Cedar Fair, L.P. (FUN)

Determining Executive Compensation

The Compensation Committee and the chief executive officer work together to individualize compensation levels and elements for our executive officers. We combine the compensation elements discussed below in a manner that we believe will optimize the executive’s contribution to the Partnership. In general, we work within ranges of base salary commensurate with the executive’s scope of responsibilities and use our cash bonus and phantom unit award programs to challenge the executive to achieve superior annual and long-term results. We do not adhere to a mechanical application of a system of compensation tied solely to annual results, recognizing that there are many factors to consider in assessing an individual’s value to the Partnership.

Although our Board, upon recommendation from the Compensation Committee, makes the final compensation decisions for the named executive officers, the process of determining compensation is a collaborative process between the Compensation Committee and the chief executive officer. The Compensation Committee and the chief executive officer may also consider input from compensation consultants regarding competitive practices and salary levels at similarly sized companies in related industries. Our chief executive officer dedicates time annually to review all of his direct reports, including the other named executive officers, as well as all of the park general managers. He reviews each individual against budget targets, operational targets and individual performance objectives established before the operating season begins and summarizes this information for the Compensation Committee. The Committee then makes compensation determinations, exercising its discretion to modify the chief executive officer’s recommendations to higher or lower levels when determined to be appropriate. Decisions regarding the chief executive officer’s compensation are made by the Compensation Committee, together with the Board of Directors, based upon its review of his performance and the Partnership’s performance.

Our budgets and related plans for compensation are made in early March, prior to the beginning of the operating season. In early March, the Board approves the budget for the current fiscal year and establishes preliminary potential cash bonus percentages and the related performance targets for the upcoming season. The types of targets established for each individual vary in accordance with his or her position. For example, corporate vice presidents’ performance targets relate to Partnership performance, particularly achievement of targeted EBITDA. Park general managers may have performance targets related to capital projects or reducing particular expenses at the parks they manage. The cash bonus percentage is determined at the Compensation Committee’s discretion. The Committee also makes long-term incentive awards, usually in the form of phantom unit awards, that are subject to performance criteria and vesting requirements discussed below in the “Long-Term Incentive Compensation” section.

The Board reviews compensation matters after the seasonal parks have closed for the season and the financial results for the season are available. The chief executive officer finalizes his evaluations of the other named executive officers, among others, and prepares recommendations with respect to cash bonus and phantom unit awards, as well as salary adjustments, for the coming year. The chief executive officer generally presents this report to the Compensation Committee in October and to the Board at the November Board meeting. Based on Partnership performance, park performance and individual performance, the Compensation Committee makes final recommendations with regard to cash bonuses, phantom unit awards and any salary adjustments, subject to Board approval.

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We have historically expected the Partnership’s performance to exceed market median, and accordingly have provided a potential compensation package that exceeds market median if those stretch performance objectives are achieved. In addition, in order to remain in the top echelon of our industry, we believe that we must aim to compensate our named executive officers in the range of 75% of the pay level provided by a designated peer group of companies. Because a portion of this compensation is dependent on performance results, an executive’s actual total direct compensation could vary considerably from that target if we have a year that exceeds or fails to meet expectations. We believe that this is a fair result and appropriately motivates our executives to achieve peak corporate and park level performance over the long term. Those executive officers with expertise that is specific to our amusement park operations and industry will be compensated at levels that we believe are necessary to maintain that expertise. The range of targeted compensation is position dependent and may reflect how difficult we believe it would be to replace that particular person.

From time to time, we have consulted nationally recognized independent consulting firms to review and analyze our compensation program, including the compensation levels, the compensation structure and the mix of long-term and short-term compensation for certain of our named executive officers. These studies reflected competitive data for base salaries, annual bonuses and long-term incentive awards for senior management of comparable companies. In 2006, we engaged Pearl Meyer and Watson Wyatt to analyze the compensation for our chief executive officer, our chief operating officer and our chief financial officer.

In 2006, the consultants developed a representative peer group of companies based on industry code and revenue size. The resultant peer group companies include:

While we compete with casinos, ski resorts and motor sports for recreational spending, we believe that there are significant differences between our business and those, so that we use the benchmark studies for guidance but do not feel that they are strictly determinative of our compensation decisions.

In early 2009, we again engaged Pearl Meyer to update their compensation analysis and comparability study for companies of our size and in related industries utilizing 2009 proxy information. We expect to use the results of this study to assess our compensation program, including the compensation levels, the compensation structure and the mix of long-term and short-term compensation, for these named executive officers.

Determining Executive Compensation

The Compensation Committee and the chief executive officer work together to individualize compensation levels and elements for our executive officers. We combine the compensation elements discussed

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below in a manner that we believe will optimize the executive’s contribution to the Partnership. In general, we work within ranges of base salary commensurate with the executive’s scope of responsibilities and use our cash bonus and phantom unit award programs to challenge the executive to achieve superior annual results. We do not adhere to a mechanical application of a system of compensation tied solely to annual results, recognizing that there are many factors to consider in assessing an individual’s value to the Partnership.

Although our Board, upon recommendation from the Compensation Committee, makes the final compensation decisions for the named executive officers, the process of determining compensation is a collaborative process between the Compensation Committee and the chief executive officer. The Compensation Committee and the chief executive officer may also consider input from compensation consultants regarding competitive practices and salary levels at similarly sized companies. Our chief executive officer dedicates time annually to review all of his direct reports, including the other named executive officers, as well as all of the park general managers. He reviews each individual against budget targets, operational targets and individual performance objectives established before the operating season begins and summarizes this information for the Compensation Committee. The Committee then makes compensation determinations, often exercising its discretion to modify the chief executive officer’s recommendations to higher or lower levels. Decisions regarding the chief executive officer’s compensation are made by the Compensation Committee, together with the Board of Directors, based upon its review of his performance and the Partnership’s performance.

Our budgets and related plans for compensation are made in early March, prior to the beginning of the operating season. In early March, the Board approves the budget for the current fiscal year and establishes preliminary potential cash bonus percentages and the related performance targets for the upcoming season. The types of targets established for each individual vary in accordance with his or her position. For example, corporate vice presidents’ performance targets relate to Partnership performance, particularly achievement of targeted EBITDA. Park general managers may have performance targets related to capital projects or reducing particular expenses at the parks they manage. The cash bonus percentage is determined in the Compensation Committee’s discretion.

The Board reviews compensation matters after the seasonal parks have closed for the season and the financial results for the season are available. The chief executive officer finalizes his evaluations of the other named executive officers, among others, and prepares recommendations with respect to cash and phantom unit awards as well as salary adjustments for the coming year. The chief executive officer generally presents this report to the Compensation Committee in October and to the Board at the November Board meeting. Based on Partnership performance, park performance and individual performance, the Compensation Committee makes final recommendations with regard to cash bonuses, phantom unit awards and any salary adjustments, subject to Board approval.

We expect the Partnership’s performance to exceed market median, and accordingly we believe that providing potential compensation that exceeds market median to our executives is appropriate. In addition, in order to remain in the top echelon of our industry, we believe that we must aim to compensate our named executive officers in the range of 75% of the pay level provided by a designated peer group of companies. We target our total direct compensation, including salary, cash bonus and long-term incentive awards, to fall around that range, with the expectation that we will hit the 75^th percentile level for all named executive officers over time. Because a portion of this compensation is dependent on performance results, an executive’s actual total direct compensation could vary considerably from that target if we have a year that exceeds or fails to meet expectations. We believe that this is a fair result and appropriately motivates our executives to achieve peak corporate and park level performance. Currently, certain top executives’ total direct compensation exceeds the market level and others’ falls below, based on the Board’s assessment of each executive’s contribution and experience. Those executive officers with expertise that is specific to our amusement park operations and industry will be compensated at levels that we believe are necessary to maintain that expertise. The range of targeted compensation is position dependent and may reflect how difficult we believe it would be to replace that particular person.

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We have consulted nationally recognized independent consulting firms to review and analyze our compensation program, including the compensation levels, the compensation structure and the mix of long-term and short-term compensation for certain of our named executive officers. These studies reflected competitive data for base salaries, annual bonuses and long-term incentive awards for senior management of comparable companies. Most recently, in 2006, we engaged Pearl Meyer and Watson Wyatt to analyze the compensation for our chief executive officer, our chief operating officer and our chief financial officer with companies of our comparable size after the acquisition of Paramount Parks.

The consultants developed a representative peer group of companies against which we measured our competitive pay level and structure for the executives indicated above. Based upon the Compensation Committee’s review of the proposed peer groups, we have determined that our peer group companies include those that have the following characteristics:

The result of these criteria is a current peer group of 16 companies with median revenues of $915,000,000 and average revenues of $980,000,000. Our combined revenues for 2007 were approximately $990,000,000. The peer group companies include:

We used these benchmarking studies and compensation consultant recommendations to devise a compensation schedule following the Paramount Parks acquisition in June 2006. The studies were useful in the context of the acquisition because our revenues doubled and our management team took on increased responsibilities. We had to adjust compensation levels accordingly. This year, however, we did not feel that an additional compensation study was necessary. While we compete with casinos, ski resorts and motor sports for recreational spending, we believe that there are significant differences between our business and those, so that we use the benchmark studies for guidance but do not feel they are required on an annual basis.

Determining Executive Compensation

The Compensation Committee and the chief executive officer work together to individualize compensation levels and elements for our executive officers. We combine the compensation elements discussed below in a manner that we believe will optimize the executive’s contribution to the Partnership. In general, we work within ranges of base salary commensurate with the executive’s scope of responsibilities and use our cash bonus and phantom unit award programs to challenge the executive to achieve superior annual results. We do not adhere to a mechanical application of a system of compensation tied solely to annual results, recognizing that there are many factors to consider in assessing an individual’s value to the Partnership.

Although our Board, upon recommendation from the Compensation Committee, makes the final compensation decisions for the named executive officers, the process of determining compensation is a collaborative process between the Compensation Committee and the chief executive officer. The Compensation Committee and the chief executive officer also consider input from compensation consultants regarding competitive practices and salary levels at similarly sized companies. Our chief executive officer dedicates time annually to review all of his direct reports, including the other named executive officers, as well as all of the park general managers. He reviews each individual against budget targets, operational targets and individual performance objectives set forth before the operating season begins and summarizes this information for the Compensation Committee. The Committee then makes compensation determinations, often exercising its discretion to modify the chief executive officer’s recommendations to higher or lower levels. Decisions regarding the chief executive officer’s compensation are made exclusively by the Compensation Committee based upon its review of his performance and the Partnership’s performance.

Our budgets and related compensation plans are made in early March, prior to the beginning of the operating season. In early March, the Board approves the budget for the current fiscal year and establishes preliminary potential cash bonus percentages and the related performance targets for the upcoming season. The types of targets established for each individual vary in accordance with his or her position. For example, corporate vice presidents’ performance targets relate to Partnership performance, most specifically achievement of targeted EBITDA. Park general managers may have performance targets related to capital projects or reducing particular expenses at the parks they manage. Overall, as discussed below, a large percentage of the cash bonus

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will be determined in the Compensation Committee’s discretion. The Board reexamines compensation matters after the seasonal parks have closed for the season. Once the financial results for the season are available, the chief executive officer finalizes his evaluations of the other named executive officers, among others, and prepares recommendations with respect to cash and phantom unit awards as well as salary adjustments for the coming year. The chief executive officer generally presents this report to the Compensation Committee in October and to the Board at the late October Board meeting. Based on Partnership performance, park performance and individual performance, the Compensation Committee makes final recommendations with regard to cash bonuses, phantom unit awards and any salary adjustments, subject to Board approval.

We expect the Partnership’s performance to exceed market median, and accordingly we believe that providing potential compensation that exceeds market median to our executives is appropriate. In addition, in order to retain top talent at our corporate headquarters and throughout our locations, we believe that we must aim to compensate our named executive officers in the range of 75% of the pay level provided by a designated peer group of companies. Therefore, we target our total direct compensation, including salary, cash bonus and long-term incentive awards, to fall within that range. While we target total direct compensation in the 75^th percentile of the market, an executive’s actual total direct compensation could vary considerably from that target if we have a year that exceeds or fails to meet expectations. We believe that this is a fair result and appropriately motivates our executives to achieve peak corporate and park level performance.

We have targeted compensation in the range of the 75^th percentile of the market for the past several years and believe that this level is effective at retaining and attracting top executives. For example, the five named executive officers have an aggregate of 128 years of service with us. Each has held various positions and been elevated within the Partnership. We have made adjustments in compensation after the acquisition to bring our compensation levels closer to the 75^th percentile of the market with similar companies at our post-acquisition size, as discussed below. Currently, certain top executives’ total direct compensation exceeds the market level and others’ fall below, based on the Board’s assessment of each executive’s contribution and experience.

In 2005 and 2006 we employed two nationally recognized independent consulting firms to review and analyze our compensation program, including the compensation levels, the compensation structure and the mix of long-term and short-term compensation for certain of our named executive officers. These studies reflected competitive data for base salaries, annual bonuses and long-term incentive awards for senior management of comparable companies. In 2005, Pearl Meyer provided a competitive pay analysis for our chief executive officer as well as recommendations with regard to the compensation for the board of directors. In 2006, we engaged both Pearl Meyer and Watson Wyatt to analyze the compensation for our chief executive officer, our chief operating officer and our chief financial officer with companies of our comparable size after the acquisition of Paramount Parks.

The consultants developed a representative peer group of companies against which we measured our competitive pay level and structure for the executives indicated above. The consultants revised the 2005 peer group in 2006 in light of our acquisition of Paramount Parks, which essentially doubled our revenues and significantly increased the responsibilities of our management team. Based upon the Compensation Committee’s review of the proposed peer groups, we have determined that our peer group companies include those that have the following characteristics:

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The result of these criteria is a current peer group of 16 companies with median revenues of $915,000,000 and average revenues of $980,000,000. Our combined revenues, with the Paramount Parks included, are estimated to be between $950,000,000 and $1,000,000,000. The peer group companies include:

Based in part on the information gathered from the benchmarking studies and other recommendations provided by the compensation consultants, we devised a compensation schedule after the acquisition pursuant to which park general managers (such as Mr. Hildebrandt, the Vice President and General Manager of Cedar Point), divisional vice presidents (such as Mr. Bender, the Regional Vice President responsible for an area including Kings Island, Kings Dominion, Worlds of Fun and Carowinds) and corporate division heads would be compensated. We also adjusted the compensation structure of Messrs. Kinzel, Falfas and Crage to bring it more in line with market practices of companies in our size and industry range. In general, these adjustments resulted in increased base salaries and an increased bonus potential for these executives.