EXHIBIT (c)(2)
CONFIDENTIAL PRESENTATION TO:
John Q. Hammons Hotels, Inc.
Presentation to the Special Committee
of the Board of Directors
JUNE 14, 2005
LEHMAN BROTHERS
Table of Contents
- --------------------------------------------------------------------------------
I. Situation Overview
II. Summary of Proposed Transaction
III. Management Financial Projections
IV. Summary Valuation
V. Analysis of Consideration to Mr. Hammons
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
SITUATION OVERVIEW
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
KEY TRANSACTION TERMS
DESCRIPTION: JQH Acquisition, LLC is proposing to, among other
things, acquire all of the outstanding shares of Class
A common stock of John Q. Hammons Hotels, Inc.
CONSIDERATION: $24.00 per share in cash
TRANSACTION VALUE: (1) The amount offered is $146.0 million for minority
shares (class A shares not currently owned by Mr.
Hammons), including outstanding options, implying a
total market cap of $550.5 and an Enterprise Value
of $1,223.7
<Table>
<Caption>
OFFER PREMIA: CURRENT SHARE PRICE PRIOR TO ANNOUNCEMENT
JUNE 10, 2005 OCTOBER 18, 2004 (2)
------------------- ---------------------
JQH % JQH %
PREMIUM TO: PRICE PREMIUM PRICE PREMIUM
--------------- ------ ------- ------ --------
Offer Price $24.00 $24.00
1 Day (2) 23.43 2.4% 11.31 112.2%
7 Days Avg. 23.29 3.0% 11.14 115.4%
30 Days Avg. 22.10 8.6% 11.00 118.1%
60 Days Avg. 22.07 8.8% 10.48 129.0%
90 Days Avg. 22.24 7.9% 10.21 135.0%
180 Days Avg. 18.81 27.6% 9.68 147.9%
1 Year Avg. 16.30 47.3% 10.22 134.8%
1 Year Median 15.75 52.4% 9.99 140.2%
1 Year High 23.58 1.8% 11.50 108.7%
1 Year Low 9.30 158.1% 6.50 269.2%
</Table>
TRANSACTION TYPE: Cash Offer followed by a short-form merger pursuant to
a Merger Agreement
ESTIMATED CLOSING DATE: Second Half of 2005
BREAK-UP FEE: $20.0 million
TAX IMPLICATIONS: Consideration to be taxable to class A common stock
holders
- ----------------
1. The amount offered to minority shareholders is the market value of
6.083mm minority class A shares (4.981mm minority class A shares
outstanding as of 6/7/05 plus 1.102mm shares related to options,
calculated under the treasury method) at an offer price of $24.00 per
share. Enterprise value includes net debt as of April 1, 2005.
2. The "1 Day" trading date prior to announcement was October 15, 2004.
Announcement date based on initial public offer by Barcelo.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 1
Timeline of Events
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
SUMMARY OF KEY EVENTS
OCTOBER 18, 2004 O Barcelo Crestline Corporation ("Barcelo") submitted a
letter to the board of directors proposing to acquire
all of the outstanding shares of class A common stock
of John Q. Hammons Hotels, Inc. ("JQH" or the
"Company") for $13.00 per share in cash
O The Board of Directors formed a special committee (the
"Special Committee") to review the Barcelo proposal,
to negotiate the terms of the proposed transaction
with respect to the Class A minority shares and to
make a recommendation to the Board of Directors on
behalf of the holders of the Class A shares
OCTOBER 26, 2004 O Special committee retained Lehman Brothers to act as
its financial advisor and the law firm of Katten
Muchin Rosenman LLP to represent it and assist it in
its review
NOVEMBER 10, 2004 O The Company reported $336.2 million of revenues and
$92.3 million of EBITDA from continuing operations for
the first nine months of 2004. Revenues increased 3.9%
compared to the 2003 nine months ended October 3, 2003
DECEMBER 7, 2004 O The Special Committee reported to the Board of
Directors that it could not support Barcelo's offer to
acquire the Company's class A shares for $13.00 per
share, but that it was open to continuing negotiations
with Barcelo to arrive at transaction that would be
fair to its stockholders
DECEMBER 28, 2004 O The Company received a non-binding proposal from JD
Holdings, LLC and iStar Financial Inc. including a no
minimum condition tender offer for the Class A shares
for $20.50 per share in cash
DECEMBER 29, 2004 O Barcelo increased its offer to acquire the Company's
class A shares for $21.00 per share in cash
O The Company and Mr. Hammons agreed to negotiate
exclusively with Barcelo through January 31, 2005 with
regard to a possible merger
JANUARY 31, 2005 O The exclusivity agreement between the Company and
Barcelo expired as well as the exclusivity agreement
between Mr. Hammons and Barcelo
O JQH Acquisition, LLC (an entity affiliated with JD
Holdings, LLC) and GIC Real Estate, Inc. submitted a
proposal to acquire the outstanding shares of the
Company's class A common stock for $24.00 per share in
cash
O JQH Acquisition, LLC entered into a Stockholder
Agreement with James M. Clark, Jr., R. Scott Asen,
Gifford Combs, Stephen J. Clearman and Raffles
Associates, L.P. representing approximately 22% of the
Class A shares
- Shareholders agreed to support a merger at $24.00
per share for class A shares
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 2
Timeline of Events
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
SUMMARY OF KEY EVENTS
FEBRUARY 4, 2005 O The Company and Mr. Hammons agreed to negotiate
exclusively with JQH Acquisition, LLC and GIC Real
Estate, Inc. through February 28, 2005 with regard to
a possible merger
O Barcelo announced that it no longer intended to pursue
a transaction with the Company
FEBRUARY 15, 2005 O The Company reported $430.8 million of revenues and
$119.7 million of EBITDA from continuing operations
for 2004. Revenues increased 4.2% compared to 2003
FEBRUARY 25, 2005 O The Company and Mr. Hammons agreed to continue to
negotiate exclusively with JQH Acquisition, LLC
through March 10, 2005 with regard to a possible
merger
MARCH 9, 2005 O The Company and Mr. Hammons agreed to continue to
negotiate exclusively with JQH Acquisition, LLC
through April 30, 2005 with regard to a possible
merger
APRIL 29, 2005 O The Company and Mr. Hammons agreed to continue to
negotiate exclusively with JQH Acquisition, LLC
through May 24, 2005 with regard to a possible merger
MAY 11, 2005 O The Company reported $111.4 million of revenues and
$32.1 million of EBITDA from continuing operations for
the first quarter ended April 1, 2005. Revenues
increased 20% compared to the first quarter ended
April 2, 2004
MAY 25, 2005 O The Company preliminarily approved forms of agreements
to be entered into between JQH Acquisition, LLC and
Mr. Hammons
- Agreement describes the various arrangements
proposed to be entered into between the parties in
connection with the proposed acquisition of the
Company by JQH Acquisition, LLC
- The Company allowed the parties until June 30,
2005 to finalize the agreements
JUNE 3, 2005 O The Special Committee received a letter from JQH
Acquisition, LLC requesting approval of several
agreements between JQH Acquisition, LLC, its financing
sources and Mr. Hammons
O Mr. Hammons advised the Special Committee that,
subject to its approval, he was prepared to enter into
the proposed transactions with JQH Acquisition, LLC
and its financing sources substantially in the forms
presented to the Special Committee
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 3
Summary Historical Operating Results
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
SUMMARY OPERATING RESULTS (1)
($ in millions, except RevPAR and ADR figures)
<Table>
<Caption>
FISCAL YEAR ENDED DECEMBER, THREE-MONTHS ENDED LTM
--------------------------------------------------------------------- -------------------- --------
1998A 1999A 2000A 2001A 2002A 2003A 2004A 4/2/2004 4/1/2005 4/1/2005
------ ------ ------ ------- ------- ------- ------- -------- -------- --------
TOTAL REVENUE $339.0 $371.7 $411.4 $ 413.4 $420.3 $ 413.5 $430.8 $ 109.3 $ 111.4 $432.9
% Growth 8.2% 9.6% 10.7% 0.5% 1.7% (1.6%) 4.2% 2.0%
COGS 194.0 207.9 227.9 233.2 224.3 216.4 220.7 53.8 55.1 222.0
------ ------ ------ ------- ------- ------- ------- -------- -------- --------
Gross Profit $144.9 $163.7 $183.4 $ 180.2 $196.1 $ 197.1 $210.0 $ 55.4 $ 56.4 $210.9
% Margin 42.8% 44.1% 44.6% 43.6% 46.6% 47.7% 48.8% 50.7% 50.6% 48.7%
SG&A 95.5 104.9 117.5 124.9 130.6 131.0 139.9 34.6 35.7 141.0
% of Sales 28.2% 28.2% 28.6% 30.2% 31.1% 31.7% 32.5% 31.7% 32.0% 32.6%
EBITDA $ 95.0 $104.5 $117.4 $ 115.4 $117.6 $ 115.9 $119.7 $ 32.3 $ 32.1 $119.4
% Margin 28.0% 28.1% 28.5% 27.9% 28.0% 28.0% 27.8% 29.6% 28.8% 27.6%
D&A 45.6 45.7 51.5 60.1 52.1 49.8 49.5 11.5 11.4 49.5
% of Sales 13.4% 12.3% 12.5% 14.5% 12.4% 12.0% 11.5% 10.5% 10.3% 11.4%
EBIT $ 49.4 $58.9 $65.9 $ 55.4 $ 65.5 $ 66.1 $70.1 $ 20.8 $ 20.7 $70.0
% Margin 14.6% 15.8% 16.0% 13.4% 15.6% 16.0% 16.3% 19.1% 18.5% 16.2%
Capex $131.2 $123.6 $ 43.5 $ 32.1 $ 28.6 $ 18.4 $30.3 $ 2.6 $ 11.3 $39.0
% of Sales 38.7% 33.3% 10.6% 7.8% 6.8% 4.4% 7.0% 2.4% 10.1% 9.0%
REVPAR $56.81 $59.65 $63.79 $ 63.68 $ 64.05 $ 64.92 $67.51 $ 67.84 $69.41
% Change in Yield 9.6% 5.0% 6.4% -0.2% 0.6% 1.4% 4.0% 2.3%
ADR $91.38 $94.87 $98.89 $100.55 $ 99.13 $100.55 $102.77 $101.12 $107.65
OCCUPANCY 62.2% 62.9% 64.5% 63.3% 64.6% 64.6% 65.7% 67.1% 64.5%
</Table>
- ----------
1. Excludes asset impairment charges, gains on property dispositions and other
non-recurring charges.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 4
Current Balance Sheet and Valuation
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
BALANCE SHEET AS OF APRIL 1, 2005
($ in millions)
<Table>
Cash & Equivalents $ 72.4
Accounts Receivable 13.4
Inventories 1.2
Prepaid Expenses & Other 3.1
------
Total Current Assets $ 90.1
Property & Equipment, net $684.4
Other LT Assets 44.0
------
TOTAL ASSETS $818.5
</Table>
<Table>
Short Term Debt $ 7.2 0.9%
Accounts Payable 4.0 0.5%
Accrued Expenses 55.6 6.8%
------ ------
Total Current Liabilities $ 66.8 8.2%
Long Term Debt $738.4 90.2%
Other LT Liabilities 5.9 0.7%
Stockholders' Equity 7.3 0.9%
------ ------
TOTAL LIABILITIES & EQUITY $818.5 100.0%
</Table>
SUMMARY MARKET STATISTICS
($ in millions, except per share data)
52 Week High 6/07/05 $ 23.58
52 Week Low 6/15/04 $ 9.30
Current Stock Price 6/10/05 $ 23.20
Total Mr. Hammons Diluted Shares (1) 16.8
Total Minority Diluted Shares (2) 6.1
Market Capitalization (3) $ 531.8
+ Net Debt 673.2
--------
Enterprise Value $1,205.0
========
<Table>
<Caption>
RELEVANT
ENTERPRISE VALUE TO: DATA MULTIPLE
- -------------------- -------- --------
LTM Revenue (4/1/05) $ 432.9 2.8x
2005E Revenue 456.8 2.6x
2006E Revenue 474.9 2.5x
LTM EBITDA (4/1/05) $ 119.4 10.1x
2005E EBITDA 126.3 9.5x
2006E EBITDA 132.0 9.1x
TOTAL DEBT / LTM EBITDA 6.2x
NET DEBT / LTM EBITDA 5.6x
</Table>
- ----------
1. Mr. Hammons shares include Class A shares, Class A outstanding stock
options (converted using treasury method), Class B shares and LP units
(B shares and LP units are convertible into Class A shares).
2. Includes minority shares and is adjusted for the effects of outstanding
options not owned by Mr. Hammons (converted using the treasury method).
3. Market capitalization based on Company-provided shares outstanding and
options outstanding (converted using the treasury method) as of 6/7/05.
Share price as of 6/10/05.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 5
Historical Stock Price Performance
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
JOHN Q. HAMMONS HOTELS STOCK PRICE PERFORMANCE SINCE IPO
<Table>
PRICE
$24
1/31/2005: Investor group
$22 offers to buy all class A
11/16/1994: Initial public common stock for $24.00 per
$20 offering of 6.04 million class share in cash
A common stock at $16.50
$18 per share
10/18/2004: Barcelo Crestline
$16 offers to buy all class A
common stock not owned by
$14 Mr. Hammons for $13.00 per
share in cash
$12
$10
$8
$6
$4
$2
11/17/94 1/19/96 3/21/97 5/26/98 7/28/99 9/29/00 11/30/01 2/3/03 4/7/04 6/10/05
JOHN Q. HAMMONS HOTELS INC.
</Table>
- ----------------
Source: Factset Research Systems.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 6
JQH Comparative Stock Price Performance
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
COMPARATIVE STOCK PRICE PERFORMANCE- TRAILING TWELVE MONTHS 6/10/2005
<Table>
<Caption>
INDEXED PRICE
250%
+144.2
225%
200%
175%
150%
125% +35.9%
+32.2%
100% +29.3%
75% +7.3%
6/10/04 7/20/04 8/30/04 10/8/04 11/19/04 12/29/04 2/8/05 3/18/05 4/29/05 6/10/05
-- JQH -- S&P 500
-- LODGING MID-CAP C CORPS COMPOSITE -- LODGING SMALL-CAP C CORPS COMPOSITE LODGING REITS
-- COMPOSITE
</Table>
- ----------
Note: Lodging Mid-Cap C-Corps Composite consists of HOT, MAR, HLT, IHG, FHR, FS;
Lodging Small-Cap C-Corps Composite consists of WBR, CHH, LQI, OEH, JQH,
LGN, WEH, IHR;
Lodging REITs Composite consists of HMT, HPT, FCH, MHX, LHO, ENN, KPA,
HIH, AHT, WXH, BOY, HT.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 7
JQH Ownership Profile
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
SHAREHOLDER ANALYSIS
<Table>
<Caption>
% FULLY
% OF CLASS CLASS A % OF CLASS DILUTED
CLASS A A SHARES EQUIVALENT A EQUIVALENT OPTIONS SHARES
INSTITUTIONAL AND RETAIL HOLDERS SHARES HELD OUTSTANDING SHARES HELD SHARES OUTSTANDING HELD OUTSTANDING
- ------------------------------------------ ----------- ----------- ----------- ------------------ --------- -----------
JQH Shareholders for Fairplay (1) 1,017,923 19.39% 1,017,923 4.72% 4.36%
First Manhattan Co. 605,319 11.53% 605,319 2.80% 2.59%
Pirate Capital, LLC 475,100 9.05% 475,100 2.20% 2.03%
Washburne Capital Management 346,100 6.59% 346,100 1.60% 1.48%
Severn River Capital Management, LLC 294,400 5.61% 294,400 1.36% 1.26%
Loeb Partner Corporation 183,600 3.50% 183,600 0.85% 0.79%
Mariner Investment Group, Inc. 134,979 2.57% 134,979 0.63% 0.58%
Raffles Associates, LP 129,800 2.47% 129,800 0.60% 0.56%
Dimensional Fund Advisors, Inc. 113,500 2.16% 113,500 0.53% 0.49%
Others 1,441,434 27.45% 1,441,434 6.68% 6.17%
---------------------------------------- ----------- ----------- ----------- ------------------ -----------
TOTAL INSTITUTIONAL AND RETAIL HOLDERS 4,742,155 90.32% 4,742,155 21.97% 20.29%
INSIDERS
- ---------------------------------------
John Q Hammons (2) 269,100 5.13% 16,607,100 76.93% 335,000 72.50%
Other Insiders 238,957 4.55% 238,957 1.11% 1,444,588 7.20%
---------------------------------------- ----------- ----------- ----------- ------------------ --------- -----------
TOTAL INSIDERS 508,057 9.68% 16,846,057 78.03% 1,779,588 79.71%
Total Class A Shares 5,250,212
Total Class A Equivalent Shares 21,588,212
Total Options and Warrants Outstanding 1,779,588
---------------------------------------- -----------
TOTAL FULLY DILUTED SHARES 23,367,800
</Table>
- ----------
Source: ShareWorld, 2004 10-K, company-provided option schedule.
1. Investor consortium (per 13D amendment filed on 2/2/05) represented by
the following shareholders: James Clark, R. Scott Asen, Gifford Combs
and Stephen J. Clearman.
2. Equivalent shares owned include Class A shares (269,100), Class B
shares (294,100), and L.P. Units (16,043,900).
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 8
Histogram of Volume Based Trading Prices
- --------------------------------------------------------------------------------
SITUATION OVERVIEW
PERCENT OF SHARES TRADED
SINCE ANNOUNCEMENT (10/18/04 TO 6/10/05)
<Table>
<Caption>
% TOTAL VOLUME
45.0%
36.0%
28.9%
27.0% 23.1%
20.2%
18.0% 16.4%
9.0% 9.9%
0.0% 1.5%
$12.90 - $14.75 - $16.60 - $18.45 - $20.30 - $22.15 -
14.75 16.60 18.45 20.30 22.15 24.00
</Table>
3 MONTHS PRE-ANNOUNCEMENT (7/15/04 TO 10/15/04)
<Table>
<Caption>
% TOTAL VOLUME
45.9%
45.0%
36.0%
27.0%
18.0% 17.9%
15.9%
9.0% 7.9%
5.7% 6.7%
0.0%
$ 9.40 - $ 9.75 - $10.10 - $10.45 - $10.80 - $11.15 -
9.75 10.10 10.45 10.80 11.15 11.50
</Table>
12 MONTHS PRE-ANNOUNCEMENT (10/15/03 TO 10/15/04)
<Table>
<Caption>
% TOTAL VOLUME
54.0%
48.6%
45.0%
36.0%
27.0%
18.0% 17.8%
12.1%
9.0% 11.9%
2.5% 7.1%
0.0%
$ 6.50 - $ 7.33 - $ 8.17 - $ 9.00 - $ 9.83 - $10.67 -
7.33 8.17 9.00 9.83 10.67 11.50
</Table>
SINCE IPO (11/16/94 - 10/15/04)
<Table>
<Caption>
% TOTAL VOLUME
45.0%
36.0%
27.0% 26.7%
23.8%
18.0%
14.0%
9.0% 10.3% 12.3% 12.9%
0.0%
$ 3.00 - $ 5.33 - $ 7.67 - $10.00 - $12.33 - $14.67 -
5.33 7.67 10.00 12.33 14.67 17.00
</Table>
- ----------
Source: Factset.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 9
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED TRANSACTION
Summary of Terms to Class A Shareholders
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED TRANSACTION
SUMMARY OF KEY TERMS TO CLASS A SHAREHOLDERS
TRANSACTION SUMMARY: o Merger whereby all Class A shares are exchanged for
cash
CONSIDERATION: o $24.00 per class A share
TREATMENT OF OPTIONS: o All options are vested and cashed out at the spread
to deal price
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 10
Summary of Terms to Mr. Hammons
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED TRANSACTION
SUMMARY OF KEY TERMS TO MR. HAMMONS
PREFERRED INTEREST: o Redemption preference of $335 million
o Either member may request redemption after the sooner
of 13 years after issuance or Mr. Hammons demise (Mr.
Hammons is 86 years old)
- 18 months to begin liquidation and one year
thereafter to complete
- Earliest obligation, however, would not be until
10 years and 1 month after closing
o Early Liquidation Preference of $50 million
- Reduces Redemption Preference
- Only upon demise of Mr. Hammons (but not earlier
than 12 months after closing)
- 24 months notice
o Various valuation protective covenants, including net
worth covenant (for distributions), maintenance capex
requirements, asset sale restrictions, maximum
leverage, and others
LINE-OF-CREDIT: o Interim line of credit, prior to closing, of $25
million
o Upon closing, Mr. Hammons will receive a 13 year
line-of-credit of up to $75 million until first
anniversary, $175 million until second anniversary,
$225 million until third anniversary, $250 million
until fourth anniversary and $275 million for the
duration of the line
- Interest rate of 1 month LIBOR + 100 basis points
- Guaranteed by iStar Financial
o Mr. Hammons, during his lifetime, may continue to draw
on line-of-credit for up to seven years
o Line-of-credit matures upon redemption of Preferred
Interest
o Except for Early Liquidation Preference, any proceeds
from redemption of Preferred Interest must be used to
repay the line-of-credit
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 11
Summary of Terms to Mr. Hammons
SUMMARY OF PROPOSED TRANSACTION
SUMMARY OF KEY TERMS TO MR. HAMMONS
NEWCO INTEREST: O 2% of cash distributions from
operating cash flow
O Valuation upside participation
- Threshold based on enterprise
value at closing plus certain
hurdle rates
- Participation of 5% of first $100
million in excess of threshold
and 3% of any amount thereafter
CHATEAU LAKE HOTEL AND O Chateau Lake Hotel and Management
MANAGEMENT COMPANY Company are to be distributed to
DISTRIBUTION: Mr. Hammons at an equity value of
$19.9 million
CLASS A COMMON SHARES O $24 per share in cash
AND CLASS A STOCK O Net cash settlement of Class A
OPTIONS: stock options
MANAGEMENT AND O NewCo to pay certain overhead costs
REVENUE SHARING: of the Management Company
O Mr. Hammons personal portfolio of
hotels to pay a 2% of revenue fee
to NewCo
LEHMAN BROTHERS 12
Summary of Other Terms of Merger Agreement
SUMMARY OF PROPOSED TRANSACTION
SUMMARY OF OTHER TERMS OF MERGER AGREEMENT
VOTING REQUIREMENT: O Subject to majority of minority
shareholders
O Special Committee may waive such
requirement
TERMINATION FEE: O Maximum termination fee of $20
million (inclusive of expense
reimbursement)
- Announcement of alternative
transaction within 18 months,
payable upon closing
O Cap on expense reimbursement of $8
million
O Lower termination fee of $4 million
plus expense reimbursement (payable
earlier)
- Mr. Hammons demise and
termination of Hammons
Transactions
- In the event of a majority of
minority vote, minority
shareholders reject the
transaction (even in absence of
an alternative transaction)
O Termination fee capped at $3
million until Parent provides
financing commitment letter
FINANCING COMMITMENT: O Parent must deliver commitment
letter or replacement commitment
letter by later of 60 days from
signing or 7 business days
subsequent to receiving notice of
completion of Proxy statement
ESCROW DEPOSIT: O $3 million escrow deposit by Parent
LEHMAN BROTHERS 13
Transaction Structure
SUMMARY OF PROPOSED TRANSACTION
INITIAL STRUCTURES
<Table>
JOHN Q. HAMMONS HOTELS, INC. JQH ACQUISITIONS, LLC
JQH ENTITIES JD OTHER POTENTIAL
ISTAR HOLDINGS, LLC INVESTORS
o JQH
o JQH Trust
o Hammons, Inc. 269,100 PUBLIC
Class A Common Class A Common
All Class B Common
JOHN Q. LP Interest
HAMMONS (76%) JQH, INC.
HOTELS, LLC JHQ
ACQUISITION, LLC
GP Interest
(24%)
100%
PROPERTY JQH LP
SUBSIDIARIES
MERGER SUB
LPII
100%
CHATEAU LAKE, LLC
</Table>
LEHMAN BROTHERS 14
Transaction Structure
- --------------------------------------------------------------------------------
SUMMARY OF PROPOSED TRANSACTION
FINAL STRUCTURE
<Table>
iStar Funding Agreement
JD OTHER POTENTIAL
iSTAR HOLDINGS, LLC INVESTORS
JQH ENTITIES
o JQH
o JQH Trust LTLOC
o Hammons, Inc.
JOHN Q.
HAMMONS TAXPAYER
HOTELS, LLC CORP 99% 100% PFD
Interest
JQH
1% ACQUISITION,
LLC
TAXPAYER CHATEAU
PROPERTY P'SHIP LAKE, LLC 100% 100% 100%
SUBSIDIARIES
100%
LENDCO JQH, INC.
JQHHM JQH LP ATRIUM
HOTELS, LLC PFD Interest
GP Interest
100%
TRS
LPII
</Table>
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 15
MANAGEMENT FINANCIAL PROJECTIONS
Historical & Projected JQH & Lodging Industry RevPAR
MANAGEMENT FINANCIAL PROJECTIONS
HISTORICAL AND PROJECTED JQH AND LODGING INDUSTRY REVPAR GROWTH
GROWTH RATE
<Table>
12%
9.6%
10%
7.8% 7.8%
8%
6.8%
6.4%
6.0%
6% 5.5%
5.3% 5.0%
4.6%
4.0%
4%
2.6% 2.9%
2.3%
2% 1.4%
0.6%
0.4%
0%
-0.2%
- -2%
-2.7%
- -4%
- -6%
-7.0%
- -8%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
US LODGING INDUSTRY JOHN Q HAMMONS
</Table>
Source: Company filings, Company projections and PwC research (for U.S.
lodging industry).
LEHMAN BROTHERS 16
Historical & Projected EBITDA Margin & RevPAR Growth
MANAGEMENT FINANCIAL PROJECTIONS
COMPARABLE COMPANY HISTORICAL AND PROJECTED EBITDA MARGIN
<Table>
40%
35%
30% [LINE GRAPH]
25%
20%
15%
2000 2001 2002 2003 2004 2005E 2006E
FELCOR MERISTAR EQUITY INNS WINSTON JOHN Q HAMMONS
</Table>
COMPARABLE COMPANY HISTORICAL AND PROJECTED REVPAR GROWTH (Y-O-Y)
<Table>
10%
5%
0%
[LINE GRAPH]
- -5%
- -10%
- -15%
2000 2001 2002 2003 2004 2005E 2006E
FELCOR MERISTAR EQUITY INNS WINSTON JOHN Q HAMMONS
</Table>
Source: Company filings, Wall Street research.
LEHMAN BROTHERS 17
Projected Operating Results
- --------------------------------------------------------------------------------
MANAGEMENT FINANCIAL PROJECTIONS
PROJECTED OPERATING RESULTS (1)
($ in millions, except RevPAR and ADR figures)
<Table>
<Caption>
FISCAL YEAR ENDED DECEMBER,
-----------------------------------------------------------------------------------------
2004A 2005E 2006E 2007E 2008E 2009E 2010E
------ ------ ------ ------ ------ ------ ------
TOTAL REVENUE $430.8 $456.8 $474.9 $492.2 $509.3 $525.1 $541.3
% Growth 4.2% 6.0% 4.0% 3.6% 3.5% 3.1% 3.1%
COGS 220.7 233.9 240.1 245.8 251.4 256.6 261.9
------ ------ ------ ------ ------ ------ ------
Gross Profit $210.0 $222.9 $234.8 $246.4 $257.9 $268.5 $279.4
% Margin 48.8% 48.8% 49.4% 50.1% 50.6% 51.1% 51.6%
SG&A 139.9 148.0 153.7 159.0 164.2 169.0 173.9
% of Sales 32.5% 32.4% 32.4% 32.3% 32.2% 32.2% 32.1%
EBITDA $119.7 $126.3 $132.0 $138.4 $144.7 $150.5 $156.5
% Margin 27.8% 27.6% 27.8% 28.1% 28.4% 28.7% 28.9%
D&A 49.5 51.3 51.0 51.0 51.0 51.0 51.0
% of Sales 11.5% 11.2% 10.7% 10.4% 10.0% 9.7% 9.4%
EBIT $70.1 $75.0 $81.1 $87.4 $93.7 $99.5 $105.5
% Margin 16.3% 16.4% 17.1% 17.8% 18.4% 19.0% 19.5%
Capex $30.3 $43.5 $30.0 $30.9 $31.8 $32.8 $33.8
% of Sales 7.0% 9.5% 6.3% 6.3% 6.2% 6.2% 6.2%
REVPAR $67.51 $69.09 $72.26 $75.20 $78.04 $80.50 $83.02
% Change in Yield 4.0% 2.3% 4.6% 4.1% 3.8% 3.2% 3.1%
ADR $102.77 $103.95 $106.96 $109.85 $112.71 $115.34 $118.05
OCCUPANCY 65.7% 66.5% 67.6% 68.5% 69.2% 69.8% 70.3%
</Table>
- ----------
1. Excludes asset impairment charges, gains on property dispositions and other
non-recurring charges.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 18
- --------------------------------------------------------------------------------
SUMMARY VALUATION
Overview of Valuation Methodologies
- --------------------------------------------------------------------------------
SUMMARY VALUATION
<Table>
VALUATION
METHODOLOGIES
COMPARABLE COMPARABLE
DISCOUNTED CASH PREMIUMS PAID
PUBLIC COMPANY TRANSACTIONS LBO ANALYSIS
FLOW ANALYSIS ANALYSIS
ANALYSIS ANALYSIS
</Table>
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
19
JQH Purchase Price Ratio Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
JOHN Q. HAMMONS HOTELS PURCHASE PRICE RATIO ANALYSIS
($ in millions, except per share data)
<Table>
<Caption>
RANGE OF ACQUISITION PRICES
-------------------------------------------------------------
ACQUISITION PRICE / SHARE $ 18.00 $ 20.00 $ 22.00 $ 24.00 $ 26.00
--------- --------- --------- --------- ---------
Variance to Current (3) -22% -14% -5% 3% 12%
Variance to Announcement (1) 59% 77% 95% 112% 130%
Diluted Shares (2) 22.8 22.8 22.9 22.9 23.0
CURRENT
STATISTIC
---------
Diluted Equity Value $ 531.8(3) $ 410.3 $ 457.0 $ 503.7 $ 550.5 $ 597.2
Net Debt 673.2 673.2 673.2 673.2 673.2 673.2
--------- --------- --------- --------- --------- ---------
Enterprise Value $ 1,205.0 $ 1,083.5 $ 1,130.2 $ 1,177.0 $ 1,223.7 $ 1,270.4
ENTERPRISE VALUE AS MULTIPLE OF:
2005E EBITDA (4) $ 126.3 9.5x 8.6x 8.9x 9.3x 9.7x 10.1x
2006E EBITDA (4) $ 132.0 9.1x 8.2x 8.6x 8.9x 9.3x 9.6x
STOCK PRICE PREMIUM TO:
52-Week High $ 23.58 -2% -24% -15% -7% 2% 10%
52-Week Low $ 9.30 149% 94% 115% 137% 158% 180%
</Table>
- ----------
1. Share price at announcement as of 10/15/2004.
2. Diluted shares based on treasury method for accounting of options.
3. Share price current as of 6/10/2005.
4. EBITDA estimates excludes asset impairment charges, debt extinguishment
costs, gain on sales, and other one-time items.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
20
John Q. Hammons Hotels Valuation Summary
- --------------------------------------------------------------------------------
SUMMARY VALUATION
JOHN Q. HAMMONS HOTELS ESTIMATED ENTERPRISE AND PER SHARE VALUATION RANGE
<Table>
($ in millions, except per share data)
IMPLIED ENTERPRISE VALUE $897 $990 $1,083 $1,177 $1,270
COMPARABLE COMPANY ANALYSIS $20.28 $25.69
Enterprise Value $1,137 - 1,263
2005E EBITDA Multiple 9.0x - 10.0x
COMPARABLE TRANSACTIONS ANALYSIS $22.75 $27.86
Enterprise Value $1,194 - 1,314
LTM EBITDA Multiple 10.0x - 11.0x
DISCOUNTED CASH FLOW ANALYSIS $20.00 $24.00
Enterprise Value $1,130 - 1,224
Terminal EBITDA Multiple 8.5x - 9.5x
LBO ANALYSIS $16.00 $20.00
Enterprise Value $1,060 - 1,130
Terminal EBITDA Multiple 8.5x - 9.5x
PREMIUMS PAID ANALYSIS $14.31 $15.13
Enterprise Value $997 - 1,017
Premium to Share Price: 26.5% - 38.1%
PREMIUMS PAID ANALYSIS - CASH
$14.17 $15.92
MINORITY SQUEEZE-OUT TRANSACTIONS
1-DAY PRIOR
Enterprise Value $994 - 1,035
STOCK JD HOLDINGS FINAL JD HOLDINGS
PRICE: INITIAL BARCELO INITIAL OFFER: BARCELO FINAL OFFER:
Premium to Share Price: 25.3% - 40.7% $11.31 OFFER: $13.00 $20.50 OFFER: $21.00 $24.00
SHARE PRICE $10 $14 $18 $22 $26
- ------------------------------------------------------------------------------------------------------------------------------------
</Table>
LEHMAN BROTHERS
21
Comparable Company Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
o Lehman Brothers evaluated a universe of six lodging companies in its
comparable company public trading multiples analysis
o No company used in this analysis is directly comparable to JQH in terms of
a number of important factors such as asset type, business model, size,
corporate structure, dividend yield and tax situation
o Lehman Brothers believes the appropriate valuation multiple for JQH is
lower than the public valuation multiples for the comparable companies
analyzed
- Current EBITDA multiples for the comparable companies analyzed are
at historically high levels due to strong anticipated growth from
RevPAR increases and margin improvements
- JQH's current financial performance is not expected to improve as
rapidly as that of the comparable companies analyzed
o JQH's Q1 2005 RevPAR growth was significantly lower than the
Q1 2005 RevPAR growth of comparable companies analyzed
o JQH's 2005E EBITDA margin is near its 2000A EBITDA margin
level while the EBITDA margins of comparable companies remain
significantly below historical levels
COMPARABLE COMPANY ANALYSIS
($ in millions, except per share data)
<Table>
<Caption>
EV / EBITDA
STOCK PRICE DISC. TO MARKET NET ENTERPRISE ---------------------------
COMPANY NAME AS OF 6/10/05 52-WK. HIGH VALUE DEBT VALUE LTM 2005E 2006E
- ------------ ------------- ----------- -------- -------- ---------- ------ ------ -----
JOHN Q. HAMMONS HOTELS $ 23.20 -1.6% $ 531.8 $ 673.2 $1,205.0 10.1X 9.5X 9.1X
FelCor $ 14.25 -4.9% $ 896.7 $1,610.6 $3,033.3 11.6x 11.4x 10.2x
MeriStar Hospitality 8.16 -4.4% 732.8 1,483.4 2,216.2 12.9x 11.4x 10.5x
Sunstone Hotel Investors 23.42 -2.3% 990.2 861.0 2,072.5(2) NM NM 10.9x
Equity Inns 12.70 -1.5% 703.8 418.6 1,205.9 14.1x 11.9x 11.1x
Lodgian 10.90 -25.3% 267.6 372.8 641.9 11.5x 11.8x 10.2x
Winston 10.95 -8.4% 305.2 151.1 550.2 13.3x 10.4x 9.0x
<Caption>
REVPAR EBITDA MARGIN
DIVIDEND NET DEBT / ---------------------- -------------------- EV /
YIELD EBITDA Q1 2005 % GROWTH(1) 2000A 2005E ROOM
-------- ---------- -------- ----------- ----- ----- ----
JOHN Q. HAMMONS HOTELS 0.0% 5.6X $ 69.41 2.3% 28.5% 27.6% $111,030
FelCor 0.0% 6.2x $ 68.94 6.7% 27.4% 21.8% $ 76,787
MeriStar Hospitality 0.0% 8.7x 73.64 5.1% 28.5% 23.5% 111,505
Sunstone Hotel Investors 4.9% 7.2x 69.96 8.6% NA 25.6% 130,526
Equity Inns 4.7% 4.9x 60.01 11.1% 36.4%(3) 32.5% 87,617
Lodgian 0.0% 6.7x 44.99 5.3% 21.6% 17.3% 47,626
Winston 5.5% 3.6x 55.41 4.3% 37.3% 34.2% 78,470
</Table>
- ----------
Source: Company filings and equity research.
(1) Year-over-year growth.
(2) Market value, net debt and enterprise value pro forma for six Renaissance
hotels portfolio acquisition in April 2005.
(3) Represents 2001A EBITDA margin. Comparable 2000A EBITDA margin not
available.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 22
Comparable Company Value Summary
- --------------------------------------------------------------------------------
SUMMARY VALUATION
<Table>
IMPLIED VALUE OF JOHN Q. HAMMONS HOTELS
($ in millions, except per share data)
JOHN Q. HAMMONS HOTELS MULTIPLE RANGE IMPLIED ENTERPRISE VALUE RANGE
- ---------------------------- ---------------------------- ------------------------------
2005E EBITDA $126.3 9.0x - 10.0x $1,136.8 - $1,263.1
IMPLIED REFERENCE RANGE $1,136.8 - $1,263.1
Less: Net Debt (1) $ (673.2) $ (673.2)
Plus: Outstanding Options Proceeds $ 10.4 $ 10.4
-----------------------------------------------------------------------------
IMPLIED EQUITY VALUE REFERENCE RANGE $ 473.9 - $ 600.2
IMPLIED VALUE PER SHARE $ 20.28 - $ 25.69
</Table>
- ----------
1. Net debt of $673.2 million as of 4/1/05.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
23
Comparable Lodging Sector Transactions Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
<Table>
<Caption>
COMPARABLE TRANSACTIONS ANALYSIS
EQUITY VALUE TRANSACTION VALUE ENTERPRISE VALUE /
ANNOUNCED ACQUIRER/TARGET ($MM) ($MM) LTM EBITDA
- --------- --------------- ------------ ----------------- ------------------
Ashford Hospitality Trust /
Mar-05 Portfolio of 21 Hotels $ 85 $ 250 8.8x
The Blackstone Group /
Aug-04 Prime Hospitality Corp. 572 795 13.0x
La Quinta Corporation /
Jul-04 Baymont Inns & Suites 415 415 13.4x
The Blackstone Group /
Mar-04 Extended Stay America, Inc. 1,595 3,094 13.8x
CNL Hospitality /
May-03 RFS Hotel Investors 395 696 11.9x
Jan-02 Inntown Suites /
Suburban Lodges 104 203 8.3x
The Blackstone Group /
Nov-01 Homestead Village, Inc. 480 740 7.4x
Accor /
Jul-99 Red Roof Inns 656 1,181 8.5x
SHP Acquisition LLC /
Apr-99 Sunstone Hotel Investors Inc. 416 878 10.4x
Mean 10.6x
Median 10.4x
</Table>
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
24
Comparable Transactions Value Summary
- --------------------------------------------------------------------------------
SUMMARY VALUATION
IMPLIED VALUE OF JOHN Q. HAMMONS HOTELS
<Table>
<Caption>
($ in millions, except per share data)
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN Q. HAMMONS HOTELS MULTIPLE RANGE IMPLIED ENTERPRISE VALUE RANGE
- ----------------------------------- --------------------- ------------------------------------
LTM EBITDA (4/1/05) $119.4 10.0x - 11.0x $1,194.4 - $1,313.9
IMPLIED REFERENCE RANGE $1,194.4 - $1,313.9
Less: Net Debt (1) $ (673.2) $ (673.2)
Plus: Outstanding Options Proceeds $ 10.4 $ 10.4
-------- --------
IMPLIED EQUITY VALUE REFERENCE RANGE $ 531.5 - $ 651.0
IMPLIED VALUE PER SHARE $ 22.75 $ 27.86
</Table>
- ----------
1. Net debt of $673.2 million as of 4/1/05.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
25
Discounted Cash Flow Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
DISCOUNTED CASH FLOW VALUATION
($ in millions, except per share amounts)
<Table>
<Caption>
TERMINAL EBITDA MULTIPLE
--------------------------------------
8.5X 9.0X 9.5X
DISCOUNT RATE
8.5% $ 340 $ 340 $ 340 PV of Free Cash Flows
$ 824 $ 872 $ 921 PV of Terminal Value
------ ------ ------
$1,164 $1,213 $1,261 Enterprise Value
$ 501 $ 550 $ 598 Equity Value (1)
$21.45 $23.52 $25.60 Value Per Share
9.0% $ 336 $ 336 $ 336 PV of Free Cash Flows
$ 802 $ 849 $ 896 PV of Terminal Value
------ ------ ------
$1,138 $1,185 $1,232 Enterprise Value
$ 475 $ 522 $ 569 Equity Value (1)
$20.31 $22.33 $24.35 Value Per Share
9.5% $ 331 $ 331 $ 331 PV of Free Cash Flows
$ 781 $ 826 $ 872 PV of Terminal Value
------ ------ ------
$1,112 $1,158 $1,204 Enterprise Value
$ 449 $ 495 $ 541 Equity Value (1)
$19.21 $21.17 $23.14 Value Per Share
</Table>
o Implied perpetuity growth rates for selected terminal multiples ranges
from 1.8% to 3.5%
o Terminal multiples are in line with historical trading range of JQH
- ----------
1. Net debt of $673.2 million as of 4/1/05.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
26
LBO Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
SUMMARY LBO ANALYSIS
<Table>
<Caption>
($ in millions) LTM 4/1/05 TRANSACTION Q3 05 Q4 05 2005 2006 2007 2008 2009
- --------------------------- ---------- ----------- -------- ------ ------ ------ ------ ------ ------
EBITDA $ 119.4 $ 33.1 $ 27.7 $ 60.8 $132.0 $138.4 $144.7 $ 150.5
Depreciation & Amortization $ (12.8) $(12.8) $(25.7) $(51.0) $(51.0) $(51.0) $ (51.0)
Interest (14.8) (14.7) (29.5) (58.5) (54.8) (50.2) (44.9)
-------- ------ ------ ------ ------ ------ --------
Pretax Income $ 5.4 $ 0.2 $ 5.6 $ 22.6 $ 32.7 $ 43.5 $ 54.6
Taxes $ (0.0) $ (0.0) $ (0.1) $ (0.3) $ (0.3) $ (0.3) $ (0.3)
Net Income 5.4 0.1 5.5 22.3 32.4 43.2 54.3
+ D&A 12.8 12.8 25.7 51.0 51.0 51.0 51.0
- Capex (10.9) (10.9) (21.8) (30.0) (30.9) (31.8) (32.8)
-------- ------ ------ ------ ------ ------ --------
FREE CASH FLOW $ 7.4 $ 2.1 $ 9.5 $ 43.3 $ 52.5 $ 62.3 $ 72.5
======== ====== ====== ====== ====== ====== ========
Debt (4/1/05) $ 745.6 836.1 $ 828.7 $826.6 $826.6 $783.4 $730.9 $668.6 $ 596.0
Cash (4/1/05) 72.4 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0
Proceeds from Sale $1,354.5
Less: Debt (586.0)
--------
Cash Flows to Equity Investor (299.7) -- -- -- -- -- 768.4
IRR 23.2%
<Caption>
ASSUMPTIONS:
- -------------------------
IRR SENSITIVITY ANALYSIS
Share Price $ 17.00 EXIT MULTIPLE
Shares Outstanding 22.9 ------------------------
-------- 8.5X 9.0X 9.5X
Equity Purchase Price $ 389.7 ------------------------
Plus: Net Debt 673.2 $15.00 25.0% 27.9% 30.5%
--------
EV Purchase Price $1,062.9 $16.00 22.6% 25.4% 28.1%
Plus: Tender Cost 62.9 $17.00 20.4% 23.2% 25.8%
--------
Total Transaction Value $1,125.8 PURCHASE $18.00 18.5% 21.2% 23.8%
Debt Financing 836.1 PRICE / $19.00 16.7% 19.4% 21.9%
Equity Investment 299.7 SHARE $20.00 15.1% 17.7% 20.2%
Cost of New Debt 6.50% $21.00 13.5% 16.1% 18.6%
Cost of Existing Mortgage Debt 8.60% $22.00 12.1% 14.7% 17.1%
Exit Multiple 9.0x
</Table>
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
Premiums Paid Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
<Table>
<Caption>
PREMIUMS OF TRANSACTIONS FROM $1.0 BILLION TO $1.5 BILLION OVERLAST TWELVE MONTHS
($ in millions)
PRICE PREMIUM TO MARKET
PRIOR TO ANNOUNCEMENT
ANNOUNCEMENT EQUITY ENTERPRISE ----------------------------
DATE ACQUIROR TARGET VALUE VALUE 1 DAY 1 WEEK 1 MONTH
- ------------ ---------------------------- ---------------------------- ------ ----------- ----- ------ -------
10/18/2004 JD HOLDINGS JOHN Q HAMMONS HOTELS $ 550 $1,224 112.2% 115.4% 119.0%
5/16/2005 UPS Overnite Corp 1,220 1,283 46.2% 35.8% 44.2%
5/12/2005 3M Corp Cuno Inc 1,290 1,349 31.3% 34.7% 33.3%
4/21/2005 Shire Pharmaceuticals Grp PLC Transkaryotic Therapies Inc 1,384 1,347 21.6% 38.1% 64.5%
4/8/2005 Goldner Hawn Johnson ShopKo Stores Inc 730 1,037 4.2% 8.2% 32.6%
12/19/2004 Centro Watt America REIT III Kramont Realty Trust 571 1,104 17.0% 16.6% 18.2%
12/5/2004 Investor Group Sola International Inc 923 1,083 26.6% 33.9% 42.5%
11/24/2004 GE Infrastructure Ionics Inc 1,072 1,298 47.9% 43.0% 60.2%
11/19/2004 Movie Gallery Inc Hollywood Entertainment Corp 868 1,074 13.4% 13.3% 36.6%
11/1/2004 Valero LP Kaneb Services LLC 518 1,154 37.9% 34.1% 33.1%
10/20/2004 Blackstone Real Estate Boca Resorts Inc 1,031 1,189 27.9% 30.6% 29.9%
10/19/2004 Constellation Brands Inc Robert Mondavi Corp 1,030 1,272 49.9% 52.3% 56.8%
9/29/2004 Cendant Corp Orbitz Inc 1,229 1,059 32.4% 34.2% 49.6%
8/24/2004 PL Retail LLC Price Legacy Corp 748 1,378 0.7% (0.2%) 4.8%
7/22/2004 Marquee Holdings Inc AMC Entertainment Inc 730 1,383 13.6% 35.9% 26.7%
MEAN (EXCLUDING JQH) 26.5% 29.3% 38.1%
MEDIAN (EXCLUDING JQH) 27.3% 34.2% 35.0%
</Table>
- ----------
Source: SDC.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
28
Premiums Paid Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
<Table>
<Caption>
IMPLIED VALUE OF JOHN Q. HAMMONS HOTELS- TRANSACTIONS FROM $1.0 BILLION TO $1.5 BILLION
LOWER UPPER
QUARTILE MEDIAN MEAN QUARTILE
------------ ------------ ------------ ------------
COMPARABLE TRANSACTIONS (1)
One Day Prior 8.0% 27.3% 26.5% 45.5%
One Week Prior 9.5% 34.2% 29.3% 42.3%
One Month Prior 19.9% 35.0% 38.1% 57.8%
IMPLIED PER SHARE PURCHASE PRICE
One Day Prior (2) $ 12.21 $ 14.40 $ 14.31 $ 16.45
One Week Prior (3) $ 12.20 $ 14.95 $ 14.41 $ 15.86
One Month Prior (4) $ 13.14 $ 14.79 $ 15.13 $ 17.29
TRANSACTION PREMIUM
One Day Prior (2) 112.2%
One Week Prior (3) 115.4%
One Month Prior (4) 119.0%
</Table>
- ----------------
1. Includes 14 transactions from 7/22/04 to 5/16/05.
2. Based on closing share price as of 10/15/04 of $11.31.
3. Based on closing share price as of 10/11/04 of $11.14.
4. Based on closing share price as of 9/17/04 of $10.96.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
29
Minority Squeeze-Out Premiums Paid Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
CASH TRANSACTIONS
SELECTED CASH ACQUISITIONS OF MINORITY INTERESTS (1)
<Table>
<Caption>
FINAL PREMIUMS PAID OVER
AVERAGE PRICE FOR (2)
TRANSACTION DATE TRANSACTION ------------------------- FINAL
- ----------------------- VALUE % 7 30 90 BUMP
ANNOUNCED EFFECTIVE TARGET NAME ACQUIROR NAME ($MM) ACQUIRED 1 DAY DAYS DAYS DAYS (3)
- --------- ---------- ---------------------- ----------------------- ----------- -------- ----- ---- ---- ---- ------
01/22/2005 Pending Equant NV France Telecom SA $ 711.7 45.8% 16.0% 16.6% 8.9% 18.8% 0.0%
01/27/2005 04/21/2005 Genencor International Danisco A/S 183.8 16.0% 23.9% 22.4% 19.9% 19.7% 0.0%
Inc.
12/07/2004 01/24/2005 Telecom Italia Mobile Telecom Italia S.p.A. 28,820.7 44.7% 8.3% 10.0% 15.8% 23.2% 0.0%
S.p.A.
08/02/2004 12/08/2004 Cox Communications Inc. Cox Enterprises Inc. 8,389.6 37.8% 26.0% 24.1% 23.4% 15.0% 8.6%
06/02/2003 08/22/2003 Ribapharm Inc. ICN Pharmaceuticals Inc. 187.3 19.9% 23.0% 26.0% 39.2% 30.1% 11.6%
07/08/2002 02/28/2003 International Specialty Samuel J. Heyman 138.0 20.0% 35.5% 37.8% 41.2% 19.4% 3.0%
Products
06/17/2002 08/05/2002 Fortress Group Inc. Lennar Corp. 112.2 26.9% 16.8% 20.7% 20.9% 20.7% 0.0%
02/19/2002 04/11/2002 Travelocity.com Inc. Sabre Holdings Corp. 447.2 30.0% 45.8% 43.9% 23.0% 31.5% 21.7%
10/10/2001 11/27/2001 TD Waterhouse Group Inc. Toronto-Dominion Bank 402.6 11.2% 53.2% 51.4% 36.2% 4.3% 5.6%
05/23/2001 09/28/2001 Unigraphics Solutions Electronic Data Systems 208.5 14.0% 52.9% 64.2% 76.9% 66.7% 20.4%
Inc. Corp.
02/15/2001 09/28/2001 Westfield America Westfield America Trust 598.0 22.5% 12.5% 12.5% 12.5% 17.6% 0.0%
03/26/2001 08/21/2001 CSFBdirect Credit Suisse First Boston 110.4 18.0% 140.0% 117.8% 84.2% 54.8% 50.0%
08/14/2000 07/13/2001 BHC Communications Inc. News Corp. Ltd. 887.7 23.9% 16.4% 12.7% 11.1% 10.4% 0.0%
10/27/2000 03/16/2001 Azurix Corp. Enron Corp. 330.1 33.1% 135.1% 133.9% 107.8% 44.7% 19.6%
09/21/2000 03/09/2001 Hertz Corp. Ford Motor Co. 734.0 18.5% 46.4% 43.3% 21.9% 16.8% 18.3%
07/24/2000 01/11/2001 Phoenix Investment Phoenix Home Life Mutual 430.1 41.0% 44.0% 41.2% 51.5% 78.4% 26.0%
Partners
08/15/2000 10/30/2000 AAPT Ltd. Telecom Corp. of New 259.1 20.1% 22.9% 24.4% 24.4% 13.0% 0.0%
Zealand
03/17/2000 09/15/2000 Vastar Resources Inc. BP Amoco PLC 1,576.0 18.0% 16.2% 31.9% 51.1% 46.9% 16.9%
04/24/2000 07/17/2000 Cherry Corp. Peter B. Cherry 130.5 48.9% 103.1% 101.1% 74.8% 75.1% 40.8%
03/27/2000 06/27/2000 Hartford Life Inc. Hartford Financial 1,325.0 18.5% 18.6% 29.0% 42.9% 26.0% 14.8%
Services Group Inc.
03/14/2000 06/20/2000 Howmet International Inc. Alcoa Inc. 349.3 15.4% 13.5% 13.0% 13.5% 17.4% 12.0%
03/23/2000 06/08/2000 Homestead Village Inc. Security Capital Group 156.8 13.0% 49.1% 57.3% 77.1% 76.5% 20.6%
Inc.
01/31/2000 04/20/2000 Thermo BioAnalysis Corp. Thermo Instrument Systems 167.9 16.0% 51.4% 55.7% 58.2% 59.4% 0.0%
Inc.
03/21/2000 04/20/2000 Travelers Property Citigroup Inc. 2,423.0 15.0% 24.5% 31.1% 32.4% 24.8% 1.1%
Casualty Corp.
12/01/1999 04/19/2000 Boise Cascade Office Boise Cascade Corp. 205.3 18.8% 43.5% 50.5% 56.2% 57.2% 24.5%
Products Corp.
03/07/2000 04/10/2000 Dead Sea Works Israel Chemicals Ltd. 144.0 10.8% 9.9% 15.0% 19.6% 37.7% 0.0%
01/19/2000 02/09/2000 Trigen Energy Corp. Elyo 159.2 47.0% 23.7% 25.3% 27.8% 94.0% 0.0%
04/01/1999 08/15/1999 Aqua Alliance Inc. Vivendi SA 117.1 17.0% 28.9% 28.9% 78.5% 65.2% 45.0%
05/07/1999 07/30/1999 J Ray McDermott SA McDermott International 514.5 37.0% 16.8% 14.2% 15.8% 32.3% 34.7%
Inc.
03/21/1999 07/01/1999 Spelling Entertainment Viacom Inc. 191.6 19.1% 44.4% 42.7% 44.3% 37.9% 8.3%
Group Inc.
11/16/1998 01/26/1999 Computer 2000 AG Tech Data Corp. 135.6 20.0% 120.4% 118.2% 115.2% 116.5% 0.0%
10/27/1998 12/14/1998 Citizens Corp. Allmerica Financial Corp. 212.4 18.0% 20.6% 18.9% 22.4% 18.2% 14.7%
Maximum: $28,820.7 48.9% 140.0% 133.9% 115.2% 116.5% 50.0%
Mean: 1,586.2 24.2% 40.7% 41.7% 42.1% 39.7% 13.1%
Median: 235.7 19.5% 25.3% 30.0% 34.3% 30.8% 10.1%
Minimum: 110.4 10.8% 8.3% 10.0% 8.9% 4.3% 0.0%
</Table>
- ----------
1. Includes completed or pending transactions since 1998 where acquiror owned
>50% of target before transaction. Acquired equity value of >$100 million.
2. Final premiums are based on final bid per share compared with last
published closing price per share prior to the initial deal announcement.
3. Final bump represents % increase between initial bid per share at
announcement and final bid per share at closing.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
30
Minority Squeeze-Out Premiums Paid Analysis
- --------------------------------------------------------------------------------
SUMMARY VALUATION
IMPLIED VALUE OF JOHN Q. HAMMONS - GOING PRIVATE ALL CASH TRANSACTIONS
<Table>
<Caption>
LOWER UPPER
QUARTILE MEDIAN MEAN QUARTILE
--------- --------- --------- ---------
COMPARABLE CASH MINORITY SQUEEZE-OUT TRANSACTIONS (1)
One Day Prior 13.7% 25.3% 40.7% 88.1%
One Week Prior 14.1% 30.0% 41.7% 87.5%
One Month Prior 14.6% 34.3% 42.1% 84.1%
IMPLIED PER SHARE PURCHASE PRICE
One Day Prior (2) $ 12.86 $ 14.17 $ 15.92 $ 21.28
One Week Prior (3) $ 12.71 $ 14.49 $ 15.79 $ 20.88
One Month Prior (4) $ 12.56 $ 14.72 $ 15.58 $ 20.18
TRANSACTION PREMIUM
One Day Prior (2) 112.2%
One Week Prior (3) 115.4%
One Month Prior (4) 119.0%
</Table>
- ----------
1. Includes 32 transactions from 1998 through April 2005.
2. Based on closing share price as of 10/15/04 of $11.31.
3. Based on closing share price as of 10/11/04 of $11.14.
4. Based on closing share price as of 9/17/04 of $10.96.
- --------------------------------------------------------------------------------
LEHMAN BROTHERS
31
- --------------------------------------------------------------------------------
ANALYSIS OF CONSIDERATION TO MR. HAMMONS
Analysis of Consideration to Mr. Hammons
- --------------------------------------------------------------------------------
ANALYSIS OF CONSIDERATION TO MR. HAMMONS
o In analyzing the financial consideration provided to Mr. Hammons and
his affiliates, Lehman Brothers reviewed the terms and conditions of
the transactions set forth in the Amended and Restated Transaction
Agreement, dated June 14, 2005, by and among John Q. Hammons, Revocable
Trust of John Q. Hammons, Hammons, Inc., JD Holdings, LLC and JQH
Acquisition and the exhibits and schedules thereto
o Based on representations and warranties in the merger agreement and
other assurances provided to us, we understand (and have assumed) that
these agreements are all of the agreements, commitments and
understandings between Mr. Hammons and his affiliates, on the one hand,
and JQH Acquisition and its affiliates, on the other hand, and that
there have been and will be no material modifications to these
documents and no "side" agreements or arrangements
o In deriving the financial value provided to Mr. Hammons and his
affiliates, Lehman Brothers examined the value under three scenarios:
- A scenario assuming the immediate demise of Mr. Hammons upon
closing
- A scenario assuming Mr. Hammons lives beyond the term of the
agreements which contain provisions whose value is dependent
on Mr. Hammons' survival, and
- A probability weighted scenario, based on mortality rates
provided by the U.S. Social Security Administration's period
life table (updated November 2004)
o With respect to the preferred interest and line-of-credit provided to
Mr. Hammons, Lehman Brothers compared the terms provided to Mr. Hammons
with other comparable market securities in order to determine the
appropriate value, discount rates and cost savings to Mr. Hammons
- Discount rate for valuation of preferred interest was derived
from examining, among other things, JQH cost of equity, JQH
cost of debt and market rates for pay-in-kind securities
- Interest cost savings on Mr. Hammons' line-of-credit was
determined based on a theoretical "arms-length" line-of-credit
cost to Mr. Hammons
o A number of the terms in these agreements may either add to or subtract
from the net value realized by Mr. Hammons and his affiliates in the
transactions, but presently do not have a quantifiable valuation from a
financial point of view
- Lehman Brothers considered and made inquiries regarding these
terms and have no information that leads us to believe the net
effect of these terms would be material to our valuation of
the consideration to Mr. Hammons and his affiliates as of the
date of this presentation or to our assessment of the
reasonableness of that consideration relative to the
consideration being paid for the minority shares
- --------------------------------------------------------------------------------
LEHMAN BROTHERS 32
Analysis of Consideration to Mr. Hammons
- --------------------------------------------------------------------------------
ANALYSIS OF CONSIDERATION TO MR. HAMMONS
SUMMARY SHARE OF ECONOMIC AND VOTING INTEREST
<Table>
<Caption>
FULLY DILUTED ECONOMIC INTEREST (1)
- --------------------------------------------------------------------------------
(in millions) SHARES % OF TOTAL
------ ----------
Class A Fully Diluted Minority Shares Outstanding 6.4 27.5%
Mr. Hammons Class A Equivalent Fully Diluted Shares (2) 16.9 72.5%
------
TOTAL 23.4
</Table>
<Table>
<Caption>
VOTING INTEREST
- --------------------------------------------------------------------------------
(in millions) SHARES % OF TOTAL
------- ----------
Class A Fully Diluted Minority Shares Outstanding 6.4 29.6%
Mr. Hammons Class A and Class B Voting Interest (3) 15.3 70.4%
-------
TOTAL 21.7
</Table>
SUMMARY SHARE OF TRANSACTION VALUE
<Table>
<Caption>
ECONOMIC VALUE TO MR. HAMMONS
- --------------------------------------------------------------------------------
($ in millions, except per share data) RANGE
--------------------------
Preferred Interest $ 145 - $ 180
Line-of-Credit 20 - 30
Diluted Class A Shares 12 - 12(5)
Other 24 - 26(4)
- -------------------------------------- -----------------------
TOTAL $ 201 - $ 248
PER EQUIVALENT SHARE $11.95 - $14.74
</Table>
<Table>
<Caption>
SUMMARY OF VALUE
- --------------------------------------------------------------------------------
($ in millions) VALUE % OF TOTAL
------ -----------
Value to Class A Minority Shareholders (5) $146.0 39.4%
Value to Mr. Hammons (at Mid-Point) 224.9 60.6%
------
TOTAL $370.9
</Table>
- ----------
1. Includes full conversion of class A stock options into class A shares.
2. Mr. Hammons owns 269,100 class A shares; 335,000 class A options;
294,100 class B shares; and 16,043,900 L.P. units.
3. Mr. Hammons has voting interests in 604,100 fully converted class A
shares and 294,100 class B shares (50:1 voting ratio to class A
shares).
4. Other includes, among other things, estimated consideration for Chateau
Lake Hotel, Mr. Hammons' management company distribution and NewCo
equity interests.
5. Class A outstanding stock options converted using treasury method.
33