IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE JOHN Q. HAMMONS HOTELS ) Civil Action No. 758-CCINC. SHAREHOLDER LITIGATION )

MEMORANDUM OPINION

Date Submitted: July 2, 2009Date Decided: October 2, 2009 Norman M. Monhait, of ROSENTHAL MONHAIT & GODDESS, P.A.,Wilmington, Delaware; OF COUNSEL: Joel H. Bernstein, Ethan D. Wohl, andMatthew C. Moehlman, of LABATON SUCHAROW LLP, New York, New York;Richard B. Brualdi and Gaitri Boodhoo, of THE BRUALDI LAW FIRM, PC, NewYork, New York, Attorneys for Plaintiffs.Thomas A. Beck and Blake Rohrbacher, of RICHARDS, LAYTON & FINGER,P.A., Wilmington, Delaware; OF COUNSEL: Michael Thompson and LoriSellers, of HUSCH BLACKWELL SANDERS LLP, Kansas City, Missouri,Attorneys for Defendant John Q. Hammons.David J. Teklits, Kevin M. Coen, and Justin B. Shane, of MORRIS, NICHOLS,ARSHT & TUNNELL LLP, Wilmington, Delaware; OF COUNSEL: Alan J.Stone, of MILBANK TWEED HADLEY & MCCLOY, New York, New York,Attorneys for Defendants John Q. Hammons Hotels, Inc., JQH Acquisition LLC,JQH Merger Corporation, John E. Lopez-Ona, Jacqueline Anne Dowdy, Daniel L.Earley, William J. Hart, Donald H. Dempsey, David C. Sullivan, and James F.Moore.CHANDLER, Chancellor

This case arises out of the merger in September of 2005 of John Q.Hammons Hotels, Inc. (“JQH” or the “Company”) with and into an acquisitionvehicle indirectly owned by Jonathan Eilian, pursuant to which the holders of JQHClass A common stock received $24 per share in cash (the “Merger”). Plaintiffs inthis purported class action seek damages for the allegedly inadequate price paid for the publicly held Class A shares. Plaintiffs contend that John Q. Hammons, JQH’scontrolling stockholder, used his control position to negotiate an array of private benefits for himself that were not shared with the minority stockholders. Eilian, athird party with no prior relationship with Hammons or JQH, negotiated withHammons and the special committee, which was formed to represent and negotiateon behalf of the minority stockholders.The result of these negotiations was thatthe Class A stockholders received cash for their shares, and Hammons, in exchangefor his Class B stock and interest in a limited partnership controlled by JQH,received a small equity interest in the surviving limited partnership, a preferredinterest with a large liquidation preference, and various other contractual rights andobligations.Plaintiffs contend that Hammons breached his fiduciary duties as acontrolling stockholder by negotiating benefits for himself that were not sharedwith the minority stockholders. Plaintiffs also contend that the JQH directors breached their fiduciary duties by allowing the Merger to be negotiated through an1

allegedly deficient process, and by voting to approve the Merger. Plaintiffs alsoassert claims against the Merger acquisition vehicles for aiding and abetting the breaches of fiduciary duty. Finally, plaintiffs assert four disclosure claims basedon alleged misstatements and omissions in the Company’s proxy statement.Before the Court are cross-motions for summary judgment, and the thresholdissue is whether the Court should apply the entire fairness or business judgmentstandard of review. Defendants argue that business judgment is the appropriatestandard of review because (1) Hammons was not involved in the process of negotiation for the purchase of the minority shares, (2) the minority stockholderswere adequately represented by the disinterested and independent specialcommittee, and (3) a majority of the minority stockholders approved the Merger ina fully informed vote. Plaintiffs, of course, disagree, and contend that entirefairness is the appropriate standard of review because (1) the special committeewas ineffective, (2) the majority of the minority vote was “illusory,” and (3)Hammons was subject to a conflict of interest because he negotiated benefits for himself that were not shared with the minority stockholders. Plaintiffs assert thatthe minority stockholders were “coerced” into accepting the Merger because the price of the Class A stock did not reflect the Company’s true value. Moreover,according to plaintiffs, Hammons’s ability to block any transaction limited the2