receive distributions of the
Company's assets.
"MINIMUM SUBSCRIPTION" means the sale of no less than 100 Membership
Units pursuant to this Offering.
"NET WORTH" means the excess of total assets over total liabilities as
determined by generally accepted accounting principles, except that if any of
such assets have been depreciated, then the amount of depreciation relative to
any particular asset may be added to the depreciated cost of such asset to
compute total assets, provided that the amount of depreciation may be added only
to the extent that the amount resulting after adding such depreciation does not
exceed the fair market value of such asset.
"OFFER" or "OFFERING" means the offer to sell up to 150 of the
Membership Units offered by this Prospectus at a price of $20,000 each, with a
minimum aggregate subscription of 100 Membership Units.
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"OPERATING AGREEMENT" means the agreement under Section 33-44-103 of
the Code of Laws of South Carolina concerning relations among the members,
managers, and limited liability company. The term includes amendments to the
operating agreement.
"PERSON" means any natural person, partnership, corporation,
association or other legal entity.
"PLANTATION" means Mount Vintage Plantation which is located
approximately 10 miles south of Edgefield, South Carolina, 13 miles north of
Augusta, Georgia and 16 miles west of Aiken, South Carolina.
"PGA" means the Pro Golfers Association.
"MANAGEMENT FEE" is a fee paid to the Manager for management services
in connection with the Golf Course.
"PROPERTY" refers to Mount Vintage Property Co., Inc., a South Carolina
corporation.
"PROSPECTUS" shall mean this offering document, which the Company
intends to be a prospectus as defined by Section 2(10) of the Securities Act of
1933, including a preliminary Prospectus.
"PTP" means a publicly-traded partnership.
"PURCHASE PRICE" means the price paid upon the purchase or sale of a
particular property, including the amount of acquisition fees and all liens and
mortgages on the property, but excluding points and prepaid interest.
"REGISTRATION STATEMENT" means the registration statement on Form S-11
(together with all amendments and exhibits thereto), of which this Prospectus is
a part, registering the offer and sale of the Membership Units with the
Commission.
"REGULATIONS" means the Internal Revenue Service regulations
promulgated under the Code.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSCRIPTION DEADLINE" is September 30, 1998.
"SUBSCRIPTION FUNDS" means funds received by the Company from
subscribers for the purpose of purchasing the Membership Units offered by means
of this Prospectus.
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EXHIBIT A
OPERATING AGREEMENT
OF
MOUNT VINTAGE PLANTATION
GOLF CLUB, LLC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
DEFINITIONS.............................................................A-3
ARTICLE II
ORGANIZATION............................................................A-6
2.1 Formation......................................................A-6
2.2 Name...........................................................A-6
2.3 Registered Office..............................................A-6
2.4 Registered Agent...............................................A-6
2.5 Principal Office In The United States; Other Offices...........A-6
2.6 Purposes.......................................................A-6
2.7 Foreign Qualification..........................................A-6
2.8 Term...........................................................A-7
2.9 Mergers; Sales of Substantially All Assets.....................A-7
2.10 No State-Law Partnership.......................................A-7
ARTICLE III
MEMBERS.................................................................A-7
3.1 Admission Of Members...........................................A-7
3.2 Representations And Warranties.................................A-8
3.3 Restrictions On The Disposition Of Membership Units............A-8
3.4 Additional Members.............................................A-9
3.5 Interests In A Member.........................................A-10
3.6 Information...................................................A-10
3.7 Liabilities To Third Parties..................................A-10
3.8 Withdrawal....................................................A-10
3.9 Classes And Voting............................................A-11
3.10 No Annual Meeting.............................................A-11
3.11 Special Meetings..............................................A-11
3.12 Place And Manner Of Meeting...................................A-11
3.13 Conduct Of Meetings...........................................A-11
3.14 Voting Lists..................................................A-12
3.15 Notice........................................................A-12
3.16 Quorum Of Members.............................................A-12
3.17 Majority Vote; Withdrawal Of Quorum...........................A-12
3.18 Voting Of Membership Units....................................A-12
3.19 Action Without Meeting........................................A-13
3.20 Assignment Of Distributional Interest.........................A-13
3.21 Distribution In Kind..........................................A-14
3.22 Right To Distribution.........................................A-14
3.23 Limitation On Distribution....................................A-14
3.24 Buy out Of Disassociating Member..............................A-14
ARTICLE IV
CAPITAL CONTRIBUTIONS..................................................A-14
4.1 Initial Contributions.........................................A-14
4.2 Failure to Complete Initial Contribution......................A-15
4.3 Subsequent Contributions......................................A-15
4.4 Failure To Make Subsequent Contributions......................A-15
4.5 Return Of Contributions.......................................A-16
4.6 Advances By Members...........................................A-16
4.7 Maintenance Of Capital Accounts...............................A-16
4.8 Distribution Of Assets........................................A-17
4.9 Sale Or Exchange Of Interest..................................A-17
4.10 Compliance With Section 704(b) Of The Code....................A-17
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS..........................................A-17
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5.1 Allocations Of Net Profits And Net Losses From Operations.....A-17
5.2 Distributions.................................................A-17
ARTICLE VI
MANAGER................................................................A-18
6.1 Management By Manager.........................................A-18
6.2 Actions By Manager; Delegation Of Authority; Officers.........A-18
6.3 Powers Of Manager.............................................A-19
6.4 Number And Term Of Office.....................................A-19
6.5 Removal.......................................................A-19
6.6 Resignation...................................................A-20
6.7 Vacancies.....................................................A-20
6.8 Place And Manner Of Meetings..................................A-20
6.9 First Meetings................................................A-20
6.10 Regular Meeting Of Manager....................................A-20
6.11 Special Meeting Of Manager....................................A-20
6.12 Notice Of Manager's Meetings..................................A-20
6.13 Action of Manager.............................................A-20
6.14 Quorum; Majority Vote.........................................A-21
6.15 Approval Or Ratification Of Acts Or Contracts By Members......A-21
6.16 Interested Managers, Officers And Members.....................A-21
6.18 Compensation..................................................A-22
ARTICLE VII
INDEMNIFICATION........................................................A-22
7.1 Indemnification...............................................A-22
ARTICLE VIII
TAXES..................................................................A-22
8.1 Tax Matters Partner...........................................A-22
ARTICLE IX
NOTICE.................................................................A-22
9.1 Notice........................................................A-22
ARTICLE X
DISSOLUTION, LIQUIDATION, AND TERMINATION..............................A-22
10.1 Dissolution...................................................A-22
10.2 Winding Up And Termination....................................A-23
10.3 Deficit Capital Accounts......................................A-23
10.4 Articles Of Termination.......................................A-24
ARTICLE XI
GENERAL PROVISIONS.....................................................A-24
11.1 Books And Records.............................................A-24
11.2 Amendment Or Modification.....................................A-24
11.3 Checks, Notes, Drafts, Etc....................................A-24
11.4 Headings......................................................A-24
11.5 Construction..................................................A-25
11.6 Entire Agreement; Supersedure.................................A-25
11.7 Effect Of Waiver Or Consent...................................A-25
11.8 Binding Effect................................................A-25
11.9 Governing Law; Severability...................................A-25
11.10 Further Assurances............................................A-25
11.11 Notice To Members Of Provisions Of This Agreement.............A-26
11.12 Counterparts..................................................A-26
11.13 Conflicting Provisions........................................A-26
11.14 Execution.....................................................A-26
</TABLE>
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<PAGE>
OPERATING AGREEMENT OF
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
This Operating Agreement of Mount Vintage Plantation Golf Club, LLC
(the "Company") dated July [___], 1998 is (a) adopted by the Manager (as defined
below) and (b) executed and agreed to, for good and valuable consideration, by
the Members (as defined below).
ARTICLE I
DEFINITIONS
As used in this Operating Agreement, the following terms have the
following meanings:
A. "Act" means the South Carolina Uniform Limited Liability Company Act
of 1996 and any successor statute as amended from time to time.
B. "Articles" means the Articles of Organization filed with the
Secretary of State of South Carolina by which the Company was organized as a
South Carolina Limited Liability Company under and pursuant to the Act, as
amended and restated from time to time.
C. "Bankrupt Member" means a Member who is the subject of an order for
relief under Title 11 of the United States Code or a comparable order under a
successor statute of general application or a comparable order under federal,
state, or foreign law governing insolvency and has the same meaning as the term
"Debtor in Bankruptcy" defined in ss. 33-44-101 (4) of the Act.
D. "Business Day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of South Carolina
are closed.
E. "Capital Contribution" means any contribution by a Member to the
capital of the Company.
F. "Code" means the Internal Revenue Code of 1986 and any successor
statute, as amended from time to time.
G. "Company" means Mount Vintage Plantation Golf Course, LLC , a South
Carolina Limited Liability Company.
H. "Company Liability" means any enforceable debt or obligation for
which the Company is liable or which is secured by any Company property.
I. "Default Interest Rate" means a rate per annum equal to the lesser
of (a) five percent (5.0%) plus a varying rate per annum that is equal to the
Wall Street Journal prime rate as quoted in the money rates section of the Wall
Street Journal which is also the base rate on corporate loans at large United
States money center commercial banks with adjustments in that varying rate to be
made on the same date as any change in that rate, and (b) the maximum rate
permitted by applicable law.
J. "Delinquent Member" means a Member who does not contribute by the
time required all or any portion of a Capital Contribution that Member is
required to make as provided in this Operating Agreement.
K. "Distributional Interest" means all of a Member's interest in
distributions by the Company.
L. "Dispose," "Disposing," or "Disposition" means a sale, assignment,
transfer, exchange, mortgage, pledge, grant of a security interest, or other
disposition or encumbrance (including, without limitation, by operation of law).
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M. "General Interest Rate" means a rate per annum equal to the lesser
of (a) the Wall Street Journal prime rate as quoted in the money rates section
of the Wall Street Journal which is also the base rate on corporate loans at
large United States Money center commercial banks with adjustments in that
varying rate to be made on the same date as any change in that rate, and (b) the
maximum rate permitted by applicable law.
N. "Initial Unit Count" means 250 Membership Units.
O. "Lending Member" means those Members, whether one or more, who
advance the portion of the Delinquent Member's Capital Contribution that is in
default.
P. "Majority in Interest" means the majority vote of both those Members
owning a majority of the capital and those Members holding a majority of the Net
Profits and Net Losses.
Q. "Manager" means MV Development Company, LLC or any Person hereafter
elected as Manager of the Company as provided in this Operating Agreement, but
does not include any Person who has ceased to be a Manager of the Company.
R. "Member" means any Person executing the Articles, this Operating
Agreement, or hereafter admitted to the Company as a Member as provided in this
Operating Agreement, but does not include any Person who has ceased to be a
Member in the Company.
S. "Membership Unit" means a unit representing a Member's proportional
interest in the Company, including, without limitation, rights to distributions
(liquidating or otherwise), allocations and information, and to consent or
approve except as otherwise provided herein. A Member may own integer numbers of
Membership Units.
T. "Net Losses" means the losses and deductions of the Company
determined in accordance with accounting principles consistently applied from
year to year employed under the method of accounting adopted by the Company and
as reported separately or in the aggregate, as appropriate, on the tax return of
the Company filed for federal income tax purposes.
U. "Net Profits" means the income and gains of the Company determined
in accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggregate as appropriate on the tax return of the Company
filed for federal income tax purposes.
V. "Operating Agreement" has the meaning given that term in the
introductory paragraph.
W. "Person" includes an individual, partnership, limited partnership,
limited liability company, foreign limited liability company, trust, estate,
corporation, custodian, trustee, executor, administrator, nominee or other
entity whether or not in a representative capacity.
X. "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
Y. "Property" means the property described on Exhibit B attached
hereto.
Z. "Required Interest" means holders of a majority of the Membership
Units entitled to vote.
Other terms defined herein have the meanings so given them.
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<PAGE>
ARTICLE II
ORGANIZATION
2.1 Formation.
The Company has been organized as a South Carolina Limited Liability
Company by the filing of Articles pursuant to the Act and the issuance of a
certificate of organization for the Company by the Secretary of State of South
Carolina.
2.2 Name.
The name of the Company is Mount Vintage Plantation Golf Club, LLC, and
all Company business must be conducted in that name or such other names that
comply with applicable law as the Manager may select from time to time.
2.3 Registered Office.
The registered office of the Company required by the Act to be
maintained in the State of South Carolina shall be the office of the initial
registered agent named in the Articles or such other office (which need not be a
place of business of the Company) as the Manager may designate from time to time
in the manner provided by law.
2.4 Registered Agent.
The registered agent of the Company in the State of South Carolina
shall be the initial registered agent named in the Articles or such other Person
or Persons as the Manager, or a Required Interest if there is no Manager, may
designate from time to time in the manner provided by law.
2.5 Principal Office In The United States; Other Offices.
The principal office of the Company in the United States shall be at
such place as the Manager may designate from time to time, which need not be in
the State of South Carolina. The Company may have such other offices as the
Manager may designate from time to time.
2.6 Purposes.
The purposes of the Company are to acquire by contribution the Property
and hold the Property for development into and operation as a golf course and to
engage in any lawful business activities related or incidental thereto.
2.7 Foreign Qualification.
Prior to the Company's conducting business in any jurisdiction other
than South Carolina, the Manager shall cause the Company to comply, to the
extent procedures are available and those matters are reasonably within the
control of the Manager or Members, with all requirements necessary to qualify
the Company as a foreign limited liability company in that jurisdiction. At the
request of the Manager, each Member shall execute, acknowledge, swear to, and
deliver all certificates and other instruments conforming with this Operating
Agreement that are necessary or appropriate to qualify, continue, and terminate
the Company as a foreign limited liability company in all such jurisdictions in
which the Company may conduct business.
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<PAGE>
2.8 Term.
The Company commenced on the date the Articles were filed with the
Secretary of State of South Carolina for the Company and shall continue in
existence for the period fixed in the Articles for the duration of the Company,
or such earlier time as this Operating Agreement may specify.
2.9 Mergers; Sales of Substantially All Assets.
The Company may merge or consolidate with another business entity only
upon the affirmative vote of a Required Interest subject to the requirements of
Sections 33-44-904 through 33-44-907 of the Act.
The Company may sell substantially all of its assets only upon the
affirmative vote of a Required Interest. For purposes of this Section 2.9, (1) a
sale of substantially all of the assets of the Company shall include (i) the
sale or transfer of 10% or more of the Property, (ii) the sale or transfer of
50% or more of the Company's entire assets or (iii) the sale or transfer of any
assets which would prevent the Company from being able to conduct the business
in which it was engaged immediately prior to such sale or transfer in
substantially the form and volume in which it was conducting such business
immediately prior to such sale or transfer and (2) a sale of substantially all
of the assets of the Company shall be deemed to have occurred if any of the
sales or transfers described in this paragraph occur in one or more related
transactions.
The Company may issue or deliver, in any one transaction or series of
related transactions, any membership interests or other securities of its issue
aggregating more than 20% of the beneficial ownership of the Company in exchange
or payment for any properties or assets of any other business entity, or
securities issued by any other business entity, or in a merger of any subsidiary
of the Company (50% or more of the ownership interests of which is held by the
Company) with or into any other business entity only upon the affirmative vote
of a Required Interest.
2.10 No State-Law Partnership.
The Members intend that the Company not be a partnership (including,
without limitation, a limited partnership) or joint venture, and that no Member
or Manager be a partner or joint venturer of any other Member or Manager, for
any purposes other than federal and state income tax purposes, and this
Operating Agreement may not be construed to suggest otherwise.
ARTICLE III
MEMBERS
3.1 Admission Of Members.
A. After the formation of this Company, a person becomes a new Member:
(1) in the case of a person acquiring one or more Membership
Units directly from this Company, on compliance with the provisions of Section
3.2 and 3.4 of this Agreement governing admission of new Members; and
(2) in the case of an assignee of a Membership Unit if there
is the consent of the Manager to permit the admission of the assignee as a
substituted Member pursuant to ss. 33-44-503 of the Act.
B. Any person may be a Member unless the person lacks capacity apart
from the Act.
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3.2 Representations And Warranties.
Each Member hereby represents and warrants to the Company and each
other Member that (a) if that Member is a corporation, it is duly organized,
validly existing and in good standing under the law of the state of its
incorporation and is duly qualified and in good standing as a foreign
corporation in the jurisdiction of its principal place of business (if not
incorporated therein); (b) if that Member is a limited liability company, it is
duly organized, validly existing, and (if applicable) in good standing under the
law of the state of its organization and is duly qualified and (if applicable)
in good standing as a foreign limited liability company in the jurisdiction of
its principal place of business (if not organized therein); (c) if that Member
is a partnership, trust, or other entity, it is duly formed, validly existing,
and (if applicable) in good standing under the law of the state of its
formation, and if required by law is duly qualified to do business and (if
applicable) in good standing in the jurisdiction of its principal place of
business (if not formed therein), and the representations and warranties in
clause (a), (b), or (c), as applicable, are true and correct with respect to
each partner (other than limited partners), trustee, or other Member thereof,
(d) that Member has full corporate, limited liability company, partnership,
trust, or other applicable power and authority to execute and agree to this
Operating Agreement and to perform obligations hereunder and all necessary
actions by the board of directors, shareholders, manager, members, partners,
trustees, beneficiaries, or other Persons necessary for the due authorization,
execution, delivery, and performance of this Operating Agreement by that Member
have been duly taken; (e) that Member has duly executed and delivered this
Operating Agreement; and (f) that Member's authorization, execution, delivery,
and performance of this Operating Agreement do not conflict with any other
agreement or arrangement to which that Member is a party or by which it is
bound.
3.3 Restrictions On The Disposition Of Membership Units.
A. Membership and transferability of Membership Units in the Company
are substantially restricted. Neither record title nor beneficial ownership of a
Membership Unit may be transferred or encumbered without the consent of the
Manager at the time of transfer. An unauthorized transfer of a Membership Units
could create a substantial hardship to the Company and jeopardize its capital
base. These restrictions upon ownership and transfer are not intended as a
penalty, but as a method to protect and preserve the Company's capital and its
financial ability to continue.
A Disposition of a Membership Unit in the Company may not be
effected without the consent of the Manager at the time of Disposition. Any
attempted Disposition by a Person of an interest or right in or in respect of
the Company other than in accordance with this section shall be, and is hereby
declared, null and void ab initio.
An assignee who becomes a Member has, to the extent assigned,
the rights and powers and is subject to the restrictions and liabilities of a
Member under this Operating Agreement and the Act. Unless otherwise provided by
this Operating Agreement, an assignee who becomes a Member also is liable for
the obligations of the assignor to make contributions but is not obligated for
liabilities unknown to the assignee at the time the assignee became a Member and
which could not be ascertained from this Operating Agreement. Whether or not an
assignee of a Membership Unit becomes a Member, the assignor is not released
from the assignor's liability to this Company.
B. Subject to the provisions of this Section 3.3, (i) a Person to whom
a Membership Unit in the Company is transferred has the right to be admitted to
the Company as a Member with the interest in Net Profits, Net Losses, and
capital so transferred to such Person, if (A) the Member making such transfer
grants the transferee the right to be so admitted, and (B) such transfer is
consented to in accordance with this section.
C. The Company may not recognize for any purpose any purported
Disposition of a Membership Unit unless and until the other applicable
provisions of this section have been satisfied and the Manager has received, on
behalf of the Company, a document (i) executed by both the Member effecting the
Disposition (or if the transfer is on account of the death, incapacity, or
liquidation of the transferor, the Member's representative) and the Person to
which the Membership Unit is Disposed, (ii) including the notice address of any
Person to be admitted to the Company as a Member and its agreement to be bound
by this Operating
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Agreement in respect of the Membership Unit being obtained, (iii) setting forth
the percentage interest in Net Profits, Net Losses and capital after the
Disposition of the Member effecting the Disposition and of the Person to which
the Membership Unit is Disposed (which together must total the percentage
interest in Net Profits, Net Losses and capital of the Member effecting the
Disposition before the Disposition), and (iv) containing a representation and
warranty that the Disposition was made in accordance with all applicable laws
and regulations (including securities laws) and, if the Person to which the
Membership Unit is Disposed is to be admitted to the Company, its representation
and warranty that the representations and warranties in this Operating Agreement
are true and correct with respect to that Person. Each Disposition and, if
applicable, admission complying with the provisions of this section is effective
as of the first day of the calendar month immediately succeeding the month in
which the Manager receives the notification of Disposition and the other
requirements of this section have been met.
D. For the right of a Member to Dispose of a Membership Unit or of any
Person to be admitted to the Company in connection therewith to exist or be
exercised, (i) either (A) the Membership Unit subject to the Disposition or
admission must be registered under the Securities Act of 1933, as amended, and
any applicable state securities laws or (B) the Company must receive a favorable
opinion of the Company's legal counsel or other legal counsel acceptable to the
Manager to the effect that the Disposition or admission is exempt from
registration under those laws and (ii) the Company must receive a favorable
opinion of the Company's legal counsel or of other legal counsel acceptable to
the Manager to the effect that the Disposition or admission, when added to the
total of all other sales, assignments, or other Dispositions within the
preceding 12 months, would not result in the Company's being considered to have
terminated within the meaning of Section 708 of the Code. The Manager, however,
may waive the requirements of this sub-part of this section.
E. The Member effecting a Disposition and any Person admitted to the
Company in connection therewith shall pay, or reimburse the Company for, all
costs incurred by the Company in connection with the Disposition or admission
(including, without limitation, the legal fees incurred in connection with the
legal opinions referred above) on or before the tenth day after the receipt by
that Person of the Company's invoice for the amount due. If payment is not made
by the date due, the Person owing that amount shall pay interest on the unpaid
amount from the date due until paid at a rate per annum equal to the Default
Interest Rate.
3.4 Additional Members.
Additional Persons may be admitted to the Company as Members, and
Membership Units may be created and issued to those Persons and to existing
Members at the discretion of the Manager so long as the total number of
Membership Units issued does not exceed the Initial Unit Count. The Manager may
issue new Membership Units to either new or existing Members beyond the Initial
Unit Count with the approval of a Required Interest.
The terms of admission or issuance must specify the percentage of Net
Profit and Net Loss allocable to such person and the Capital Contribution
applicable thereto and may provide for the creation of different classes of
Membership Units having different rights, powers, and duties. The Manager shall
reflect the creation of any new class of Membership Units in an amendment to
this Operating Agreement indicating the different rights, powers, and duties,
and such an amendment need be executed only by the Manager. Any such admission
also must comply with the requirements described elsewhere in this Operating
Agreement and is effective only after the new Member has executed and delivered
to the Manager a document including the new Member's notice address, its
agreement to be bound by this Operating Agreement, and its representation and
warranty that the representations and warranties required of new Members are
true and correct with respect to the new Member. The provisions of this section
shall not apply to Dispositions of Membership Units.
Existing Members of the Company shall have no preemptive right to
acquire additional, newly created Membership Units of the Company or any other
securities of the Company.
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3.5 Interests In A Member.
A Member that is not a natural person may not cause or permit an
interest, direct or indirect, in itself to be Disposed of such that after the
Disposition, (a) the Company would be considered to have terminated within the
meaning of section 708 of the Code or (b) without the consent of the Manager if
that Member shall cease to be controlled by substantially the same Persons who
control it as of the date of its admission to the Company. On any breach of the
provisions of clause (b) of the immediately preceding sentence, the Company
shall have the option to buy, and on exercise of that option the breaching
Member shall sell, the breaching Member's Membership Units all in accordance
with Section 3.24.
3.6 Information.
A. In addition to the other rights specifically set forth in this
Operating Agreement, each Member is entitled to all information to which that
Member is entitled to have access pursuant to Section 33-44-408 of the Act under
the circumstances and subject to the conditions therein stated. The Members
agree, however, that the Manager, from time to time may determine, due to
contractual obligations, business concerns, or other considerations, that
certain information regarding the business affairs, properties, and financial
condition of the Company should be kept confidential and not provided to some or
all other Members, and that it is not just or reasonable for those Members or
assignees or representatives thereof to examine or copy that information.
B. The Members acknowledge that from time to time, they may receive
information from or regarding the Company in the nature of trade secrets or that
otherwise is confidential, the release of which may be damaging to the Company
or Persons with which it does business. Each Member shall hold in strict
confidence any information it receives regarding the Company that is identified
as being confidential (and if that information is provided in writing, that is
so marked) and may not disclose it to any Person other than another Member or
the Manager, except for disclosures (i) compelled by law (but the Member must
notify the Manager promptly of any request for that information, before
disclosing it, if practicable), (ii) to advisers or representatives of the
Member or Persons to which that Member's Membership Units may be Disposed as
permitted by this Operating Agreement, but only if the recipients have agreed to
be bound by the provisions of this section or (iii) of information that Member
also has received from a source independent of the Company that the Member
reasonably believes obtained that information without breach of any obligation
of confidentiality. The Members acknowledge that breach of the provisions of
this section may cause irreparable injury to the Company for which monetary
damages are inadequate, difficult to compute, or both. Accordingly, the Members
agree that the provisions of this section may be enforced by specific
performance.
C. Notwithstanding any other provision of this Operating Agreement, the
Company shall provide Members with an annual report within 90 days of the close
of the Company's fiscal year. The annual report shall contain financial
statements audited by an independent certified public accountant. The annual
report shall also contain a detailed statement of any transactions between the
Company and the Manager or affiliates of the Manager for the fiscal year to
which the annual report pertains, showing the amount paid or accrued to each
recipient and the services performed.
3.7 Liabilities To Third Parties.
Except as otherwise expressly agreed in writing, no Member or Manager
shall be liable for the debts, obligations or liabilities of the Company,
including under a judgment decree or order of a court.
3.8 Withdrawal.
No Member may withdraw from the Company as a Member prior to the date
specified in the Articles of Organization for dissolution of the Company.
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3.9 Classes And Voting.
The Manager, in its sole discretion, may create different classes of
Membership Units; provided, however, that the approval of a Required Interest is
required to issue any new class of Membership Units having more than either 20%
of the voting power or 20% of the dollar value of distributional rights of the
Company initially authorized by this Operating Agreement or previously approved
by a Required Interest of the Members. The Manager shall reflect the creation of
any new class of Membership Units in an amendment to this Operating Agreement
indicating the different rights, powers, and duties, and such an amendment need
be executed only by the Manager. Unless and until the Manager creates different
classes of Membership Units, there shall be one class of Membership Units which
shall have all voting power on all matters on which Members are entitled to vote
pursuant to the terms of applicable law, the Articles and this Operating
Agreement. The following provisions shall apply to each class or group:
A. The rights, powers, or duties of a class of Membership units may be
senior to those of one or more existing classes of Membership Units.
B. Prompt notice of the taking of an action under this Operating
Agreement that requires less than unanimous written consent of the Members and
that may be taken without a meeting shall be given to the Members who have not
consented in writing to the taking of the action.
C. For the purposes of this section, the taking of an action includes
amending this Operating Agreement or creating, under provisions of this
Operating Agreement, a class of Membership Units that was not previously
outstanding.
3.10 No Annual Meeting.
The Company shall not hold annual meetings.
3.11 Special Meetings.
Special meetings of the Members may be called at any time by the
Manager. Special meetings of Members shall also be called by the Manager upon
the written request of the holders of at least twenty-five percent (25%) of the
Membership Units entitled to be voted at such meeting. Such request shall state
the purpose or purposes of such meeting and the matters proposed to be acted on
thereat.
3.12 Place And Manner Of Meeting.
All meetings of the Members shall be held at such time and place,
within or without the State of South Carolina, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof. Participation in
a meeting as provided herein shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
3.13 Conduct Of Meetings.
All meetings of the Members shall be presided over by the chairman of
the meeting, who shall be the Manager (or representative thereof) or a Person
delegated the role of chairman by the Manager. The chairman of any meeting of
Members shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to the individual in order.
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3.14 Voting Lists.
The Manager, officer, or agent having charge of the records reflecting
the Membership Units of each Member, shall make, at least ten (10) days before
each meeting of Members, a complete list of the Members entitled to vote at such
meeting or any adjournment thereof, arranged in alphabetical order with the
address of and percentage of Membership Units of each Member, which list, for a
period of ten (10) days prior to such meeting, shall be kept on file at the
registered office of the Company and shall be subject to inspection by any
Member at any time during usual business hours. Such list shall also be produced
and kept open at the time and place of the meeting and shall be subject to the
inspection of any Member during the whole time of the meeting. The original
records reflecting the Membership Units of each Member shall be prima-facie
evidence as to who are the Members entitled to examine such list or records or
to vote at any meeting of Members. Failure to comply with the requirements of
this Section shall not affect the validity of any action taken at such meeting.
3.15 Notice.
Written or printed notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten nor more than sixty days
before the date of the meeting either personally or by mail, or at the direction
of the officer or person calling the meeting, to each Member entitled to vote at
the meeting, provided that such notice may be waived as provided in this
Operating Agreement. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the Member at the Member's
address as it appears on the records of the Company, with postage thereon
prepaid. Any notice required to be given to any Member hereunder or under the
Articles of Organization need not be given to the Member if (A) notice of two
consecutive meetings of the Company or (B) all (but in no event less than two)
payments (if sent by first class mail) of distributions during a twelve-month
period have been mailed to that person, addressed at his address as shown on the
records of the Company, and have been returned undeliverable. Any action or
meeting taken or held without notice to such person shall have the same force
and effect as if the notice had been duly given.
3.16 Quorum Of Members.
Unless otherwise provided in the Articles or required by applicable
law, the holders of a majority of the Membership Units for each class entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of Members.
3.17 Majority Vote; Withdrawal Of Quorum.
With respect to any matter when a quorum is present at the beginning of
any meeting, the majority vote of the holders of the Membership Units, present
in person or by proxy, of each class having voting power with respect to that
matter, shall decide such matter brought before such meeting, unless the matter
is one upon which an express provision of the Articles, this Operating
Agreement, or any applicable statute not overridden by the Articles or this
Operating Agreement requires a different vote, in which case such express
provision shall govern and control the decision of such matter. The Members
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Members to leave less than
a quorum.
3.18 Voting Of Membership Units.
Except as otherwise provided in the Act, each Membership Unit shall
entitle its holder to one vote on each matter submitted to a vote at a meeting
of Members, except to the extent that the voting rights of any class or classes
of Membership Units are limited or denied by the Articles or by this Operating
Agreement.
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Membership Units owned by another limited liability company or
corporation, the majority of the membership units or voting stock of which is
owned or controlled by this Company, and Membership Units held by this Company
in a fiduciary capacity shall not be voted, directly or indirectly, at any
meeting, and shall not be counted in determining the total Membership Units at
any given time.
A Member may vote either in person or by proxy executed in writing by
the Member or by his duly authorized attorney in fact. No proxy shall be valid
after eleven (11) months from the date of its execution unless otherwise
provided in the proxy. Each proxy shall be revocable unless the proxy form
conspicuously states that the proxy is irrevocable and the proxy is coupled with
an interest.
3.19 Action Without Meeting.
Any action required by the Act to be taken at a meeting of the Members,
or any action which may be taken at a meeting of the Members, may be taken
without a meeting, without prior notice, and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall have been signed
by the holder or holders of all the Membership Units for each class, if more
than one class, entitled to vote with respect to the action that is the subject
matter of the consent, and such consent shall have the same force and effect as
a unanimous vote of the Members. Every written consent pursuant to this section
shall be signed, dated and delivered in the manner required by, and shall become
effective at the time and remain effective for the period specified by, the Act.
A telegram, telex, cablegram, or similar transmission by a Member, or a
photographic, photostatic, facsimile, or similar reproduction of a writing
signed by a Member, shall be regarded as signed by the Member for purposes of
this section. Prompt notice of the taking of any action by Members without a
meeting shall be given to those Members who did not consent in writing to the
action.
For purposes of this Section, the taking of the action includes
amending this Operating Agreement or creating, under provisions of this
Operating Agreement, a class of Membership Units that was not previously
outstanding.
3.20 Assignment Of Distributional Interest.
A. Unless otherwise provided by this Operating Agreement:
(1) a Distributional Interest is assignable in whole or in
part only in accordance with subsection B of this Section;
(2) an assignment of a Distributional Interest does not
entitle the assignee to become, or to exercise rights or powers of, a Member;
(3) an assignment entitles the assignee to receive
distributions, to which the assignor was entitled, to the extent those items are
assigned and allocates to the assignee the assignor's allocable share of Net
Profit and Net Loss; and
(4) until the assignee becomes a Member, the assignor Member
continues to be a Member and to have the power to exercise any rights or powers
of a Member.
B. A Member or a holder of a Distributional Interest, before assigning
such Distributional Interest in whole or in part to any third party, must first
offer, in writing, to assign such whole or part of the Distributional Interest
to the Company on the same terms as the Member or holder proposes to assign such
whole or part of the Distributional Interest to the third party. The Company
shall have 30 days to agree, in writing, to accept the assignment of such whole
or part of the Distributional Interest on the terms of the written offer. If the
Company accepts the assignment, the Member or holder must assign such whole or
part of the Distributional Interest to the Company on the terms of the written
offer. If the Company declines to so accept the assignment, then the Member or
holder may assign such whole or part of the Distributional Interest to the third
party, but only on the terms of the written offer.
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3.21 Distribution In Kind.
Except as provided by the Articles or this Operating Agreement, a
Member, regardless of the nature of the Member's contribution, may not demand or
receive a distribution from this Company in any form other than cash.
3.22 Right To Distribution.
Subject to the Act, at the time that a Member becomes entitled to
receive a distribution, with respect to that distribution, that Member has the
status of and is entitled to all remedies available to a creditor of the
Company.
3.23 Limitation On Distribution.
No distribution may be made if, after giving effect to the
distribution:
A. the Company would not be able to pay its debts as they become due in
the ordinary course of business; or
B. the Company's total assets would be less than the sum of its
liabilities plus, the amount that would be needed, if the Company were to be
dissolved, wound up, and terminated at the time of the distribution, to satisfy
the preferential rights upon dissolution, winding up and termination of Members
whose preferential rights are superior to those receiving the distribution. The
Company may base a determination that a distribution is not prohibited upon the
provisions of Section 33-44-406(b) and (c) of the Act.
3.24 Buy out Of Disassociating Member.
Following the death, expulsion, bankruptcy or dissolution of a Member
or the occurrence of any other event that terminates the continued membership of
a Member in the Company, the disassociating Member shall be entitled to receive
any distribution which the disassociating Member was entitled to receive prior
to the death, expulsion, bankruptcy or dissolution of the Member or the
occurrence of any other event which terminates the continued membership of the
Member in the Company. The Company shall have the option to acquire the
disassociating Member's Membership Units following disassociation, but the
Company shall have no obligation to purchase a disassociating Member's
Membership Units until the date of the expiration of the specified term of the
Company that existed on the date of the disassociation if the expiration of the
specific term does not result in the dissolution and winding up of the Company's
business under Section 33-44-801 of the Act. The date of payment, if any, and
fair market value of the Disassociating Member's Membership Units shall be
determined by the Manager pursuant to the provisions of Section 33-44-701(b).
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Contributions.
Each initial Member shall make the Capital Contribution described for
that Member on Exhibit A at the times and on the terms specified on Exhibit A
and shall make such additional Capital Contributions as may be required of
Members from time to time pursuant to Section 4.3 of this Operating Agreement.
The value of the Capital Contributions shall be as set forth on Exhibit A. No
interest shall accrue on any Capital Contribution and no Member shall have the
right to withdraw or be repaid any Capital Contribution except as provided in
this Operating Agreement. Each additional Member shall make such Capital
Contribution at such time as established by the Manager.
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4.2 Failure to Complete Initial Contribution
If a Member fails to pay any portion of his initial Capital
Contribution within sixty (60) days of the due date for that portion, then, at
the Manager's sole discretion, the Manager may revoke that Member's Membership
and any Membership Units of that Member. In the event that one or more
Membership Units are revoked pursuant to the terms of this Section 4.2, all
portions of the initial Capital Contribution already paid by any Member for such
Membership Units shall be forfeit to the Company, and the Company shall waive
any and all rights to institute any legal proceeding to attempt to recover any
balance remaining due on such Membership Units.
4.3 Subsequent Contributions.
Without creating any rights in favor of any third party, each Member
shall, in addition to the Member's initial contribution required by Section 4.1
and Exhibit A of this Operating Agreement, contribute to the Company, in cash,
on or before the date specified as hereinafter described that Member's pro rata
share of all monies that 100% of the Members determine are necessary to enable
the Company to cause the assets of the Company to be properly operated and
maintained and to discharge its costs, expenses, obligations, and liabilities.
The Manager, following the Members' determination of the need for additional
capital, shall notify each Member of the need for Capital Contributions pursuant
to this Section 4.3 when appropriate, which notice must include a statement in
reasonable detail of the proposed uses of the Capital Contributions and a date
(which date may be no earlier than the fifth Business Day following each
Member's receipt of its notice) before which the Capital Contributions must be
made. This Section 4.3 may be repealed or amended only with the approval of 100%
of the Members.
4.4 Failure To Make Subsequent Contributions.
A. If a Member does not contribute by the time required all or any
portion of a Capital Contribution that Member is required to make as provided in
this Operating Agreement, the Company may exercise, on notice to that Member
(the "Delinquent Member"), one or more of the following remedies:
(1) taking such action (including, without limitation, court
proceedings) as the Manager may deem appropriate to obtain payment by the
Delinquent Member of the portion of the Delinquent Member's Capital Contribution
that is in default together with interest thereon at the Default Interest Rate
from the date that the Capital Contribution was due until the date that it is
made, all at the cost and expense of the Delinquent Member;
(2) permitting the other Members on a pro rata basis or in
such other percentages as they may agree (the "Lending Member," whether one or
more), to advance the portion of the Delinquent Member's Capital Contribution
that is in default, with the following results:
(a) the sum advanced constitutes a loan from the
Lending Member to the Delinquent Member and a Capital Contribution of that sum
to the Company by the Delinquent Member pursuant to the applicable provisions of
this Operating Agreement,
(b) the principal balance of the loan and all accrued
unpaid interest thereon is due and payable in whole on the tenth day after
written demand therefor by the Lending Member to the Delinquent Member,
(c) the amount loaned bears interest at the Default
Interest Rate from the day that the advance is deemed made until the date that
the loan, together with all interest accrued on it, is repaid to the Lending
Member,
(d) all distributions from the Company that otherwise
would be made to the Delinquent Member (whether before or after dissolution of
the Company) instead shall be paid to the Lending
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Member until the loan and all interest accrued on it have been paid in full to
the Lending Member (with payments being applied first to accrued and unpaid
interest and then to principal),
(e) the payment of the loan and interest accrued on
it is secured by a security interest in the Delinquent Member's Membership
Units, as more fully set forth in this section, and
(f) the Lending Member has the right, in addition to
the other rights and remedies granted to it pursuant to this Operating Agreement
or available to it at law or in equity, to take any action (including without
limitation, court proceedings) that the Lending Member may deem appropriate to
obtain payment by the Delinquent Member of the loan and all accrued and unpaid
interest on it, at the cost and expense of the Delinquent Member;
(3) exercising the rights of a secured party under the Uniform
Commercial Code of the State of South Carolina, as more fully set forth in this
Section; or
(4) exercising any other rights and remedies available at law
or in equity.
B. Each Member grants to the Company, and to each Lending Member with
respect to any loans made by the Lending Member to that Member as a Delinquent
Member pursuant to this section, as security, equally and ratably, for the
payment of all Capital Contributions that Member has agreed to make and the
payment of all loans and interest accrued on them made by Lending Members to
that Member as a Delinquent Member pursuant to this section, a security interest
in and a general lien on its Membership Units and the proceeds thereof, all
under the Uniform Commercial Code of the State of South Carolina. On any default
in the payment of a Capital Contribution or in the payment of such a loan or
interest accrued on it, the Company or the Lending Member, as applicable, is
entitled to all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of South Carolina with respect to the security
interest granted in this section. Each Member shall execute and deliver to the
Company and the other Members all financing statements and other instruments
that the Manager or the Lending Member, as applicable, may request to effectuate
and carry out the preceding provisions of this section. At the option of the
Manager or a Lending Member, this Operating Agreement or a carbon, photographic,
or other copy hereof may serve as a financing statement.
4.5 Return Of Contributions.
A Member is not entitled to the return of any part of its Capital
Contributions or to be paid interest in respect of either its capital account,
or its Capital Contributions. An unrepaid Capital Contribution is not a
liability of the Company or of any Member. A Member is not required to
contribute or to lend any cash or property to the Company to enable the Company
to return any Member's Capital Contributions.
4.6 Advances By Members.
If the Company does not have sufficient cash to pay its obligations,
any Member(s) that may agree to do so with the Manager's consent may advance all
or part of the needed funds to or on behalf of the Company. An advance described
in this section constitutes a loan from the Member to the Company, bears
interest at the General Interest Rate from the date of the advance until the day
of payment, and is not a Capital Contribution.
4.7 Maintenance Of Capital Accounts.
The Company shall establish and maintain a Capital Account for each
Member. Each Member's Capital Account shall be increased by (1) the amount of
any money actually contributed by the Member to the capital of the Company, (2)
the fair market value of any property contributed, as determined by the Company
and the contributing Member at arm's length at the time of contribution, or in
the case of property contributed by the Manager, as determined by independent
third party appraisal (net of liabilities assumed by the Company or subject to
which the Company takes such property, within the meaning of ss. 752 of the
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Code), and (3) the Member's share of Net Profits and of any separately allocated
items of income or gain. Each Member's Capital Account shall be decreased by (1)
the amount of money actually distributed by the Company to the Member, (2) the
fair market value of any property distributed to the Member, as determined by
the Company and the Member at arm's length at the time of distribution (net of
liabilities of the Company assumed by the Member or subject to which the Member
takes such property within the meaning of ss. 752 of the Code), and (3) the
Member's share of Net Losses and of any separately allocated items of deduction
or loss.
4.8 Distribution Of Assets.
If the Company at any time distributes any of its assets in-kind to any
Member, the Capital Account of each Member shall be adjusted to account for that
Member's allocable share of the Net Profits or Net Losses that would have been
realized by the Company had it sold the assets that were distributed at their
respective fair market value immediately prior to their distribution.
4.9 Sale Or Exchange Of Interest.
In the event of a sale or exchange of some or all of the Member's
Interest in the Company, the Capital Account of the transferring Member shall
become the Capital Account of the assignee, to the extent it relates to the
portion of the interest transferred.
4.10 Compliance With Section 704(b) Of The Code.
The provisions of this Article IV as they relate to the maintenance of
Capital Accounts are intended, and shall be construed, and, if necessary,
modified to cause the allocations of profits, losses, income, gain and credit
pursuant to Article V to have substantial economic effect under the Regulations
promulgated under ss. 704(b) of the Code, in light of the distributions made
pursuant to Articles V and X and the Capital Contributions made pursuant to this
Article IV. In cases where ss. 704(c) and ss. 1.704-3 of the Regulations apply
to Company property, Members' Capital Accounts shall be adjusted in accordance
with ss. 1.704- 1(b)(2)(iv)(g) of the Regulations for allocations to them of
income, gain, loss, and deduction (including depreciation, depletion,
amortization, or other cost recovery) as computed for book purposes, with
respect to property. Notwithstanding anything herein to the contrary, this
Operating Agreement shall not be construed as creating a deficit restoration
obligation.
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations Of Net Profits And Net Losses From Operations.
Net Profits, Net Losses, and other items of income, gain, loss,
deduction and credit shall be apportioned among the Members in accordance with
their proportionate ownership of Membership Units, provided that income, gain,
loss and deduction arising out of disposition of all or any portion of the Land
shall be allocated to the Manager and the other Members in accordance with
Section 704(c) of the Code and regulations thereunder (together, "Section
704(c)"). Any elections or other decisions regarding such allocations pursuant
to Section 704(c) shall be made by the Manager in any permissible manner which
reflects the purpose and intention of this Operating Agreement. Such allocations
pursuant to Section 704(c) shall not affect or be taken into account in
connection with distributions of cash or property to the Members under Section
5.2 or 10.2 of this Operating Agreement.
5.2 Distributions.
From time to time, the Manager shall determine in its reasonable
judgment to what extent, if any, the Company's cash on hand exceeds the current
and anticipated needs, including, without limitation, needs for
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operating expenses, debt service including service of debt owed to the Manager,
acquisitions, reserves, and mandatory distributions, if any. To the extent such
excess exists, the Manager may make distributions to the Members in accordance
with their proportionate ownership of Membership Units.
ARTICLE VI
MANAGER
6.1 Management By Manager.
Except for situations in which the approval of the Members is required
by this Operating Agreement or by nonwaivable provisions of applicable law, and
subject to the provisions of Section 6.2, (i) the powers of the Company shall be
exercised by or under the authority of, and the business and affairs of the
Company shall be managed under the direction of, the Manager; and (ii) the
Manager may make all decisions and take all actions for the Company not
otherwise provided for in this Operating Agreement, including, without
limitation, the following:
A. entering into, making, and performing contracts, agreements, leases,
management contracts and other undertakings binding the Company that may be
necessary, appropriate, or advisable in furtherance of the purposes of the
Company and making all decisions and waivers thereunder;
B. opening and maintaining bank and investment accounts and
arrangements, drawing checks and other orders for the payment of money and
designating individuals with authority to sign or give instructions with respect
to those accounts and arrangements;
C. maintaining the assets of the Company in good order;
D. collecting sums due the Company;
E. to the extent that funds of the Company are available therefor,
paying debts and obligations of the Company;
F. acquiring, utilizing for Company purposes, and disposing of any
asset of the Company;
G. selecting, removing, and changing the authority and responsibility
of lawyers, accountants, and other advisers and consultants;
H. obtaining insurance for the Company; and
I. determining distributions of Company cash and other property as
provided in Section 5.5.
6.2 Actions By Manager; Delegation Of Authority; Officers.
A. In managing the business and affairs of the Company and exercising
its powers, the Manager shall act (i) through written acts as may be provided or
limited in other provisions of this Operating Agreement; and (ii) through
committees pursuant to Section 6.2 B.
B. The Manager may, from time to time, designate one or more advising
committees, each of which shall be comprised of the Manager and one or more
Members. At every meeting of any such committee, the presence of a majority of
all the Members thereof shall constitute a quorum, and the affirmative vote of a
majority of the Members present shall be necessary for the adoption of any
resolution. The Manager may dissolve any committee at any time, unless otherwise
provided in the Articles or this Operating Agreement.
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C. The Manager may, from time to time, designate one or more Persons to
be officers of the Company who are not Managers. No officer need be a resident
of the State of South Carolina or a Member. Any officers so designated shall
have such authority and perform such duties as the Manager may, from time to
time, delegate to them. The Manager may assign titles to particular officers.
Unless the Manager decides otherwise, if the title is one commonly used for
officers of a business corporation, the assignment of such title shall
constitute the delegation to such officer of the authority and duties that are
normally associated with that office, subject to any specific delegation of
authority and duties made to such officer by the Manager. Each officer shall
hold office until his successor shall be duly designated and shall qualify or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Any number of offices may be held by the same
Person. The salaries or other compensation, if any, of the officers and agents
of the Company shall be fixed from time to time by the Manager.
D. Any officer may resign as such at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Manager. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Manager whenever in its judgment the best interests of the
Company will be served thereby; provided, however, that such removal shall be
without prejudice to the contract rights, if any, of the Person so removed.
Designation of an officer shall not of itself create contract rights. Any
vacancy occurring in any office of the Company may be filled by the Manager.
E. Any Person dealing with the Company, other than a Member, may rely
on the authority of any Manager or officer in taking any action in the name of
the Company without inquiry into the provisions of this Operating Agreement or
compliance herewith, regardless of whether that action actually is taken in
accordance with the provisions of this Operating Agreement.
6.3 Powers Of Manager.
The Manager is an agent of this Company for the purpose of its business
or affairs and the act of a Manager, including, but not limited to, the
execution in the name of the Company of any instrument for apparently carrying
on in the usual way the Company business or businesses of the kind carried on by
the Company, binds the Company, unless the Manager so acting has, in fact, no
authority to act for this Company in the particular matter, and the person with
whom the Manager is dealing has knowledge of the fact that the Manager has no
such authority.
6.4 Number And Term Of Office.
There shall only be one Manager of the Company. The Manager of the
Company shall be MV Development Company, LLC. It shall serve as Manager of the
Company for the entire term of existence of the Company as specified in the
Articles unless (i) it is removed as provided in Section 6.5 of this Agreement,
(ii) it resigns as provided in Section 6.6 of this Agreement, (iii) it is
dissolved if a Person other than an individual or dies or is declared
incompetent by a court of appropriate jurisdiction if an individual, or (iv) it
becomes a debtor in bankruptcy or seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of itself or substantially all
of its assets. Unless otherwise provided in the Articles, the Manager need not
be a Member or resident of the State of South Carolina.
6.5 Removal.
The Manager may be removed, for cause, at any special meeting of
Members by the affirmative vote of a Required Interest; provided, however, that
the Manager may be so removed only upon the condition that the Manager, and/or
any affiliate of the Manager, are also previously or simultaneously released
from any guarantee(s) of any obligations of the Company. The notice calling such
meeting shall give notice of the intention to act upon such matter and provide
that the vacancy caused by such removal may be filled at such meeting by vote of
holders of a majority of the Membership Units.
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6.6 Resignation.
A. The Manager may resign at any time by sending, personally or by
mail, a written resignation letter to all Members. The resignation shall be
effective at the time specified in the resignation letter, or if no time is
specified, then on the date the resignation letter is first delivered to
Members. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the Member at his address as it appears
on the records of the Company, with postage thereon prepaid. The acceptance of
the resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation letter.
B. The resignation letter referred to in paragraph A above shall be
accompanied by (i) notice of a special meeting, as provided in Sections 3.11 and
3.15 of this Operating Agreement, called for the purpose of electing a new
Manager, (ii) a voting list prepared in accordance with Section 3.14 of this
Operating Agreement of Members entitled to vote at such special meeting and
(iii) the name of a Member designated as chairman, as provided in Section 3.13
of this Operating Agreement, of the special meeting, which Member may be the
Manager, if still a Member, or a representative thereof.
6.7 Vacancies.
Any vacancy occurring in the position of Manager may be filled by an
affirmative vote of holders of a majority of the Membership Units. A Manager
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. In any period during which no Manager holds office, a
Required Interest shall perform all of the functions of the Manager.
6.8 Place And Manner Of Meetings.
[Reserved]
6.9 First Meetings.
[Reserved]
6.10 Regular Meeting Of Manager.
[Reserved]
6.11 Special Meeting Of Manager.
[Reserved]
6.12 Notice Of Manager's Meetings.
[Reserved]
6.13 Action of Manager.
Any action to be taken by the Manager, including any action required by
statute to be taken at a meeting of the managers of a limited liability company,
may be taken without a meeting, in a writing setting forth the action so taken
and signed by the Manager.
A-19
<PAGE>
6.14 Quorum; Majority Vote.
[Reserved]
6.15 Approval Or Ratification Of Acts Or Contracts By Members.
The Manager in its discretion may submit any act or contract for
approval or ratification at any special meeting of the Members called for the
purpose of considering any such act or contract, and any act or contract that
shall be approved or be ratified by a Required Interest shall be as valid and as
binding upon the Company and upon all the Members as if it shall have been
approved or ratified by every Member of the Company.
6.16 Interested Managers, Officers And Members.
A. No contract or transaction (i) between this Company and its Manager
or one or more officers, or (ii) between this Company and any other limited
liability company, corporation, partnership, association, or other organization
in which one or more of its managers, directors or officers are also officers of
the Company or officers or members of the Manager or have a financial interest
in the Company or the Manager, shall be void or voidable solely because the
Manager or officer authorizes the contract or transaction if:
(1) The material facts as to the relationship or interest and
as to the contract or transaction are disclosed or are known to the Members
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of a Required Interest of the Members; or
(2) The contract or transaction is fair as to this Company as
of the time it is authorized, approved, or ratified by the Manager or the
Members. A contract or transaction is fair for purposes of this section if its
terms are comparable to those which would result from arms length negotiations
with unrelated third parties regarding matters similar to those covered by the
contract or transaction in question.
B. This provision shall not be construed to invalidate any contract or
transaction that would be valid in the absence of this provision.
C. Notwithstanding any other provisions of this Operating Agreement and
to the extent permitted by applicable law, the Manager and/or any affiliate of
the Manager are hereby expressly permitted, without prior approval of the
Members, to make loans and advances to the Company for the purpose of developing
the Property for use as a golf course, for the operating expenses of such golf
course and for other purposes reasonably related to the Company's business
provided the terms of such loans or advances are either comparable to, or more
favorable to the Company than, terms which would result from arms length
negotiations with unrelated third parties for loans or advances to the Company
for similar purposes.
6.17 Activities Not Constituting Violation of Duty of Loyalty.
Participation by the Manager or any officer of the Company in any
business activity, including without limitation, developing, owning, investing
in, or operating another golf course shall not be a violation of the Manager's
or any officer's duty of loyalty to the Company solely because the Manager or
officer participates in such business activity.
A Manager shall not be required to manage the Company as its sole and
exclusive function and it (or any Member) may have other business interests and
may engage in other activities in addition to those relating to the Company.
Neither the Company nor any Member shall have any right, by virtue of this
Operating Agreement, to share or participate in such other investments or
activities of a Manager or Member or to the income or proceeds derived
therefrom. A Manager or Member shall incur no liability to the Company or to any
of the Members as a result of engaging in any other business or venture except
as required by applicable law and as otherwise provided in this Operating
Agreement.
A-20
<PAGE>
6.18 Compensation.
By written action approved by a vote of a Required Interest of the
Members, the Manager may designate a stated compensation for itself. Members of
any special or standing committees may, by resolution of the Manager, be paid
their expenses, if any, of attendance at each committee meeting and may be paid
a fixed sum for attendance at each committee meeting.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
The Company shall indemnify the Members, Manager, and agents for all
costs, losses, liabilities, and damages paid or accrued by such Members, Manager
or agents in connection with the business of the Company, to the fullest extent
provided or allowed by applicable law.
ARTICLE VIII
TAXES
8.1 Tax Matters Partner.
The Manager is designated as the "tax matters partner" of the Company
pursuant to ss. 6231(a)(7) of the Code.
ARTICLE IX
NOTICE
9.1 Notice.
Any notice or communication required or permitted to be given by any
provision of this Operating Agreement shall be in writing and shall be deemed to
have been given and received by the Person to whom directed (a) when delivered
personally to such Person, or (b) when posted in the United States mails if sent
by registered or certified mail, postage and charges prepaid, addressed to the
Person to which directed at the address of which such Person has notified the
Company.
ARTICLE X
DISSOLUTION, LIQUIDATION, AND TERMINATION
10.1 Dissolution.
The Company shall dissolve and its affairs shall be wound up only upon
the first to occur of the following:
A. the written consent of the Manager;
B. the expiration of the period fixed for the duration of the Company
set forth in the Articles;
C. upon an event that makes it unlawful for all or substantially all of
the business of the Company to be continued, but any cure of illegality within
ninety (90) days after notice to the Company of the event is effective
retroactively to the date of the event;
A-21
<PAGE>
D. upon entry of a judicial decree that:
(i) the economic purpose of the Company is likely to be
unreasonably frustrated;
(ii) another Member has engaged in conduct relating to the
Company's business that makes it not reasonably practicable to carry on
the Company's business with that Member;
(iii) it is not otherwise reasonably practicable to carry on
the Company's business in conformity with the Articles of Organization
and the Operating Agreement;
(iv) the Company failed to purchase the Member's
Distributional interest as required by ss. 33-44-701 of the Act; or
(v) the Managers or Members in control of the Company have
acted, are acting, or will act in a manner that is illegal, oppressive,
fraudulent, or unfairly prejudicial to a Member; and
E. entry of a decree of judicial dissolution of the Company under
Section 33-44-801 (b) of the Act or administrative dissolution as provided in
Section 33-44-809 of the Act.
10.2 Winding Up And Termination.
On dissolution of the Company, the Manager shall act as liquidator or
may appoint one or more Members as liquidators. If there is no Manager, then a
Required Interest of the Members will appoint one or more Members as liquidator.
The liquidator shall proceed diligently to wind up the affairs of the Company
and make final distributions as provided herein and in the Act. The costs of
liquidation shall be borne as a Company expense. Until final distribution, the
liquidator shall continue to operate the Company properties with all of the
power and authority of the Manager. The steps to be accomplished by the
liquidator are as follows:
A. as promptly as possible after dissolution and again after final
liquidation, the liquidator shall cause a proper accounting to be made by a
recognized firm of certified public accountants of the Company's assets,
liabilities, and operations through the last day of the calendar month in which
the dissolution occurs or the final liquidation is completed as applicable.
B. the liquidator shall cause the notice described in Section 33-44-807
of the Act to be mailed to each known creditor of and claimant against the
Company and the notice described in Section 33-44-808 of the Act to be published
in accordance with the terms thereof;
C. the liquidator shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without
limitation, all expenses incurred in liquidation, any advances described in
Section 4.6 and any loans or advances from the Manager to the Company described
in Section 6.16) or otherwise make adequate provision for payment and discharge
thereof (including, without limitation, the establishment of a cash escrow fund
for contingent liabilities in such amount and for such term as the liquidator
may reasonably determine); and
D. all remaining assets of the Company shall be distributed to Members
in accordance with their proportionate ownership of Membership Units.
10.3 Deficit Capital Accounts.
Notwithstanding anything to the contrary contained in this Operating
Agreement, and notwithstanding any custom or rule of law to the contrary, to the
extent that the deficit, if any, in the capital account of any Member results
from or is attributable to deductions and losses of the Company (including
non-cash items
A-22
<PAGE>
such as depreciation), distributions of money pursuant to this Operating
Agreement to all Members in proportion to their respective interests in the
Company or special allocations required by this Operating Agreement, upon
dissolution of the Company such deficit shall not be an asset of the Company and
such Members shall not be obligated to contribute such amount to the Company to
bring the balance of such Member's capital account to zero.
10.4 Articles Of Termination.
After the dissolution of the limited liability company pursuant to
Section 33-44-801 of the Act, the liquidator, as defined in Section 10.2 of this
Operating Agreement, shall file Articles of Termination with the Secretary of
State of South Carolina and take such other actions as may be necessary to
terminate the Company.
ARTICLE XI
GENERAL PROVISIONS
11.1 Books And Records.
A. The Company shall maintain those books and records that it may deem
necessary or desirable. All books and records shall be open to inspection of the
Members from time to time. The Manager may examine all such books and records at
all reasonable times. The Company shall keep and maintain such records as the
Manager deems appropriate.
B. The Company shall maintain its records, if any, in written form or
in another form capable of conversion into written form within a reasonable
time.
C. The Company shall keep in its registered office in South Carolina
and make available to Members on reasonable request the street address of its
principal United States office in which the records, if any, are maintained or
will be available.
D. The Company shall keep its books on the cash method of accounting.
11.2 Amendment Or Modification.
Except as otherwise provided herein or by applicable law, this
Operating Agreement may be amended and modified from time to time only by a
written instrument adopted and executed by a Required Interest of the Members;
provided, however, that adoption of any amendment or modification creating,
altering or removing a supermajority voting or quorum provision must be approved
by the higher of either the existing required vote or quorum or the proposed
required vote or quorum of the provision to be amended or modified. No Member or
Manager shall have any vested rights in the Operating Agreement.
11.3 Checks, Notes, Drafts, Etc.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness issued in the name of or payable to the Company shall
be signed or endorsed by a designated person which may be appointed by the
Manager. The designated person may be a Manager(s), officer(s), Member(s), or
other person(s) as may from time be designated.
11.4 Headings.
The headings used in this Operating Agreement have been inserted for
convenience only and do not constitute matter to be construed in interpretation.
A-23
<PAGE>
11.5 Construction.
Whenever the context so requires, the gender of all words used in this
Operating Agreement includes the masculine, feminine, and neuter, and the
singular shall include the plural, and conversely. All references to Articles
and Sections refer to articles and sections of this Operating Agreement, and all
references to Exhibits, if any, are to Exhibits attached hereto, if any, each of
which is made a part hereof for all purposes. If any portion of this Operating
Agreement shall be invalid or inoperative, then, so far as is reasonable and
possible:
A. The remainder of this Operating Agreement shall be considered valid
and operative; and
B. Effect shall be given to the intent manifested by the portion held
invalid or inoperative.
11.6 Entire Agreement; Supersedure.
This Operating Agreement constitutes the entire agreement of the
Members and their Affiliates relating to the Company and supersedes all prior
contracts or agreements with respect to the Company, whether oral or written.
11.7 Effect Of Waiver Or Consent.
A waiver or consent, express or implied, to or of any breach or default
by any Person in the performance by that Person of its obligations with respect
to the Company is not a consent or waiver to or of any other breach or default
in the performance by that Person of the same or any other obligations of that
Person with respect to the Company. Failure on the part of a Person to complain
of any act of any Person or to declare any Person in default with respect to the
Company, irrespective of how long that failure continues, does not constitute a
waiver by that Person of its rights with respect to that default until the
applicable statute-of-limitations period has run.
11.8 Binding Effect.
Subject to the restrictions on Dispositions set forth in this Operating
Agreement, this Operating Agreement is binding on and inures to the benefit of
the Members and their respective heirs, legal representatives, successors, and
assigns.
11.9 Governing Law; Severability.
THIS OPERATING AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF SOUTH CAROLINA EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS OPERATING AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.
In the event of a direct conflict between the provisions of this Operating
Agreement and (a) a mandatory provision of the Articles, or (b) any mandatory
provision of the Act, the applicable provision of the Articles or the Act shall
control. If any provision of this Operating Agreement or the application thereof
to any Person or circumstance is held invalid or unenforceable to any extent,
the remainder of this Operating Agreement and the application of that provision
to other Persons or circumstances is not affected thereby and that provision
shall be enforced to the greatest extent permitted by law.
11.10 Further Assurances.
In connection with this Operating Agreement and the transactions
contemplated hereby, each Member shall execute and deliver any additional
documents and instruments and perform any additional acts that may be necessary
or appropriate to effectuate and perform the provisions of this Operating
Agreement and those transactions.
A-24
<PAGE>
11.11 Notice To Members Of Provisions Of This Agreement.
By executing this Operating Agreement, each Member acknowledges that it
has actual notice of (a) all of the provisions of this Operating Agreement,
including, without limitation, the restrictions on the transfer of Membership
Units set forth in Article III, and (b) all of the provisions of the Articles.
Each Member hereby agrees that this Operating Agreement constitutes adequate
notice of all such provisions, and each Member hereby waives any requirement
that any further notice thereof be given.
11.12 Counterparts.
This Operating Agreement may be executed in any number of counterparts
with the same effect as if all signing parties had signed the same document. All
counterparts shall be construed together and constitute the same instrument.
11.13 Conflicting Provisions.
To the extent that one or more provisions of this Operating Agreement
appear to be in conflict with one another, then the Manager shall have the right
to choose which of the conflicting provisions are to be enforced. Wide latitude
is given to the Manager in interpreting the provisions of this Operating
Agreement to accomplish the purposes and objectives of the Company, and the
Manager may apply this Operating Agreement in such a manner as to be in the best
interest of the Company, in its sole discretion, even if such interpretation or
choice of conflicting provisions to enforce is detrimental to one or more
Members.
11.14 Execution.
This Operating Agreement may be executed in multiple counterparts,
identical except for the signatories and dates of adherence. Each counterpart
may be executed by affixing the signatures of the Manager and a subscribing
Member immediately below or to an enrollment agreement of form and substance
determined by the Manager at its sole discretion.
SIGNATURES ON FOLLOWING PAGE
A-25
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the Manager and the subscribing Member indicated
below have hereunto set their signatures as of the date indicated below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
THE MANAGER MEMBER
__________________________________________ _________________________________________
Print Name of Manager if Not an Individual Print Name of Member of Not an Individual
__________________________________________ _________________________________________
Signature Signature
__________________________________________ _________________________________________
Print Name (and Title of Signatory if the Print Name (and Title of Signatory if the
Manager is not an Individual) Member is not an Individual)
___________________
Date
</TABLE>
A-26
<PAGE>
EXHIBIT A
CAPITAL CONTRIBUTIONS
MV DEVELOPMENT COMPANY, LLC
The Capital Contribution of MV Development Company, LLC shall be the
243 acres real estate described on Exhibit B (the "Land"), which shall be used
for purposes of developing and operating an 18-hole golf course. As of June 25,
1998, the fair market value of the Land was determined to be $4,000.00 per acre
or $970,000.00 in total. MV Development Company, LLC received or will receive 48
Membership Units in return for its Capital Contribution of the Land.
OTHER MEMBERS
Members joining the Company shall make a Capital Contribution of
$20,000 for each Membership Unit purchased. Members joining prior to September
30, 1998 must pay $1,000.00 per Membership Unit upon becoming a party to the
Operating Agreement and the balance due by October 16, 1998. Members joining on
or after September 30, 1998 must pay the $20,000.00 price of their Membership
Units upon becoming a party to the Operating Agreement.
A-27
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF PROPERTY
A-28
<PAGE>
EXHIBIT B
MEMBER ENROLLMENT AGREEMENT
MOUNT VINTAGE PLANTATION GOLF COURSE, LLC
This Membership Enrollment Agreement (the "Agreement") for Mount
Vintage Plantation Golf Course, LLC, a South Carolina limited liability company
(the "LLC") is hereby entered into as of the date of signature of the parties
hereto by and between MV Development Company, LLC, a South Carolina limited
liability company (the "Manager") as Manager of the LLC, and
(the "Member").
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the same meaning as such terms have in the prospectus (the
"Prospectus") filed with the U.S. Securities and Exchange Commission as part of
a registration statement on Form S-11 (the "Registration Statement") pertaining
to the Company's offer to sell up to $3.0 million in aggregate principal amount
of its Membership Units (as defined in the Prospectus).
The Member wishes to purchase, and the Manager wishes to sell on behalf
of the LLC, the number of Membership Units indicated below.
In mutual consideration for the agreements, warranties and covenants
contained herein, the parties agree, warrant and covenant as follows:
MEMBER REPRESENTATIONS & WARRANTIES
As an inducement to the Manager to enter into this Agreement on behalf
of the Company, the Member warrants and represents as follows:
<TABLE>
<CAPTION>
<S> <C>
Member's
Initials
I. The Member either (i) has an annual gross income of at least $45,000 and a Net ______
Worth (as defined in the Glossary of the Prospectus) of at least $45,000 or (ii) a
minimum Net Worth of at least $150,000. Net Worth calculated pursuant to this
paragraph excludes the Member's home, home furnishings, and automobiles.
II. The Member is purchasing the Membership Units for his, her or its own account ______
and not for the purpose of reselling the Membership Units.
III. The Member received a copy of the Prospectus at least five (5) business days ______
prior to the date of this Agreement and has had an adequate opportunity to read
the Prospectus, including without limitation the sections of the Prospectus titled
"Risk Factors" and "Certain Federal Income Tax Consequences," and to seek legal
and tax planning advice concerning an investment in the Membership Units.
IV. The Member understands that an investment in the Membership Units is not a ______
liquid investment. There is no market for the Membership Units nor is a market
for the Membership Units likely to develop. The Member may not transfer his,
her or its Membership Unit(s) without the approval of the Manager, and the
Company has a right-of-first-refusal in the event that the Member desires to
transfer the distributional interests associated with his, her or its Membership
Unit(s). The Manager may actively seek to prevent a market for the Membership
Units or the distributional interest related thereto from developing in order to
preserve the Company's partnership status for federal income tax purposes.
B-1
<PAGE>
V. The Member understands that an investment in the Membership Units involves a ______
high degree of risk, including without limitation the risk that the Member may
lose his, her or its entire investment in the Membership units, and the Member
warrants that he, she or it could comfortably afford to lose the entire amount
invested in the Membership Units.
VI. The Member believes that he, she or it can reasonably benefit from an investment ______
in the Membership, based on the Member's overall investment objectives and
portfolio structure.
VII. The Member is aware that Exhibit A to the Prospectus contains a copy of the ______
operating agreement for the LLC (the "Operating Agreement"). The Member
understands that by executing this Agreement, he or she becomes a Member of
the LLC and becomes fully bound by the Operating Agreement as a party thereto.
VIII. The Member hereby warrants that he or she (i) received the Prospectus, (ii) ______
received any and all sales material pertaining to the Offering described in the
Prospectus, and (iii) signed this Agreement all while in either the State of South
Carolina or the State of Georgia. The Member further hereby warrants that he or
she has not received any sales material pertaining to the Offering described in the
Prospectus or discussed the Offering with any officer, director, employee, agent or
representative of the Company or the Manager at any time while not in either the
State of South Carolina or the State of Georgia.
IX. The Member understands that neither the Manager nor any of its affiliates has any ______
prior experience in managing or operating a golf course or golf club.
</TABLE>
PURCHASE AND SALE OF MEMBERSHIP UNITS
ADMISSION AS MEMBER
VIII. The Member, by executing this Agreement, wishes, intends and agrees to
become a party to the Operating Agreement, to become a Member of the
LLC and to purchase the number of Membership Units in the LLC indicated
below.
IX. The Member hereby agrees to purchase, and the Manager hereby agrees to
sell on behalf of the LLC, the number of Membership Units indicated
immediately below.
Number of Membership Units to be Purchased by the Member:
X. The Member hereby agrees to pay for the Membership Units to be
purchased by paying $1,000.00 upon execution of this Agreement and
$19,000.00 by October 16, 1998 for each Membership Unit purchased.
XI. The Manager hereby acknowledges receipt from the Member of $ .00.
-------
XII. The Manager hereby agrees, on behalf of the LLC, to admit the Member as
a member of the LLC subject to the terms of the Operating Agreement.
AGREED TO THIS _____ DAY OF ______________, 199_, IN WITNESS WHEREOF
THE PARTIES HAVE HEREUNTO SET THEIR SIGNATURES.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
THE MANAGER MEMBER
__________________________________________ _________________________________________
Print Name of Manager if Not an Individual Print Name of Member of Not an Individual
B-2
<PAGE>
__________________________________________ _________________________________________
Signature Signature
__________________________________________ _________________________________________
Print Name (and Title of Signatory if the Print Name (and Title of Signatory if the
Manager is not an Individual) Member is not an Individual)
_________________________________________
(Address)
_________________________________________
_________________________________________
(Telephone Number)
PLACE OF SIGNATURE:______________________________________________________________________
(Indicate municipality and State)
</TABLE>
B-3
<PAGE>
Exhibit C
Projections of Development Costs
and
Five Year Projections of Operations
of
Mount Vintage Plantation Golf Club, LLC
<PAGE>
PROJECTIONS OF DEVELOPMENT COSTS
<TABLE>
<CAPTION>
<S> <C>
Description of Work Total 97 Jan-98 Feb-98 Mar-98 Apr-98
- ------------------- -------- ------ ------ ------ ------
Golf Development Costs
Architect Fees - Tom 2,500 7,500
Jackson
Market Study-Hotel and 3,000 3,000
Club Assoc.
Legal & Accounting Fees - 5,000 15,000
Structure/Offering/Other
Pre-opening
Marketing/Operations
Budget
Subtotal 5,600 10,500 5,000 15,000
Golf Club Construction
Permits
Wetlands Delineation - 7,500
168hrs @ $80/hr
Survey - Outsourced 9,000
Engineering - Outsourced
Grow-in Period - Four
Months (adm. and oper.
costs)
Centerline Survey
Mobilization
Erosion Control
Clearing and Grubbing
Lake Construction (Dams)
Rough Grading
Shaping
Drainage
Greens Construction
Tee Construction
Trap Construction
Irrigation (Golf Course)
Bridges
Bulkheads and Walls
Cart Paths (Concrete)
Greens Fumigation
Fertilizer and Lime
Fine Grading
Grassing
Contingency
Subtotal 7,500 9,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work May-98 Jun-98 Jul-98 Aug-98 Sep-98
- ------------------- ------ ------ ------ ------ ------
Golf Development Costs
Architect Fees - Tom 10,000 20,000 20,000 15,000 15,000
Jackson
Market Study-Hotel and
Club Assoc.
Legal & Accounting Fees - 5,000 10,500 10,500 25,500 30,500
Structure/Offering/Other
Pre-opening 9,500 8,500 6,500 6,500 3,000
Marketing/Operations
Budget
Subtotal 24,500 39,000 37,000 47,000 48,500
Golf Club Construction
Permits 2,800
Wetlands Delineation -
168hrs @ $80/hr
Survey - Outsourced 7,930 2,815
Engineering - Outsourced
Grow-in Period - Four
Months (adm. and oper.
costs)
Centerline Survey 9,000
Mobilization
Erosion Control
Clearing and Grubbing
Lake Construction (Dams)
Rough Grading
Shaping
Drainage
Greens Construction
Tee Construction
Trap Construction
Irrigation (Golf Course)
Bridges
Bulkheads and Walls
Cart Paths (Concrete)
Greens Fumigation
Fertilizer and Lime
Fine Grading
Grassing
Contingency
Subtotal 9,000 10,730 2,815
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Oct-98 Nov-98 Dec-98 Total-98 Jan-99
- ------------------- ------ ------ ------ -------- ------
Golf Development Costs
Architect Fees - Tom 15,000 15,000 117,500 15,000
Jackson
Market Study-Hotel and 3,000
Club Assoc.
Legal & Accounting Fees - 500 500 500 103,500 500
Structure/Offering/Other
Pre-opening 3,000 1,200 500 39,000 800
Marketing/Operations Budget
Subtotal 18.500 16,700 1,300 263,000 16,300
Golf Club Construction
Permits 2,800
Wetlands Delineation - 7,500
168hrs @ $80/hr
Survey - Outsourced 19,745
Engineering - Outsourced 13,500 13,500
Grow-in Period - Four
Months (adm. and oper.
costs)
Centerline Survey 9,000
Mobilization 30,000 30,000
Erosion Control 40,000 6,000 6,000 52,000 12,000
Clearing and Grubbing 120,000 60,000 50,000 230,000 10,650
Lake Construction (Dams) 70,000 70,000 10,000 150,000
Rough Grading 200,000 162,500 160,000 522,500
Shaping 80,000 50,000 20,000 150,000
Drainage 120,000 80,000 60,000 260,000 40,000
Greens Construction 90,000 100,000 70,000 260,000 15,000
Tee Construction 30,000 30,000 60,000 10,000
Trap Construction
Irrigation (Golf Course) 50,000 200,000 250,000 130,000
Bridges 28,000 10,000 38,000 4,000
Bulkheads and Walls 20,000 27,000 47,000 20,000
Cart Paths (Concrete)
Greens Fumigation
Fertilizer and Lime
Fine Grading
Grassing 8,334 10,000 18,334
Contingency 20,000 20,000 20,000 60,000 20,000
Subtotal 792,834 686,500 663,000 2,180,379 261,650
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Feb-99 Mar-99 Apr-99 May-99 June-99
- ------------------- ------ ------ ------ ------ -------
Golf Development Costs
Architect Fees - Tom 15,000 15,000
Jackson
Market Study-Hotel and
Club Assoc.
Legal & Accounting Fees - 500 500 500 500 500
Structure/Offering/Other
Pre-opening 2,200 2,500 7,500 7,500 7,500
Marketing/Operations Budget
Subtotal 2,700 18,000 8,000 23,000 8,000
Golf Club Construction
Permits
Wetlands Delineation -
168hrs @ $80/hr
Survey - Outsourced
Engineering - Outsourced
Grow-in Period - Four 36,200 38,000 39,500
Months (adm. and oper.
costs)
Centerline Survey
Mobilization
Erosion Control 6,000 6,000 6,000 6,000 6,000
Clearing and Grubbing
Lake Construction (Dams)
Rough Grading 15,000 40,000 30,000
Shaping
Drainage
Greens Construction
Tee Construction 20,000
Trap Construction 13,334 30,000 30,000 30,000
Irrigation (Golf Course) 30,000 50,000 40,000 25,000
Bridges
Bulkheads and Walls
Cart Paths (Concrete) 20,000 70,000 120,000 45,000
Greens Fumigation 15,000
Fertilizer and Lime 4,000 10,000 11,000
Fine Grading 12,000 10,000 30,000 38,000
Grassing 5,000 30,000 60,000
Contingency 20,000 20,000 20,000 20,000 20,000
Subtotal 76,000 201,334 311,200 284,000 204,500
</TABLE>
C-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Jul-99 Aug-99 Sep-99 Oct-99
- ------------------- ------ ------ ------ ------
Golf Development Costs
Architect Fees - Tom 15,000 10,000
Jackson
Market Study-Hotel and
Club Assoc.
Legal & Accounting Fees - 500 500
Structure/Offering/Other
Pre-opening 10,000 15,000 10,000 100,000
Marketing/Operations Budget
Subtotal 25,500 15,500 20,000 100,000
Golf Club Construction
Permits
Wetlands Delineation -
168hrs @ $80/hr
Survey - Outsourced
Engineering - Outsourced
Grow-in Period - Four 41,500 42,500
Months (adm. and oper.
costs)
Centerline Survey
Mobilization
Erosion Control 6,000
Clearing and Grubbing
Lake Construction (Dams)
Rough Grading
Shaping
Drainage
Greens Construction
Tee Construction
Trap Construction
Irrigation (Golf Course)
Bridges
Bulkheads and Walls
Cart Paths (Concrete)
Greens Fumigation
Fertilizer and Lime
Fine Grading 40,000
Grassing 30,000
Contingency 20,000 20,000 20,000
Subtotal 137,500 62,500 20,000
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Nov-99 Dec-99 Total-99 Total
- ------------------- ------ ------ -------- -----
Golf Development Costs
Architect Fees - Tom 10,000 80,000 200,000
Jackson
Market Study-Hotel and 6,000
Club Assoc.
Legal & Accounting Fees - 4,000 107,500
Structure/Offering/Other
Pre-opening 275,000 438,000 477,000
Marketing/Operations Budget
Subtotal 10,000 275,000 522,000 790,500
Golf Club Construction
Permits 2,800
Wetlands Delineation - 7,500
168hrs @ $80/hr
Survey - Outsourced 19,745
Engineering - Outsourced 13,500
Grow-in Period - Four 197,700 197,700
Months (adm. and oper.
costs)
Centerline Survey 9,000
Mobilization 30,000
Erosion Control 48,000 100,000
Clearing and Grubbing 10,650 240,650
Lake Construction (Dams) 150,000
Rough Grading 85,000 607,500
Shaping 150,000
Drainage 40,000 300,000
Greens Construction 15,000 275,000
Tee Construction 30,000 90,000
Trap Construction 103,334 103,334
Irrigation (Golf Course) 275,000 525,000
Bridges 4,000 42,000
Bulkheads and Walls 20,000 67,000
Cart Paths (Concrete) 255,000 255,000
Greens Fumigation 15,000 15,000
Fertilizer and Lime 25,000 25,000
Fine Grading 130,000 130,000
Grassing 125,000 143,334
Contingency 180,000 240,000
Subtotal 1,558,684 3,739,063
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Total 97 Jan-98 Feb-98 Mar-98 Apr-98
- ------------------- -------- ------ ------ ------ ------
Golf Club Equip. and
Mainentance
Maintenance Equipment
Purchased
Maintenance Equipment
Leased
Maintenance Building (6000
sf @ $25/ft.)
Maintenance Area Site Work
& Road
Subtotal
Club House and Grounds
Club House (5000 sf @
$130/ft) (including arch.
fees)
Club House Furnishings
Cart Storage Barn (5500sf @
$20/ft)
Parking Lot and Road Work
Irrigation
Landscaping
Lighting
Signing
Subtotal
Total Expenditures 5,500 18,000 9,000 5,000 15,000
Reserve for operating losses
Constr. interest ($3.5M loan,
9%, interest only 3 yrs)
Grand Total 5,500 18,000 9,000 5,000 15,000
Running Expenditure Total 5,500 23,500 32,500 37,500 52,500
Equity
Repayments
Draw 5,500 18,000 9,000 5,000 15,000
Cumulative Debt 5,500 23,500 32,500 37,500 52,500
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work May-98 Jun-98 Jul-98 Aug-98 Sep-98
- ------------------- ------ ------ ------ ------ ------
Golf Club Equip. and
Mainentance
Maintenance Equipment
Purchased
Maintenance Equipment
Leased
Maintenance Building (6000
sf @ $25/ft.)
Maintenance Area Site Work
& Road
Subtotal
Club House and Grounds
Club House (5000 sf @
$130/ft) (including arch.
fees)
Club House Furnishings
Cart Storage Barn (5500sf @
$20/ft)
Parking Lot and Road Work
Irrigation
Landscaping
Lighting
Signing
Subtotal
Total Expenditures 24,500 48,000 57,000 67,730 51,315
Reserve for operating losses
Constr. interest ($3.5M loan,
9%, interest only 3 yrs)
Grand Total 24,500 48,000 37,000 57,730 51,315
Running Expenditure Total 77,000 125,000 162,000 219,730 271,045
Equity (20,000) (3,000,000)
Repayments 199,730
Draw 24,500 28,000 37,000 57,730
Cumulative Debt 77,000 105,000 142,000 199,730
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Oct-98 Nov-98 Dec-98 Total-98 Jan-99 Feb-99
- ------------------- ------ ------ ------ -------- ------ ------
Golf Club Equip. and
Mainentance
Maintenance Equipment
Purchased
Maintenance Equipment
Leased
Maintenance Building (6000
sf @ $25/ft.)
Maintenance Area Site Work
& Road
Subtotal
Club House and Grounds
Club House (5000 sf @ 25,000 25,000 50,000 50,000 50,000
$130/ft) (including arch.
fees)
Club House Furnishings
Cart Storage Barn (5500sf @
$20/ft)
Parking Lot and Road Work
Irrigation
Landscaping
Lighting
Signing
Subtotal 25,000 25,000 50,000 50,000 50,000
Total Expenditures 810,334 728,200 689,300 2,493,379 327,950 128,700
Reserve for operating losses
Constr. interest ($3.5M loan, 26,250
9%, interest only 3 yrs)
Grand Total 810,334 728,200 689,300 2,493,379 327,950 154,950
Running Expenditure Total 1,081,379 1,809,579 2,498,849 2,826,829 2,981,779
Equity
Repayments
Draw
Cumulative Debt
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Mar-99 Apr-99 May-99 Jun-99
- ------------------- ------ ------ ------ ------
Golf Club Equip. and
Mainentance
Maintenance Equipment 200,000
Purchased
Maintenance Equipment 3,200 3,200 3,200 3,200
Leased
Maintenance Building (6000 150,000
sf @ $25/ft.)
Maintenance Area Site Work 5,000
& Road
Subtotal 203,200 158,200 3,200 3,200
Club House and Grounds
Club House (5000 sf @ 50,000 50,000 50,000 50,000
$130/ft) (including arch.
fees)
Club House Furnishings
Cart Storage Barn (5500sf @ 10,000 10,000 10,000
$20/ft)
Parking Lot and Road Work
Irrigation
Landscaping
Lighting
Signing
Subtotal 50,000 60,000 60,000 60,000
Total Expenditures 472,534 637,400 370,200 275,700
Reserve for operating losses
Constr. interest ($3.5M loan, 26,250 26,250 26,250 26,250
9%, interest only 3 yrs)
Grand Total 498,784 683,660 396,450 301.950
Running Expenditure Total 3,480,563 4,044,213 4,440,663 4,742,613
Equity
Repayments
Draw 460,563 563,650 396,450 301,950
Cumulative Debt 460,563 1,024,213 1.420,663 1,722,613
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Jul-99 Aug-99 Sep-99 Oct-99
- ------------------- ------ ------ ------ ------
Golf Club Equip. and
Mainentance
Maintenance Equipment
Purchased
Maintenance Equipment 3,200 3,200
Leased
Maintenance Building (6000
sf @ $25/ft.)
Maintenance Area Site Work
& Road
Subtotal 3,200 3,200
Club House and Grounds
Club House (5000 sf @ 50,000 50,000 100,000 100,000
$130/ft) (including arch.
fees)
Club House Furnishings 20,000 64,000
Cart Storage Barn (5500sf @ 20,000 20,000 20,000 20,000
$20/ft)
Parking Lot and Road Work 10,000 20,000 20,000
Irrigation 8,000
Landscaping 40,000
Lighting 8,000
Signing 5,000
Subtotal 80,000 131,000 244,000 120,000
Total Expenditures 246,200 212,200 284,000 220,000
Reserve for operating losses 64,968 64,968 64,968
Constr. interest ($3.5M loan, 26,250 26,250
9%, interest only 3 yrs)
Grand Total 272,450 238,450 284,968 184,968
Running Expenditure Total 5,015,063 5,253,513 5,602,481 5,887,449
Equity
Repayments
Draw 272,450 238,450 348,968 284,968
Cumulative Debt 1,995,063 2,233,513 2,582,481 2,867,449
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Description of Work Nov-99 Dec-99 Total-99 Total
- ------------------- ------ ------ -------- -----
Golf Club Equip. and 200,000 200,000
Mainentance
Maintenance Equipment 19,200 19,200
Purchased
Maintenance Equipment 150,000 150,000
Leased
Maintenance Building (6000 5,000 5,000
sf @ $25/ft.)
Maintenance Area Site Work 374,200 374,200
& Road
Subtotal 600,000 650,000
Club House and Grounds
Club House (5000 sf @
$130/ft) (including arch. 84,000 84,000
fees) 110,000 110,000
Club House Furnishings
Cart Storage Barn (5500sf @ 50,000 50,000
$20/ft) 8,000 8,000
Parking Lot and Road Work 40,000 40,000
Irrigation 8,000 8,000
Landscaping 5,000 5,000
Lighting 905,000 955,000
Signing 3,359,884 5,858,763
Subtotal 259,870 259,870
Total Expenditures 10,000 276,000 183,750 183,750
Reserve for operating losses 64,968 259,870
Constr. interest ($3.5M loan, 3,803,504 6,302,383
9%, interest only 3 yrs)
Grand Total 74,968 229,966
Running Expenditure Total 5,962,417 6,302,383
Equity
Repayments
Draw 74,968 339,966 3,282,383 3,282,383
Cumulative Debt 2,942,417 3,282,383
</TABLE>
C-7
<PAGE>
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
PROJECTED INCOME STATEMENT AND CASH FLOW
FOR THE FOUR MONTHS ENDING DECEMBER 31, 1999, AND EACH
OF THE FOUR YEARS IN THE PERIOD ENDING DECEMBER 31, 2003
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
INCOME 1999 2000 2001 2002 2003
- ------ ---- ---- ---- ---- ----
Member fees $ 37,500 $ 276,000 $ 381,000 $ 492,240 $ 544,320
Initiation fees -- 250,000 190,000 105,000 85,000
Weekend fees 80,332 305,760 306,824 402,072 437,085
Weekday fees 21,032 80,080 80,344 97,464 105,960
Masters week fees -- 89,600 89,600 112,000 112,000
Cart fees 55,500 252,000 282,000 371,000 406,000
Practice range 1,500 25,000 27,500 29,500 32,000
Grill and beverage 26,333 79,000 130,350 141,168 148,198
Miscellaneous 1,500 5,000 8,000 9,000 10,000
Total Income 223,697 1,362,440 1,495,618 1,759,444 1,880,563
EXPENSES
Practice Range:
Labor and payroll taxes 6,000 18,000 18,900 19,656 20,442
Supplies, balls, etc. 1,333 4,000 4,200 4,368 4,543
Repairs and maintenance 1,667 5,000 5,250 5,460 5,678
Total Practice Range 9,000 27,000 28,350 29,484 30,663
Golf Carts:
Labor and payroll taxes 19,333 58,000 60,900 63,336 65,869
Utilities 3,667 11,000 11,550 12,012 12,492
Supplies and miscellaneous 2,000 6,000 6,300 6,552 6,814
Repairs and maintenance 1,433 4,300 4,515 4,696 4,883
Lease expense 22,500 67,500 67,500 67,500 67,500
Total Golf Carts 48,933 146,800 150,765 154,096 157,558
Golf Course:
Labor and payroll taxes 89,500 268,500 281,925 293,202 304,930
Gas and oil 6,167 18,500 19,425 20,202 21,010
Utilities 5,067 15,200 15,960 16,598 17,262
Supplies and miscellaneous 7,167 21,500 22,575 23,478 24,417
Repairs and maintenance 4,800 14,400 15,120 15,725 16,354
Fertilizer, chemicals, seed, sod 18,667 56,000 58,800 61,152 63,598
Equipment rental 12,833 38,500 40,425 42,042 43,724
Total Golf Course 144,201 432,600 454,230 472,399 491,295
</TABLE>
C-8
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Grill and Beverage:
Labor and payroll taxes 21,667 65,000 68,250 70,980 73,819
Food and supplies 11,333 34,000 35,700 37,128 38,613
Miscellaneous 3,333 10,000 10,500 10,920 11,357
Total Grill and Beverage 36,333 109,000 114,450 119,028 123,789
Buildings:
Supplies and miscellaneous 4,000 12,000 12,600 13,104 13,628
Repairs and maintenance 3,000 9,000 9,450 9,828 10,221
Total Buildings 7,000 21,000 22,050 22,932 23,849
General and Administrative:
Admin. salaries and payroll taxes 30,000 90,000 94,500 98,280 102,211
Pro Shop salaries and payroll taxes 51,667 155,000 162,750 169,260 176,030
Dues and subscriptions 1,433 4,300 4,515 4,696 4,883
Utilities 6,333 19,000 19,950 20,748 21,578
Telephone 667 2,000 2,100 2,184 2,271
Administrative 1,667 5,000 5,250 5,460 5,678
Accounting and auditing 1,333 4,000 4,200 4,368 4,543
Insurance - general and group 17,333 52,000 54,600 56,784 59,055
Advertising 16,000 48,000 50,400 52,416 54,513
Taxes and licenses 5,000 15,000 15,750 16,380 17,035
Interest 105,000 315,000 315,000 308,106 292,172
Depreciation 23,333 70,000 70,000 70,000 70,000
Miscellaneous 1,667 5,000 5,250 5,460 5,678
Total General and Admin. 261,433 784,300 804,265 814,142 815,647
TOTAL EXPENSES 506,900 1,520,700 1,574,110 1,612,081 1,642,801
NET INCOME (283,203) (158,260) (78,492) 147,363 237,762
ADJUSTMENTS TO DERIVE CASH FLOW
Depreciation 23,333 70,000 70,000 70,000 70,000
Capitalized costs -- -- -- (75,000) (75,000)
Principal receipts -- -- -- --
Principal payments -- -- -- (126,187) (138,024)
NET CHANGE IN CASH (259,870) (88,260) (8,492) 16,176 94,738
Cash, beginning of year 20,000 3,260,130 3,171,870 3,163,378 3,179,554
Cash, end of year 3,260,130 3,171,870 3,163,378 3,179,554 8,274,292
</TABLE>
C-9
<PAGE>
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
HYPOTHETICAL ASSUMPTIONS
NOTE 1 - EXPENSES
The projected golf course expenses are the management's estimates of the costs
that will be associated with the golf course operation. The estimates are based
on the management's knowledge of the industry and comparable operating results
of local golf courses. The projection assumes an increase in operating expenses
of 5% for year 2001 and 4% for years 2002 and 2003.
Projected additions to buildings, machinery and equipment, and furniture and
fixtures are approximately $1.3 million. Depreciation is projected on a
straight-line basis over forty years for buildings and seven years for machinery
and equipment and furniture and fixtures.
NOTE 2 - REVENUE
MEMBERSHIP
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Annual membership 100 200 276 318 352
Membership lapsing -- (16) (22) (25) (28)
Net annual membership 100 184 254 293 324
Membership assumptions are based on net annual membership growth of 100% in year
2000, 50% in year 2001, 25% in year 2002, and 20% in year 2003; and a 8%
decrease of annual membership each year.
ROUNDS
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Total rounds 4,625 21,000 23,500 26,500 29,000
Member rounds 800 6,400 8,890 10,255 11,340
Non member rounds 3,825 14,560 14,610 16,245 17,660
Weekend rounds 2,869 10,920 10,958 12,184 13,245
Weekday rounds 956 3,640 3,652 4,061 4,415
Masters week rounds N/A 1,120 1,120 1,120 1,120
The total rounds assumption for each year is a management estimate. The member
rounds assumption for the first year is a management estimate and assumes 35
rounds per member during years 2000, 2001, 2002 and 2003. Non member weekend and
weekday rounds are allocated on a three-to-one ratio, respectively. The Masters
Gold Tournament is unique in the golfing world. The demand for play during the
week is significant. During the Masters week, management assumes an increase in
rates and usage based on information of course activity in the area for that
week.
C-10
<PAGE>
NOTE 2 - REVENUE (continued)
FEES
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
Average initiation fee $ N/A $ 2,500 $ 2,500 $ 2,500 $ 2,500
Average member monthly fee 125 125 125 140 140
Average weekend green fee 28 28 28 33 33
Average weekday green fee 22 22 22 24 24
Average cart fee 12 12 12 14 14
Average Masters week green 80 80 80 100 100
fee
Member monthly fees will be collected for three months in 1999. The cart fee is
included in the average Masters week green fee.
OTHER INCOME - Cart fees, practice range, grill and beverage, and other income
are the management's estimates. The estimates are based on the management's
knowledge of the industry and comparable operating results of local gold
courses.
NOTE 3 - BANK DEBT
The presentation projection assumes that the Company will obtain long-term
borrowing of $3.5 million, bearing interest at 9%, with interest only terms for
the first three years.
C-11
<PAGE>
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
FINANCIAL STATEMENT
JUNE 4, 1998
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT.................................................F-2
BALANCE SHEET................................................................F-3
NOTES TO FINANCIAL STATEMENT.................................................F-4
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Members
of Mount Vintage Plantation Golf Club, LLC
We have audited the accompanying balance sheet of Mount Vintage Plantation Golf
Club, LLC as of June 4, 1998. This financial statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Mount Vintage Plantation Golf Club,
LLC as of June 4, 1998, in conformity with generally accepted accounting
principles.
SEROTTA MADDOCKS EVANS & CO., CPA's
Augusta, Georgia
June 4, 1998
F-2
<PAGE>
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
BALANCE SHEET
JUNE 4, 1998
ASSETS
Current Assets
Cash................................................$ 20,000
==============
MEMBERS' EQUITY...............................................$ 20,000
==============
SEE NOTES TO FINANCIAL STATEMENT
F-3
<PAGE>
MOUNT VINTAGE PLANTATION GOLF CLUB, LLC
NOTES TO THE FINANCIAL STATEMENT
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS ACTIVITIES - Mount Vintage Plantation Golf Club, LLC
(the Company) was organized to develop and operate a single golf course at Mount
Vintage Plantation, a residential and equestrian community.
BASIS OF ACCOUNTING - The Company prepares its financial statements on the
accrual basis of accounting.
USE OF ESTIMATES - Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with a maturity of three months or less to be cash equivalents.
INCOME TAXES - The Company is not a taxpaying entity for federal income tax
purposes; thus, no income tax expense is recorded in the statements. Income from
the Company is taxed to the members in their individual returns.
INVENTORIES - Inventories are stated at lower of cost or market using the
first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost. Provisions
for depreciation and amortization are made by charges to income at rates based
upon the estimated useful lives of the assets and are computed by the
straight-line method for financial statement purposes and accelerated method for
tax purposes. Major additions for capital assets and improvements are
capitalized as projects are constructed. Interest incurred during the
construction phase of the fixed assets is reflected in the capitalized value of
the asset constructed.
INTANGIBLES - Organizational costs are amortized on a straight-line basis over
five years.
MEMBERSHIP DUES AND INITIATION FEES - Membership dues are recognized as revenue
in the applicable membership period. Any unearned amounts are included in
deferred revenue at the end of each accounting period. Initiation fees are
recorded as revenue in the period when fees are collected.
ADVERTISING - The Company follows the policy of charging the costs of
advertising to expense as incurred.
NOTE 2 - LIMITED LIABILITY CORPORATION
The Company has been organized as a South Carolina Limited Liability Company by
the issuance of a certificate of organization for the Company by the Secretary
of State of South Carolina. As a result, the members' liability is limited. MV
Development Co., LLC is designated as the Manager.
F-4
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 31. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, payable by the
Company in connection with the sale of the Membership Units being registered.
All amounts are estimates except the SEC registration fee.
SEC Registration Fee...............................................$885.00
Printing and Engraving...........................................$3,500.00
Legal Fees and Expenses of the Company..........................$80,000.00
Accounting Fees and Expenses....................................$11,500.00
Miscellaneous....................................................$3,500.00
- --------------------------------------------------------------------------
Total...........................................................$99,385.00
Item 32. Sales to Special Parties.
The Manager will receive 48 Membership Units in a private placement
separate from this Offering in exchange for its contribution of the Land for the
Golf Course. The number of Membership Units the Manager will receive will be
determined by dividing the fair market value of the Land, as determined by
independent appraisal to be $4,000 per acre, by $20,000 and rounding down to the
nearest integer. Thus, the Company believes that the Manager will pay the same
price for its Membership Units as the price for which Membership Units are being
offered in this Offering. The Manager also purchased one Membership Unit for
$20,000 upon formation of the Company.
Item 33. Recent Sales of Unregistered Securities.
The Membership Units to be sold to the Manager as described above in
Item 32 will not be registered with the Commission. These Membership Units will
not be registered in reliance on Section 4(2) of the Securities Act as a
transaction not involving a public offering.
Item 34. Indemnification of Directors and Officers.
The Operating Agreement provides that the Company shall indemnify the
Manager and agents of the Company for all costs, losses, liabilities, and
damages paid or accrued by the Manager or such agent in connection with the
business of the Company to the fullest extent provided or allowed by applicable
law.
Item 35. Treatment of Proceeds From Stock Being Registered.
Not applicable.
Item 36. Financial Statements and Exhibits.
(a) Financial Statements filed as part of this Registration Statement:
Beginning on Page F-1 of the Prospectus.
(b) Exhibits
3.1 Articles of Organization of the Company.
3.2 Operating Agreement of the Company: Included as Exhibit A to the
Prospectus.
5.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Legality.
8.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Tax Matters.
II-1
<PAGE>
10.1 Design Contract by and between MV Development Company, LLC and Tom
Jackson, Inc. dated March 17, 1998.
10.2 Letter Contract between MV Development Company, LLC and Donald P. Howard
dated December 1, 1997.
23.1 Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibits
5.1 and 8.1.
23.2 Independent Auditors' Consent.
23.3 Real Estate Appraisers' Consent.
24.1 Power of Attorney: Contained on Signature Page.
27.1 Financial Data Schedule: Included in electronic filing only.
99.1 Subscription Agreement: Included as Exhibit B to the Prospectus.
99.2 Financial Projections: Included as Exhibit C to the Prospectus.
99.3 Real Estate Appraisal of Sherman & Hemstreet, Inc.
Item 37. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes that:
II-2
<PAGE>
(1) For purposes of determining any liability under the
Securities Act of 1933, as amended, the information omitted from the form of
prospectus as filed as part of the registration statement in reliance upon Rule
430A and contained in the form of prospectus filed by the Registrant pursuant to
Rule 424(b(1) or (4) or 497(h) under the Securities Act of 1933, as amended,
shall be deemed to be part of the registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) The undersigned Registrant hereby undertakes: (a) to file any
prospectus required by Section 10(a)(3) as post-effective amendments to the
registration statement, (b) that for the purpose of determining liability under
the Act each such post-effective amendment may be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time may be deemed to be the initial bona
fide offering thereof, (c) that all post-effective amendments will comply with
the applicable forms, rules and regulations of the Commission in effect at the
time such post-effective amendments are filed, and (d) to remove from
registration by means of a post-effective amendment any of the securities being
registered which remain at the termination of the offering.
(e) The Registrant undertakes to send to each Member at least on an annual
basis a detailed statement of any transactions with the Manager or its
affiliates, and of fees, commissions, compensation and other benefits paid, or
accrued to the Manager or its affiliates for the fiscal year completed, showing
the amount paid or accrued to each recipient and the services performed.
(f) The Registrant undertakes to provide to the Members the financial
statements required by Form 10-K or Form 10-KSB for the first full fiscal year
of operations of the Company.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Edgefield, State of South Carolina, on July 9,
1998.
MOUNT VINTAGE PLANTATION GOLF CLUB,
LLC
/s/ Donald P. Howard
By:_______________________________________________
Donald P. Howard
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Donald P. Howard and Bettis C. Rainsford,
and each of them, as true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents or any of them, or their or his or her substitute
or substitutes, may lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Donald P. Howard
____________________________ President and Chief July 9, 1998
Donald P. Howard Executive Officer
/s/ Bettis C. Rainsford
____________________________ Secretary, Treasurer, July 9, 1998
Bettis C. Rainsford Chief Financial Officer &
Principal Accounting Officer
MV DEVELOPMENT COMPANY, LLC Manager
/s/ Bettis C. Rainsford
______________________________ July 9, 1998
By Bettis C. Rainsford, Member
/s/ Talmadge Knight
__________________________ July 9, 1998
By Talmadge Knight, Member
II-4
<PAGE>
II-5
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
No. Title Page
- --- ----- ----
3.1 Articles of Organization of the Company. II-6
3.2 Operating Agreement of the Company: Included as Exhibit A to the Prospectus. A-1
5.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Legality. II-8
8.1 Opinion of Wyche, Burgess, Freeman & Parham, P.A. re Tax Matters. II-10
10.1 Design Contract by and between MV Development Company, LLC and
Tom Jackson, Inc. dated March 17, 1998. II-19
10.2 Letter Contract between MV Development Company, LLC and Donald P. Howard
dated December 1, 1997. II-23
23.1 Consent of Wyche, Burgess, Freeman & Parham, P.A.: Contained in Exhibits 5.1 and 8.1.
23.2 Independent Auditors' Consent. II-25
23.3 Real Estate Appraisers' Consent. II-26
24.1 Power of Attorney: Contained on Signature Page. II-4
27.1 Financial Data Schedule: Included in electronic filing only.
99.1 Subscription Agreement: Included as Exhibit B to the Prospectus. B-1
99.2 Financial Projections: Included as Exhibit C to the Prospectus. C-1
99.3 Real Estate Appraisal of Sherman & Hemstreet, Inc. II-27
</TABLE>
II-6
Exhibit 3.1
STATE OF SOUTH CAROLINA
SECRETARY OF STATE JIM MILES
ARTICLES OF ORGANIZATION
LIMITED LIABILITY COMPANY
The undersigned deliver the following articles of organization to form
a South Carolina limited liability company pursuant to ss. 33-44-202 and ss.
33-44-203 of the 1976 South Carolina Code, as amended.
1. The name of the limited liability company which complies with ss.
33-44-105 of the South Carolina Code of 1976 as amended is
Mount Vintage Plantation Golf Club, LLC
2. The address of the initial designated office of the limited
liability company in South Carolina is:
100 Whiskey Road (P.O. Box 706, Edgefield, South Carolina 29824)
-------------------------------------------------------------------
Street Address
North Augusta, South Carolina 29841
-------------------------------------------------------------------
City Zip Code
3. The initial agent for service of process of the limited liability
company is:
Bettis C. Rainsford
-------------------------------------------------------------------
Name
100 Whiskey Road (P.O. Box 706, Edgefield, South Carolina 29824)
-------------------------------------------------------------------
Street Address
North Augusta, South Carolina 29841
-------------------------------------------------------------------
City Zip Code
4. The name and address of each organizer is:
(a) Bettis C. Rainsford
-------------------------------------------------------------
Name
108-1/2 Courthouse Square
-------------------------------------------------------------
Street Address
Edgefield, South Carolina 29824
-------------------------------------------------------------
City Zip Code
(b)
-------------------------------------------------------------
Name
-------------------------------------------------------------
Street Address
-------------------------------------------------------------
City Zip Code
(Add additional lines if necessary)
5. [X] Check this box only if the company is to be a term
company. If so, provide the term specified:
December 31, 2050
-----------------------------------------------------------
II-7
<PAGE>
----------------------------------------------------------
6. [X] Check this box only if management of the limited liability
company is vested in a manager or managers. If this
company is to be managed by managers, specify the name and
address of each initial manager.
(a) MV Development Company, LLC
-------------------------------------------------------------
Name
108-1/2 Courthouse Square (P.O. Box 388)
--------------------------------------------------------------
Street Address
Edgefield South Carolina 29824
--------------------------------------------------------------
City State Zip Code
(b)
--------------------------------------------------------------
Name
--------------------------------------------------------------
Street Address
--------------------------------------------------------------
City State Zip Code
(c)
--------------------------------------------------------------
Name
--------------------------------------------------------------
Street Address
--------------------------------------------------------------
City State Zip Code
(d)
--------------------------------------------------------------
Name
--------------------------------------------------------------
Street Address
--------------------------------------------------------------
City State Zip Code
7. [ ] Check this box only if one or more of the members of the
company are to be liable for its debts and obligations
under ss. 33-44-303(c). If one or more members are so
liable, specify which members, and for which debts,
obligations or liabilities such members are liable in
their capacity as members.
______________________________________________________________
______________________________________________________________
______________________________________________________________
8. Unless a delayed effective date is specified, these articles will
be effective when endorsed for filing by the Secretary of State.
Specify any delayed effective date and time:
______________________________________________________________
II-8
<PAGE>
9. Set forth any other provisions not inconsistent with law which the
organizers determine to include, including any provisions that are
required or are permitted to be set forth in the limited liability
company operating agreement.
10. Signature of each organizer:
/s/ Bettis C. Rainsford
-------------------------------------
Signature of Organizer
-------------------------------------
Signature of Organizer
Date: May 22, 1998
------------------
FILING INSTRUCTIONS
1. File two copies of this form, the original and either a duplicate
original or a conformed copy.
2. If space on this form in not sufficient, please attach additional
sheets containing a reference to the appropriate paragraph in this
form, or prepare this using a computer disk which will allow for
expansion of the space on this form.
3. This form must be accompanied by the filing fee of $110.00 payable to
the Secretary of State.
Form Approved by South Carolina
Secretary of State Jim Miles, June 1996
II-9
Form of Opinion re Legality
[Wyche, Burgess, Freeman & Parham Letterhead]
July __, 1998
Mount Vintage Plantation Golf Course, LLC
108-1/2 Courthouse Square
Edgefield, South Carolina 29824
Re: Opinion regarding legality of shares issued pursuant to the
Registration Statement on Form S-11 of Mount Vintage
Plantation Golf Club, LLC
Ladies and Gentlemen:
The opinion set forth below is rendered with respect to the 150
membership units (the "Membership Units") of the Mount Vintage Plantation Golf
Club, LLC, a South Carolina limited liability company (the "Company"), that will
be registered with the Securities and Exchange Commission on a registration
statement on Form S-11 (the "Registration Statement") pursuant to the Securities
Act of 1933, as amended.
In this regard, we have examined the Company's Articles of Organization
and the form of the Company's operating agreement (the "Operating Agreement")
included as an appendix to the prospectus (the "Prospectus") contained in the
Registration Statement. We assume that purchasers of the Membership Units
pursuant to the Registration Statement will become parties to the Operating
Agreement by execution of the subscription agreement included as an appendix to
the Prospectus and that the Company will be run in accordance with the terms of
the Operating Agreement. We have also examined originals or copies of such
corporate documents and records of the Company, certificates of public
officials, certificates of the Company or any officer thereof and such other
documents as we have deemed relevant and necessary as the basis for this opinion
and statement.
With respect to matters of fact, we have relied upon certificates of
public officials and certificates of the Company or any officer thereof and have
assumed, without independent investigation, the accuracy of the factual
statements made and the information contained in such certificates. Nothing has
come to our attention to cause us to believe that we are not justified in
relying upon such certificates.
We have assumed, without investigation, the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to authentic original documents of all documents submitted to us as
copies, and the accuracy and completeness of all documents made available to us
by the Company. We have assumed, without investigation, the legal capacity of
all persons. We have assumed, without investigation, that there has not been any
mutual mistake of fact or misunderstanding. With respect to agreements,
instruments and other documents executed by entities or individuals other than
or in addition to the Company, we have assumed, without investigation, the power
and authority of any such other entity or individual to enter into and perform
all of its or his obligations under such agreements, instruments and other
documents, the due execution and delivery by each such entity or individual of
such agreements, instruments and other documents and that such agreements,
instruments and other documents are the valid, binding and enforceable
obligations of each such other entity or individual.
Based on and subject to the foregoing and subject to the comments,
limitations and qualifications set forth below, we are of the opinion that upon
payment to the Company by purchasers of the Membership
II-10
<PAGE>
Units of the price indicated in the Registration Statement therefore, the
Membership Units offered pursuant to the Registration Statement will be legally
issued, fully paid to the Company and non-assessable.
The foregoing opinion is limited solely to matters governed by the laws
of the State of South Carolina in force on the date of this letter. We express
no opinion with regard to any matter that may be (or that purports to be)
governed by the laws of any other state or jurisdiction or any political
subdivision of the State of South Carolina. In addition, we express no opinion
with respect to any matter arising under or governed by the South Carolina
Uniform Securities Act, as amended, or any law respecting any environmental
matter.
This opinion is rendered as of the date of this letter and applies only
to the matters specifically covered by this opinion, and we disclaim any
continuing responsibility for matters occurring after the date of this letter.
This opinion is limited to the matters expressly set forth herein, and no
opinion is implied or may be inferred beyond the matters expressly stated
herein.
Except as noted below, this opinion is rendered solely for your benefit
in connection with the Registration Statement and may not be relied upon, quoted
or used by any other person or entity, other than purchasers of the Membership
Units, or for any other purpose without our prior written consent.
We consent to the use of this opinion as an exhibit to the Registration
Statement. We also consent to the use of our name under the heading "Legal
Matters" in the Registration Statement.
Very truly yours,
II-11
Form of Opinion re Tax Matters
[Wyche, Burgess, Freeman & Parham letterhead]
July __, 1998
Mount Vintage Plantation Golf Club, LLC
108-1/2 Courthouse Square
Edgefield, South Carolina 29824
RE: Mount Vintage Plantation Golf Club, LLC
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
aspects of the offering and sale of Membership Units representing ownership
interests in Mount Vintage Plantation Golf Club, LLC, a South Carolina
manager-managed, term limited liability company (the "Company"), managed by MV
Development Company, LLC, a South Carolina member-managed, term limited
liability company (the "Manager"), all as described in the Registration
Statement on Form S-11 to be filed with the Securities and Exchange Commission
(the "Registration Statement"), and the Prospectus included therein (the
"Prospectus"). Capitalized terms used herein shall have the meaning ascribed to
them in the "Glossary" section of the Prospectus or as set forth in the
Operating Agreement included in the Prospectus.
In order to render our opinion, we have reviewed and relied upon (a)
executed copies of the Articles of Organization of the Company filed with the
South Carolina Secretary of State on May 26, 1998; (b) the Registration
Statement; and (c) representations of the Manager as provided herein and as
disclosed in the Prospectus, including, inter alia, that: (i) all statements and
information in the Prospectus are accurate and complete and (ii) the Company
will be operated in a business-like manner and substantially in accordance with
the Operating Agreement and the Prospectus. We have assumed the accuracy of the
representations contained in the Prospectus, that the Operating Agreement will
be executed substantially in the form included as Exhibit "A" to the Prospectus
and that the Company will be operated in accordance with the provisions of the
Operating Agreement.
We have also relied upon, and based our interpretation on, pertinent
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations (including Temporary and Proposed Regulations) promulgated
thereunder ("Regulations"), existing judicial decisions, and current
administrative rulings and procedures issued by the Internal Revenue Service
("IRS"), all of which are subject to change, with or without retroactive
application, by legislation, administrative action and judicial decision. Any
changes in the facts assumed hereunder or in the Code or Regulations made
subsequent to the date of this opinion could materially affect the statements
made herein and have adverse effects on the income tax consequences of investing
in the Company.
This opinion is strictly subject to all of the terms, conditions and
limitations set forth herein, and all references to this opinion contained in
the Prospectus are expressly qualified by reference to the entirety of this
opinion. Further, this opinion is directed primarily to individual taxpayers who
are citizens of the United States. No opinion is given with respect to federal
income tax aspects of the offering which depend upon a Member's particular
circumstances, and no opinion is given with respect to the federal income tax
consequences to any new Member substituted for a Member. The opinions expressed
herein also do not extend to a continuation of operations following the
resignation or removal of the Manager.
II-12
<PAGE>
Our opinion attempts to address each material tax issue that involves a
reasonable possibility of challenge by the IRS; however, it should be noted that
this opinion is not a representation or a guarantee that the tax results opined
to herein or described in the Prospectus will be achieved. This opinion has no
binding effect or official status of any kind, and no assurance can be given
that the conclusions reached in this opinion would be sustained by a court if
contested by the IRS. For purposes of our opinion, any statement that it is
"more likely than not" that any tax position will be sustained means that in our
judgment at least a 51% chance of prevailing exists if the IRS were to challenge
the allowability of such tax position and that challenge were to be litigated
and judicially decided.
Based on and subject to the foregoing and subject to the comments,
limitations and qualifications set forth below, we are of the following opinion:
Partnership Status
The Company will be classified and treated as a partnership for federal
income tax purposes. Pursuant to Sections 301.7701-2(c) and 301.7701-3(b) of the
Regulations, the Company should be treated as a partnership for federal income
tax purposes because it will be a business entity that is not a corporation, it
will have two or more members following the Offering and it will not have
elected to be taxed as a corporation. The Company has not requested an IRS
ruling on its partnership status for federal income tax purposes.
As a partnership, the Company will not be subject to federal income
tax, but will pass through items of income, gain, deduction, loss and credit to
Members. If the Company were to be classified as a corporation for federal
income tax purposes, the Company wold be subject to an entity level tax. If the
Company is classified as a corporation, the tax consequences of holding the
Membership Units would also be affected. Rather than reporting income, gain,
loss and deductions under the partnership tax rules, distributions by the
Company would be treated as corporate dividends to the extent they are paid from
corporate earnings and profits. Distributions in excess of earnings and profits
may be treated either as a return of capital or as a gain if the distributions
exceed a Member's tax basis in its Membership Interest. Such treatment may cause
a Member to realize a different amount of income for tax purposes than if it
were allocated income under the partnership tax rules.
Publicly Traded Partnership Rules
The Company will not be classified as a publicly traded partnership (a
"PTP") under Code Section 7704. Under Code Section 7704(b), a partnership may be
classified as a PTP if interests in the partnership are traded on an established
securities market, or are readily tradable on a secondary market (or the
substantial equivalent thereof). Under Regulation Section 1.7704-1(d), interests
in a partnership are not considered readily tradeable unless the partnership
participates in the establishment of the market or the inclusion of its
interests thereon or recognizes transfers on the market by redeeming the
transferor partner or admitting the transferee as a partner. The Operating
Agreement prohibits transfer of ownership of the Membership Units without the
consent of the Manager. The Operating Agreement also gives the Company a
right-of-first-refusal in the event a Member wishes to transfer the
distributional rights associated with the Member's Membership Units. The Manager
has represented that it will use its right to withhold consent to transfer of
ownership of the Membership Units and will cause the Company to exercise its
right-of-first refusal with respect to transfer of the distributional rights
associated with Membership Units to the extent necessary to prevent the
Membership Units from being traded on an established securities market or a
secondary market.
The remaining summary of federal income tax consequences in this
opinion assumes that the Partnership will be classified as a partnership for
federal income tax purposes.
Taxation of Members of the Company
Purchase of Membership Units. Generally, Members will not recognize any
gain or loss upon the purchase of their Membership Units. Section 721(a) of the
Code provides that generally, neither the
II-13
<PAGE>
partnership nor any of its partners shall recognize a gain or loss upon the
contribution of property (including cash) to a partnership in exchange for a
partnership interest.
Pass Through of Gain and Loss. Generally items of income, gain, loss,
deduction or credit of the Company will be allocated to Members in accordance
with their proportionate ownership of Membership Units for tax purposes and will
have to be reported by Members on their individual income tax returns. As
partners for tax purposes, Members may be subject to tax on their distributive
share of income or gain, without regard to whether they receive a distribution
from the Company.
Allocation of income, gain, loss and deduction with respect to
contributed property. In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members, including the Manager, so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and the fair market value of such property at the time of
transfer to the Company. Generally, the Company's adjusted basis in contributed
property is the same as its adjusted basis in the hands of the contributing
Member immediately prior to contribution adjusted for any gain or loss
recognized by the contributing Member upon transfer. This opinion assumes that
any elections or other decisions relating to such allocations pursuant to
Section 704(c) will be made by the Manager in any permissible manner which
reflects the purpose and intention of the Operating Agreement. Such allocations
pursuant to Section 704(c) will not affect or be taken into account in
connection with distributions of cash or property to the Members under the terms
of the Operating Agreement.
Code Section 704(b) Modifications. Section 4.10 of the Operating
Agreement provides that Article IV governing capital contributions will be
construed and, if necessary, modified to cause the allocations of profits,
losses, income, gain and credit pursuant to Article V of the Operating Agreement
to have substantial economic effect under the Regulations promulgated under
Section 704(b) of the Code, in light of the distributions made pursuant to
Articles V and X and the capital contributions made pursuant to Article IV of
the Operating Agreement.
Distributions with Respect to Membership Units. Generally, under Code
Section 731(a), in the event that the Company makes a distribution to its
Members, gain will not be recognized by Members unless the amount distributed
exceeds the Member's basis in his or her Membership Units prior to the
distribution. If the amount distributed exceeds the Member's basis, then the
Member will recognize gain to the extent of the excess. Also, generally under
Code Section 731(a), loss would not be recognized by a Member in the event the
Company makes a distribution with respect to the Membership Units unless the
distribution is in liquidation of the Member's interest in the Company and no
property other than cash, unrealized receivables, and inventory are received by
the Member, in which case, the Member would recognize loss to the extent that
the Member's basis in his or her Membership Units exceeds the amount of cash and
the basis of the unrealized receivables and inventory distributed. Any gain or
loss recognized as described above will be treated as gain or loss from the sale
or exchange of the Membership Units.
Members' Federal Tax Basis
Initial Basis. A Member's initial federal income tax basis in his or
her Membership Units will equal the amount of cash paid for the Membership
Units. Pursuant to Code Section 722, a Member's initial basis in his or her
Membership Units equals the sum of the cash and the adjusted basis of any
property contributed to the Company in exchange for the Membership Units
increased by any gain recognized by the Member upon such contribution. This
opinion assumes that Members purchasing the Membership Units offered by the
Registration Statement will only be paying cash for their Membership Units as
provided in the Registration Statement, so their initial basis in the Membership
Units will equal the amount paid for the Membership Units.
General Adjustments to Basis. In general, under Code Section 705, a
Member's basis in his or her Membership Units will be adjusted for the Member's
distributive share of the Company's taxable income, tax-exempt income, losses
and expenditures that are not otherwise taken into account in computing taxable
income. In addition, under Code Section 733 a Member's basis will be reduced
(but not below zero) for
II-14
<PAGE>
non-liquidating distributions by the amount of money distributed to such Member
and by the amount of the basis in the hands of the Member of any property
distributed to such Member.
Limits on Losses. Under Section 704(d) of the Code, a Member's
distributive share of losses of the Company (including capital losses) is
limited to such Member's adjusted basis in the Membership units, determined at
the end of the taxable year in which such loss occurred. A loss disallowed under
this provision may be deducted in the taxable year when it is repaid to the
Company by the Member.
Adjustments for Liabilities of the Company. A Member's basis will
generally be increased or decreased in proportion to the share of the Company's
liabilities attributable to the Member's Membership Units. This opinion assumes,
based on the contents of the Prospectus, that the Company will enter into a
substantial credit facility. Code Section 752 provides that any increase or
decrease in a partner's share of the liabilities of a partnership or any
increase or decrease in a partner's personal liability as a result of the
assumption by the partner of liabilities of the partnership will be treated as a
contribution to or distribution from the partnership. Such a deemed contribution
or distribution generally results in an increase or decrease in the partner's
basis in the partnership. (If a deemed distribution exceeds the partner's basis,
then such deemed distribution would be treated as gain to the partner to the
extent of such excess.)
As permitted by Section 33-44-303 of the LLC Act, Section 3.7 of the
Operating Agreement provides that no Member or Manager of the Company will be
personally liable for the liabilities of the Company. Therefore, pursuant to
Section 1.752-1(a)(2) of the Regulations, liabilities of the Company will be
considered non-recourse for purposes of determining a Member's basis. Under
Section 1.752-3 of the Regulations, non-recourse liabilities are allocated first
to the extent of a Member's Section 704(b) share of partnership minimum gain;
second, to the extent a Member would realize taxable gain under Section 704(c)
if all of the Company's property that is subject to non-recourse debt were sold
for the amount of the debt and no other consideration; and, third, in proportion
to the Member's share of profits of the Company. Partnership minimum gain is
defined in Section 1.704-2(b)(2) as the extent to which debt related to Company
property that is non-recourse to the Company exceeds the Company's basis in such
property.
The tax basis of a Membership Unit that is attributable to such
liabilities will be reduced as the result of the admission of new Members, since
the new Members will be entitled to their allocable share of liabilities in
accordance with their profits interests. To the extent liabilities are thus
shifted from a Member, such amount will be treated as a distribution to such
Member. This distribution is applied against and reduces the tax basis of such
Member's interest in the Company. To the extent such deemed distribution exceeds
a Member's basis, it could create taxable gain.
Other Limits on Losses
At Risk Limitations. The deductibility of allocable shares of Company
losses by Members is limited by the "at risk" limitations in Code Section 465.
Members who are individuals are not allowed to deduct Company losses in excess
of the amounts which such Members are determined to have "at risk" at the close
of the Company's tax year. Generally, a Member's amount "at risk" will include
the amount of his or her cash capital contribution to the Company. Pursuant to
Section 1.465-22 of the Regulations, a Member's amount "at risk" will be reduced
by his or her allocable share of Company losses and by distributions and
increased by his or her allocable share of Company income. Generally under Code
Section 465(b), a Member's allocable share of Company liabilities are not at
risk; however, certain qualifying non-recourse financing related to the holding
of real property may be treated as at risk. Pursuant to Code Section 465(a)(2),
any deductions which are disallowed under this limitation may be carried forward
indefinitely and utilized in subsequent years to the extent that a Member's
amount "at risk" is increased in those years.
Passive Loss Limitations. Section 469 of the Code substantially
restricts the ability of many taxpayers (including individuals, estates, trusts,
certain closely-held corporations and certain personal service corporations) to
deduct losses derived from so-called "passive activities." Passive activities
generally include any activity involving the conduct of a trade or business in
which the taxpayer does not
II-15
<PAGE>
materially participate (including the activity of a limited partnership in which
the taxpayer is a limited partner) and certain rental activities (including the
rental of real estate). Based on the above authority, it is our opinion that,
more likely than not, a Member's interest in the Company will be treated as a
passive activity, if such issue were challenged by the IRS, litigated and
judicially decided. Accordingly, income and loss of the Company, other than
interest or other similar income earned on temporary investments and working
capital reserves (which would constitute portfolio income pursuant to Code
Section 469(e)(1)), will constitute passive activity income and passive activity
loss, as the case may be, to Members.
Generally, losses from passive activities are deductible only to the
extent of a taxpayer's income or gains from passive activities and will not be
allowed as an offset against other income, including salary or other
compensation for personal services, active business income or "portfolio
income," which includes nonbusiness income derived from dividends, interest,
royalties, annuities and gains from the sale of property held for investment.
Passive activity losses that are not allowed in any taxable year are suspended
and carried forward indefinitely and allowed in subsequent years as an offset
against passive activity income in future years. Upon a taxable disposition of a
taxpayer's entire interest in a passive activity to an unrelated party,
suspended losses with respect to that activity may then be deducted.
The Code provides that the passive activity loss rules will be applied
separately with respect to items attributable to each publicly traded
partnership. Accordingly, if the Company were deemed to be a publicly traded
partnership, Company losses, if any, would be available only to offset future
non-portfolio income of the Company.
Depreciation and Recapture
Section 167(a) of the Code provides that the real property improvements
acquired or constructed by the Partnership and the personal property acquired by
the Partnership shall generally be entitled to a reasonable allowance for
exhaustion, wear and tear or obsolescence. The amount of the allowable deduction
is generally determined under Section 168 of the Code. The table below indicates
the recovery period and method the Company has indicated to us that it will use
for the types of property listed in the table. It is our opinion that these
recovery periods and methods are permitted under Code Section 168 and Rev. Proc.
87-56.
Asset Life (years) Method
- ----- ------------ ------
Buildings 39 straight-line
Golf Course Improvements 15 straight-line
Normal Furniture, Fixtures & 7 double-declining
Equipment balance
Computers & Short-Lived 5 double-declining
Assets balance
Pursuant to Code Sections 167 (c) and 1011, the tax basis for all depreciable
assets will be the cost of the asset to the Company, which have not been
determined at this time.
Risk of Taxable Income Without Cash Distributions
Members are generally liable for federal income tax on the Company's
gains and income regardless of whether they receive a distribution from the
Company. Thus, a Member's tax liabilities could exceed
II-16
<PAGE>
cash distributions in corresponding years. For example, the Company could elect
to retain income for future uses rather than distribute such income to Members.
In this instance, Members would be taxed on their proportional share of the gain
without receiving any cash distribution from the Company with which to pay such
taxes. No opinion is expressed on whether or when Members actual tax liabilities
will exceed cash distributions received by them.
Sale or Other Disposition of Membership Units
Gain or Loss, Ordinary Income or Deduction. A Member may be unable to
sell any of his or her Membership Units by reason of the nonexistence of any
market therefor. In general, under Code Section 741, in the event that
Membership Units are sold, however, the selling Member will realize gain or loss
equal to the difference between the gross sale price or proceeds received from
sale and the Member's adjusted tax basis in the Membership Units. Assuming the
Member is not a "dealer" with respect to such Membership Units and has held the
Membership Units for more than one year, his gain or loss will be long-term
capital gain or loss, except for that portion of any gain attributable to such
Member's share of the Company's "unrealized receivables" and "substantially
appreciated inventory," as defined in Section 751 of the Code, which would be
taxable as ordinary income.
Relief of Share of Company Indebtedness. Sale of Membership Units will
result in the Member being relieved of his or her share of the Company's
non-recourse liabilities. Under Code Section 752(d) and the Supreme Court's
holdings in Crane v. Commissioner, 331 U.S. 1 (1947) and Tufts v. Commissioner,
461 U.S. 300 (1983), the amount of non-recourse liability from which the Member
is relieved will be included in the amount realized upon sale of the Membership
Unit. If the Member has a negative capital account balance, the Member's gain on
sale could be greater than the amount of consideration received by the Member
from the purchaser excluding the assumption of Company debt by the purchaser.
Thus, the Member could have a taxable gain that does not reflect cash or
property received in the sale.
Section 754 Election. The Company has represented to us that it expects
to make a Code Section 754 election, which means that the Company's basis in its
property will be adjusted upon the transfer of a Member's Membership Units. When
a Member sells his or her Membership Unit, the purchaser's basis in the
Membership Unit will generally be the price paid plus the proportional amount of
Company liability assumed. If no Section 754 election is made by the Company and
the selling Member recognizes gain or loss on the sale of his or her Membership
Unit, the purchaser's basis in the Membership Unit ("outside basis") will
generally differ from the purchaser's proportional share of the Company's basis
in Company property ("inside basis"). If the Company then sells some Company
property, the purchaser of the Membership Unit will be allocated gain or loss
from the sale by the Company, resulting in a form of double taxation whereby
both the seller and purchaser of a Membership Unit are taxed in connection with
the sale by the Company of Company property. If a Section 754 election is made,
Code Section 743(b) provides that the Company's inside basis will be adjusted
upwards or downwards in an amount that reflects the difference between the
Membership Unit purchaser's outside basis and his or her proportionate share of
the Company's inside basis. Such an adjustment generally will eliminate or
reduce the double taxation effect described above. If the Company makes a
Section 754 election, as expected, then under Section 1.754-1(c) of the
Regulations, the election can only be revoked with the consent of the Internal
Revenue Service.
Gift of Membership Units. If a Member makes a gift of his or her
Membership Unit, the Member may realize gain to the extent that the share of
Company liabilities allocated to the Membership Unit exceed the donor's basis in
the Membership Unit. Generally, the making of a gift is not a taxable event for
federal income tax purposes; however, under Section 1.1001-1(e) of the
Regulations and the holding in Diedrich v. Commissioner, 457 U.S. 191 (1982),
the gift of a Membership Unit will be deemed to include gain from sale to the
extent that the share of Company liabilities allocated to the Membership Unit
exceed the donor's basis in the Membership Unit. A donor Member may never
recognize a loss from the gift of a Membership Unit. The extent to which gain
realized by a donor Member is capital gain or ordinary income is governed by the
principals described above under the heading "Gain or Loss, Ordinary Income of
Deduction."
II-17
<PAGE>
A Member making a gift of his or her Membership Units may be liable for
federal gift tax depending on the value of the Membership Units donated and the
value of other gifts the donor Member has made. No opinion is expressed on
whether any particular Member will be subject to any gift tax upon making a gift
of his or her Membership Unit(s).
Sale or Other Disposition of Partnership Property
If the Company were to sell the Golf Course or buildings erected on the
Land in relation to the Golf Course or other Company property, the Company will
recognize gain or loss to the extent that the amount realized is more or less
than the Company's adjusted basis in the property sold. The amount realized upon
the sale of Company property will generally be equal to the sum of the cash
received plus the amount of indebtedness encumbering the property, if any,
assumed by the purchaser or to which the property remains subject upon the
transfer of the property to the purchaser. The Company's adjusted basis in its
property will in general be equal to the original cost of the property less
depreciation and cost recovery allowances allowed to the Company with respect to
such property.
Assuming that the Company is not deemed to be a dealer with respect to
its properties, such gain or loss will generally be taxable under Section 1231
of the Code. A Member's share of the gains or losses resulting from the sale of
Company property would generally be combined with any other Section 1231 gains
or losses realized by the Member in that year from sources other than the
Company. Because Company property is generally property used in trade or
business and generally will be held for more than one year, the net Section 1231
gain or loss is generally treated as long-term capital gain (subject to
depreciation or cost recovery allowance recapture, if any, which results in
ordinary income treatment pursuant to Code Sections 1245 and 1250) or ordinary
loss, as the case may be. Investors should be aware that the amount of taxable
gain allocated to a Member with respect to the sale of Company property may
exceed the cash proceeds received by such Member with respect to such sale.
As discussed above, special allocations of gain, loss, income or
deduction may be made if the Company disposes of property contributed to it in
exchange for Membership Units and the fair market value of such property at the
time of contribution differed from the contributor's basis in such property.
Section 183 "Tax Shelter" Rules
Section 183 of the Code provides for the disallowance of certain
deductions attributable to activities "not engaged in for profit." The term
"activity not engaged in for profit" is defined as any activity other than an
activity that constitutes a trade or business or an activity that is engaged in
for the production or collection of income. In general, an activity will be
considered as entered into for profit where there is a reasonable expectation of
profit in the future. The determination of whether an activity is engaged in for
profit is based upon the facts and circumstances of each case.
Based upon the purpose of the Company to operate the Golf Course and
the assumption that the Manager will operate the Company in a business-like
manner in all material respects and strictly in accordance with the Operating
Agreement and the Prospectus, and assuming the determination as to whether the
activities of the Company are activities entered into for profit under Section
183 is made at the Company level, it is our opinion that it is more likely than
not that the activities contemplated by the Company will be considered
activities entered into for profit by the Company, if such issue were challenged
by the IRS, litigated and judicially decided. However, the IRS may also apply
Section 183 to Members notwithstanding any determination made with respect to
the Company in this regard, and since the test of whether an activity is deemed
to be engaged in for profit is based upon facts and circumstances that exist
from time to time, no assurance can be given that Section 183 of the Code may
not be applied in the future to disallow deductions allocable to Members from
Company operations. No opinion is given as to the application of Code Section
183 at the Member level.
Liquidation or Termination of the Company
The dissolution and liquidation of the Company will involve the
distribution to the Members of the Company's cash and property, if any,
remaining after payment of all the Company's debts and liabilities.
II-18
<PAGE>
If a Member receives cash in excess of the basis of his or her Membership Units,
such excess will be taxable as a gain pursuant to Code Section 731. If a Member
were to receive only cash, unrealized receivables and inventory (as defined in
Section 751(d)(2) of the Code) upon dissolution and liquidation, he or she would
recognize a loss to the extent, if any, that the adjusted basis of his or her
Membership Units exceeded the amount of cash, unrealized receivables and
inventory received. No loss would be recognized if a Member were to receive
property other than money, unrealized receivables and inventory.
There are a number of exceptions to these general rules.
State and Local Taxes
South Carolina Income Tax. All Members of the Company, whether or not
they are South Carolina residents, will be subject to South Carolina state
income taxes on their share of Company income, pursuant to South Carolina Code
("SC Code") Sections 12-6-600 and 12-6-1720(1)(d). The table below discloses the
individual income tax rates on South Carolina taxable income:
Amount of Taxable Income South Carolina Income Tax
- ------------------------ -------------------------
Not over $2,220 2.5% of taxable income
Over $2,220 but not over $4,440 $56 + 3% of excess over $2,220
Over $4,440 but not over $6,660 $123 + 4% of excess over $4,440
Over $6,660 but not over $8,880 $212 + 5% of excess over $6,660
Over $8,880 but not over $11,100 $323 + 6% of the excess over $8,880
Over $11,100 $456 + 7% of the excess over $11,100
The actual South Carolina income tax owed by individual investors in
any given year will vary depending on the financial situation and results of
operations of the Company and on the individual circumstances of the investor.
No opinion is given as to the actual South Carolina income tax consequences of
an investment in the Membership Units to any individual Member.
Special Provisions for Members Who are Not South Carolina Residents.
Pursuant to SC Code Section 12-8-590(C), the Company will withhold income taxes
at a rate of 5% of a non-resident Member's share of Company South Carolina
taxable income, whether distributed or undistributed. Amounts so withheld can be
used as credit against South Carolina taxes due when the non-resident Member
files his or her South Carolina income tax return. SC Code Section
12-6-4910(1)(d) generally requires non-resident Members to file a South Carolina
income tax return if they have South Carolina gross income.
Where to Get South Carolina Income Tax Return Forms. According to South
Carolina Department of Revenue ("SCDOR") publications, South Carolina income tax
forms may be obtained by written or oral request to the SCDOR at: South Carolina
Department of Revenue, Forms, Columbia, South Carolina 29214-0402, tel. (803)
898-5320. SCDOR publications also indicate that South Carolina income tax forms
can be downloaded from SCDOR's web site at: http://www.dor.state.sc.us.
Other State and Local Taxes. An investment in the Membership Units may
subject investors who are not South Carolina residents to taxes imposed by their
own state and local governments. While the Company does not, at this time,
intend to conduct business in any state other than South Carolina, the
II-19
<PAGE>
Company could acquire property or conduct business in other states in the
future, in which case investors might be subject to state and local taxes in
states other than South Carolina and their home states. No opinion is given as
to the state or local income tax consequences to any individual investor from an
investment in the Membership Units.
Tax Returns and Tax Information
The Company has indicated that it expects to provide each Member at
least annually with a Schedule K-1 (or such successor schedule or form as the
IRS may require) indicating that Member's allocable share of the Company's
profits and losses, which will list separately any partnership item that may be
subject to special rules. Each Member will then be required to report his or her
allocable share of these items on his or her individual return. The Company has
indicated that it does not intend to provide such tax information to anyone,
including an assignee of the distributional rights related to one or more
Membership Units, unless such person is actually admitted as a Member of the
Company.
The Company is required to file a federal partnership information
return even though it does not itself pay federal income tax. Such information
return may be audited by the IRS, and such audit may result in adjustments or
proposed adjustments. Any adjustment of the Company's partnership information
return normally will result in adjustments or proposed adjustments of Members'
returns. Any audit of a Member's return could result in adjustments of
non-partnership as well as partnership income and losses.
Alternative Minimum Tax
Pursuant to Code Section 55, alternative minimum tax is payable to the
extent that a taxpayer's alternative minimum tax exceeds his regular federal
income tax liability for the taxable year. Alternative minimum tax for
individual taxpayers is a percentage of "alternative minimum taxable income"
("AMTI") in excess of certain exemption amounts. The first $175,000 of AMTI in
excess of the exemption amount is taxed currently at 26%, and AMTI in excess of
$175,000 over the exemption amount is taxed currently at 28%. Alternative
minimum taxable income is generally computed by adding what are called "tax
preference items" to the taxpayer's regular taxable income, with certain
adjustments. While it is not anticipated that an investment in the Company will
give rise to any specific tax preference items, the amount of alternative
minimum tax imposed depends upon various factors unique to each particular
taxpayer. No opinion is expressed as to the possible application of the
alternative minimum tax to any individual investor in the Membership Units.
Anti-Abuse Rules
As noted above, partnerships as such are not liable for income taxes
imposed by the Code. In December 1994, however, the IRS adopted Regulation
Section 1.701-2 setting forth "anti-abuse" rules under the Code provisions
applicable to partnerships, which rules authorize the Commissioner of Internal
Revenue to recast transactions involving the use of partnerships either to
reflect the underlying economic arrangement or to prevent the use of a
partnership to circumvent the intended purpose of any provision of the Code.
These rules generally apply to all transactions relating to a partnership
occurring on or after May 12, 1994, and thus would be applicable to the
Company's activities. If any of the transactions entered into by the Company
were to be recharacterized under these rules, or the Company, itself, were to be
recast as a taxable entity under these rules, material adverse tax consequences
to all of the Members could occur. In this regard, the Company indicated that it
is not aware of any fact or circumstance which could cause the IRS to exercise
its authority under these rules to recast any of the transactions to be entered
into by the Company or to restructure the Company itself.
Aggregate Opinion
Subject to the assumptions and limitations set forth herein, it is our
opinion that it is more likely than not that, in the aggregate, substantially
more than half of the material tax benefits contemplated by the Prospectus, in
terms of their financial impact on a typical investor, will be realized by an
investor in the Company. We advise you further that the section of the
Prospectus entitled "Federal Income Tax
II-20
<PAGE>
Consequences" accurately reflects our opinion with respect to those matters
therein as to which an opinion is specifically attributed to us.
-----------------------------------------
The opinions contained herein are limited solely to matters governed by
the Code, the Regulations, and interpretations thereof by courts of competent
jurisdiction and to the provisions of the South Carolina Code expressly
mentioned by section number herein. This opinion is limited to the matters
expressly set forth herein, and no opinion is implied or may be inferred beyond
the matters expressly stated herein. This opinion is rendered as of the date of
this letter and applies only to the matters specifically covered by this
opinion, and we disclaim any continuing responsibility for matters occurring
after the date of this letter.
Except as noted below, this opinion is rendered solely for your benefit
in connection with the Registration Statement and may not be relied upon, quoted
or used by any other person or entity, other than purchasers of the Membership
Units, or for any other purpose without our prior written consent.
Consent is hereby given to the filing of this opinion as an exhibit to
the Registration Statement and to the references to our Firm under the caption
"Certain Federal Income Tax Consequences" in the Prospectus concerning this
opinion.
Very truly yours,
II-21
STATE OF SOUTH CAROLINA
MOUNT VINTAGE LINKS AT
MOUNT VINTAGE PLANTATION
AN 18 HOLE GOLF COURSE
COUNTY OF EDGEFIELD DESIGN CONTRACT
THIS AGREEMENT, made and entered into this 17th day of March, 1998, by
and between MV DEVELOPMENT COMPANY, LLC, hereinafter called Owners, and TOM
JACKSON, INC., Golf Course Architect, 126 Pebble Creek Drive, Taylors, South
Carolina 29687, hereinafter called Consultant.
W I T N E S S E T H:
THAT WHEREAS, the Owner plans to develop a certain tract of land in
Edgefield County adjacent to SC Highway 34, known as Mount Vintage Plantation;
and
WHEREAS, the Owner wishes to construct a golf course of eighteen (18)
holes, hereinafter referred to as Mount Vintage Links at Mount Vintage
Plantation; and
WHEREAS, the Consultant is willing to furnish his services in
connection with the design and planning of said golf course and the Owner
desires to engage the services of the Consultant for that purpose.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, it is understood and agreed by and between the parties as
follows:
A. SCOPE OF SERVICES.
1. The Consultant will act as agent for the Owner and will
coordinate all surveying, permitting and engineering services
for the project.
2. The Consultant will prepare a Conceptual Master Plan for the
project to include, but not limited to, an eighteen (18) hole
golf course with related amenities, the residential streets,
and all development parcels.
3. The Consultant will prepare a plan for staking the golf course
centerlines.
II-22
<PAGE>
4. The Consultant will walk the surveyed centerlines of the golf
course with the Owner to check for accuracy, and/or, if
necessary, the Consultant will make any field changes that may
be appropriate to improve the design of the golf course.
5. Upon approval of the centerline locations, the Consultant will
flag the clearing limit for the golf course construction.
6. The Consultant will assist the Project Engineers with the
preparation of the plans for the required permits to grade the
golf course.
7. The Consultant will prepare Irrigation Plans and
Specifications for the golf course, and will generally inspect
the installation work.
8. The Consultant will prepare bidding documents and
specifications for the construction of the golf course.
9. The Consultant will generally manage the construction of the
golf course as follows:
a. To act as agent for the Owner in all matters dealing
with the design and construction of the golf course.
b. To assist the Owner in negotiating with the various
contractors who will be performing the construction
work.
c. To provide field sketches for the construction of the
tees, traps and greens, fairways and other site
features.
d. To provide on-site visits during the construction.
These visits are to be on a bi-weekly basis or as
needed by the Contractor.
10. The Consultant will provide post-planning consultation to
insure the course is grown-off in accordance with his design
concepts.
11. The Consultant will provide pre-opening consultation to mark
traps and mow lines for tees, fairways and greens.
B. PLANNING, ENGINEERING AND SURVEYING.
1. As agent for the Owner, the Consultant will prepare a Request
for Proposals to including Planning, Engineering and Surveying
Services needed for permitting, design and construction of the
golf course and residential development.
II-23
<PAGE>
2. As agent, the Consultant will obtain quotes from three or more
qualified firms for these services and will submit a summary
of the quotes and an award recommendation to the Owner for
approval.
3. As agent, the Consultant will prepare a contract for these
services and will submit executed copies of said documents to
the Owner for acceptance.
4. Payments for Planning, Engineering and Surveying Services are
not included in the fees of the Consultant's Design Contract.
The Consultant will approve and submit monthly invoices to the
Owner for these services, who will make direct payment to the
firm providing the services.
C. COMPENSATION.
The Owner shall pay the Consultant One Hundred Ninety Thousand Dollars
($190,000.00) as compensation for the services to be performed as set forth
above. This compensation shall include all the expenses incurred by the
Consultant pursuant to the performances of his services.
D. PAYMENTS.
The Owner shall make payments for the Consultant's services at the time
and at the rates herein set froth. The Consultant will furnish monthly reports
to the Owner showing the percentage of work completed for items 1-4 below.
1. Upon acceptance of the centerlines and the completion of the
flagging for the fairway clearing, one payment of $15,000.00.
Completion of this phase is scheduled for March 15, 1998.
2. Upon completion of the schematic layout of the golf course
drainage, one payment of $5,000.00. Completion of this phase
is scheduled for April 1, 1998.
3. Upon completion of the drainage plan for the entire site by
the Owner's Engineers, one payment of $15,000.00. Completion
of this phase is scheduled for May 1, 1998.
4. Upon completion of the Irrigation Plans and Specifications,
one payment of $10,000.00. Completion of this phase is
scheduled for May 1, 1998.
5. The balance of $145,000.00 will be payable in ten (10) monthly
installments of $14,500.00 beginning on the date that
construction commences. The final monthly installment of the
unpaid balance, whichever is greater, will be due upon
completion of the grassing.
E. DEFAULT.
II-24
<PAGE>
1. If, for whatever reason, it becomes necessary to stop all work
on the project, the Owner shall notify the Consultant of such
action in writing. The Owner shall pay the Consultant for
services completed through the date of default, and the
Consultant's services will be suspended. The amount due the
Consultant will be based on the monthly reports submitted to
the Owner by the Consultant.
2. It is understood, however, that a temporary delay in work does
not necessarily mean that the Consultant's services are
terminated permanently. The Owner will honor the remaining
financial terms of this agreement if the Owner resumes
construction on the golf course.
F. ADVERTISING, MARKETING AND MEMBERSHIP.
The Owner hereby agrees to use the name of Tom Jackson, Inc., Golf
Course Architect, and Consultant agrees to allow his name to be used in
advertising and marketing materials that relate to the design of this facility.
Nothing herein shall limit Owner's ability to have other affiliations which may
also be used in advertising and marketing this facility.
IN TESTIMONY WHEREOF, the parties hereto have executed this AGREEMENT under the
seal the day and year first above written.
ATTEST:
WITNESS: _________________________ FOR: TOM JACKSON, INC.
/s/ Thomas R. Jackson, Jr.
----------------------------
Thomas R. Jackson, Jr.
----------------------------
President
WITNESS: /s/ Tyra B. Miller FOR: MV DEVELOPMENT COMPANY, LLC
---------------------------
/s/ Bettis Rainsford
----------------------------
Name
MEMBER
----------------------------
Title
II-25
Exhibit 10.2
Mount Vintage Plantation Golf Club, LLC
Post Office Box 706
Edgefield, South Carolina 29824
803-637-5304 (tele.)
803-637-6066 (fax)
July 2, 1998
Mr. Donald P. Howard
Highview Grainge
575 Vann Road
Trenton, South Carolina 29847
Dear Don:
This letter confirms our agreement with you with respect to your role
with Mount Vintage Plantation Golf Club, LLC in the development of a golf course
and related facilities within Mount Vintage Plantation.
We understand that your role will include the following duties:
1. to lead and oversee the conceptual development of the project;
2. to manage the architects, engineers, surveyors, and wetlands
experts;
3. to interface with all governmental authorities and procure all
necessary permits and approvals;
4. to oversee and secure the necessary financing for the project,
including raising a minimum of $2 million in equity from
investors;
5. to oversee and manage the construction of the golf course and
all associated improvements;
6. to oversee and manage the marketing of the golf course
project.
In connection therewith, we agree to pay you a fee of One Hundred
Thousand Dollars ($100,000.00), which fee shall be contingent upon the closing
of the financing on the golf course and shall be payable out of the proceeds
thereof.
II-26
<PAGE>
If this meets with your understanding, please sign on the line at the
foot of this letter and return it to me at your earliest opportunity.
Thanking you and with best wishes, I remain
Very truly yours,
/s/ Bettis C. Rainsford
Bettis C. Rainsford
Approved:
/s/ Donald P. Howard
- ---------------------------
Donald P. Howard
Date: July 2, 1998
-------------
II-27
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
MV Development Company, LLC, Manager
Mount Vintage Plantation Golf Club, LLC
We consent to incorporation by reference in the Registration Statement on Form
S-11 (the "Registration Statement") of Mount Vintage Plantation Golf Club, LLC
(the "Company") to be filed with the U.S. Securities and Exchange Commission of
our report dated June 4, 1998, relating to the balance sheet of the Company as
of June 4, 1998. We also consent to the reference to our name under the heading
"Experts" in the prospectus contained in the Registration Statement.
/s/ Serotta Maddocks Evans & Co.
Serotta Maddocks Evans & Co., CPAs
Augusta, Georgia
July 10, 1998
II-28
Exhibit 23.3
REAL ESTATE APPRAISERS' CONSENT
MV Development Company, LLC, Manager
Mount Vintage Plantation Golf Club, LLC
We hereby consent to the inclusion of our appraisal of various tracts
of unimproved land, totaling 237.72 acres, south of Edgefield and north of North
Augusta in Edgefield County, South Carolina as an exhibit to the Registration
Statement on Form S-11 (the "Registration Statement") of Mount Vintage
Plantation Golf Club, LLC, to be filed with the U.S. Securities and Exchange
Commission. We also consent to the reference to our name under the heading
"Experts" in the prospectus contained in the Registration Statement.
/s/ J. Marshall Vann, SRA
--------------------------------
SHERMAN & HEMSTREET, INC.
Augusta, Georgia
July 8, 1998
II-29
A COMPLETE SUMMARY APPRAISAL REPORT
OF VARIOUS TRACTS OF UNDEVELOPED LAND
TOTALING 237.72 ACRES
Located
SOUTH OF EDGEFIELD AND NORTH OF NORTH AUGUSTA
EDGEFIELD COUNTY, SOUTH CAROLINA
FOR
Mount Vintage Plantation Golf Club, LLC.
PO Box 706
Edgefield, SC 29824
PREPARED BY
J. Marshall Vann, SRA
Sherman & Hemstreet, Inc.
123 Eighth Street
Augusta, Ga., 30901
DATE OF VALUATION:
June 16, 1998
DATE OF INSPECTION
June 16, 1998
PREPARED ON:
June 25, 1998
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<PAGE>
Mr. Bettis C. Rainsford June 25, 1998
Mount Vintage Plantation Golf Club, LLC
PO Box 706
Edgefield, SC 29824
Re: A Complete Summary Appraisal Report of Various Tracts of Undeveloped Land
Located south of Edgefield and north of North Augusta and identified as
A portion of Mount Vintage Plantation Edgefield County, South Carolina
Dear Mr. Rainsford:
At your request, I have inspected and prepared a complete summary appraisal
report of various tracts of unimproved land south of Edgefield and north of
North Augusta in Edgefield County, South Carolina. I have personally made an
inspection and the necessary investigative analysis to determine the market
value of the fee simple interest in the aforementioned property on June 16,
1998, which was the date of the initial inspection.
The accompanying report describes the sales comparison approach to value and the
conclusions derived by application of the approach. Please note the assumptions
and limiting conditions included in the addenda to the report. This appraisal is
made subject to these assumptions and limiting conditions.
Based upon my investigation and analysis of the data gathered with respect to
this assignment, I have formed the opinion that the market value of the fee
simple interest in the subject property, subject to encumbrances stated herein,
on June 16, 1998 was:
Allocated as follows:
Improvements: N/A
Land: 237.72 Acres @ $4,000 per acre $950,000 (Rounded)
NINE HUNDRED AND FIFTY THOUSAND DOLLARS
($950,000)
Supporting data are contained in the attached report. Thank you for the
opportunity of preparing this report. Please call me at (706)722-8334 if you
have any questions or if you wish to discuss the report.
Respectfully submitted,
/s/ J. Marshall Vann, SRA
------------------------------
J. Marshall Vann, SRA, CG410
Cert. General R. E. Appraiser
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
----
Photograph of Subject Property.................................................1
Summary of Important Facts and Conclusions.....................................4
Purpose of Appraisal...........................................................5
Scope of Appraisal.............................................................5
Sales History of the Property..................................................7
Definition of Market Value.....................................................9
Definition of Fee Simple Estate............................................... 9
Regional & City Summary ......................................................10
Neighborhood Analysis.........................................................10
Description of the Site.......................................................12
Zoning and Land Use Plan......................................................15
Assessment and Tax Data.......................................................15
Site Data.....................................................................17
Description of the Improvements...............................................17
Highest and Best Use Analysis.................................................19
The Appraisal Process.........................................................24
Comparable Land Sales.........................................................26
Sales Comparison Grid ........................................................33
Sales Comparison Grid Analysis................................................34
Reconciliation and Conclusion of Value .......................................36
Certification.................................................................38
Statement of Limiting Conditions..............................................39
Qualifications of J. Marshall Vann............................................41
</TABLE>
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PHOTOGRAPHS OF THE SUBJECT PROPERTY
[PHOTO APPEARS HERE]
Entrance to Mount Vintage Plantation
Facing East
[PHOTO APPEARS HERE]
View Of Proposed Clubhouse Site
Taken by J. Marshall Vann, SRA on June 29, 1998
Facing North
1
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PHOTOGRAPHS OF THE SUBJECT PROPERTY
[PHOTO APPEARS HERE]
View of Holes #4 and #5 Across Power Line Easement
Facing in a Southwesterly Direction
[PHOTO APPEARS HERE]
View of #1 Green, Facing Southwest
Taken by J. Marshall Vann, Facing East on June 29, 1998
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PHOTOGRAPHS OF THE SUBJECT PROPERTY
[PHOTO APPEARS HERE]
Street View From Entrance on Sweetwater Road
Facing in a Northerly Direction
[PHOTO APPEARS HERE]
Street View From on Sweetwater Road, Facing South
Taken by J. Marshall Vann on June 29, 1998
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Property Type: Various Tracts of Unimproved Land
Location of Property: West of Road #S-19-34 or Sweetwater Road
within the parameters of Mount Vintage
Plantation, south of Edgefield and north of
North Augusta, SC
Owner of Record: Mount Vintage Property Company, Incorporated
Previous Owner/Developer: Assemblage of property from various owners
Date of Value: June 16, 1998
Date of Inspection: June 16, 1998
Date of Report: June 25, 1998
Property Rights Appraised: 100% Fee Simple Interest
Purpose of the Appraisal: To estimate the fee simple market value of
various tracts of unimproved land for the
special use as a golf course via a complete
summary appraisal report.
Site Size/Area: 237.72 total acres of partially wooded land
of which 15.7 acres is existing or proposed
ponds and approximately 4.0 acres is
wetlands.
Edgefield County Identification: Mount Vintage Plantation
Improvements: None other than the partially wooded area,
the pond and the wetland areas that were
mentioned above. The sales used in this
report were partially wooded tracts of which
some were improved with ponds as described
in the description of the property. This
appraiser is not qualified to perform timber
cruises. The adjustments were explained
following the grid found in the sales
comparison/market approach to value.
Utilities to the subject are well and septic
tank at this time.
Zoning: N/A; Edgefield County
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SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Highest and Best Use Typical Use: Single Family Residential Development
As if Vacant: Special Use: For Golf Course to Encourage
Residential Development
Highest and Best Use
As Improved: N/A
Conclusion of Value: Value of 237.72 Acres @ $4,000 per acre
$950,000 (100% Interest)
PURPOSE & USE OF THE APPRAISAL
The purpose and use of the appraisal is to analyze all pertinent
factors in order to estimate the fee simple market value of the various parcels
of undeveloped land to be used for a golf course. The property is a portion of
Mount Vintage Plantation in Edgefield County, South Carolina. The appraised
value is as of June 16, 1998 which is the initial date of inspection. The values
derived by this appraisal will be used in a prospectus for potential investors
in this golf course development. The development is an assemblage of property,
which began in 1992 and will be discussed in the History of the Property section
of this report. A complete summary appraisal report will be prepared for Mt.
Vintage Plantation Golf Club, LLC. To my knowledge the property is not listed
for sale nor is there a contract to purchase the property as of the date of the
appraisal or the date of this report.
The appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan.
SCOPE OF THE APPRAISAL
SCOPE OF THE APPRAISAL
It is the intent of this report to be a complete summary appraisal
report of the stated interest in the subject real estate. As such, it reports
only summary discussions of the data, reasoning, and analyses that were used in
the appraisal process to develop the appraiser's opinion of value. The process
of gathering data and arriving at a value estimate is the same in a complete
summary appraisal report as in a self contained report; however more of the
supporting data are retained in the appraiser's file for this appraisal. It is
the appraiser's belief
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SCOPE OF THE APPRAISAL
that the report meets all of the requirements set forth under Standards Rule 2-2
(b) for a complete summary appraisal report as prescribed by: (1) the "Uniform
Standards of Professional Appraisal Practice" as promulgated by the Appraisal
Foundation, and (2) the regulations of the Appraisal Board of the State of South
Carolina. The depth of discussion contained in this report is specific to the
needs of the client. The appraiser is not responsible for unauthorized use of
this report.
The real estate is various tracts of land located south of Edgefield
and north of North Augusta, Edgefield County, South Carolina in a mixed land use
area of residential homes, timberland, row crop and some industrial use land.
There are special use properties nearby that include churches and schools.
The property consists of 237.72 acres of special use property intended
for golf course development. Included in this acreage are 15.7 acres of proposed
pond and approximately 4.0 acres of wetlands. The primary access to the
development is off the east side of Sweetwater Road also known as Road S-19-34.
The cut through road off of Sweetwater Road is Mount Vintage Plantation Drive.
The site is best visualized on the plats that were provided to perform an
appraisal of the golf course property.
Although limited, enough data is available in the local market to reach
a supportable value conclusion by the employment of standard appraisal
techniques. A value estimate was arrived at by the use of a sales
comparison/market approach to value. The cost approach is not appropriate
because the only improvements included in the appraised value are part of the
real estate or items of real property such as timber, ponds, and wetland areas.
The income approach to value is not a typical method to determine a value for
the subject due to inadequate rental data on leased land in the neighborhood.
All reasonable efforts were made to collect, confirm and analyze data
available from the Edgefield and Aiken Counties, SC market area, which would
assist in the preparation of this report. The appraiser subscribes to a
reporting service that provides deed data for all recorded sales in Edgefield
and Aiken Counties in South Carolina, which are the principal urban counties
that would be comparable to the subject neighborhood. A five-year summary of
commercial
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SCOPE OF THE APPRAISAL
property sales in these counties is maintained and consulted on each appraisal.
In addition, tax office sales data are routinely inspected and consultations
held on a continuing basis with local brokers and developers active in the
commercial real estate market.
Data selected as germane to this appraisal assignment are further
investigated, confirmed by a party to the transaction if possible, analyzed and
discussed in the report. Other market area data, trends and conditions form
background information for the interpretation of the data employed in the
appraisal.
The appraiser has not made a formal title search or survey. Title data
on the description of the property and any encumbrances were obtained from the
records obtained from Mr. Rainsford's office and from the pubic records at the
Edgefield County Courthouse.
SALES HISTORY OF THE SUBJECT PROPERTY
Mount Vintage Property Company Incorporated as shown in the Edgefield
County Tax Assessors Office currently owns the 237.72 acres that are the subject
of this report. As of the date of my inspection and after obtaining the owners
records, Mount Vintage Plantation is an assemblage of property from 10 different
property owners and the total 4,078.67 acres of which 163.08 acres are owned by
Mount Vintage Development Company, LLC. Mount Vintage Property Co., Inc owns
3,915.59 acres and the subject of this report is a portion of the development.
The assemblage of property occurred from May of 1992 until January of 1995.
The subject is a 237.72-acre tract of land intended specifically for
golf course use. The surrounding property is subdivided on the site plan,
however all roads have not been cut as of the inspection date. The property is
currently being developed in phases. 13 lots have been sold and 1 lot is under
contract as of June 25, 1998. The first lot was sold on July 20, 1995. The sales
history is as follows:
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SALES HISTORY OF THE SUBJECT PROPERTY
<TABLE>
<CAPTION>
<S> <C>
Grantee Lot # DB & Pg Date Size/Acr Sales $ $ Per Acr View
- -------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------
Mooney 25 483/260 07/20/95 2.27 $22,900 $10,088 Wds/Crnr
Lewis 25 567/246 12/05/97 2.27 $28,000 $12,345 Resale
Haas 27 484/283 07/27/95 10.57 $70,000 $6,623 Pond
Talbert 24 494/218 10/31/95 2.20 $21,900 $9,955 Woods
Lewis 3 497/053 12/01/95 3.51 $35,000 $9,972 Creek
Boone 8 523/093 08/15/96 3.62 $35,000 $9,669 Pond
Patton 5 (Estate) 525/032 08/30/96 10.20 $85,000 $8,333 Pond
Lechene 12 525/256 09/20/96 2.53 $30,433 $12,029 Pond
McDaniel 28 518/035 01/27/97 2.05 $25,000 $12,195 Woods
Ashcraft 4 575/162 02/11/98 6.66 $57,900 $8,694 Pond
Stevens 5 577/105 02/20/98 4.67 $48,900 $10,471 Pond
Hadden 10 577/152 02/25/98 3.26 $39,900 $12,239 Pond
Harrison 13 580/118 03/13/98 2.45 $34,900 $14,245 Pond
Durden 14 588/289 05/21/98 3.07 $42,900 $13,974 Pond
Unknown 20 N/A Pending 4.10 $35,900 $8,756 Creek
- -------------- -------------- ------------- ------------- ------------- -------------- ------------- -------------
</TABLE>
For the purposes of this report, the subject is a 237.72-acre portion
of the 4,000-acre development. The site plan shows actual topography and
acreage's that were used to appraise the golf course property.
Because of the size and shape of the subject parcel, the property is
situated on more than one tax map in the Edgefield County Tax Assessors Office
and will not be delineated in this report. The site plan of this parcel was
provided and is assumed to be correct.
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MARKET VALUE
"The most probable price which a property should bring in a competitive
and open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is not
affected by undue stimulus. Implicit in this definition is the consummation of a
sale as of a specified date and passing the title from seller to buyer under
conditions whereby:
1. buyer and seller are typically motivated
2. both parties are well informed or well advised, and acting in what they
consider their best interests;
3. a reasonable time is allowed for exposure in the open market
4. payment is made in terms of cash in United States dollars or in terms of
financial arrangements comparable thereto; and
5. the price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions granted
by anyone associated with the sale. (Source: Uniform Standards of
Professional Appraisal Practice, 1998, Page 163).
DEFINITION OF FEE SIMPLE ESTATE
"Absolute ownership unencumbered by any other interest or estate,
subject only to the limitations imposed by the governmental powers of
taxation, eminent domain, police power, and escheat."(Source: The Appraisal
of Real Estate, Eleventh Edition, Appraisal Institute, l996, Pg. l37).
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SUMMARY OF REGIONAL AND CITY DATA
Regional & City Data is an essential part of the appraisal process. By
using the four forces, it is this appraiser's conclusion that all four
forces affect the subject property in a positive manner.
The environmental forces reflect a favorable geographical location with
a mild climate. There is adequate access by major highways with ample
education, medical facilities, shopping, churches, housing, and industry.
The economic forces reflect a continuing growth of industry and new
businesses, which bring in additional people who need housing. As shown by
statistics, per capita income has been rising, household income is rising,
and industrial payrolls are rising, therefore, a continuing need for
residential single-family housing.
Social forces which include population growth and unemployment rates
are all evidence that Aiken is a growing community with an unemployment rate
very near the state and national level even with cutbacks at the Savannah
River Site.
Government forces indicate that Edgefield County has stable
governmental forces that thrive for a growing community and a prosperous
future. The four forces support the conclusion that the subject is in a
favorable location with favorable probabilities that the subject property
would sell at a reasonable price within a reasonable time frame if it were
placed on the open market.
NEIGHBORHOOD ANALYSIS
The property valued in this report is located in an outlying area of
Edgefield County. The area is gradually being developed with residential homes
and a wide range of home sizes and values are noted. The subject is a portion of
a 4,000-acre development known as Mount Vintage Plantation. Access to the
property is off the east side, northbound lane of Sweetwater Road or Road #
S-19-34. The property is located 10 miles south of Edgefield, 13 miles north of
Augusta and approximately 16 miles west of Aiken.
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NEIGHBORHOOD ANALYSIS
The neighborhood is comprised of a wide range of residential home sites,
farms, other special use properties and large timber tracts. Commercial activity
in the immediate area will consist of agricultural related businesses such as
strawberry farms, livestock, pastures and timber harvest.
State Highway #230 or Martintown Road bound the subject neighborhood on
the west. It is south of Edgefield or State Road #23 and US Highway #25 and #121
bound the neighborhood on the east. Interstate 20 is south of the property about
12 miles.
The neighborhood is a mixed-use area comprised of residential home sites,
farms, and large timber tracts. Commercial activity on a broader scope is mainly
industrial and located along US Hwy. #25, closer to Interstate 20. Recent
industrial development in the area is the new Menardi-Criswell filter plant and
Southern Felt Incorporated has also completed construction of a yarn
manufacturing plant across Maxwell Drive from Menardi-Chriswell. The Market
Place is a recently completed shopping center with Winn Dixie as the anchor
tenant.
This section of Edgefield County has seen increasing population due to the
availability of reasonable commercial and residential land values in addition to
its location to all necessary everyday conveniences such as restaurants, retail
and grocery shopping, banking, schools, and recreational activities. The
majority of conveniences are located south in North Augusta and west in Augusta,
Georgia. The area has seen several newer subdivisions developed and several
larger tracts of land being purchased for the purpose of selling the timber.
Recent residential ventures include the subject of this report (a golf course)
and an equestrian facility being developed for the purpose of training riders,
boarding horses and fox hunting. The estimated 4,000 acres of land purchased for
residential/equestrian development is identified as Mount Vintage Plantation.
Some of the more exclusive neighborhoods include The Oaks S/D off of Gregory
Lake Road and Savannah Barony, which has homes fronting on the Savannah River.
Mid range value subdivisions that have been developed include Bergen Place,
Walnut Grove, Walnut Place, and Butlers Mill.
At this point it should be noted that there have been some higher than
expected land sales to occur in the immediate area due to the voting out of the
video poker amusement facilities in Aiken County. Soon after the video poker was
voted against in Aiken County, there were a number of land
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NEIGHBORHOOD ANALYSIS
sales just inside Edgefield County that were for the purpose of constructing the
video poker amusement facilities. Some of the smaller establishments are up for
sale after only a short opening time frame.
The availability of utilities is average and by way of well and septic
tanks which is considered common for the area. Access to necessary conveniences
is considered average from this site. Increasing population, residential
development, and recreational activities in this area all lead to a positive
analysis and continued growth for the subject neighborhood. There is a
continuing effort being made at all levels to continue the economic growth and
development of commercial and residential properties in this neighborhood.
There are various homes near the subject and outside of the Mount Vintage
Plantation that includes older frame homes, mobile and modular homes, homes on
large tracts of land and some newly built homes. A wide range of housing size
and values is common for rural areas such as this. The neighborhood is 25%
built-up and is approximately 75% agricultural and timber use property. The
homes in Mount Vintage Plantation are subject to restrictive covenants and
minimum size homes and price ranges are required to insure conformity.
SITE DESCRIPTION AND ANALYSIS
The subject property consists of various tracts of land in the same
vicinity that link together and form an 18-hole golf course layout. The total
acreage is 237.72 acres and is separated into seven tracts that range from 16.04
acres to 78.39 acres as shown in the site plan provided by Tom Jackson,
Incorporated, Golf Course Design and Land Planning.
For the purpose of this report the intended use will be specific for a
golf course and should be treated as one tract of land. The appraised value
includes the timber and the proposed water influence, however it should be noted
that this appraiser is not a qualified timber cruiser. The comparable sales were
all wooded tracts that were purchased for residential development and some had a
water influence. Minimal adjustments were required in this section of the report
because the sales used in this report were purchased for their development
potential and not the
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SITE ANALYSIS
timber value or water influence. The subject property was inspected by this
appraiser and the site plan shows a total of 237.72 acres broken down as
follows:
<TABLE>
<S> <C>
TRACT #1) 16.64 Acres
TRACT #2) 41.25 Acres
TRACT #3) 16.80 Acres
TRACT #4) 13.37 Acres
TRACT #5) 42.95 Acres
TRACT #6) 78.39 Acres
TRACT #7) 28.32 Acres
-----------
Total Golf Course is 237.72 Acres
</TABLE>
For the purpose of this report, the appraised value for the golf course
land will include 237.72 acres of which three proposed ponds on site will be 7.8
acres, 4.7 acres and 3.2 acres or 15.7 acres total. According to the engineer
who performed the survey there is about 4 acres included in the wetland area.
This area will be incorporated into the golf course and no adverse values should
be recognized because of the restricted use of wetlands.
The topography appears to have adequate drainage because of the rolling
terrain and various wooded areas throughout Mount Vintage Plantation. The main
access to the property is off of Sweetwater Road or S-19-34, which is a
north-south county maintained paved road that runs along the western edge of the
development. Mount Vintage Plantation Drive intersects the development and is a
cut through road to various phases of the development and leads to the proposed
clubhouse. The site is about ten miles south of Edgefield, thirteen miles north
of Augusta and sixteen miles west of Aiken. The site is best identified as Mount
Vintage Plantation.
From my inspection of the most recent FEMA 100-year flood maps and
conversation with the engineers, only a very small portion, if any, of the golf
course will be affected by the 100-year flood plain. Qualified surveyors would
be able to determine a precise location of the
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SITE ANALYSIS
100-year flood plain areas in relation to the subject property. The subject may
be found on the Unincorporated Areas of Edgefield County Flood Hazard Boundary
Map #450229-0001 A in Zone C. The flood map is dated January 20, 1978.
The appraised value assumes no hazardous or adverse environmental
conditions are associated with any part of this site. A visual inspection did
not reveal any evidence of obvious potential environmental hazards such as
underground storage tanks, storage containers, and evidence of waste disposal.
The property does not appear to have been used in any business that would be
expected to produce such hazards. The appraiser is not aware of any formal
environmental study having been conducted by a qualified investigator. This
appraiser is not qualified to make a determination and any interested parties
should take such steps as are necessary to satisfy their requirements concerning
the possible presence of such material.
The subject is currently in an unincorporated area in Edgefield County,
South Carolina. There are no particular zoning designations or districts in this
area at the present time. Edgefield County currently has a Commercial and
Industrial Land Development Plan for unincorporated areas similar to the
subject. The usage for the surrounding property is residential and the
developers have established restrictive covenants in Mount Vintage Plantation to
insure conformity.
Electricity is the only public utility available for the property at
this time. Each property owner is responsible for sewage disposal by means of
septic tank and water being obtained by well. Access to the developed lots and
golf course will be by means of paved county maintained roadways. It should be
noted that Mount Vintage Plantation Drive is the only county maintained road in
the development and the developers have not deeded the other roads to the County
at this time.
From a functional adequacy standpoint, the intended use as a golf
course is good and the design and layout are adequate for its intended use.
There is no competition in the immediate area from another golf course. There is
good frontage and access to the property from major arteries of Edgefield
County. The location in Edgefield County in comparison to neighboring and
competitive parcels is good.
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ZONING AND LAND USE PLAN
The subject is currently in an unincorporated area in Edgefield County,
South Carolina. There are no particular zoning designations or districts in this
area at the present time. Edgefield County currently has a Commercial and
Industrial Land Development Plan for unincorporated commercial areas. Commercial
as well as residential development use may require an approved site plan by the
Edgefield County Planning and Development Board. The above information was
obtained from the Edgefield County Land Use Ordinance Manual and from
conversation with Mr. Henry Coleman and Mr. Jack Jenkins from the Edgefield
County Planning Commission.
The subject is an existing subdivision and has been approved for
residential use by the Edgefield County authorities. The owners of the
development have also set up restrictive covenants to insure conformity. The
appraised value assumes that the proper authorities of the Planning and
Development Board will approve the specific use as a golf course.
PROPERTY ASSESSMENT AND TAX DATA
The subject is an irregular shaped 237.72-acre tract of land separated
by Mount Vintage Plantation Drive. The property is identified in the Edgefield
County Tax Assessors Office on various tax maps. The land use for the larger
tracts according to the tax assessor's office is for agricultural use and taxed
as such. After conversation with authorities at the tax assessor's office, they
value the larger tracts at approximately $800 per acre. They are being taxed on
a vacant land valuation.
The property and improvements are subject to compliance with taxation
under the auspices of Edgefield County. After reviewing the assessed taxes being
levied on the property, it appears the taxes being paid are within the range of
taxes assessed for comparable use properties in the neighborhood.
The 1997 mill rate in Edgefield County is 263.0 for unincorporated
areas and 256.0 for incorporated areas. The municipality mill rate for each town
is added to the incorporated mill rate for total tax evaluations to be
performed. Different municipality mill rates are applicable for those properties
located in the Towns of Edgefield, Johnston and Trenton. The county mill rate
for properties in the town is 256.0 plus the municipality mill rate of 88 for
Edgefield, 85 for Johnston and 64.7 for Trenton. The current assessment ratio
for vacant land and commercial properties is 6%, the ratio for industrial
property is 10.5% and the ratio for improved residential land is 4%.
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PROPERTY ASSESSMENT AND TAX DATA
Like most South Carolina communities, the annual budget for Edgefield
County tends to increase gradually with time. The County mill rates decreased in
1996, however gradual increases in taxes will be required because of the newly
constructed and renovated schools in 1995 and 1996 in addition to increases in
the county budget. Considering the location of the improvements and the overall
trend in Edgefield County, the taxes due and payable on the subject will
increase gradually over time.
At present, the assessor's office has the ownership of the subject in
the name of Mount Vintage Property Company, Inc. The unimproved property in the
area is valued for agricultural use at or near $800.00 per acre, which is
significantly lower than the fair market value. The taxes being paid on the
subject should increase significantly after the golf course is developed.
The current assessment ratio for similar agricultural property in
Edgefield County is 6%; the l997 unincorporated mill rate is 263. The 1997 taxes
for the subject before penalties or assessment will be based on the Edgefield
County appraised value of 237.72 acres @ $800.00 per acre or $190,176 and are
calculated as follows:
<TABLE>
<S> <C>
Appraised Value x Assessment Ratio = Assessed Value
$190,176 x .060 = $11,410.56
Assessed Value x County Millage + City Millage = Total Taxes
$11,410.56 x .26300 + N/A = $3,000.98
</TABLE>
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SITE DATA
As of the inspection date, the subject property is vacant land with no
known on-site improvements of significant value other than real property
improvements.
<TABLE>
<S> <C>
Physical Characteristics:
Total Area: 237.72 acres+/-
On site improvements: None included in the appraised value
Topography: Rolling terrain
View: Neighboring residential home sites
Soil: Sand/Clay
Utilities: Well & Septic Tank
Power line and gas line easements are incorporated into the development and do
not adversely affect the value of the property.
Mineral Deposits: None known of any commercial value
Environmental Hazards: None known
Flood Zone: No; Flood Map 450229-0001 A.
Zone C; January 20, l978.
Functional Adequacy: Good
</TABLE>
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RELATIONSHIP OF SITE TO SURROUNDINGS
The parcel of land is for a specific use as a golf course as previously
described and shown on the site plan. The tract will be analyzed as one large
tract of land and compared to the most comparable subdivision sales that this
appraiser was able to find and verify data on.
The subject is a special use property that is intended to be a golf
course. Because of the layout and design of this tract, the primary highest and
best use for the subject is for golf course development. It is the opinion of
this appraiser that a secondary highest and best use would be for additional
lots to the subdivided and sold. The golf course supports the highest and best
use theory because it will enhance sales activity around the site for those
people interested in building homes on a golf course lot.
The subject was compared to property purchased for residential
development because there were no sites of this size that were purchased for the
specific use as a golf course. The subject is compatible to the surrounding area
and enhances the value of the adjacent properties. With proper management, a
golf course use will continue to be the highest and best use of this unimproved
property in the future. The marketability of these parcels is expected to be
good when evaluating the current developments near the subject property. Modest
interest rates paired with a good location and private restrictions should
enhance the marketability of this property especially for those people looking
for an outlying area with several types of recreational facilities available to
include equestrian facilities such as horse training, riding and fox hunting and
golf.
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HIGHEST AND BEST USE ANALYSIS
The Appraisal of Real Estate, Eleventh Edition, page 297 defines
highest and best use as, "The reasonably probable and legal use of vacant land
or an improved property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value." Four criteria that
the highest and best use must meet are legal permissibility, physical
possibility, financial feasibility, and maximum profitability.
Highest and best use as though vacant "assumes a parcel of land is
vacant or can be made vacant through demolition of any improvements."
Highest and best use of property as improved pertains to "the use that
should be made of an improved property in light of its improvements."
This section of the report will discuss in detail the highest and best
use as if vacant and as improved, using the four tests of legal permissibility,
physical possibility, financial feasibility, and maximum profitability.
1. Legally permissible may be stated as permitted uses by zoning,
land use and deed restrictions on the site in question.
2. Physically possible concerns the size, shape, area, and terrain of
the site in question and whether or not the improvement can be
built on this site.
3. Financially feasible concerns the physically possible and legally
permissible uses, which will produce a positive net, return to the
owner of the site.
4. Maximum profitability concludes that among the feasible uses
stated above, which use will produce the greatest net return to
the owner of the site.
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HIGHEST AND BEST USE ANALYSIS
Highest & Best Use of the Site as Though Vacant
Legally Permissible: In looking at the property as though vacant, the
first test of legal permissible use was analyzed. The subject parcel is located
in an unincorporated area of Edgefield County where zoning restrictions are not
enforced at this time. If any portion of the property would be developed into a
subdivision or some type of commercial development, a site plan would have to be
approved by The Edgefield County Planning Board. At the present time there are
no restrictions on this tract regarding specific zoning regulations, therefore
many different uses for the tract would be acceptable. Legally permitted uses
may consist of special use or subdivision development since the surrounding
property is being developed as single-family residential use.
Physically Possible: The subject site consists of several tracts of
undeveloped land at this time. The intended use of the subject tract is for golf
course development. An alternate use that is physically possible is for
subdivision development. The site plan that was provided is a golf course design
and according to the engineers, is physically possible based on the slope and
shape of the surrounding topography. The 18-hole golf course will run throughout
this phase of Mount Vintage Plantation and will include approximately 16 acres
of water in 3 separate ponds. Approximately 4 acres of the property is
considered to be wetlands and there is little or no part of this property
situated in the 100-year flood plain area. It is physically possible to use the
land for golf course development or residential subdivision development.
There is adequate access with all the necessary conveniences relating
to shopping, areas of employment, schools, churches, and recreational
facilities. No adverse easements or encroachments were noted during my physical
inspection of the property and the site plan. It is presumed that adequate soil
conditions exist for full development and that drainage is adequate. Utilities
are adequate because well and septic tanks are common for property owners in
this
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<PAGE>
HIGHEST AND BEST USE ANALYSIS
area. Based on the physical characteristics of the land subdivision development
or special use as a golf course would be physically possible.
Financially Feasible: After determining what uses are physically
possible and legally permissible, those uses expected to produce a positive net
return are regarded as financially feasible. Adequate positive net income or
rate of return would indicate that a use is financially feasible. It must be
demonstrated that the proposed usage is in demand and that a sufficient level of
market need exists. After analyzing the competing property in the area and the
current economic situation at hand, there is sufficient land surrounding the
subject that is being used for residential development. It should be realized
that there would be a certain degree of risk regarding the financial feasibility
of a golf course in this area of Edgefield County. The three closest courses are
Pine Ridge Country Club, situated between Edgefield and Johnston, North Augusta
Country Club located on the north side of Gregory Lake Road and the new River
Course in North Augusta that borders the Savannah River. Continued development
of vacant land for a combination of golf course and residential use in this area
is an indication of financial feasibility. The interest rates and unemployment
rates are low which is an indicator of a strong economy.
The subject is a new residential subdivision that already provides an
equestrian facility for the boarding of horses, training riders and fox hunting.
The subdivision is being developed in phases at this time. Several of the lots
have sold since the first phase was opened. Because of the residential lots that
are already subdivided, the remaining land should be used for golf course
development. It is the opinion of this appraiser that the golf course
development would increase the sales activity of vacant lots in this
subdivision.
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<PAGE>
HIGHEST AND BEST USE ANALYSIS
Maximally Productive: Of the uses that are legally permissible,
physically possible, and financially feasible, the use that would provide the
highest rate of return, or value is considered to be the highest and best use of
the subject site as though vacant. After stating that a golf course development
would enhance the sales activity of vacant lots, then it is reasonable to
conclude that the maximally productive use of this property is for golf course
development.
Through research of the Edgefield and Aiken County records at the Tax
Assessors and RMC Office, there have been several tracts of land purchased for
residential development within the last few years. These large tracts were
purchased for subdivision development. There are no comparable sales in this
market area that were purchased for the specific use as a golf course only. The
most comparable tracts of land will be discussed in the following section and
comparisons will be made on a per acre basis. An appraised value for the subject
with 237.72 acres will then be determined.
In conclusion, the highest and best use for the subject property is to
develop the property for golf course use in order to sell single family
residential home sites. The most comparable sites of this nature were sold to
developers for residential development. The subject will be compared to
subdivision sales in Aiken and Edgefield Counties.
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<PAGE>
HIGHEST AND BEST USE ANALYSIS
Highest & Best Use of the Property as Improved:
Any determination of highest and best use includes identifying the
motivation of probable purchasers. The benefits of a residential neighborhood
like the subject property make it possible to maximize a potential net income by
the resale of developed lots. Again, the site as improved, must meet the four
criteria:
l. Is it legally permissible.
2. Is it physically possible.
3. Is it financially feasible.
4. Is it maximally productive.
For the purpose of this report the highest and best use as improved is
not applicable to vacant land. There are no known developed lots, improvements,
or proposed improvements on this site at the present time.
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<PAGE>
THE APPRAISAL PROCESS
"The Appraisal of Real Estate," prepared by the Textbook Revision
Sub-Committee of the American Institute of Real Estate Appraisers, states that
"value is a problem solving process in which the influence of sociological,
economic, governmental, and physical forces are analyzed in relation to a real
property. The finished product provides the basis for a decision relating to the
property being appraised."
In the appraisal process, three approaches to value are generally used:
The Cost Approach, the Sales Comparison Approach, and the Income Approach.
The subject property is a vacant tract of land whereby the cost and
income approaches are not applicable. The Sales Comparison Approach is the most
reliable way to determine the fee simple market value. In applying the Sales
Comparison Approach, the appraiser does the following:
1.Seeks similar properties for which pertinent sales, listings,
offerings, and/or rental data are available
2.Ascertains the conditions of sale, including the price, motivating
forces, and its bona fide nature.
3.Analyzes each of the comparable properties' important attributes in
relation to the corresponding attributes of the property being
appraised under the general divisions of time, location, physical
characteristics, and terms of sale.
4.Considers the dissimilarities in the characteristics disclosed in
Step 3, in terms of their probable effect on the sales price.
5.Formulates, in the light of the comparisons made, an opinion of the
relative value of the property being appraised.
The key to the Sales Comparison Approach is the quantity and quality of
the comparable sales. Are there enough of them and are they similar to the
subject? Adjustments must be made and the degree of variation between the
comparables and the subject many times is the key to the estimate via the market
approach. The sales comparison approach is considered extremely significant
because it is an expression of the value established by action of buyers and
sellers in the market. It will be the only approach used in this report to
determine the fee simple market value. A map showing the proximity of the
comparable sales to the subject follows.
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<PAGE>
Map
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 1 TAX MAP & PARCEL # pt 00-182-0l-020
------- -----------------
GRANTOR Evans, McNeill, Kendall, & Associates DATE June 23,1989
----------------------------------------------------- --------------
GRANTEE Johnny Hendrix, d.b.a. Vale Development Corp.
-------------------------------------------------
SIZE 304.65 acres DEED BOOK 1106 PAGE 104 & 112
---------------------------------------- ------ ----------
PRICE $1,220,000 PLAT BOOK PAGE
--------------------------------------- ----- ----------
LOCATION Old Dibble Road, Current site of The Vale Phase I
-----------------------------------------------------------------------
SITE IMPROVEMENTS Private water system and septic tanks
--------------------------------------------------------------
DESCRIPTION/REMARKS
This property is in an outlying area in Aiken County where equestrian
activity is encouraged. The topography is rolling terrain and a pond is situated
on a portion of this development. There is good frontage and access from Old
Dibble Road
Z0NING N/A, Aiken County UNIT PRICE $4,004/Acre
------------------- -------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 2 TAX MAP & PARCEL # Pt.00-136-01-004
GRANTOR Woodside Development Co. DATE March 28, l99l
---------------------------------------------------- ---------------
GRANTEE Plantation South, Inc.
------------------------------------------------------------------------
SIZE 74.98 acres DEED BOOK l239 PAGE 093
--------------------------------------------- ------ ----
PRICE $700,000.00 PLAT BOOK PAGE
--------------------------------------------- ------ ----
LOCATION Off Chukker Creek Road
-----------------------------------------------------------------------
SITE IMPROVEMENTS All normal utilities; city water, sewer, and natural gas
---------------------------------------------------------------
DISCRIPTION/REMARKS
This property is adjacent to Woodside Plantation. A new school was
constructed near the subdivision during the development process. The topography
is rolling terrain and all utilities are available.
ZONING N/A, Aiken County UNIT PRICE $9,336 /Acre
------------------- ---------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 3 TAX MAP & PARCEL # 00-109-01-020
GRANTOR Donald Risher DATE June 30,1989
---------------------------------------------------- --------------
GRANTEE Larry Coker
-----------------------------------------------------------------------
SIZE l62.004 Acres DEED BOOK 1108 PAGE l79
------------------------------------------ ------ -----
PRICE $567,014 PLAT BOOK PAGE
------------------------------------------ ------ -----
LOCATION Beaver Creek Subdivision; Off Silver Bluff Road
-----------------------------------------------------------------------
SITE IMPROVEMENTS Natural Gas, City Water, Septic Tank
--------------------------------------------------------------
DESCRIPTION/REMARKS:
A $300.00 per acre commission was not included in the sale. This
property is similar with regard to location and inferior to the subject property
with regard to size.
ZONING N/A, Aiken County UNIT PRICE $3,500/Acre
------------------ -------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 4 TAX MAP & PARCEL # 00-015-01-556
GRANTOR Home Sites LTD DATE August 21, 1995
------------------------------------------------ -----------------
GRANTEE Belva T. Lacy
-----------------------------------------------------------------------
SIZE 54.81 Acres DEED BOOK l555 PAGE 333
---------------------------------------- ------- -----
PRICE $461,442.51 PLAT BOOK 30 PAGE 161
---------------------------------------- ------- -----
LOCATION South side of Walnut Lane, North Augusta, S.C.
-----------------------------------------------------------------------
SITE IMPROVEMENTS Vacant/open site at time of purchase, Public water
--------------------------------------------------------------
DESCRIPTION/REMARKS
The tract is level and on street grade. The site was purchased for a
residential development. The site transferred ownership from Eric Brandenburg to
Home Sites LTD on December 9, 1993 for consideration of $383,670 or $7,000 per
acre. Sales activity in this area has increased because of a new shopping center
currently under construction in the area. This is a desirable site for
residential homes to be built. According to Mr. Lacy, 4 lots per acre could be
constructed on this site with minimal site work due to level topography. Also
noted around this site is an open space preservation zone, which will assure a
sense of privacy for the homeowners who purchase homes in this subdivision once,
developed. North Augusta public water and sewer is available
ZONING R-3, Single Family Residential UNIT PRICE $ 8,419/ Acre
------------------------------ -------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 5 TAX MAP & PARCEL # pt 00-003-01-009
GRANTOR Margaret Rose Hammond DATE June 15, 1989
------------------------------------------------- --------------
GRANTEE Sigla & Associates
---------------------------------------------------------------------
SIZE 100 Acres DEED BOOK l105 PAGE 005
------------------------------------ ----- -----
PRICE $807,500 PLAT BOOK 22 PAGE 64
------------------------------------ ------ -----
LOCATION Off S.C. Hwy #230, Martintown Road, North Augusta, Savannah Barony
----------------------------------------------------------------------
SITE IMPROVEMENTS None at the time of sale
-------------------------------------------------------------
DESCRIPTION/REMARKS:
This is now an established S/D named Savannah Barony. A portion of this
subdivision borders the Savannah River, which is considered superior to the
subject site. The site has good access to Interstate-20, which is just north of
Savannah Barony. Topography is rolling terrain similar to the subject's
topography. The subdivision has the availability of North Augusta public sewer
and public water.
ZONING R-1; Single Family Residential UNIT PRICE $ 8,075/Acre
------------------------------- ------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 6 TAX MAP & PARCEL#pt 00-015-01-001
GRANTOR Lee H. and Eric L. Brandenburg DATE October 15, 1990
----------------------------------------------- -----------------
GRANTEE Home Sites LTD
-----------------------------------------------------------------------
SIZE 96.49 Acres DEED BOOK 1206 PAGE 269
----------------------------------------- ------ ------
PRICE $ 299,119.00 PLAT BOOK 24 PAGE 67-2
----------------------------------------- ------- -------
LOCATION North side of Walnut Lane. Butlers Mill Subdivision
-----------------------------------------------------------------------
SITE IMPROVEMENTS Vacant/open site at time of purchase
--------------------------------------------------------------
DESCRIPTION/REMARKS
This property is an established subdivision named Butlers Mill. The
subdivision is level and on street grade. Minimal grading and excavation
expenses were necessary to develop this subdivision to its current state. A 100'
Electric and Gas utility easement exists on this site. Butlers Mill has North
Augusta sewer and Edgefield County public water.
ZONING PUD; Planned Unit Development UNIT PRICE $ 3,100/ Acre
------------------------------- --------------
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<PAGE>
DESCRIPTION OF THE COMPARABLE SALES
TRANSACTION 7 TAX MAP & PARCEL #155-00-00-019
GRANTOR Dan M. Herlong DATE June 2, 1998
----------------------------------------------------- ------------
GRANTEE Irwin Gene Scoggins
------------------------------------------------------------------------
SIZE 51.35 acres DEED BOOK 590 PAGE 057
------------------------------------------ -------- ----
PRICE $130,000.00 PLAT BOOK PAGE
------------------------------------------ -------- ----
LOCATION SW corner of Roads #175 and #353 or Pine Ridge Road; Edgefield County
------------------------------------------------------------------------
SITE IMPROVEMENTS All normal utilities; county water and septic tank
---------------------------------------------------------------
DESCRIPTION/REMARKS
This property is a level and rectangular parcel that is improved with
two barns that are 3,500 and 1,200 square feet. The property is situated across
from a golf course and the intentions of the seller are to subdivide the
property for residential single family development.
ZONING N/A, Edgefield County UNIT PRICE $2,531/Acre
------------------------- -------------
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<PAGE>
<TABLE>
<S> <C>
SALES COMPARISON APPROACH GRID
SUBJCT SALE #1 SALE #2 SALE #3 SALE #4 SALE #5 SALE #6 SALE #7
Sales $ $1,220,000 $700,000 $567,014 $461,443 $807,500 $299,119 $130,000
SIZE 304.65 74.98 162.00 54.81 100.00 96.49 51.35
$/Acre $4,005 $9,336 $3,500 $8,419 $8,075 $3,100 $2,532
Fincng N/A CshtoSllr Cshtosllr CshtoSllr CshtoSllr Csh/Sllr Csh/Sllr Csh/Sllr
MrktCnd Current 6/23/89 3/28/91 6/30/89 8/21/95 6/15/89 10/15/90 6/2/98
1%/Year
Adjstd $4,365 $9,989 $3,815 $8,672 $8,802 $3,348 $2,532
$/Ac
Size 237.72 304.65 74.98 162.00 54.81 100.00 96.49 51.35
0% -25% 0% -25% -20% -20% -25%
Location Average Superior Superior Superior Equal Superior Equal Equal
-10% -20% -10% 0% -20% 0% 0%
Site/Vw 15.7AcPnd 1 Pond Woods 1Pond Woods SavRiver Woods Pastur
4 AcWld 10% 20% 10% 20% -20% 20% 15%
Access/ Good Equal Equal Equal Equal Inferior Equal Equal
Frontge Good Equal Equal Equal Equal Inferior Equal Equal
0% 0% 0% 0% 10% 0% 0%
Utilities Adequate Equal Equal Equal Equal Equal Equal Equal
0% 0% 0% 0% 0% 0% 0%
Topo/ Rolling Rolling Rolling Rolling Rolling Rolling Rolling Level
Shape Irregular Irregular Irregular Irregular Rectnglr Irregular Irregular Irregular
0% 0% 0% 0% 0% 0% 0%
Use Glf Course SingleFam SingleFam SingleFam SingleFam SingleFam SingleFam SingleFam
0% 0% 0% 0% 0% 0% 0%
Net Adjstmnt 0% -25% 0% -5% -50% 0% -10%
$0 ($2,497) $0 ($434) ($4,401) $0 ($253)
Adjstd $ $4,365 $7,492 $3,815 $8,238 $4,401 $3,348 $2,278
Per Acre
</TABLE>
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<PAGE>
SALES COMPARISON GRID ANALYSIS
Sales Comparison Grid Analysis:
Many comparable sales of large tracts of land were analyzed and
adjusted to the subject to determine a fee simple market value on a per acre
basis. The Edgefield and Aiken County market areas were researched in order to
find as many sales as possible. The adjustments were considered reasonable and
the largest adjustments were required for differences in size, location and
site/view. The sales were purchased for single-family subdivision development.
These are the most comparable and the best indications of value for the subject
that this appraiser was able to find and verify data on. The property is unique
because of the intended golf course use. This appraiser was unable to find any
sales of land for the specific use as a golf course therefore subdivision sales
were the most comparable to the subject. There were no recent sales of tracts of
land purchased for residential development therefore older sales were the only
means to establish an appraised value.
Each sale was researched and verified by public records and by grantor
or grantee when possible. Each comparable was inspected to insure that accurate
adjustments were made. The adjusted values reflect differences in financing,
market conditions, conditions of sale and physical characteristics when needed.
The adjustments were qualitative and had to be made based upon appraisal
experience and the interaction with other commercial appraisers and real estate
agents. It is necessary to explain each segment of the adjustment grid where
differences are noted.
None of the sales required an adjustment for financing. All sales were
sold in terms of cash or market rate financing where the seller received cash at
closing. No unusual sales conditions or concessions were noted.
Market Condition adjustments were appropriate because of slowly
increasing property values and costs of construction over the last few years.
Edgefield and Aiken Counties are stable communities even with the employment
cutback at Savannah River Site. After the region and neighborhood data was
reviewed, as well as the annual consumer price index figures, a 1% increase in
property value per year is reasonable for the subject neighborhood.
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<PAGE>
SALES COMPARISON GRID ANALYSIS
Size adjustments were required because it is typically the case that
smaller tracts of land sell for more per acre than larger tracts if all things
are equal with the exception of size. Large differences have to be recognized
before a size adjustment can be made. In the case of the subject, the sales
under 75 acres required size adjustments of 25%. And the sales near 100 acres
were adjusted at 20%. Sales #1 and #3 were considered equal and required no
adjustment for differences in size.
Sales #1 and #3 are situated in outlying areas of Aiken County and
deemed superior to the subject location by 10%. Sale #2 adjoins but is not a
part of Woodside Plantation. It is also situated near a new school and was
superior to the subject location by 20%. #4 has some frontage on the Savannah
River and was adjusted down by 20%. No adjustments for location were warranted
when #4, #6 and #7 were paired with the subject property. The sales that were
adjusted by 10% and 20% are closer to the North Augusta and Aiken market, which
produce a broader variety of potential users and uses. A matched pairs analysis
was not possible. The adjustment was qualitative based on my experience in these
markets.
The site/view adjustments were made based on actual inspections of each
comparable sale and the available plats that were recorded at the Edgefield and
Aiken County Clerk of Courts Office. The adjustments in this section considered
the market value of the water influence and the wooded areas that were located
on each tract of land. The subject will have 3 ponds with approximately 16 acres
of water influence. All sales were different with regard to site/view and
adjusted from -20 to +20%. The property with open pasture required an adjustment
of 15% because two barns were situated on the property and added some
contributory value. The developable property on the Savannah River was limited
but still superior to the subject and was adjusted down by 20%. The sales with
woods were adjusted up by 20% and the sales with woods and pond influence were
adjusted by 10%. The adjustments were estimated after each sale was verified and
the visual inspection of the plats and property was completed.
The subject has good frontage on S-19-34 or Sweetwater Road. Sale #5
had inferior access and visibility and was adjusted up by 10%.
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<PAGE>
SALES COMPARISON GRID ANALYSIS
Topography and shape adjustments were not required. No difference in
sales price could be proved when #7, which was level and on street grade, was
paired with the other sales used in this report. #7 was not adjusted down
because it was a level site. Sales #1 through #6 were most comparable to the
subject and carried the most weight in this report. All sales are adequate for
their intended use and there were no significant differences in terrain or
overall marketability of the subject based on sloping or irregular shaped tracts
of land.
There were no differences with regard to utilities or zoning districts
and adjustments were not considered in these two categories.
There were no adjustments for differences in use. There were no
unimproved golf course tracts that were surrounded by residential developments
to have been exposed to the open market and sold. It was appropriate for his
appraiser to use subdivision sales that were near other developed areas as a
basis of comparison to the subject. One recent sale of a smaller tract of land
in Edgefield County that is located across from a golf course was used and
produced a low range of value to be expected from the sale of the subject.
RECONCILIATION AND CONCLUSION OF VALUE
In conclusion, the comparable sales produced a wide range of values per
acre to be expected from the sale of the subject. Many sales in Edgefield and
Aiken Counties were researched and verified. The most comparable sales were
older tracts of land that were developed for residential development. The sales
were placed on the sales comparison grid and the appropriate adjustments for
market condition and physical differences tightened the range of value to be
expected from the sale of the subject property. There have been no recent
similar subdivision developments in Aiken or Edgefield Counties that this
appraiser is aware of. The sales used were the best available comparison to the
subject. The adjustments were necessary and deemed reasonable to establish a fee
simple market value for the subject. More recent sales of large tracts that
would require fewer adjustments and produce a more accurate indication of market
value were not available. The range of value after a market condition
adjustment, but before differences in physical characteristics were
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<PAGE>
RECONCILIATION AND CONCLUSION OF VALUE
analyzed was from $2,532 to $9,989 per acre. After the necessary adjustments,
the range tightened from $2,278 to $8,238 per acre. Excluding the two high and
the two low ranges of values it was reasonable to conclude that the subject
would sell between $3,815 and $4,401 per acre. Taking all current economic
conditions into consideration, a mid range value of $4,000 per acre is
appropriate for the subject.
The subject parcel is a 237.72-acre tract of land with approximately 16
acres of proposed pond area. The site plan shows where the property will be
totally surrounded by developed lots that are a portion of Mount Vintage
Plantation. The intended use for the 237.72-acre tract is a golf course. After
all factors were considered $4,000 per acre is the best indication of value for
the subject. The mean of the range of value was $4,848 per acre; the median
value is $4,365. Because of the unique characteristics, a lower value at $4,000
per acre is appropriate for the subject. $4,000 per acre falls in the middle of
the range and is used as an appraised value.
237.72 Acres @ $4,000 per Acre = $950,880
The market value of the golf course property, 237.72 Acres, with
approximately 16 acres of proposed water influence is estimated to be:
NINE HUNDRED FIFTY THOUSAND DOLLARS
-----------------------------------
$950,000
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<PAGE>
CERTIFICATION
The undersigned does hereby certify that:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal
professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the
subject of this report.
4. My compensation is not contingent on an action or event resulting from the
analyses, opinion, or conclusions in, or the use of, this report.
5. My analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the requirements of the Code of
Professional Ethics and the Standards of Professional Practice of the
American Institute of Real Estate Appraisers.
6. The use of this report is subject to the requirements of the American
Institute of Real Estate Appraisers relating to review by its duly
authorized representatives.
7. As of the date of this report, I have completed the requirements of the
continuing education program of the Appraisal Institute.
8. I have made a personal inspection of the property that is the subject of
this report.
9. No one provided significant professional assistance to the person signing
this report.
/s/ J. MARSHALL VANN, SRA
---------------------------------------
J. Marshall Vann, SRA, CG410
State Cert. General R.E. Appraiser
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STATEMENT OF LIMITING CONDITIONS
1. It is assumed title to the land, all improvements thereon, together with
the contents therein, are marketable. No investigation of legal fee or
title to the property has been made. No consideration has been given to
liens or encumbrances, which may be against the property, except as
specifically stated in the appraisal report.
2. The appraiser does not have any present or contemplated financial interest
in the property appraised, nor is the fee for this appraisal report
contingent upon the values reported.
3. All opinions and final estimates are those of the contract appraiser, after
having made a personal inspection of the land and improvements.
4. No land survey has been made by the appraiser, and land dimensions and
descriptions in this report were taken from information furnished by the
owner and available public records. The appraiser assumes no responsibility
for the accuracy of such land dimensions and descriptions.
5. All opinions as to market value are presented as the appraiser's considered
opinion based on the facts and data set forth in the report. The appraiser
assumes no responsibility for changes in market conditions or for the
inability of the owner or his representative to locate a purchaser at the
appraised value.
6. The market value developed in this appraisal does allow for sales
commissions to real estate brokers or others duly authorized to sell the
property.
7. The final values are predicated on the assumption that there is a
reasonable seller, buyer, lessee or lessor, fully acquainted with the
property, its uses and limitations.
8. The appraiser is not required to give testimony or to appear in court with
reference to this property by reason of this report unless prior
arrangements have been made.
9. By acceptance of this appraisal report, the orderer, owner, purchaser,
seller, client, lender or any person subsequently receiving this report
agrees and understands that the appraiser's liability is limited to the
amount of the appraisal fee charged for preparing this appraisal report.
This appraisal report is an economic study for value, it is not an
engineering, structural, mechanical, feasibility or architectural study.
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STATEMENT OF LIMITING CONDITIONS
10. Users of this appraisal report are directed to obtain the services of a
professional engineer to determine the presence and/or absence of hazardous
materials including, but not limited to: asbestos and/or radon gas and/or
urea formaldehyde foam insulation, as well as the structural integrity of
the building and the present condition of its mechanical systems, since the
Appraiser(s) has made no such inspection expressly or implied and accept no
responsibility therefore.
11. This appraisal is specifically contingent upon, and the appraiser's
understanding that, there has been or will be, a removal of any underground
storage tanks which exist or which may have existed on the subject site;
also that there has been no contamination of soils. If contamination has
occurred, the contaminated soils and the source of the contamination will
be removed and the contamination remedied on the subject site in accordance
with all federal and state regulations.
12. Acceptance of, and/or use of, this appraisal report by client or any third
party constitutes acceptance of the above conditions. Appraiser liability
extends only to stated client, not subsequent parties or users of any type,
and the total liability of appraiser and firm is limited to the amount of
the fee received by appraiser.
/s/ J. MARSHALL VANN, SRA
----------------------------------
J. Marshall Vann, SRA, CG410
State Cert. General R.E. Appraiser
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TRANSACTION 1 TAX MAP & PARCEL # Map 71; Prcl 7
------- -----------------
GRANTOR Grace T. Clark DATE May 2, 1991
----------------------------------------------------- ------------
GRANTEE Regis Development Co.
-----------------------------------------------------------------------
SIZE 207.2 Acres DEED BOOK 939 PAGE 272
---------------------------------------- --------- -----
PRICE $1,036,000; $5,000 per acre PLAT BOOK PAGE
---------------------------------------- --------- -----
LOCATION North side of Hardy McManus Road to Savannah River; Rivershyre S/D
------------------------------------------------------------------------
SITE IMPROVEMENTS Public Water, Public Sewer, Natural Gas
--------------------------------------------------------------
DESCRIPTION/REMARKS:
Since the purchase of the site, the property has been subdivided into
separate tracts of land for development of residential home sites. Rivershyre is
currently being developed in phases as seen on the tax assessors map.
Approximately 30% of the total acreage is in the 100 year flood plain. The
subdivision borders the southern edge of the Savannah River and is located in
Columbia County, Georgia. All utilities are available to this site.
ZONING R-2; Residential UNIT PRICE $5,000/Acre
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TRANSACTION 5 TAX MAP & PARCEL # 00-159-01-001 00-158-01-169
GRANTOR Mark XX Investment Corp. DATE December 19,1986
------------------------------------------------- ----------------
GRANTEE Thomas J. Biddle
------------------------------------------------------------------------
SIZE l53.15 acres DEED BOOK 964 PAGE 245
------------------------------------------ ------- -----
PRICE $336,930 MISC BOOK PAGE
------------------------------------------ ------- -----
LOCATION Current site of Exeter Subdivision
------------------------------------------------------------------------
SITE IMPROVEMENTS Natural Gas, City Water, Septic Tanks
--------------------------------------------------------------
DESCRIPTION/REMARKS
This property is less than one mile from the subject property and very
similar with regard to location and topography.
ZONING N/A, Aiken County UNIT PRICE $2,200/acre
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TRANSACTION 6 TAX MAP & PARCEL # pt 00-l34-0l-020
GRANTOR Julia E. McMillan DATE September l4, l990
----------------------------------------------- --------------------
GRANTEE Waters Edge Development of Aiken
------------------------------------------------------------------------
SIZE 40.44 Acres/7.88 Acre Pond DEED BOOK 1199 PAGE 218
----------------------------------------- ------- -----
PRICE $500,000 PLAT BOOK 24 PAGE 29
------------------- --------------------- ------- -----
LOCATION Located off Richardson Lake Road (Waters Edge)
------------------------------------------------------------------------
SITE IMPROVEMENTS City water and natural gas
--------------------------------------------------------------
DESCRIPTION/REMARKS
This property is very similar to the subject with regard to topography
but superior with regard to location. A 7.88 acre pond is located on this site
and residential homes are being constructed around the pond site.
ZONING N/A, Aiken County UNIT PRICE $l2,364/acre
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TRANSACTION 10 TAX MAP & PARCEL # 00-015-01-001
GRANTOR Lee H. and Eric L. Brandenburg DATE May 12, 1992
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GRANTEE Home Sites LTD
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SIZE 179.23 Acres DEED BOOK 1324 PAGE 114
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PRICE $ 896,150 MISC BOOK 27 PAGE 109
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LOCATION North side of Walnut Lane, North Augusta; Walnut Grove S/D
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SITE IMPROVEMENTS Vacant/Partially wooded site at time of purchase
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DESCRIPTION/REMARKS
This property is gentle rolling terrain that would require minimal
excavation and grading. A portion of the site has been developed into Walnut
Grove S/D. The site has North Augusta sewer and Edgefield County public water.
ZONING R-4; Single Family Residential UNIT PRICE $ 5,000/Acre
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TRANSACTION 12 TAX MAP & PARCEL # 154-00-01-057
GRANTOR Lang Rivers, Hayes Financial Services, Inc. and Robert W. Pollard Jr.
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GRANTEE Betty H. Paxton
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SIZE 6.0 Aces DEED BOOK 560 PAGE 123
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PRICE $39,000.00 PLAT BOOK 560 PAGE 29
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LOCATION SW corner of Roads #40 and #353 or Pine Ridge Road; Edgefield County
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SITE IMPROVEMENTS All normal utilities; county water and septic tank
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DESCRIPTION/REMARKS
This property is a level and rectangular parcel that is not improved at
this time. The property is situated in a residential are near the Pine Ridge
County Club golf course and the intentions of the seller are to subdivide the
property for residential multi-family development.
ZONING N/A, Edgefield County UNIT PRICE $6,500/Acre
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QUALIFICATIONS OF APPRAISER
J. Marshall Vann, SRA
PROFESSIONAL EXPERIENCE AND BACKGROUND
Appraisal associate with Palmetto Service Corporation, Aiken, South
Carolina, from September 1988 to June 1995. Appraisal associate with Sherman and
Hemstreet Inc., commercial sales and developers, 123 Eighth Street, Augusta,
Georgia, 30901 from June 15, 1995 to present.
MAI Candidate status with The Appraisal Institute. Candidate #: M932997
Awarded SRA designation from The Appraisal Institute in 1993.
Qualified as an expert witness for testimony in Federal Court, in
Columbia, SC and Superior Court in Richmond County, GA.
Currently licensed as a Georgia and South Carolina Certified General
Real Estate Appraiser (License No. CG 003605 (GA) and CG 410 (SC), and as a Real
Estate Salesman with the South Carolina Real Estate Commission.
Primary responsibilities include the appraisal of a variety of
commercial, single family, multifamily, condominiums, and vacant land properties
in Georgia and South Carolina, primarily Richmond and Columbia Counties in
Georgia and Aiken, Edgefield, and McCormick Counties in South Carolina. Clients
served consist of various governmental bodies, relocation companies,
governmental organizations, law firms, banks, savings and loan associations,
local businesses, and individuals. Responsibilities also include the inspection
of construction sites for disbursement on construction loans for various lending
institutions in Georgia and South Carolina.
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Education
BA Degree, History, 1980, Presbyterian College, Clinton, South Carolina.
Completed various courses with the Appraisal Institute, formerly the American
Institute of Real Estate Appraisers, and the South Carolina Real Estate
Commission.
1988-Real Estate I, 40 Hours-Aiken Technical College
1989-Real Estate II, 30 Hours-Aiken Technical College
1989-Real Estate Appraisal Principles, 38.5 Hours - American Institute of Real
Estate Appraisers, University of Georgia, Athens, GA.
1990-Residential Valuation Course, 39 Hours - American Institute of Real Estate
Appraisers, University of Georgia, Athens, GA.
1991-Standards of Professional Practice, Part A, 16 hours - Athens, GA.
1996-Columbia, SC
1991-Standards of Professional Practice, Part B, 11 Hours - Athens, GA.
1996-Columbia SC
1992-Credit received from the American Institute of Real Estate Appraisers for a
Residential Demonstration Appraisal Report.
1992-Capitalization & Theory Techniques Part A, 39 hours - American Institute of
Real Estate Appraisers, University of South Carolina, Columbia, SC.
1993-Advanced Income Capitalization, Course 510, 40 hours - Appraisal Institute,
University of Georgia, Athens, GA.
1994-Advanced Applications, Course 550, 40 hours - Appraisal Institute,
University of Georgia, Athens, GA.
1995-Appraisal Procedures, Course 120, 39 Hours - Appraisal Institute,
University of Georgia, Athens, GA.
1995-Report Writing and Valuation Analysis, Course 540, 40 hours - Appraisal
Institute, Georgia State University North Metro Center, Atlanta, GA.
1995-Credit received from The Appraisal Institute for a Demonstration Appraisal
Report of an Income property.
1997-The Appraisers Complete Review, 21 Hours, Orlando Arena, Orlando, Florida
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Assocation Memberships
1988-Member, Aiken Board of Realtors
1989-Licensed South Carolina Real Estate Salesman
1990-Permanent Real Estate Sales License
1992-South Carolina & Georgia Licensed Real Estate Appraiser
1993-South Carolina & Georgia Certified Residential Real Estate Appraiser
1993-SRA Designation from Appraisal Institute
1993-Member - Panel of Regional Ethics & Counseling, Appraisal Institute
1995-Placed on the Lender Selection Roster of Appraisers in the Atlanta, GA and
Columbia, SC HUD Offices.
1995-South Carolina & Georgia Certified General Real Estate Appraiser
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