THE HILLSDALE PLAN A Road Map To A Vibrant And Independent Hillsdale

INTRODUCTION Hillsdale Golf Club (‘HGC’) is entering its 62nd year nestled on over 22 million square feet of prime real estate located less than 30 minutes from Montreal. HGC is uniquely blessed with two distinct golf courses, a rich culture and a beautiful environment. Its location is highly attractive as it is equally accessible to members living in the Montreal area and those with second homes in the Laurentians. HGC’s membership consists of passionate individuals of various age demographics, financial capabilities as well as many with a long standing emotional attachment to the club. There were 664 golfers who enjoyed HGC during this past season. These members consisted of 115 couples, 131 single men, 17 single women, 30 members under our corporate category, 17 senior equity weekday members, 9 senior non-equity weekday members, 40 intermediate members under 40 years of age, with the balance of golfers representing junior and associate categories. The current aggregate membership represents slightly under 400 dynamic members (dynamic membership counts are based on an amount equal to a Full member’s membership dues equaling one member). HGC also generated approximately $1.3 million dollars of gross revenue ($890,000 net) from outside tournaments, private parties and corporate events in 2014 and the facility is widely respected by the Montreal and Quebec golfing community. HGC currently maintains sufficient membership levels to operate a $5.3 million dollar annual operating budget with responsible fiscal management. Despite difficult circumstances for the past three years, operating assessments have averaged approximately $100,000 annually representing less than 2 percent of annual budgets. These shortfalls have been attributable to a variety of unforeseen events. As you are aware, the Board of Directors summarized the essential elements of an operational plan for 2015 and beyond during the Town Hall meeting of October 2 nd. Since that date, and based on members feedback, the Board of Directors and management have continued to work on our planning for the future. Our plan relies on many facts and recommendations contained in the Global Golf Advisors (‘GGA’) report as well as feedback from our members and is summarized below. We have decided to call it the “Hillsdale Plan”. The Board believes that the Hillsdale Plan allows HGC and its members to face the future together and independently.

THE HILLSDALE PLAN The GGA report set out the following elements which form the basis of the Hillsdale Plan: 

Membership costs were too expensive and out of touch with today's standards;



HGC had deferred capital for so long that we require approximately 6 million dollars to restore our club to premium condition so as to help retain existing members and attract new members; and,



HGC’s land potential which was currently evaluated at 5 million dollars could increase to $30-40 million dollars if rezoned.

The Hillsdale Plan sets out a series of initiatives which the Board believes can succeed in restoring our club to one of Montreal's premier private golf clubs over the next five (5) years. 1. Re-Engineering Our Membership Categories and Dues To develop a long term modern and strategic business model for both equity and non-equity memberships GGA reported that our membership costs were over market and our traditional playing restrictions on several categories required revision. Therefore the Hillsdale Plan proposes the following changes. 1.1 Equal Access to the Tee Men, couples and single women would have equal access to the tee. Consequently, the single playing lady category would be abolished. Playing restrictions would still apply to Junior and beginner golfers. 1.2 Revised Membership Categories and Costs The Hillsdale Plan proposes to grandfather the existing category of Senior Full member aged 85 and over who have been with the club for over 40 years and the Associate Category 2. The Associate Category 2 is comprised of widows and senior playing ladies. Both categories would see a small increase in 2015 dues. We further propose to introduce a Family category, which would incorporate the Associate Category 1 (Playing Spouse), as these membership dues are to be included in the Family Category dues. The Senior Equity Weekday Category would also be abolished. Members currently under that category will have the option to either become Senior Weekday Non-Equity (Single or Family1), or Full Equity (Single or Family1).

Food & Beverage Minimum – Unchanged

2014 Dues

Single Equity

7,045

Single Non-Equity

5,950

Family1 Equity

10,385

Family1 Non-Equity

9,290

2015

Capital Oper.

2014

Assmt

Assmt

Total

450

315

7,810

5,750

252

6,202

6,000

315

11,150 9,500

252

9,542 10,000

450

Dues

Capital Hillsdale

2015

Assmt

Fund

Total

DIFF.

750

180

6,680

-1,130

180

6,180

-22

360

10,610

-540

360

10,360

818

750

2014 Dues

2015

Capital Oper.

2014

Assmt

Assmt

Total

Dues

Capital Hillsdale

2015

Assmt

Fund

Total

DIFF.

Single Sr. Weekday NonEquity

4,250

252

4,502

4,750

180

4,930

428

Family1 Sr. Weekday NonEquity

6,950

252

7,202

7,000

360

7,360

158

Senior 85/40

4,125

4,125

2,875

2,875

-1,250

Senior Widow

4,125

4,575

4,125

180

4,745

170

Corporate - 4 Members

10,500

10,500 11,000

720

11,720

1220

Corporate - 2 Members

6,250

6,250

360

6,860

610

1

265

185

6,500

440

The family category shall include a playing couple and two (2) children who qualify as junior members.

In addition, in order to retain and attract new members aged 25 to 39, a vital part of our future, we propose to introduce a Country Club Membership, which will be non-equity. Current equity members aged 25-39 would have the right to change to the Country Club Category but would be required to maintain their equity status and pay entrance fees and their pro-rated share of capital assessments. Annual dues for the Country Club Category would be $995 for a single and $1,295 for couples and pay as you go golf for $60 per round. The total amount payable by the Country Club member in dues and amount spent per round would be capped at the total dues charged to a member of the same age. There would be no food and beverage minimum for this category.

The aggregate fees proposed under this new plan for single men and family equity members inclusive of all assessments will in all cases be lower than the costs members incurred over the past two seasons. It is estimated that these membership category revisions, if implemented, would reduce 2015 membership dues revenues by approximately $150,000 on the basis of NO REDUCTION in 2014 membership numbers. We plan to address this anticipated membership dues shortfall in three (3) ways. First, we shall make our best efforts to find savings in our operational budget. Second, we are optimistic that these new categories shall enable us to increase our membership numbers over 2014 thereby reducing the shortfall. Third, any shortfall caused by the revised membership categories shall be funded through limited bank borrowings. 1.3 Initiation Fees Hillsdale will abolish its 60/60 program and re-introduce the following initiation fees: Family Single Intermediate

$12,000 $10,000 $ 6,000

New Equity members shall be required to pay the aforementioned initiation fees. The payment schedule and any one time payment discounts shall be determined by the Board of Directors. 2. Capital Assessment Under the Hillsdale Plan, existing Full members aged 40 and over would be given an option to opt out of continued equity participation in the club and change their status to non-equity. Full members that choose to retain their equity position would accept to pay a capital assessment of $750.00 per year for the next 4 years commencing in 2015. This assessment would be prorated to all membership categories. Family1 Equity Category is considered one (1) category and therefore would be subject to one (1) capital assessment of $750 per year for the next 4 years. We anticipate that this measure would raise 1 million dollars of new capital over the next four (4) years to be used to invest in capital improvements. This assessment program could also permit bank borrowings to expedite improvements. 3. The Hillsdale Fund All members, whatever their category, would pay their prorated share of any operating assessments. In addition, the club would create a special “Hillsdale Fund”. Under the Hillsdale Fund, each member would be charged an amount of $180 per year which will be dedicated to a special project each season. 4. Restructuring of Our Ownership Model At the request of the HGC Executive, a special committee composed of Michael Pesner, Miles Leutner and chaired by Robert Raich was asked this summer to study a restructuring of HGC’s existing ownership structure and develop a tax effective plan to convert the club to a non-profit corporation that would grant each existing Full Equity member a share and provide the ability to raise new capital by offering members the opportunity to acquire additional shares.

The Committee delivered a report to the Board in August 2014. The report proposed to grant shares to each existing Full Equity member and to attract additional investment from members who wish to increase their ownership interest in the club in order to benefit from the future potential long term property value which was identified by our land evaluator PCG Carmon. The Board believes we can raise significant additional capital by implementing the report which capital would be invested in our facilities. In order to ensure that the report is fully understood by all members, a Corporate Committee to be cochaired by Morty Lober and Michael Wagen shall review the proposed restructuring plan with the club’s external auditors and an independent law firm, as well as seek member input. Thereafter, the Corporate Committee shall present a report to the Board of Directors in the spring of 2015. We wish to make clear that no restructuring plan shall be adopted unless it is approved by a vote of the membership. 5. Public Play The board has decided that there will be no public play at HGC in 2015. The GGA plan sought to introduce 18,000 rounds of public play with a plan that provided for segregation of the public by making 10 Laurentian the 1st hole and investing $200,000 to $300,000 to segregate the public player from the membership. The plan sought to increase those levels to 24,000 rounds in subsequent years generating $1.2 to $1.5 million dollars of new revenue annually. GGA reported that our 2 courses can accommodate 80,000 to 90,000 rounds annually, and that in 2013 and 2014, inclusive of outside tournaments, guests and reciprocities, less than 35,000 rounds have been played at Hillsdale each season. The issue of public play has by far been the most controversial amongst members. Furthermore, segregating the public has also generated widespread commentary and difference of opinion. As a result no measures will be implemented without further consultation with our members. 6. Unaccompanied Guest Play We propose to introduce Unaccompanied Guest Play for the 2015 season. This initiative would entitle our members to arrange for unaccompanied guests to enjoy the club’s facilities, at defined times. If approved, further details regarding this initiative would be announced at the beginning of the 2015 season. 7. Capital Improvements The Board believes that the Hillsdale Plan would generate sufficient capital so that we may begin to address our capital spending needs in a gradual and conservative manner. The decision on which capital improvements to complete and in what priority shall be made by the Board of Directors after consultation with the relevant Committees and careful consideration of the GGA member survey results. 8. Summary and Process hould members embrace the Hillsdale Plan, the Board of Directors will mandate both existing and new Committees to oversee each aspect of the plan. These would include:

a. The Membership Committee which would be responsible for marketing the new membership categories and our new business model to attract new members; b. The newly formed Corporate Committee which would present a report to the Board of Directors in the spring of 2015 on a restructuring of the ownership of the club; c. The Green and Clubhouse Committees which would analyze and prioritize all capital improvements and manage the spending; and, d. The Budget and Finance Committee which would oversee the budget for the foregoing and any bank financing activities. In summary, if approved, the Hillsdale Plan will:

  

Reduce member costs and introduce a modern competitive business model that will retain existing members, attract new members and generate new sources of revenue; Introduce a reasonable capital assessment payable over four (4) years that begins to finance the capital investment that is required for the future; and, Commence the process of the clubhouse and golf course improvements required to enhance member experience and satisfaction and help attract new members.

Finally, based on a complete analysis of the GGA member survey results, the Hillsdale Plan safeguards against the departure of existing members and would serve as a basis for developing a new strong membership base. The Board believes the Hillsdale Plan is financially viable and can be implemented with minimal financial risk to the membership. The Board will present a full overview of the Hillsdale Plan to members during the annual meeting of November 17th so that each of our members have an opportunity to ask questions and ensure there is a full and complete understanding of this initiative. In conclusion, throughout this process the Board has received hundreds of questions and opinions from numerous members representing a host of different points of view. The Board understands and respects that there are many members who feel strongly about how we should address our current challenges and future options. The Board will ensure that members have the opportunity to fully understand the benefits and risks of our future option and provide a forum to attempt to bridge the gap of members’ opinions with a view to reaching an acceptable conclusion which will permit HGC to move forward in a unified and cohesive manner. The Board of Directors