Mount Sunapee Lease, Frequently Asked Questions Frequently Asked Questions Why is there a new owner of the Mount Sunapee Lease and who is it? CNL Lifestyle Properties (CNL), through its ownership of CLP Mount Sunapee, LLC , was the owner of the lease holder of the Lease and Operating Agreement (Lease) of the Mount Sunapee ski area. CNL was a Securities and Exchange Commission (SEC) regulated Real Estate Investment Trust (REIT) which was set to expire in 2015. It was always anticipated that the Lease would have a new owner. Och-Ziff Real Estate (OZRE) purchased the lease holder (i.e. CLP Mount Sunapee, LLC) under the Lease as part of its overall acquisition of 14 CNL assets. OZRE is a private equity firm which invests capital on behalf of investors including state pension plans and institutional investors. The acquisition of the Mount Sunapee lease holder will not affect operations at the Mount Sunapee Resort (Resort). The Resort will continue to be operated by The Sunapee Difference (TSD), owned by Tim and Diane Mueller, under the terms of its existing long term lease, in the same manner it has been for many years. Who has been the Operator, Lease Holder and Owner of the lease holder for the Mount Sunapee Ski Area since December 1998? 1998 2008 2017 Owner of Lease Holder The Mueller Family CNL Lifestyle Properties Och-Ziff Real Estate Lease Holder The Sunapee Difference CLP Mount Sunapee LLC CLP Mount Sunapee LLC Operator The Sunapee Difference The Sunapee Difference The Sunapee Difference What is the financial position of Och-Ziff Real Estate? The Mount Sunapee lease holder was acquired by real estate private equity funds at OZRE, which collectively have in excess of $1.5B of committed capital from investors, including state pension plans and endowments. OZRE, founded in 2003, has completed over 100 transactions across diverse real estate asset classes. OZRE and its affiliates committed in excess of $100 million to the ski transaction, demonstrating its commitment to both the Mount Sunapee Lease and the overall investment. What was the process by which Och-Ziff Real Estate became the owner of the lease holder under the Lease? The change of ownership of the Sunapee lease holder (i.e. CLP Mount Sunapee, LLC) was part of a much larger transaction whereby CNL divested its interest in 35 attraction, ski, and family entertainment assets for an aggregate consideration of approximately $830 million in connection with its planned dissolution. OZRE, together with EPR Properties, acquired these assets from CNL, with OZRE acquiring the interest in 14 assets (13 ski area assets and one “scenic” asset) valued at approximately $374 million and EPR Properties acquiring the interest in the other 21 assets for approximately $456 million. All ski assets located in the United States were acquired in the same manner – namely, through a transfer of equity interests in the property holding entity. In other words, the structure of the transfer of each asset was not differentiated to account for consent rights. To the extent the consent of the landowner was required in connection with OZRE’s acquisition, such consent was obtained. The purchase of the Mount Sunapee Lease was a part of a much larger financial transaction and the structure of the transfer of equity interests was the same across each of the 13 US properties acquired by OZRE. Why did the transaction not trigger the assignment provision of the Lease? The 1998 Lease provision where the lease holder may assign or otherwise transfer any interest in the Lease with the prior written approval of the State (provision #22) is limited and was not triggered in this transaction. The provision was exercised in 2008 when the Lease was assigned from The Sunapee Difference (TSD) to CLP Mount Sunapee, LLC. That assignment was approved by the Department of Resources and Economic Development (DRED) commissioner. The Lease requires State approval of its transfer, but there is no requirement in the Lease that the State approve a change in the ownership of the lease holder. In September 2016, the State was notified by CNL of its intent to transfer its ownership in the Lease holder through an equity sale. As a result of the structure of the transaction, the lease holder who existed under CNL (i.e. CLP Mount Sunapee, LLC) continues to exist as a legal entity and as the lease holder under the Lease; consequently the assignment provision was not triggered within the Mount Sunapee Lease. What about Och-Ziff’s civil and criminal fines under the Foreign Corrupt Practices Act and what actions have the company taken to ensure these violations can never happen again? OZRE’s parent company, Och-Ziff Capital Management Group LLC (Och-Ziff), reached a settlement agreement in September 2016 with the U.S. Department of Justice (DOJ) and the SEC for violations of the Foreign Corrupt Practices Act and the Investment Advisers Act of 1940. The conduct underlying the settlement took place from 2007-2011, ceasing six years ago. The SEC has concluded that the “driving forces” of the violative conduct were two former employees who separated from the firm over four years ago. Och-Ziff has implemented numerous control enhancements to ensure that the conduct underlying its 2016 settlements with government authorities cannot recur. These enhancements include: William Barr, former Attorney General of the United States, has joined the firm’s Board of Directors, and chairs a new board committee devoted to compliance oversight. The firm hired a dedicated Chief Compliance Officer and elevated the Compliance department – whereas the Compliance department previously reported to the Legal department, it now reports directly to the President of the firm. The firm hired a dedicated lawyer to oversee its FCPA (Foreign Corrupt Practices Act) control efforts. The firm created a “Business Risk Committee”, chaired by the firm’s Chief Legal Officer that reviews proposed transactions presenting potential heightened risk. Och-Ziff also has revised its policies and procedures designed to address the type of conduct at issue in the settlements. In addition to these measures, a compliance monitor was also appointed by the DOJ and SEC. The monitor will conduct reviews to ensure that policies and procedures are being followed. Will there be changes with the Operator at Mount Sunapee Resort? No. The Mount Sunapee Resort will continue to be operated by The Sunapee Difference (as it has since the State first leased Mount Sunapee ski area in 1998) under the terms of its existing long term lease, in the same high quality manner it has been for many years. From a user’s perspective, the transfer of lease holder will not matter, similar to a first mortgage being sold between banks. Day-to-day operations will continue to remain in the hands of The Sunapee Difference, owned by Tim and Diane Mueller, which will operate the Resort in accordance with the annual operating plan and the master development plan as approved by the commissioner of the Department of Natural and Cultural Resources. Does the transfer of the Mount Sunapee lease holder to Och-Ziff Real Estate open the Mount Sunapee Ski Area to “resource extraction”? No. Pursuant to the Mount Sunapee Lease, OZRE and its operator are only entitled to "operate a commercial recreational… facility (including all of its support activities) on Mount Sunapee." OZRE does not have the right under the Mount Sunapee Lease, or any other document (including the mortgage OZRE entered into in connection with its acquisition of the Mount Sunapee lease holder), to extract any minerals or oil from the Mount Sunapee ski area. Will this have an impact on the potential West Bowl Expansion? Not directly; however, OZRE will bring capital expansion resources to its entire portfolio of ski assets. These resources could be instrumental if and when the Operator (The Sunapee Difference) decides to move forward with the potential West Bowl Expansion. Are there any changes to the Lease and Operating Agreement as a result of the new lease holder? No. The terms and conditions of the Lease and Operating Agreement remain the same as they have been in the original lease of 1998 and 2016 Lease Amendment.