Clubhouse Improvement Project

1. Clubhouse Improvement Project

2. Key Contributors LRCC Board • Dean Bartee • Kirk Bowman • Andy Brown • Mike Gallagher • Teri Gangi - Helder • Kevin Lynch • Bob Miroyan • Steve Vindasius Kirsten Grado Linda Landsidle Dennis McEvoy Scott Meckenstock Wade Meyercord Bill Puterbaugh Jim Summers Craig Vent

3. Key Contributors Jerry Winges (architect) South Bay Construction Stan Prolo Rick Forney Linda Lamb

4. Agenda Project Motivation LRCC Strategic Plan Planning Project Overview Costs and Schedule Questions and Answers

5. Project Motivation Clubhouse Facilities have seen few upgrades and maintenance since 2005 Outdoor dining very popular Opportunity to expand seating Add a Destination Bar – Highest level of dissatisfaction from 2010 Food & Beverage Survey

6. Mission Statement La Rinconada will be recognized as one of the premier private clubs in the South Bay by providing an exceptional golf, dining and social experience in a multi-generational, family centric environment.

7. Proposal Addresses Private Club Market Trends Top Private Clubs excel against their peers in the following areas: • Clarity of Mission and Purpose • Quality Facilities • Food and Beverage Excellence • Excellent Staff and Service • Sound Leadership and Communication

8. 2012 Key Strategic Initiatives Establish Food & Beverage as a key differentiator for the Club • Menu variety with consistent food quality and excellent service • Favorable comparisons with the best restaurants in Los Gatos and Saratoga • Add a Grille Bar • Improve ambiance in the Grille/Grille Bar/Main Dining Room • Convenience – online reservations, expanded dining hours

9. LRCC Transformational Investments 1992 Golf Course Renovation 2005 Clubhouse Remodel 2009 Driving Range Improvements 2010 Pool Renovation and Fitness Center Addition 2012 Golf Course Turf Conversion

10. Transformational Investments Create Value

11. New Members

12. 2 Years of Planning Member input through surveys Discussions and visits with other clubs Input from consultants Reviewed numerous Grille Bar options Interior Design & Architectural drawings Construction bids from 3 general contractors

13. Clubhouse Improvements • Carpet throughout entire 1st Floor • Grille Room • All new furniture • Replace banquettes • Valences to reduce glare • New Grille Bar • Adds 24 new seats • Destination bar • Open 6 evenings per week • Grille menu plus cocktails and appetizers when Grille not open • Grille Lounge / Service Bar • Sofas and chairs for pre-dinner cocktails • Partition from traffic area • Main Dining Room • Replace banquettes • Room dividers for more intimate ambiance • Mirrors on wall • Patio • Add Trellis and built-in heaters • Add barbecue

24. Clubhouse Improvements • Carpet throughout entire 1st Floor • Grille Room • All new furniture • Replace banquettes • Valences to reduce glare • New Grille Bar • Adds 24 new seats • Destination bar • Open 6 evenings per week • Grille menu plus cocktails and appetizers when Grille not open • Grille Lounge / Service Bar • Sofas and chairs for pre-dinner cocktails • Partition from traffic area • Main Dining Room • Replace banquettes • Room dividers for more intimate ambiance • Mirrors on wall • Patio • Add Trellis and built-in heaters • Add barbecue

25. Capital Costs

26. Financing $687,000 from Social Membership sales and (5) Treasury Certificated (subject to Membership approval) $763,000 from a $1,750 per Member assessment, subject to Membership approval

27. Treasury Memberships Capital Account receives 95% of sales amount in 3 installments Slotted every 5th spot Eases Assessment Amount Requires Membership Approval

28. Rounds of Golf

29. 3 Assessment Financing Options Single payment of $1,750 billed in January 2013 Two payments of $900 billed in January and July 2013 Monthly payments of $155 for one year beginning January 2013 Assessment is amortized over 12 months for Memberships sold in 2013

30. No Operating Cost Increase

31. Project Schedule

32. Summary Improve the Member experience and ambience Protect our investment by upgrading & maintaining facilities Beautiful new destination bar & upgraded patio Member assessment minimized by utilizing funds from the new Social Memberships and Certificated Treasuries

33. Clubhouse Improvements Frequently Asked Questions Why do we need to do this project? Our 2011 Strategic Plan identified the need to have our Food and Beverage operation as a key differentiator for the Club. Our Members had told us in the 2010 Food & Beverage Survey that the lack of a Grille Bar was their highest area of dissatisfaction. The need to improve the ambiance in both the Grille and the Main Dining Room were also called out in that survey. Addressing these two issues was specifically identified in the Strategic Plan. We just recently sold all of our Memberships and had a waiting list to get into the Club. Why do we need to do this project NOW? The carpet throughout the first floor is worn and is an eyesore. The furniture in the Grille predates the 2004 Clubhouse remodel. The lack of a Grille Bar has been identified for many years as a shortcoming of the Club. The reason we have full Membership rolls and enjoy rising initiation fees, in stark contrast to nearby clubs, is because we have continued to invest in our facilities. Why wasn’t a Grille Bar included in the 2004 Clubhouse remodel? At the time it was thought that the Grille Service Bar would be adequate and there was also a desire to maximize seating space in the Grille. In hindsight, the Club failed to realize that the Members need a casual place to congregate and enjoy cocktails and appetizers after a round a golf or after work. Clearly, we made an error and we need to correct it. Why does the Grille Bar have to be done as an expensive addition? Couldn’t it just be located within the Grille itself? We considered 3 other locations for the Grille Bar: In the current “library” area adjacent to the Grille Along the window section of the Grille On the left side of the Grille as you enter The first space is too small for an adequate bar without intruding into the heavy traffic path to the Grille, Pro Shop and kitchen. The other two locations were deemed to be too noisy and intrusive to families dining in the Grille and would reduce seating in the

34. Grille. Putting the bar area along the windows also meant no bar backdrop or large TV without blocking the view. In addition, by having a separable space for the Grille Bar, it can be available to Members and their guests every day that the Clubhouse is open, regardless of any other events occurring at the Club. We have a really nice bar in the Main Dining Room that is underutilized. Why not make that the Member bar? The Main Dining Room is the largest space in the Clubhouse and serves many functions: Dinner service on most Friday and Sundays (plus Wednesdays during the summer months) Member events such as Seniors, Women’s/Men’s tournaments and invitationals, Nine & Dines Private Member events such as weddings, bar mitzvahs, sales meetings Private outside events An analysis of the 105 days that the Clubhouse was open during May-August 2012 showed that the MDR Bar would only have been available to Members on 53 of those days. OK, then why not just swap the function of the Grille and the Main Dining Room? As the largest contiguous space in the Clubhouse, the Main Dining Room is required for many events such as tournaments, weddings and bar mitzvahs. The Grille is much too small to host these events. Won’t the construction of the Grille Bar addition compromise the architectural lines of the Clubhouse? We worked with our architect to ensure that the Grille Bar blends harmoniously with the rest of the Clubhouse. How will the Pro Shop see the first tee since the Grille Bar blocks their current view? Head Pro Andy Kimball has requested that a starter podium be located near the first teebox, including computer access to our tee sheet and point of sale system. This will enable the Pro Shop to provide even better management of the first tee than they are able to do today. Will there be more or less seating in the Grille for dinner?

35. Currently, the Grille seats 64. The Grille Bar adds an additional 24 seats for a total of 88. With only 24 seats, is the Grille Bar large enough to host all of the golfers coming in to eat or socialize after playing the golf course? We believe the Grille Bar has the right balance between capacity and intimacy/friendliness. At particularly popular times, the crowd will usually be able to overflow into the adjacent Grille and Patio. Will Members be able to dine in the Grille Bar? The Grille Bar will provide the same menu during Grille operating hours. When the Grille is closed cocktails and appetizers will be available in the Grille Bar. It will remain open until at least 8:00 p.m. every day that the Clubhouse is open, regardless of any other events at the Club. Will the furniture be replaced? All of the furniture in the Grille and lounge area will be replaced. The furniture in the Main Dining Room is newer and is not in need of replacement. What about the worn and soiled carpeting? As part of this project, all of the carpeting on the first floor of the Clubhouse will be replaced. Will the glare from the windows in the Grille be addressed? Yes, our designer has included some valences for the upper windows to reduce the glare. What will happen to the uncomfortable booths in the Grille? The booths will be removed and will be replaced by comfortable banquettes, tables and chairs. This is part of the standard décor in fine dining establishments. Will the Grille remain family friendly? Yes, by locating the Grille Bar in a separate area families can continue to enjoy dining in the Grille without being distracted by Members who are enjoying the bar. What are the plans for the current “library” area and the Grille Service Bar?

36. The furnishings in the lounge area adjacent to the Grille entry will be upgraded with sofas and chairs to provide a space for socializing while waiting to be seated in the Grille. The Member service area that includes ice tea, lemonade and coffee will be relocated to the current Service Bar space. Will the aesthetics be addressed in the Main Dining Room? The existing banquettes will be replaced with more comfortable seating and the candle display will be replaced with mirrors. Movable room dividers will be installed to create a more intimate atmosphere in the Main Dining Room. What is the background of our interior designer? Does she have experience designing similar facilities for other private clubs? Linda Lamb has been a professional interior designer for 30 years and is principal of her own firm, Lamb Design Group, which she founded in 1986 and is located in Carmel. She received a Bachelor of Science Degree in Interior Design in 1979 and is a Professional member of ASID. Linda has completed more than 10 new construction projects on the Big Island of Hawaii, most notably the 20,000 sq. ft. Ke’oluGolf Clubhouse at the Hualalai Four Seasons Resort. She has done work for Hilton, Quail Lodge Resort in Carmel Valley and is the designer for the Cannery Row Company, owners of 3 boutique hotels in Monterey. Here at La Rinconada, Linda has been our in-house designer for the past 3 years. She has been responsible for a number of successful projects, including the complete design coordination for the Pool and Fitness Center as well as smaller projects in the Main Dining Room, Ladies Locker Room and Spyglass Conference Room. How much will it cost? The total capital cost of the project is $1,450,000. Did the Club conduct a competitive bidding process? Yes, the Club received three competitive bids. We have selected South Bay Construction’s bid for this project. The Club had a very positive experience using South Bay for the Pool and Fitness Center construction. How will it be financed? The Club plans to use funds from three sources for this project: $141,000 from the 2012 sale of Social Memberships

37. $546,000 from the sale of 5 new Certificated Memberships – requires Membership approval $763,000 from a $1,750 per Member assessment – requires Membership approval For Members who sell their Membership in 2013, the assessment will be amortized over a 12 month period beginning January 2013 Will I have to come up with the cash all at once? No. While the base plan is a single payment of $1,750 in January 2013, there are two additional financing options. You can elect to make two payments of $900 in each of January 2013 and July 2013. Or you can make monthly payments of $155 each month in 2013. We sold 14 Social Memberships in 2012. How come you are only using part of those proceeds as funding for this project? The Board seeks to balance our capital investments in the Club, including continuing investment in the golf course. For example, part of the capital raised from selling Social Memberships in 2012 was used for the turf conversion project that was just completed. Why does the Club continue to add new Members? Aren’t the facilities getting too crowded with all of these additional Members? Golf course usage is holding steady at about 30,000 rounds per year. This is down from peak usage of about 40,000 rounds. We invest to add capacity at the Club as required, such as the improvements we made to the driving range 2 years ago. This project will add additional dining capacity to the Grille. Why is the Board presenting this as an “all or nothing” proposal? Why not separate the new Grille Bar from the other improvements and have two votes? The Board wants to address all of the key Clubhouse issues that impact our ability to deliver a top notch food and beverage experience for our Members. The absence of a comfortable venue for food and drink that is open for the Members six days per week is at the top of that list. The Board is presenting a plan that it believe maximizes the chances for approval of the entire project. What will happen if the Members do not pass this proposal? If this proposal does not pass, the Board will reconvene on this subject and come up with an alternative path. However, the Board is strongly in favor of this proposal and that is why it is the one being presented to the Members for a vote.

38. Why does there have to be an assessment? Why not just wait until we have accumulated sufficient capital funds to pay for this project without an assessment? The bulk of our capital funds come from the transfer fees the Club receives from the sale of Certificated Memberships. Each year, most of that money is required to fund the replacement of golf course maintenance equipment, maintenance of the Clubhouse and other facilities and small golf course projects such as tee box rebuilding. It could take 5 years or more to accumulate as much capital for this project as we will receive from the $1,750 assessment. How will the value of my Membership be affected by this project? Over the past several years the Club has enjoyed increasing Membership value while Membership prices of other clubs in the area have been declining. The Board believes that this is a direct result of our Club’s investment in facilities that reflect the changing demographic of private club members. This project is consistent with our prior investments and as such should add to the value of Memberships at LRCC. What about operating costs? Will there be a dues increase? Our analysis shows additional operating costs of $84,000. This is more than offset by $57,000 in additional Food and Beverage margin due to increased Member spending and $40,000 is annual dues revenue from the 5 additional Memberships that will be added. What is the projected schedule? Assuming the Membership approves this project in November; we will order the replacement carpet and Grille furniture in December and install it in April 2013. Plans for the Grille Bar and Patio trellis project will be submitted to the Town of Los Gatos in January 2013. Construction should commence in August 2013 and be completed by November 2013. Will food service continue during the construction period? Yes, we will utilize the Main Dining Room during construction in the Grille area. Do we have our landlord’s approval for this project? Yes, our landlord has given approval for this project.

39. Clubhouse Improvements • Fact Sheet • New Grille Bar Addition • New facility built on the patio adjacent to the Grille and Pro Shop • 16 seats at tables and 8 seats at the bar • View of the first fairway and downtown San Jose similar to the Grille • Large flat screen TV for watching sports • Grille food service plus cocktails and appetizers when the Grille is closed • Available to Members and their guests every day the Clubhouse is open • Grille Improvements • Replace booths with banquettes, tables & chairs • Lounge area for socializing furnished with sofas and chairs • New carpet • All new furnishings • Valence on top windows to reduce glare • Improves aesthetics • Patio Improvements • Trellises for shade during the day • Permanent heaters for warmth in the evening • Built in barbeque at the southeast end of the patio • Capital Funding • $141,000 from sale of 2012 Social Memberships • $546,000 from sale of 5 new Certificated Memberships • $763,000 from $1,750 per Member assessment • Three payment options: • Single payment of $1,750 in January 2013 • Two payments of $900 in January 2013 and July 2013 • Monthly payments of $155 for one year beginning January 2013 • Assessment is amortized over 12 months for Memberships sold during 2013

40. Operating Costs and Revenues Additional annual operating costs of $84K $57K of additional F&B gross profit and $40K of additional dues income from the 5 new Memberships result in no net expense increase Project Schedule November 2012 – Membership vote December 2012 – Order new carpet and furniture January 2013 – Initiate Town of Los Gatos permitting process April 2013 – Install new carpet and furniture August 2013 – Begin Grille Bar & Patio trellis construction November 2013 – Grand Opening Main Dining Room will remain open during Grille Bar construction