<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box: [_] Confidential, For Use of the
[X] Preliminary Proxy Statement Commission Only (as permitted
by Rule 14a-6(e) (2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
Courtyard by Marriott Limited Partnership
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials: $30,448
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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COURTYARD BY MARRIOTT LIMITED PARTNERSHIP
10400 Fernwood Road
Bethesda, Maryland 20817
To the Limited Partners of Courtyard by Marriott Limited Partnership:
A Purchase Offer and Consent Solicitation is being made pursuant to the
terms of a settlement (the "Settlement") relating to a class action lawsuit
brought against the predecessor-in-interest to CBM One LLC, a Delaware limited
liability company and the general partner (the "General Partner") of Courtyard
by Marriott Limited Partnership (the "Partnership"), Marriott International,
Inc., a Delaware corporation ("Marriott International"), Host Marriott
Corporation, a Delaware corporation, as the predecessor-in-interest to a
Maryland corporation of the same name ("Host Marriott"), various related
entities and others, in the 285th Judicial District Court (the "Court") of Bexar
County, Texas (the "Haas Litigation"). The Settlement also relates to lawsuits
filed with respect to six other limited partnerships (such suits, together with
the Haas Litigation, the "Litigation").
On March 9, 2000, the defendants and counsel to the class action
plaintiffs in the Litigation entered into a settlement agreement (the
"Settlement Agreement") providing for the settlement of all the Litigation. The
Settlement with respect to the Partnership consists of:
. an offer by CBM I Holdings LLC, a Delaware limited liability company (the
"Purchaser"), to purchase all outstanding units of limited partnership
interest in the Partnership (other than units held by the General Partner)
pursuant to a purchase offer (the "Purchase Offer"); and
. a merger of a subsidiary of the Purchaser into the Partnership immediately
following the consummation of the Purchase Offer (the "Merger"), pursuant
to which (1) all units held by holders who have not tendered their units in
the Purchase Offer and who have not opted-out of the Settlement will be
cashed out for the same amount of consideration paid in the Purchase Offer,
and (2) all units held by unitholders who have opted-out of the Settlement
will be converted into the right to receive an amount in cash equal to the
appraised value of such units.
The consummation of the Purchase Offer and the Merger is subject to the
final approval by the Court of the Settlement. Following the expiration of the
Purchase Offer there will be a hearing before the Court to determine the
fairness of the Settlement. Assuming all the other conditions to the Purchase
Offer have been satisfied (or waived, if waivable), the Purchase Offer will be
consummated as soon as practicable after the Settlement is approved by the Court
and all appeal periods have expired or, if the approval of the Settlement is
appealed, after the Settlement is determined finally to be approved. Immediately
following the consummation of the Purchase Offer, the Merger will be
consummated.
The Purchase Offer. Pursuant to the terms of the Settlement Agreement,
the Purchaser has agreed to offer to purchase all of the issued and outstanding
units of limited partnership interest in the Partnership (other than units owned
by the General Partner) at a price of $134,130 per unit (or a pro rata portion
thereof) in cash, upon the terms and subject to the conditions set forth in the
Purchase Offer and Consent Solicitation attached hereto. This amount represents
not only the value of your units, but also the value of the settlement of the
claims asserted in the Haas litigation. If the Court approves legal fees and
expenses of approximately $18,000 per unit to counsel to the class action
plaintiffs in the Haas Litigation, the net amount that each holder that is a
class member will receive is approximately $116,000 per unit (or a pro rata
portion thereof) (the "Net Settlement Amount"). The amount a holder will receive
in the Purchase Offer
<PAGE>
will be reduced by any amount owed by such holder on the original purchase
price of his or her units. If you wish to receive the Net Settlement Amount for
your units in the Purchase Offer, you should consent to the Merger and the
amendments to the partnership agreement as described below. The approval of the
Merger and the amendments to the partnership agreement by the holders of a
majority of the outstanding units is one of the conditions to the Purchase Offer
and the Merger.
The Purchaser is an indirect wholly owned subsidiary of CBM Joint Venture
LLC (the "Joint Venture"), a Delaware limited liability company that is a joint
venture between MI CBM Investor LLC ("MI Investor"), a Delaware limited
liability company and a wholly owned indirect subsidiary of Marriott
International, and Rockledge Hotel Properties, Inc., a Delaware corporation
("Rockledge") (through wholly owned subsidiaries). Rockledge currently owns a
99% non-managing interest in the General Partner. Host Marriott, L.P. ("Host
LP"), which owns the 1% managing interest in the General Partner, also owns a
95% non-voting interest in Rockledge. Host Marriott owns approximately 78% of
the equity interests in Host LP. Marriott International currently does not own
an interest in either Host Marriott, Rockledge or the General Partner, but one
of Marriott International's subsidiaries is the manager of the hotels owned by
the Partnership. In addition, two individuals who serve on the board of
directors of Host Marriott also serve on the board of directors of Marriott
International.
The Merger. The terms of the Settlement Agreement provide for the Merger of
a subsidiary of the Purchaser into the Partnership pursuant to an agreement and
plan of merger (the "Merger Agreement") immediately following the consummation
of the Purchase Offer. In the Merger, each outstanding unit of limited
partnership interest in the Partnership that has not been tendered in the
Purchase Offer (other than units held by the General Partner, the Purchaser or
holders who have elected to opt-out of the Settlement) will be converted into
the right to receive $134,130 per unit (or a pro rata portion thereof) in cash.
If the Court approves legal fees and expenses of approximately $18,000 per unit
to counsel to the class action plaintiffs in the Haas Litigation, the net amount
that each holder that is a class member will receive is approximately $116,000
per unit (or a pro rata portion thereof). In addition, each outstanding unit
held by a holder who has elected to opt-out of the Settlement will be converted
in the Merger into the right to receive a cash amount equal to the appraised
value of such unit (or a pro rata portion thereof), as determined in accordance
with the appraisal provisions of the Merger Agreement and the Settlement
Agreement. The appraised value of units will not include any amount representing
the value of the settlement of the claims asserted in the Haas Litigation. The
amount to be received by any unitholder in the Merger will be reduced by any
amount owed by such holder on the original purchase price of his or her units.
If you wish to opt-out of the Settlement, you must follow the procedures
described in the attached Purchase Offer and Consent Solicitation.
Written Consent. The Purchase Offer and Merger will not be consummated
unless holders of a majority of the units submit their written consent to (1)
the Merger and (2) amendments to the Partnership's partnership agreement as more
fully described in the Purchase Offer and Consent Solicitation (the
"Amendments"). The Amendments are intended to clarify that the terms of the
Settlement (including the Purchase Offer and the Merger) are consistent with the
provisions of the partnership agreement and to facilitate the consummation of
<PAGE>
the Purchase Offer and the Merger. Accordingly, the General Partner is hereby
soliciting your consent to each of:
. the Merger, and
. Amendments.
The only holders of units who will be entitled to consent to the Merger
and the Amendments will be holders of record of units at the close of business
on ___________, 2000 who have been admitted to the Partnership as limited
partners. The terms of the Settlement are described in detail under the heading
"The Settlement - The Settlement Agreement" in the Purchase Offer and Consent
Solicitation.
A Purchase Offer and Consent Solicitation, including a BLUE Proof of Claim,
Assignment and Release and a GREEN consent form, are enclosed with this notice.
The attached Purchase Offer and Consent Solicitation contains instructions on
how to tender your units in the Purchase Offer and to consent to the Merger and
the Amendments.
The Settlement will not be consummated unless the Court approves the
fairness of the Settlement (including the terms and conditions of the Purchase
Offer, the Merger and the Amendments) at a hearing at which unitholders who have
not opted-out of the Settlement and who have timely filed the proper documents
with the Court have the right to appear. See the "Notice of Pendency and
Settlement of Claim and Derivative Action Related to Courtyard by Marriott LP
and Final Approval Hearing" which is being distributed by counsel to the class
action plaintiffs with the Purchase Offer and Consent Solicitation, for a
description of the procedures that must be followed in order to appear at the
hearing.
A Special Litigation Committee appointed by the General Partner has
determined that the terms of the Settlement (1) are fair and reasonable to the
Partnership (which the Special Litigation Committee considers, as a practical
matter, to have an identity of interest with the limited partners with respect
to the derivative claims in the Haas Litigation) and (2) include a fair and
reasonable settlement of any and all derivative claims, express or implied, made
on behalf of the Partnership in the Haas Litigation. Counsel for the class
action plaintiffs recommends that the class action plaintiffs approve the
Settlement by tendering their units and consenting to the Merger and the
Amendments. See "The Settlement."
The General Partner is not making a recommendation to you as to whether to
tender or refrain from tendering your units or whether or not to consent to the
Merger or the Amendments. You must make your own decisions as to these matters.
CBM One LLC
General Partner
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Secretary
Date: _____________, 2000
Bethesda, Maryland
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
SUMMARY TERM SHEET...................................................................................... 2
SPECIAL CONSIDERATIONS.................................................................................. 13
THE SETTLEMENT.......................................................................................... 17
Background of the Settlement...................................................................... 17
The Settlement Agreement.......................................................................... 20
Position of the General Partner, the Purchaser, the Joint Venture, Marriott
International, MI Investor and Rockledge Regarding the Purchase Offer.................... 22
Recommendation of the Special Litigation Committee and Counsel to the Class Action Plaintiffs..... 22
Purpose and Structure of the Purchase Offer; Merger and Amendments................................ 23
Conditions of the Purchase Offer and the Merger................................................... 24
Plans for the Partnership; Certain Effects of the Purchase Offer.................................. 24
Certain Information Concerning the Partnership.................................................... 25
Certain Information Concerning the Purchaser, the Joint Venture, Marriott
International, MI Investor and Rockledge................................................. 26
Source and Amount of Funds........................................................................ 27
Certain Transactions with the Partnership......................................................... 28
Security Ownership of Certain Beneficial Owners and Management.................................... 30
Regulatory Matters................................................................................ 30
Final Court Hearing and Right to Appear........................................................... 30
Procedures for Opting-Out of the Settlement....................................................... 32
The Merger........................................................................................ 32
The Amendments.................................................................................... 35
Federal Income Tax Considerations................................................................. 40
Selected Historical Consolidated Financial Data................................................... 47
Description of Real Estate........................................................................ 48
Operating Data.................................................................................... 50
THE PURCHASE OFFER...................................................................................... 52
Terms of the Purchase Offer....................................................................... 52
Settlement Fund; Acceptance for Payment; Payment for Units........................................ 53
Procedures for Accepting the Purchase Offer and Tendering Units................................... 54
Withdrawal Rights................................................................................. 56
Market for the Partnership's Limited Partnership Units and Related Security Holder Matters........ 56
Transfer Fees and Taxes........................................................................... 57
THE WRITTEN CONSENTS.................................................................................... 58
Record Date and Outstanding Units................................................................. 58
Majority Vote Required; Voting Rights............................................................. 58
Solicitation Period............................................................................... 58
Voting and Revocation of Consents................................................................. 58
Effective Time of Amendments...................................................................... 59
Effective Time of the Merger...................................................................... 59
No Special Meeting................................................................................ 59
Rights of Appraisal............................................................................... 59
Interests of Certain Persons in the Matters to be Acted Upon...................................... 60
OTHER MATTERS........................................................................................... 60
Fees and Expenses................................................................................. 60
Miscellaneous..................................................................................... 61
</TABLE>
Schedule I - Directors and Executive Officers of Marriott International, Inc.,
MI CBM Investor LLC, Rockledge Hotel Properties, Inc., CBM Joint
Venture LLC and CBM I Holdings LLC
Schedule II - Directors and Executive Officers of CBM One LLC
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<PAGE>
SUMMARY TERM SHEET
We urge you to read carefully this purchase offer and consent solicitation,
particularly the matters discussed under the heading "The Settlement," before
deciding whether to tender or refrain from tendering your units of limited
partnership interest in Courtyard by Marriott Limited Partnership and whether to
vote for or against the merger and the amendments to the partnership agreement
described below. The following is a summary of information contained in this
purchase offer and consent solicitation. The summary is not intended to be
complete, and you should read carefully this entire purchase offer and consent
solicitation and the related proof of claim, assignment and release, consent
form and the other documents to which we have referred you. In particular, you
should read the information contained under the heading "Special
Considerations." The purchase offer and consent solicitation, together with the
proof of claim, assignment and release, are referred to herein as the "Purchase
Offer and Consent Solicitation."
The term the "general partner" as used in this purchase offer and consent
solicitation refers to CBM One LLC, the general partner of Courtyard by Marriott
Limited Partnership. The terms "we", "our" and the "purchaser" as used in this
purchase offer and consent solicitation refer to CBM I Holdings LLC, a wholly
owned indirect subsidiary of CBM Joint Venture LLC, or the "joint venture,"
which is a joint venture between MI CBM Investor LLC, or "MI Investor," a wholly
owned indirect subsidiary of Marriott International, Inc., or "Marriott
International," and Rockledge Hotel Properties, Inc., or "Rockledge" (through
wholly owned subsidiaries).
WHY ARE YOU MAKING THIS PURCHASE OFFER AND CONSENT SOLICITATION?
This purchase offer and consent solicitation is being made pursuant to the
terms of a settlement agreement relating to a class action lawsuit brought
against the general partner, Marriott International, Host Marriott, various
related entities and others. The settlement relates to litigation involving
Courtyard by Marriott Limited Partnership and six other limited partnerships,
including Courtyard by Marriott II Limited Partnership. The settlement provides
for a purchase offer, followed by a merger, and amendments to the partnership
agreement as described in this purchase offer and consent solicitation. See "The
Settlement -- Background of the Settlement," pages 12 through 15.
WHO IS OFFERING TO BUY MY UNITS?
Our name is CBM I Holdings LLC. We are a wholly owned indirect subsidiary
of the joint venture and were organized for the sole purpose of making the
purchase offer. The joint venture is a joint venture between MI Investor, a
subsidiary of Marriott International, and Rockledge (through wholly owned
subsidiaries). See "The Settlement -- Certain Information Concerning the
Purchaser, the Joint Venture, Marriott International, MI Investor and
Rockledge," pages 21 through 23.
WHAT CLASSES AND AMOUNTS OF SECURITIES ARE YOU SEEKING IN THE OFFER?
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<PAGE>
We are offering to purchase all outstanding units of limited partnership
interest in Courtyard by Marriott Limited Partnership other than units owned by
the general partner.
HOW MUCH ARE YOU OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF
PAYMENT?
We are offering to pay $134,130 per unit (or a pro rata portion thereof) in
cash to purchase each unit, settle the Haas litigation and obtain a release of
all claims in the Haas litigation. If the court approves legal fees and expenses
of approximately $18,000 per unit to counsel to the class action plaintiffs in
the Haas litigation, the net amount that each holder that is a class member will
receive is approximately $116,000 per unit (or a pro rata portion thereof).
This amount will be reduced by any amount owed by the holder on the original
purchase price of such unit. The aggregate amount we are offering to pay for
all outstanding units (other than the 15 units held by the general partner) is
$152,237,550. See "The Settlement -- The Settlement Agreement," pages 15
through 17.
WHAT WILL I RECEIVE IF I PURCHASED A UNIT FROM A CLASS MEMBER, BUT DID NOT
OBTAIN AN ASSIGNMENT OF LITIGATION CLAIMS FROM THAT CLASS MEMBER?
If you purchased a unit from a class member without obtaining an assignment
of that class member's litigation claims, the purchaser will still pay $134,130
for each unit that you tender in the purchase offer or that is converted in the
merger. However, this amount represents not only the value of your units, but
also the value of the settlement of the claims asserted in the Haas litigation.
Accordingly, the $134,130 per unit (or a net amount per unit of approximately
$116,000 after payment of court awarded legal fees and expenses to counsel to
the class action plaintiffs of approximately $18,000 per unit), or a pro rata
portion thereof will have to be divided between you and the class member from
whom you purchased the unit. If you are unable to agree on how the money should
be divided, the division will be made by a special master appointed by the
court. Payment for the units will be made by deposit of the purchase price with
Chase Bank of Texas, N.A., which has been retained by counsel to the class
action plaintiffs as escrow agent. The defendants in the litigation have no
responsibility for or liability whatsoever with respect to the distribution of
the settlement funds, or the determination or payment of claims.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
We will need approximately $_____ million to purchase all of the units
pursuant to the purchase offer, to consummate the merger and to pay related fees
and expenses. We will obtain the funds indirectly from Marriott International
and Rockledge. See "The Settlement -- Source and Amount of Funds," page 23.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
Because the form of payment consists solely of cash and the purchase offer
is not conditioned on our ability to obtain financing, we do not think our
financial condition is relevant to your decision as to whether to tender in the
purchase offer or consent to the merger. Our obligations in connection with the
purchase offer and the merger are guaranteed by Marriott International and Host
Marriott. See "The Settlement -- Source and Amount of Funds," page 23.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE PURCHASE OFFER?
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<PAGE>
You will have at least until 12:00 midnight, New York City time, on
_____________, 2000 to decide whether to tender your units in the purchase
offer. See "The Purchase Offer -- Terms of the Purchase Offer," pages 48 and
49.
CAN THE PURCHASE OFFER BE EXTENDED?
Yes. We can elect to extend the purchase offer at any time. See "The
Purchase Offer -- Terms of the Purchase Offer," pages 48 and 49.
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<PAGE>
HOW WILL I BE NOTIFIED IF THE PURCHASE OFFER IS EXTENDED?
If the purchase offer is extended we will issue a press release announcing
the extension no later than 9:00 a.m., New York City time, on the next business
day after the day the purchase offer was scheduled to expire. See "The Purchase
Offer -- Terms of the Purchase Offer," pages 48 and 49.
HOW DO I TENDER MY UNITS?
To tender all or any portion of your units, you must either (1) complete
and sign the BLUE proof of claim, assignment and release (or a facsimile
thereof) and mail or deliver it and any other required documents to GEMISYS
Corporation, which has been retained by counsel to the class action plaintiffs
to serve as claims administrator, at the address set forth on the back cover of
this purchase offer and consent solicitation, or (2) if your units are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact such nominee and instruct it to tender your
units. See "The Purchase Offer -- Procedures for Accepting the Purchase Offer
and Tendering Units," pages 66 and 67. However, tendering your units does not
in itself constitute your consent to the merger and the amendments to the
partnership agreement. You can only consent to the merger and the amendments by
completing and returning the enclosed GREEN consent form.
WHAT ARE THE SIGNIFICANT CONDITIONS TO THE PURCHASE OFFER AND THE MERGER?
The consummation of the purchase offer and the merger is subject to a
number of conditions, including:
(1) the order of the court approving the terms of the settlement and the
dismissal of the litigation shall have become final (other than by reason of an
appeal relating solely to counsel fees and expenses),
(2) not more than 10% of the units of limited partnership interests in
each of Courtyard by Marriott Limited Partnership and each of the other six
limited partnerships involved in the settlement (other than units held by
persons named as insiders in the settlement agreement) shall be held by holders
who have elected to "opt-out" of the settlement, and
(3) holders of a majority of the units in each of Courtyard by Marriott
Limited Partnership and Courtyard by Marriott II Limited Partnership (other than
affiliates of these partnerships) shall have approved each partnership's merger
and amendments to each partnership's partnership agreement.
We have the right to waive condition (2) above in our sole discretion.
However, conditions (1) and (3) cannot be waived. Accordingly, if conditions
(1) and (3) were to be satisfied and we were to waive condition (2), the
purchase offer and merger would still be consummated. See "The Settlement --
Conditions of the Purchase Offer and the Merger," page 19.
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<PAGE>
WHEN WILL I RECEIVE PAYMENT FOR MY UNITS IF I TENDER?
The court will hold a hearing for approval of the settlement once all
conditions to consummating the purchase offer and the merger, other than
condition (1) above, have been satisfied. Within seven business days after the
judgment order approving the terms of the settlement and the dismissal of the
litigation becomes final, the escrow agent will distribute to each unitholder
who has submitted a valid proof of claim prior to such date the funds to which
such holder is entitled. See "The Purchase Offer -- Settlement Fund; Acceptance
for Payment; Payment for Units," pages 49 and 50.
MUST I SUBMIT A PROOF OF CLAIM TO RECEIVE FUNDS IN THE SETTLEMENT?
Yes. No unitholder will be entitled to receive any funds from the
settlement until a valid proof of claim is submitted, whether before or after
the judgment order becomes final. However, if you have not submitted a valid
proof of claim within 90 days of the date a judgment order approving the
settlement becomes final and you have not opted-out of the settlement, then the
counsel to the class action plaintiffs will execute a proof of claim on your
behalf. See "The Purchase Offer -- Procedures for Accepting the Purchase Offer
and Tendering Units," pages 50 through 52.
HOW DO I WITHDRAW PREVIOUSLY TENDERED UNITS?
You may withdraw units that you have tendered at any time prior to the
expiration date. To withdraw units, you must deliver a written notice to the
claims administrator prior to the expiration of the purchase offer at the
address set forth on the back cover of this purchase offer and consent
solicitation. For more information on your withdrawal rights, see "The Purchase
Offer--Withdrawal Rights," page 52. If the settlement agreement terminates
without the settlement becoming final, then all of your tendered units will be
returned.
WHO HAS DETERMINED THAT THE TERMS OF THE SETTLEMENT ARE FAIR?
Counsel to the class action plaintiffs recommends that the class action
plaintiffs approve the settlement by tendering their units in the purchase offer
and consenting to the merger and the amendments. The special litigation
committee appointed for Courtyard by Marriott Limited Partnership by the general
partner has determined that the terms of the settlement (1) are fair and
reasonable to the partnership (which the special litigation committee considers,
as a practical matter, to have an identity of interest with the limited partners
with respect to the derivative claims in the Haas Litigation) and (2) include a
fair and reasonable settlement of any and all derivative claims, expressed or
implied, made on behalf of Courtyard by Marriott Limited Partnership in the
litigation. See "The Settlement -- Recommendation of the Special Litigation
Committee and Counsel to the Class Action Plaintiffs," pages 17 and 18.
HOW DO I OPT-OUT OF THE SETTLEMENT?
If you do not wish to participate in the settlement, you may exclude
yourself from the settlement class by submitting an opt-out notice, no later
than the expiration date, to the claims administrator. The opt-out notice must
contain the information described under the heading "The Settlement-Procedures
for Opting-Out of the Settlement," page
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<PAGE>
27. In addition, you should complete, execute and include with your opt-out
notice the certificate of non-foreign status included in the proof of claim. If
you do not timely and validly submit an opt-out notice, you will be bound by all
orders and judgments entered in the litigation, whether favorable or unfavorable
to you.
DO I HAVE THE RIGHT TO APPEAR AT THE FINAL COURT HEARING?
Unitholders who have not opted-out of the settlement have the right to
appear at the final court hearing to be held on August 28, 2000, if they follow
the procedures described under the heading "The Settlement - Final Court Hearing
and Right to Appear" on pages 25 through 27. The settlement will not be
consummated unless the court approves the fairness of the settlement (including
the terms and conditions of the purchase offer, the merger and the amendments)
at the final hearing.
WHY IS THE GENERAL PARTNER SOLICITING CONSENTS?
The general partner is soliciting the consents of the limited partners
pursuant to the terms of the settlement agreement. If the merger and the
amendments to the partnership agreement are not approved by limited partners
holding a majority of the outstanding units (excluding units held by the general
partner and its affiliates), the settlement agreement will not be consummated
and the purchaser will not be obligated to purchase the units. See "The
Settlement -- Conditions of the Purchase Offer and the Merger," page 19.
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<PAGE>
WHAT WILL HAPPEN IN THE MERGER?
The terms of the settlement agreement provide for the merger of CBM II
Acquisition, L.P., a subsidiary of the purchaser, with and into Courtyard by
Marriott Limited Partnership immediately after the consummation of the purchase
offer. Courtyard by Marriott Limited Partnership will be the surviving entity
in the merger.
In the merger:
. each outstanding unit that has not been tendered in the purchase offer
(other than units held by the general partner, the purchaser and holders
who have elected to opt-out of the settlement) will be converted into
the right to receive $134,130 per unit (or a pro rata portion thereof)
in cash. If the court approves legal fees and expenses of approximately
$18,000 per unit to counsel to the class action plaintiffs in the Haas
litigation, the net amount that each holder that is a class member will
receive is approximately $116,000 per unit (or a pro rata portion
thereof); and
. each outstanding unit held by a unitholder who has elected to opt-out of
the settlement will be converted into the right to receive a cash amount
equal to the appraised value of such unit (or a pro rata portion
thereof). The appraised value will not include any amount representing
the value of the settlement of the claims asserted in the Haas
litigation.
Any amount to be received by any holder in the merger will be reduced by
any amount owed by the holder on the original purchase price of his or her
units. See "The Settlement -- The Merger," pages 27 through 29.
WHAT ARE THE PROPOSED AMENDMENTS TO THE PARTNERSHIP AGREEMENT?
The proposed amendments to the partnership agreement are intended to
clarify that the terms of the settlement agreement (including the purchase offer
and the merger) are consistent with the provisions of the partnership agreement
and to facilitate the consummation of the purchase offer and the merger.
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<PAGE>
The amendments to the partnership agreement will not be implemented if, for
any reason, the purchase offer is not consummated, even if the amendments
receive the requisite approval. The proposed amendments are described in detail
under the heading "The Settlement -- The Amendments," pages 29 through 34.
WHO IS ENTITLED TO VOTE ON THE MERGER AND THE PROPOSED AMENDMENTS TO THE
PARTNERSHIP AGREEMENT?
You are entitled to vote on the merger and the proposed amendments to the
partnership agreement if you owned units on __________, 2000 and have been
admitted as a limited partner, except that if you are in default with respect to
the original purchase price of your units, you are not entitled to vote with
respect to such units. See "The Written Consents -- Record Date and Outstanding
Units," page 54.
HOW DO I CONSENT TO THE MERGER AND THE PROPOSED AMENDMENTS?
If you wish to consent to the merger and the amendments, you should
complete, sign, date and return the GREEN consent form to the claims
administrator in the enclosed envelope with pre-paid postage. Your vote on
these matters is very important. Your failure to return the enclosed consent
form will have the same effect as not consenting to the merger and the
amendments and, therefore, will constitute a vote against the settlement.
Tendering your units by submitting a proof of claim does not in itself
constitute your consent to the merger and the amendments. See "The Written
Consents -- Voting and Revocation of Consents," pages 54 and 55.
HOW DO I REVOKE MY CONSENT?
You may revoke your executed and returned consent form at any time prior
to the expiration date by delivering to the claims administrator a signed and
dated written notice stating that your consent is revoked. After the expiration
date, all consents previously executed and delivered and not revoked shall
become irrevocable. See "The Written Consents - Voting and Revocation of
Consents," pages 54 and 55.
HOW LONG DO I HAVE TO CONSENT?
You may submit your signed consent form now. In order for your consent
form to be accepted, it must be received by the claims administrator no later
than 12:00 midnight, New York City time, on _____________, 2000, unless the
expiration date of the purchase offer is extended, in which case the new
expiration date will be the last date on which your consent form will be
accepted. See "The Written Consents - Solicitation Period," page 54.
WHAT HAPPENS IF I DON'T TENDER MY UNITS IN THE PURCHASE OFFER AND I VOTE AGAINST
THE MERGER AND THE AMENDMENTS, BUT THE MERGER AND AMENDMENTS NEVERTHELESS
RECEIVE THE REQUIRED UNITHOLDER APPROVAL?
Whether or not you tender your units in the purchase offer or vote against
the merger and the amendments, if the merger and amendments receive the approval
of unitholders holding a majority of the outstanding units, and the
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other conditions to the purchase offer and the merger are satisfied, (or waived,
if waivable) the purchase offer and merger will be consummated. If you did not
consent to the merger and the amendments, and you did not tender your units in
the purchase offer, you will be cashed out in the merger at the purchase offer
price less attorneys' fees and expenses, unless you have opted-out of the
settlement by following the procedures described under "The Settlement--
Procedures for Opting-Out of the Settlement" on page 27, in which case you will
receive the appraised value of your units.
WHAT MATERIAL FEDERAL INCOME TAX CONSIDERATIONS SHOULD I CONSIDER IN CONNECTION
WITH THE SETTLEMENT, THE PURCHASE OFFER AND THE MERGER?
Participating Unitholders. If you tender your units and submit the
required proof of claim to the claims administrator under the terms of the
purchase offer or if you do not tender your units but do not affirmatively
"opt-out" of the settlement (in either case, you will be a "participating
unitholder"), you very likely will be deemed to have received, solely for
federal income tax purposes, either in the purchase offer or pursuant to the
merger, two separate amounts on a per unit basis: (1) an amount in exchange for
your units, and (2) an amount in settlement of the claims asserted in the
litigation. None of the defendants in the litigation, the bidders, nor any of
their affiliates are taking any position, for federal income tax purposes,
regarding the allocation by the participating unitholders of the cash payment
between the amount received in consideration for the units and the amount
received in settlement of the claims. If the sum of the portion of the cash
payment from the purchaser that is properly allocable to the purchase of your
units (which amount will be deemed to include any amount owed by you on the
original purchase price of your units) plus your share of the partnership's
nonrecourse liabilities exceeds your adjusted tax basis in your units, you will
recognize gain, all of which (subject to a possible exception described below
under "Federal Income Tax Considerations --Federal Income Tax Rates Applicable
to Gain from Disposition of Units by Participating and Nonparticipating
Unitholders") will be treated as capital gain taxable at applicable capital gain
rates (including the 25% rate applicable to your share of the "unrecaptured
Section 1250 gain" of the partnership). It is not clear how the portion of the
cash payment that is properly allocable to the settlement of the claims in the
litigation will be characterized and whether that payment will cause you to
recognize capital gain or ordinary income. You might be required to include in
income your share of the legal fees and expenses paid to counsel for the class
action plaintiffs in the litigation. You might be able to deduct all or a
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portion of such deemed payment of legal fees and expenses (subject to various
limitations) or otherwise reduce a portion of the gain that you would have
recognized upon receiving the offer consideration from the purchaser.
Nonparticipating Unitholders. If you affirmatively "opt-out" of the
settlement (so that we refer to you as a "nonparticipating unitholder"), you
will be treated as having made a taxable disposition of your units pursuant to
the merger, which disposition would be deemed to occur on the effective date of
the merger. If the sum of the cash payment received in respect of your units
(which amount will be deemed to include any amount owed by you on the original
purchase price of your units) plus your share of the partnership's nonrecourse
liabilities exceeds your adjusted tax basis in your units, you will recognize
gain, all of which (subject to a possible exception described below under
"Federal Income Tax Considerations -- Federal Income Tax Rates Applicable to
Gain from Disposition of Units by Participating and Nonparticipating
Unitholders") will be treated as capital gain taxable at applicable capital gain
rates (including the 25% rate applicable to your share of the "unrecaptured
Section 1250 gain" of the partnership).
Federal Tax Withholding Applicable to Participating and Nonparticipating
Unitholders. Even if you choose not to return the rest of the proof of claim,
you should return the Certificate of Non-Foreign Status to prevent federal
income tax withholding on the amounts payable to you pursuant to the settlement.
See "The Settlement -- Federal Income Tax. Considerations" pages 34 through 41.
See "Federal Income Tax Considerations," on page 34, for a detailed
description of the material federal income tax considerations relevant to
unitholders as a result of the settlement, the purchase offer and the merger.
WHAT WILL BE THE CONSEQUENCES TO THE PARTNERSHIP OF THE PURCHASE OFFER AND THE
MERGER?
The joint venture, through its subsidiaries and, therefore, its equity
owners would own 100% of the equity interests in Courtyard by Marriott Limited
Partnership and would solely have the benefit or detriment of any change in the
partnership's value and would receive all distributions, if any, with respect to
the partnership's operations. Although Courtyard by Marriott Limited
Partnership would become privately held and would no longer be subject to the
reporting requirements of the Securities Exchange Act of 1934, it will be
required to continue filing periodic reports with the SEC under the terms of its
senior notes. See "The Settlement -- Plans for the Partnership; Certain Effects
of the Purchase Offer," pages 19 and 20.
TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE PURCHASE OFFER OR THE CONSENT
SOLICITATION?
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Counsel to the class action plaintiffs has retained GEMISYS Corporation as
the claims administrator to answer your questions regarding completion of the
proof of claim and consent form and to provide you with additional copies of
this purchase offer and consent solicitation, the proof of claim, the consent
form, and other related materials. The telephone number of GEMISYS is (800) 326-
8222. Because we or our affiliates are defendants in the lawsuit, the Purchaser,
the joint venture, MI Investor, Marriott International and the general partner
and its affiliates are prohibited from discussing the settlement with you. You
are encouraged to call David Berg or Jim Moriarty, counsel to the class action
plaintiffs, if you have questions regarding the terms of the settlement. Mr.
Berg's telephone number is (713) 529-5622 and Mr. Moriarty's telephone number is
(713) 528-0700.
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SPECIAL CONSIDERATIONS
Before deciding whether or not to tender any of your Units in the Purchase
Offer or whether to consent to the Merger or the Amendments, you should
carefully consider the following factors.
. Determination of the Purchase Offer Price; No Fairness Opinion from a Third
Party
The purchase offer price was determined in extensive arms-length
negotiations among the defendants in the Litigation, the class action
plaintiffs, Palm Investors, LLC, several Equity Resource Funds, and the special
litigation committee appointed for the Partnership by the General Partner (the
"Special Litigation Committee"). See "The Settlement -- Background of the
Settlement." The Partnership did not request or obtain an opinion from a third
party regarding the fairness of the purchase offer price from a financial point
of view and the General Partner, as a result of a conflict of interest, makes no
recommendation to Unitholders as to whether to tender their Units or consent to
the Merger and the Amendments. However, the Special Litigation Committee has
determined that the terms of the Settlement (1) are fair and reasonable to the
Partnership (which the Special Litigation Committee considers, as a practical
matter, to have an identity of interest with the limited partners with respect
to the derivative claims in the Haas Litigation) and (2) include a fair and
reasonable settlement of any and all derivative claims, expressed or implied,
made on behalf of the Partnership in the Haas Litigation. In addition, counsel
to the class action plaintiffs in the Haas Litigation ("Class Counsel")
recommends that the class action plaintiffs approve the Settlement by tendering
their Units in the Purchase Offer and consenting to the Merger and the
Amendments. It should be noted that Class Counsel represents the class action
plaintiffs on a contingency fee basis and has advised the Partnership that it
intends to request the Court for an award of attorneys' fees and reimbursement
of expenses of approximately $18,000 per Unit. If the Court approves this
request, Class Counsel will receive approximately $18,000 for each Unit that is
tendered in the Purchase Offer or converted in the Merger. However, Class
Counsel will not be awarded any attorneys' fees or reimbursement of expenses
with respect to Units held by limited partners who have elected to opt-out of
the Settlement. Finally, it is a condition of consummation of the Purchase
Offer and the Merger that the Court approve the fairness of the settlement for
class members.
. Lack of Trading Market; The Purchase Offer Price may differ from the Market
Value of the Units
There is currently no established public trading market for the Units, nor
is there another reliable standard for determining the fair market value of the
Units. The Purchase Offer and the Merger afford Unitholders an opportunity to
dispose of their Units for cash, which alternative otherwise might not be
available to them currently or in the foreseeable future. However, the purchase
offer price may be higher or lower than the price that could be obtained in the
open market. Although the purchase offer price includes an amount representing
the value of the settlement of the claims asserted in the Haas Litigation, any
amounts awarded by the Court to Class Counsel as attorneys' fees and expenses
(not to exceed approximately $18,000 per Unit), will be subtracted from the
total amount that Unitholders (other than Unitholders who have opted-out of the
Settlement) will receive in the Purchase Offer or the Merger.
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. The Appraised Value of Units may be higher or lower than the Net Settlement
Amount
Unitholders who elect to opt-out of the Settlement will receive the
appraised value of their Units in the Merger. The appraised value of Units may
be lower or higher than the Net Settlement Amount that Unitholders who do not
opt-out of the settlement will receive in the Purchase Offer or the Merger
(assuming all conditions to the Purchase Offer and the Merger are satisfied or
waived, if waivable). If you opt-out of the Settlement, the amount you will
receive in the Merger will not include any amount representing the value of the
settlement of the claims asserted against the Defendants in the Haas Litigation
and will include no deductions for attorneys' fees and expenses.
. Purchase Offer Price May Not Represent Liquidation Value of the Units.
Accordingly, Opting-Out of the Settlement Class and not consenting to the
Merger and Amendments May Result in Greater Future Value
The purchase offer price may be more or less than the net proceeds that
would be realized if the Partnership were liquidated. If the purchase offer
price per Unit is lower than the final per Unit liquidation value, the Purchaser
and General Partner would benefit upon the liquidation of the Partnership from
the spread between the purchase offer price for the tendered Units that are
acquired in the Purchase Offer and the Merger and the amount the Purchaser and
General Partner would receive in such liquidation. Accordingly, Unitholders may
ultimately receive a greater return on their investment if the Settlement
(including the Purchase Offer and the Merger) is not consummated and Unitholders
will continue holding their Units. If less than a majority of the outstanding
Units consent to the Merger and the Amendments, the Settlement will not be
consummated.
. Conflicts of Interest with Respect to the Purchase Offer; No General
Partner Recommendation
The General Partner is a defendant in the Haas Litigation and, therefore,
has a conflict of interest with respect to the Purchase Offer, the Merger and
the Amendments. The General Partner makes no recommendation to any Unitholder
as to whether to tender or refrain from tendering Units or as to whether to vote
for or against the Merger or the Amendments. You must make your own decision
whether or not to opt-out of the Settlement, based upon a number of factors,
including several factors that may be personal to you, such as your financial
position, your need or desire for liquidity, your preferences regarding the
timing of when you might wish to sell your Units, other financial opportunities
available to you, and your tax position and the tax consequences to you of
selling your Units.
. Material Federal Income Tax Considerations in Connection with the Purchase
Offer and the Merger
If the Purchase Offer and the Merger occur, the receipt of cash by you
under the terms of the Settlement Agreement will constitute a taxable
transaction. You will recognize taxable gain to the extent that the amount that
you are deemed to receive exceeds your tax basis in your Units. The amount that
you will be deemed to receive will be the sum of the cash amount received by you
(which will be deemed to include any amount owed by you on the original purchase
price of your Units plus your share of the Partnership's nonrecourse liabilities
(and, if you do not affirmatively "opt out" of the settlement) may also include
all or a part of your portion of the legal fees paid to Class Counsel). If you
do not affirmatively "opt-out" of the Settlement, portion of the amount that you
are deemed to receive in the Settlement very likely will be considered to be
attributable to the settlement of the claims asserted in the Litigation, all or
a portion of
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which may be taxed at the ordinary income tax rate applicable to you. The
remaining portion of your taxable gain will be taxed at applicable capital gain
tax rates (including the 25% rate applicable to your share of the "unrecaptured
Section 1250 gain" of the Partnership).
. Loss of Future Distributions from the Partnership
After consummation of the Purchase Offer and the Merger (assuming all
conditions to the Purchase Offer and the Merger are satisfied or waived, if
waivable), the Joint Venture will hold all right, title and interest in and to
all of the limited partnership interests in the Partnership, as well as the
right to receive any cash dividends, distributions, rights, and other securities
issued or issuable in respect thereof. You will not receive any future
distributions from operating cash flow of the Partnership or upon a sale or
refinancing of properties owned by the Partnership for any Units that the
Purchaser acquires from you in the Purchase Offer or the Merger. We cannot
predict what the future performance of the Partnership will be. Therefore,
retaining the ownership of your Units may be more beneficial to you.
. Proxies become Irrevocable after Expiration Date; Potential Delay in Payment
Units tendered pursuant to the Purchase Offer may be withdrawn at any time
on or prior to the Expiration Date and, unless accepted for payment by the
Purchaser pursuant to the Purchaser Offer, may also be withdrawn at any time
after _______, 2000. The Purchaser reserves the right to extend the period of
time during which the Purchase Offer is open and thereby delay acceptance for
payment of any tendered Units. Units will be returned promptly at such time as
it is finally determined that the conditions for consummation of the Purchase
Offer and the Merger will not be satisfied or waived (if waivable). Written
Consent Forms submitted to the Claims Administrator prior to the Expiration Date
may be revoked until the Expiration Date. However, properly executed and timely
received Consent Forms that were not properly withdrawn will become binding and
irrevocable after the Expiration Date and will not expire until the conditions
for consummation of the Purchase Offer and the Merger are satisfied (or waived,
if waivable) or until such time as it is finally determined that such conditions
will not be satisfied or waived. However, until the Court order approving the
Settlement has become final, the Purchase Offer and the Merger will not be
consummated. If there is an appeal of the Court's order approving the
Settlement, there may be a lengthy delay before you receive any payment for your
Units but your consent to the Merger and the Amendment will remain valid.
. Alternatives to Tendering Units
If you wish to retain your Units because you believe that the Settlement is
not in your best interests, you should not consent to the Merger and the
Amendments. If the conditions to the Purchase Offer and the Merger are not
satisfied (or waived, if waivable), you will retain your Units and may seek a
private sale of your Units now or later.
However, even if you do not consent to the Merger and the Amendments, the
Purchase Offer and the Merger will be consummated if they receive the approval
of a majority of the outstanding Units and the other conditions to the Purchase
Offer and the Merger are satisfied (or waived, if waivable). In that case, you
will receive the purchase offer price less attorneys' fees and expenses for your
Units in the Merger, unless you have opted-out of the Settlement, in which case
you will receive the appraised value of your Units. See "The Settlement--The
Merger."
EACH UNITHOLDER MUST MAKE HIS OR HER OWN DECISION REGARDING THE OFFER, THE
MERGER AND THE AMENDMENTS BASED ON HIS OR HER PARTICULAR CIRCUMSTANCES.
UNITHOLDERS SHOULD CONSULT WITH THEIR
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RESPECTIVE ADVISORS ABOUT THE FINANCIAL, TAX, LEGAL AND OTHER IMPLICATIONS TO
THEM OF ACCEPTING THE OFFER AND CONSENTING TO THE MERGER AND THE
AMENDMENTS.
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THE SETTLEMENT
Background of the Settlement
Organization and Business of the Partnership. The Partnership is a
Delaware limited partnership formed on July 15, 1986 to acquire and own 50
Courtyard by Marriott hotels (the "Hotels") and the land on which certain of the
Hotels are located. The sole general partner of the Partnership, with a 5%
general partner interest, is CBM One LLC, which is jointly owned by Host LP,
which holds the sole managing interest, and Rockledge, which holds a non-
managing interest.
On August 20, 1986, the General Partner made a capital contribution of $1.2
million in cash and land valued at $4.8 million for its 5% general partner
interest. On that same date, 1,150 Units, representing a 95% interest in the
Partnership, were sold in a private placement at an offering price per Unit of
$100,000. A portion of the Units were purchased on an installment basis, with
the limited partners' obligations to make the installment payments evidenced by
promissory notes payable to the Partnership and secured by their Units. The
General Partner currently owns a total of 15 Units, which were purchased from
defaulting investors, representing a 1.24% limited partnership interest in the
Partnership.
On August 20, 1986, the Partnership began operations and executed a
purchase agreement with Marriott Corporation (the predecessor to Host Marriott
Corporation) to acquire the Hotels and the land on which certain of the Hotels
are located for a total price of $448.2 million. Of the total purchase price,
$374.7 million was paid in cash from the proceeds of mortgage financing and the
initial installment payments from the sale of the Units, and $73.5 million from
a note payable to Host Marriott Corporation. Twenty-eight of the Hotels were
conveyed to the Partnership in 1986, twenty-one Hotels in 1987, and the final
Hotel in January 1988. The Hotels are managed as part of the Courtyard by
Marriott hotel system under a long-term management agreement with Courtyard
Management Corporation (the "Manager"), currently a wholly owned subsidiary of
Marriott International. For a description of certain terms of the management
agreement, see "Certain Transactions with the Partnership--Management Agreement"
below.
The Partnership did not have sufficient cash to repay its original mortgage
loan at maturity in June 1993 and defaulted on the loan. In December 1993, the
Partnership entered into a forbearance agreement whereby its mortgage lenders
agreed not to exercise their rights and remedies for nonpayment of the loan. In
April 1994, the Partnership entered into a restated loan agreement with its
mortgage lenders, which would have matured in June 1997, subject to extension of
two one-year periods if certain operating profit levels were met. The loan
required that 75% or more of the available cash flow each year be applied to
additional principal repayments. The General Partner's predecessor provided a
$37.3 million guarantee of the original loan and Host Marriott provided a $40.0
million guarantee of the refinanced loans, which was backed up by a guarantee
from Marriott International. A total amount of $7,341,000 was advanced by the
General Partner's predecessor under the original guarantee, which as of March
24, 2000, had accrued a total of $7,600,000 of interest.
On March 21, 1997, the Partnership refinanced its mortgage debt. The total
amount of the debt was increased from $280.8 million to $325.0 million. The
$44.2 million of excess refinancing proceeds were used to: (i) make a $7 million
contribution to the property improvement fund to cover anticipated shortfalls;
(ii) pay approximately $7.0 million of refinancing costs; and (iii) make a $30.2
million partial return of capital distribution to the partners. The new loan
requires monthly payments of interest at a fixed rate of 7.865% and principal
based on a 20-year amortization schedule. The loan has a scheduled maturity in
April 2012.
The Abandoned 1997 Rollup Transaction. In late 1997, the Partnership and
five other Marriott partnerships that own limited service hotels explored a
potential transaction involving the formation of an "umbrella partnership real
estate investment trust," or UPREIT, that
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would acquire the limited service hotels owned by the six partnerships. The
transaction was intended to provide the limited partners in the six partnerships
with liquidity and the opportunity to participate in a public entity with growth
potential. As a result of conditions in the market for limited service hotels,
the transaction was abandoned.
The Unsuccessful Sales Effort. In mid-1998, the Partnership and five other
Marriott partnerships retained Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") as their financial advisor to explore the
possibility of sales of these Marriott partnerships, on a portfolio or
individual basis, in an effort to provide liquidity to limited partners and help
them realize the value of their investments. More than 70 prospective
purchasers were contacted, and certain financial information concerning the
Partnership was made available to a number of them for their review and analysis
on a confidential basis. Although the Partnership received several indications
of interest, due to the large number of Hotels owned by the Partnership, many
prospective purchasers did not have the ability to consummate a transaction of
this size. The Partnership had preliminary discussions with the party that made
the most attractive proposal, but the Partnership and this bidder did not pursue
a definitive agreement because of uncertainties regarding the future operating
results of the Partnership's Hotels.
The Litigation. The Settlement Agreement is intended to resolve lawsuits
brought on behalf of limited partners in the Partnership, as well as lawsuits on
behalf of partners in six other partnerships. On March 16, 1998, limited
partners in the Partnership and several other Marriott Partnerships filed a
lawsuit (the "Haas Litigation"), styled Robert M. Haas, Sr. and Irwin Randolph
Joint Tenants, et al. v. Marriott International, Inc., et al., Case No. 98-CI-
04092, in the 57th Judicial District Court of Bexar County, Texas (the "Court")
against Marriott International, Host Marriott, various of their subsidiaries,
various individuals, and Hospitality Valuation Services, Inc. (collectively, the
"Haas Litigation Defendants"). This lawsuit related to the Partnership and the
following other partnerships (collectively, the "Marriott Partnerships"):
Courtyard by Marriott II Limited Partnership, Marriott Residence Inn Limited
Partnership, Marriott Residence Inn II Limited Partnership, Fairfield Inn by
Marriott Limited Partnership, Host DSM Limited Partnership (formerly known as
Desert Springs Marriott Limited Partnership) and Atlanta II Limited Partnership
(formerly known as Atlanta Marriott Marquis Limited Partnership). The
plaintiffs in the Haas Litigation alleged, among other things, that the
defendants in this lawsuit conspired to sell hotels to those Marriott
Partnerships at inflated prices and that they charged excessive management fees
to manage the hotels owned by those partnerships. They also alleged that the
Haas Litigation Defendants committed fraud, breached fiduciary duties, and
violated the provisions of various contracts. As part of the Settlement,
counsel to the plaintiffs in the Haas Litigation ("Class Counsel") will move for
certification of a settlement class consisting of all limited partners that were
Unitholders as of March 9, 2000, excluding the Haas Litigation Defendants, the
Insiders and two groups of limited partners that have elected to opt-out of the
Haas Litigation and intervene and are represented by separate counsel -- Palm
Investors, LLC and several Equity Resource Funds (the "Intervenors"). In
addition, the settlement class will consist of persons who were named as
plaintiffs in the Haas Litigation and sold their Units prior to March 9, 2000,
but did not assign their litigation claims.
In addition, certain limited partners of Courtyard by Marriott II Limited
Partnership filed a separate lawsuit, styled Whitey Ford, et al. v. Host
Marriott Corporation, et al., Case No. 96-CI-08327, in the 285th Judicial
District Court of Bexar County, Texas, involving similar allegations against
Host Marriott, Marriott International, various related entities, and others
(collectively, the "Courtyard II Defendants" and together with the Haas
Litigation Defendants, the "Defendants"). On January 29, 1998, two other
limited partners of Courtyard by Marriott II Limited Partnership, A.R. Milkes
and D.R. Burklew, filed a petition to expand this lawsuit (the "Milkes
Litigation" and, together with the Haas Litigation, the "Litigation") into a
class action. On June 23, 1998, the Court entered an order certifying a class
of limited partners under Texas law in the Milkes Litigation. As a result,
Courtyard by Marriott II Limited Partnership is no longer included in the Haas
Litigation.
The Defendants in both the Haas Litigation and the Milkes Litigation have
filed answers denying the allegations and asserting various defenses, including
the statutes of limitations.
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The Negotiations. The Settlement is the result of negotiations in
connection with the Haas and the Milkes Litigation that took place over the
course of one year. The parties to the Settlement Agreement engaged in
extensive settlement negotiations and explored numerous preliminary settlement
strategies during the course of the Litigation. In March 1999, the parties
proposed to retain a mediator, and in April 1999, Mr. Finis Cowan, a former
federal district judge, was retained to mediate the dispute. During the summer
of 1999, several mediation sessions were held, both in Houston, Texas and
Washington, D.C., at which representatives of all the parties to the Litigation
and their respective counsel were present. These sessions focused primarily on
various proposed partnership restructurings and cash payments. During these
negotiations, the parties strongly disagreed on the asserted value of the
claims. As no settlement appeared imminent, the parties continued to prepare
diligently for the trial, which was scheduled for February 2000.
On August 17, 1999, the General Partner, in accordance with Section 17-
403(c) of the Partnership Act, appointed an independent Special Litigation
Committee consisting of The Honorable William H. Webster and The Honorable
Charles B. Renfrew, to investigate, review, and analyze, on behalf of the
Partnership, the facts and circumstances surrounding the derivative claims
asserted in the Milkes Litigation and decide what action the Partnership should
take with respect to such claims. William H. Webster, a partner at the law firm
of Milbank, Tweed, Hadley & McCloy LLP in its Washington, D.C. office, served as
a Judge of the United States District Court for the Eastern District of Missouri
from 1970 until 1973, when he was elevated to the United States Court of Appeals
for the Eighth Circuit. From 1978 until 1987, Mr. Webster served as Director of
the Federal Bureau of Investigation. From 1987 until 1991, he served as Director
of Central Intelligence, where he headed all the foreign intelligence agencies
of the United States and the Central Intelligence Agency. Charles B. Renfrew,
who operates law offices under his own name and practiced at two major U.S. law
firms prior to that, served as a Judge of the United States District Court for
the Northern District of California from 1972-80 and as Deputy Attorney General
of the United States from 1980-81. The Special Litigation Committee retained, as
its counsel, Richard C. Tufaro and the law firm of Milbank, Tweed, Hadley &
McCloy, LLP to assist in its investigation and review.
In January 2000, counsel for the Special Litigation Committee met in
Houston, Texas with Class Counsel in an effort to advance settlement
negotiations between the parties. The Special Litigation Committee believed
that it controlled the determination of the derivative claims and formed its own
views on the value of those claims and an appropriate settlement on behalf of
the Partnership and Courtyard by Marriott II Limited Partnership (collectively,
the "Partnerships"). After telephonic conversations between the Special
Litigation Committee's counsel and the Defendants and their counsel, on February
4, 2000, the parties to the litigation and their respective counsel met in
Washington, D.C. with the Special Litigation Committee. The negotiations lasted
all day at the office of the Special Litigation Committee's counsel. It was at
this settlement meeting that a settlement strategy involving a proposed sale of
the units of limited partnership interest in the Partnerships to the Defendants
was raised. Class Counsel, after consultation with its representative clients,
viewed the proposal favorably because it provided an exit strategy and
liquidity--two significant factors desired by the class plaintiffs.
During February 2000, the numerous telephonic settlement negotiations took
place in an attempt to define the parameters of an acceptable Unit repurchase
and litigation settlement strategy. Throughout this time, Class Counsel was
meeting with its clients, advisors and with counsel to the Special Litigation
Committee to discuss various proposed settlement terms. Similarly, the
Defendants and their respective counsel and advisors continued to have internal
discussions and discussions with counsel to the Special Litigation Committee
regarding the resolution of the Litigation. Additional
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meetings were held in Houston in February 2000, culminating in the execution of
a non-binding settlement term sheet on February 23, 2000.
During the settlement process, Class Counsel, counsel to the Special
Litigation Committee, and their respective experts and advisors, or some of
them: (1) obtained additional financial material regarding all of the Marriott
Partnerships; (2) reviewed detailed information regarding the attempted sale of
the Partnerships by Merrill Lynch; (3) interviewed and deposed a representative
of Merrill Lynch; (4) reviewed the terms of the secondary market purchases of
units of limited partnership interest in the Partnerships; and (5) performed
such other reviews and analysis as they deemed appropriate.
Further settlement negotiations followed, resulting in the execution of the
Settlement Agreement by the Defendants, counsel for the plaintiffs, the
Intervenors and the Special Litigation Committee on March 9, 2000.
Fees. In connection with the consummation of the Purchase Offer and the
Merger, the Joint Venture will pay Merrill Lynch a fee in accordance with the
terms of its engagement letter entered into in mid-1998 in connection with its
sales efforts.
The Settlement Agreement
Insofar as it relates to the limited partners in the Partnership, the
Settlement Agreement provides for a two-step process to effectuate the
Settlement, consisting of the Purchase Offer and the Merger on the terms and
conditions set forth elsewhere in this Purchase Offer and Consent Solicitation.
The Settlement Agreement provides that the Joint Venture, Host Marriott,
Rockledge, and Marriott International, or their designees, will deposit the
settlement funds with respect to the Haas Litigation (an aggregate amount of
$152,237,550 reduced by $134,130 for each Unit held by a Unitholder who opts-out
of the Settlement and further reduced by any amounts owed by Unitholders on the
original purchase price of any Units) in escrow with Chase Bank of Texas, N.A.,
which has been retained to act as escrow agent for the settlement funds (the
"Escrow Agent") within three business days after the Court enters a judgment
order approving the Settlement Agreement. If the judgment order becomes final
without an appeal (other than an appeal that relates solely to counsel fees and
expenses), then the Escrow Agent will be authorized to make distributions within
seven business days after the date on which the judgment order becomes final
(such date, the "Effective Date") of an amount equal to $134,130 per Unit (or a
pro rata portion thereof) in cash to limited partners who have submitted valid
Proofs of Claim on or before the Effective Date. If the Court approves legal
fees and expenses of approximately $18,000 per Unit to Class Counsel, the net
amount that each Unitholder that is a class member in the Haas Litigation will
receive is approximately $116,000 per Unit (or a pro rata portion thereof) (the
"Net Settlement Amount"). The Net Settlement Amount to be received by any
holder will be reduced by any amount owed by the holder on the original purchase
price of such Unit. The Escrow Agent will be authorized to make distributions
of the Net Settlement Amount to limited partners who submit valid Proofs of
Claim after the Effective Date within seven days after receipt of their Proofs
of Claim. If a class action plaintiff has not submitted a valid Proof of Claim
to the Claims Administrator within 90 days following the Effective Date and such
plaintiff has not opted-out of the Settlement, Class Counsel will execute a
Proof of Claim on behalf of that limited partner. The execution of the Proof of
Claim by Class Counsel on behalf of a limited partner will entitle the limited
partner to receive the Net Settlement Amount for each Unit held by such limited
partner and release, on behalf of such limited partner, all claims that are
released, settled and discharged as part of the Settlement as provided in the
Proof of Claim.
Upon the terms and subject to the conditions of the Purchase Offer, payment
for the Units (other than Units held by holders who have opted out of the
Settlement) will be made by deposit of the consideration therefor with the
Escrow Agent. Upon deposit of the settlement funds with respect to the Haas
litigation the Escrow Agent for the purpose
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of making payment to validly tendering Unitholders, the Purchaser's obligation
to make such payment shall be satisfied and such tendering Unitholders must
thereafter look solely to Class Counsel and the Escrow Agent for payment of the
amounts owed to them by reason of acceptance for payment of Units pursuant to
the Purchase Offer or the Merger. The Defendants in the Litigation have no
responsibility for or liability whatsoever with respect to the investment or
distribution of the settlement funds, the determination, administration,
calculation or payment of claims, or any losses incurred in connection
therewith, or with the formulation or implementation of the plan of allocation
of the settlement funds, or the giving of any notice with respect to same.
By execution and delivery of a Proof of Claim, you will be granting a
release of any and all claims, whether known or unknown, relating to the
purchase and sale of Units, the operation of the Partnership or management of
the Hotels, and other related matters, as set forth in greater detail in the
Proof of Claim. If you do not opt-out of the settlement class, you will also be
deemed to have granted such a release by virtue of the judgment order, even if
you fail to execute and deliver a valid Proof of Claim. Pursuant to a Proof of
Claim delivered prior to the Effective Date, you will also transfer your Units
to the Purchaser, free and clear of any liens or encumbrances.
The Haas Litigation Defendants have agreed with the Intervenors to pay the
Intervenors $134,130 per Unit in the Purchase Offer pursuant to the same
Settlement Agreement entered into with Class Counsel. The Intervenors have
agreed to grant releases to the Haas Litigation Defendants as provided in the
Proof of Claim and to pay their own counsel fees and expenses. The Intervenors
have also agreed to exercise their best efforts to accomplish the terms and
conditions of the Settlement Agreement and accordingly are expected to tender
their Units in the Purchase Offer and to vote in favor of the Merger and the
Amendments. Insiders who own Units will also not be members of the plaintiff
class in the Haas Litigation. They will receive $134,130 per Unit tendered in
the Purchase Offer. If any of the persons discussed in this paragraph who are
not members of the plaintiff class in the Haas Litigation do not tender their
Units prior to the Expiration Date, their Units will be converted in the Merger
in the same manner as Units held by other participating Unitholders in the
Merger.
If you or any other plaintiffs file an appeal of the judgment order (other
than an appeal that relates solely to counsel fees and expenses), the Escrow
Agent will return the settlement fund, with interest, to the Joint Venture, Host
Marriott, Rockledge, and Marriott International, or their designees, within two
days after receiving documentation of the event. If an order of an appellate
court affirming the judgment order subsequently becomes final, then the Joint
Venture, Host Marriott, Rockledge, and Marriott International, or their
designees, will return the settlement fund to the Escrow Agent within three
business days thereafter, without interest.
The Settlement Agreement provides that the limited partners in the
Partnership will continue to own their respective Units until the judgment order
becomes final. The General Partner will cause the Partnership to make
distributions of Cash Available for Distribution (as defined in the Partnership
Agreement) for the period until the judgment order is entered. Following entry
of the judgment order, and until the judgment order becomes final, assuming
there is no appeal, no additional distribution of Cash Available for
Distribution will be made, but the limited partners will be entitled to receive
interest accumulated on the settlement fund, less administrative expenses. If
an appeal is filed, the General Partner will cause the Partnership to make
distributions of Cash Available for Distribution for the period until the
judgment order becomes final.
There may be a delay in such distribution to the extent the judgment order
becomes final in the middle of an accounting period or the General Partner is
otherwise unable to finally determine the amount of the distribution prior to
the judgment order becoming final.
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Position of the General Partner, the Purchaser, the Joint Venture, Marriott
International, MI Investor and Rockledge Regarding the Purchase Offer
The terms of the Purchase Offer and the Merger (as well as all of the other
terms of the Settlement Agreement) were established through extensive arms-
length negotiations between and among the plaintiffs, the Defendants and their
counsel. None of the Joint Venture, the Purchaser, Marriott International, MI
Investor, Rockledge or the General Partner makes any recommendation with respect
to the Purchase Offer, the Merger, the Amendments, or the other terms of the
Settlement Agreement.
The General Partner is a Defendant and therefore has a conflict of
interest. Accordingly, the General Partner makes no recommendation to any
Unitholder whether to tender or to refrain from tendering his or her Units. YOU
MUST EACH MAKE YOUR OWN DECISION WHETHER OR NOT TO TENDER YOUR UNITS AND WHETHER
OR NOT TO CONSENT TO THE MERGER AND THE AMENDMENTS.
Recommendation of the Special Litigation Committee and Counsel to the Class
Action Plaintiffs
The Special Litigation Committee engaged the law firm of Milbank, Tweed,
Hadley & McCloy LLP to act as counsel and assist in the investigation. The
Special Litigation Committee also retained the law firm of Bouchard Margules
Friedlander & Maloney Huss to advise on matters of Delaware law and Jackson &
Walker LLP to advise on matters of Texas law. In addition to these three law
firms, the Special Litigation Committee retained experts, Cushman Realty
Corporation and Maurice Robinson & Associates, LLC to assist in analyzing the
claims.
After extensive analysis of the factual and legal issues, the Special
Litigation Committee concluded that the terms of the proposed Settlement (1) are
fair and reasonable to the Partnership (which the Special Litigation Committee
considers, as a practical matter, to have an identity of interest with the
limited partners with respect to the derivative claims in the Milkes
Litigation), and (2) include a fair and reasonable settlement of any and all
derivative claims, expressed or implied, made on behalf of the Partnership in
the Haas Litigation. The Special Litigation Committee has advised the
Partnership it considered the following factors in determining that the proposed
Settlement is fair and reasonable:
(1) the Settlement fairly reflects the substantial risks of litigation to
the Partnership and the limited partners;
(2) the Settlement fairly accounts for the inherent value of the Units
based upon market-tested offers to purchase the Partnership obtained by Merrill
Lynch in the summer of 1999;
(3) holders of Units who do not want to participate in the Settlement may
opt-out of the Settlement and have their Units appraised and pursue their
individual claims separately;
(4) the fairness of the Settlement is subject to Court approval;
(5) the Settlement requires the approval of a majority of the limited
partners in the form of a consent to the Merger;
(6) limited partners who do not opt-out of the class may appear at the
hearing to determine the fairness of the Settlement and oppose the Settlement;
(7) the lack of an existing active trading market for the Units;
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(8) the terms of the Settlement were the result of extensive arms' length
negotiations between Class Counsel and the Defendants; and
(9) the advice of independent financial experts, Cushman Realty
Corporation and Maurice Robinson & Associates, LLC, retained by the Special
Litigation Committee in connection with the investigation.
In addition, Class Counsel has recommended to its clients that they approve
the Settlement by tendering their Units in the Purchase Offer and consenting to
the Merger and the Amendments. Class Counsel has determined that the Settlement
represents a fair, reasonable and attractive settlement. Class Counsel came to
this conclusion after engaging in extensive investigation and discovery on the
claims asserted in the Haas Litigation that lasted over eighteen months.
According to documents filed with the Court, the investigations and discovery
conducted by Class Counsel included:
(1) inspecting thousands of pages of documents produced by the Defendants
in the Litigation and by third parties;
(2) deposing numerous present and former employees of the Defendants in
the Litigation;
(3) deposing plaintiffs;
(4) deposing third party witnesses;
(5) employing and consulting with experts, including reviewing and
producing expert reports and attending and taking expert depositions;
(6) reviewing public and on-line filings; and
(7) researching applicable legal issues with respect to the claims
asserted in the Haas Litigation.
According to documents filed with the Court, Class Counsel, based on its
collective experience in handling hundreds of limited partnership claims,
believes that the Settlement confers substantial benefits upon the class and
each member of the class and is in the best interests of the class members.
Purpose and Structure of the Purchase Offer; Merger and Amendments
The purpose of the Purchase Offer and the Merger is to fulfill the
obligations of Marriott International, Host Marriott and Rockledge under the
Settlement Agreement. See " 3/4The Settlement Agreement." The acquisition of
the Units has been structured as a cash purchase offer followed by a merger in
order to ensure that all of the Units are acquired, to permit different
consideration for Unitholders that participate in the Settlement and Unitholders
that elect to opt-out of the Settlement, and to provide for a majority vote on
the Merger and Amendments.
The Settlement Agreement and the Merger Agreement provide that, if the
judgment order approving the Settlement becomes final, Unitholders who fail to
tender their Units, other than Unitholders who opt-out of the Settlement, will
receive the same consideration in the Merger as Unitholders whose Units are
purchased in the Purchase Offer. If the judgment order approving the Settlement
becomes final, each holder of Units who has opted out of the Settlement will be
entitled to receive a cash amount per Unit determined through an appraisal
process set forth in the Settlement Agreement and the Merger Agreement, but such
appraisal amount will not include any amount representing the value of the
settlement of the claims that were asserted in the Haas Litigation.
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Conditions of the Purchase Offer and the Merger
Notwithstanding any other provisions of the Purchase Offer and Consent
Solicitation, the Purchaser is not obligated to accept for payment, purchase or
pay for, subject to Rule 14e-1(c) under the Securities Exchange Act of 1934, any
Units tendered, or to consummate the Merger, unless the following conditions are
satisfied:
(1) the order of the Court approving the terms of the Settlement and the
dismissal of the Litigation shall have become final (other than by reason of an
appeal relating solely to counsel fees and expenses),
(2) not more than ten percent of the units of limited partnership
interests in each of the Partnership and each of the other six Marriott
Partnerships (other than units held by Insiders) shall be held by holders who
have elected to opt-out of the Settlement,
(3) holders of a majority of the outstanding units of limited partnership
interests in each of the Partnership and Courtyard by Marriott II Limited
Partnership (other than the general partners of these partnerships and their
affiliates) shall have submitted valid written consents to its merger and the
proposed amendments to its partnership agreement.
The condition set forth in (2) above is for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the circumstances
giving rise to this condition and may be waived by the Purchaser in writing, in
whole or in part, at any time and from time to time, in its sole discretion.
The failure by the Purchaser at any time to exercise this right will not be
deemed a waiver of such right and this right will be deemed an ongoing right
which may be asserted at any time and from time to time until the Expiration
Date. However, conditions (1) and (3) may not be waived by the Purchaser.
Accordingly, in the event that holders of a majority of the outstanding Units
fail to consent to the Merger and the Amendments, the Purchase Offer and the
Merger and the other transactions contemplated by the Settlement will not be
consummated.
Plans for the Partnership; Certain Effects of the Purchase Offer
The Purchaser, the Joint Venture, Marriott International, MI Investor and
Rockledge currently intend that, upon consummation of the Purchase Offer and the
Merger, the Partnership will continue its business and operations, substantially
as, and in such places as, they are currently being conducted. Except as set
forth in this Purchase Offer and Consent Solicitation, the Purchaser has no
present plans or proposals regardless of the outcome of the Purchase Offer that
would result in an extraordinary transaction, such as a merger, reorganization,
liquidation, or sale or transfer of a material amount of assets, involving the
Partnership or its subsidiaries, or any material changes in the Partnership's
capitalization, distribution policy, structure or business. Immediately prior
to the consummation of the Purchase Offer, Rockledge will contribute its 99%
non-managing interest in the General Partner to the Joint Venture as a capital
contribution and Host LP will contribute its 1% managing interest to the Joint
Venture as a capital contribution. As a result, following the consummation of
the Purchase Offer and the Merger, the Partnership will be 100% owned indirectly
by the Joint Venture (through the General Partner and the Purchaser) and,
therefore, by the Joint Venture's equity owners, MI Investor, Rockledge (through
wholly owned subsidiaries) and Host LP. In addition, subject to contractual
obligations to third parties, Rockledge (through wholly owned subsidiaries) and
MI Investor intend to make certain changes to the arrangements under which the
Manager provides management services to the subsidiaries of the Partnership that
own the Hotels to make such
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arrangements more consistent with arrangements that the Manager and its
affiliates currently have with other properties in which Rockledge and Host
Marriott have an interest. See "--Certain Transactions with the Partnership." In
addition, following consummation of the Purchaser Offer and the Merger, the
Partnership will be required, under the terms of its senior notes, to make an
offer to purchase all outstanding senior notes as a result of a change of
control of the Partnership.
The Units currently are registered under the Exchange Act, and the
Partnership currently is subject to the periodic reporting requirements of that
Act. Following the consummation of the Purchase Offer and the Merger, the
Partnership will become privately held directly and indirectly by Marriott
International and Rockledge through the Joint Venture and its subsidiaries.
Under the terms of its senior notes, the Partnership will be required to
continue filing periodic reports with the SEC, although it will not be required
to do so under the Exchange Act.
Following consummation of the Purchase Offer and the Merger, you will have
no further opportunity to participate in the benefit of increases, if any, in
the value of the Partnership's business and properties or to receive future
distributions, if any, in respect of the Partnership's operations.
Certain Information Concerning the Partnership
Business Description. The Partnership is a Delaware limited partnership
with its principal offices located at 10400 Fernwood Road, Bethesda, Maryland
20817. The Partnership was formed on July 15, 1986 to acquire and own the Hotels
and the respective fee or leasehold interests in the land on which the Hotels
are located. The Hotels are located in 16 states and contained a total of 7,223
guest rooms as of December 31, 1999. The Partnership is engaged solely in the
business of owning and operating hotels. The Hotels are operated as part of the
Courtyard by Marriott system, which includes over 471 hotels worldwide in the
moderately-priced segment of the lodging industry. The Hotels are managed by the
Manager, a wholly owned subsidiary of Marriott International, under the
Management Agreement. See "-- Certain Transactions with the Partnership."
The Partnership has no directors or officers. The business policymaking
functions of the Partnership are carried out through the managers and executive
officers of the General Partner. The name, business address, principal
occupation, five-year employment history, and citizenship of the managers and
executive officers of the General Partner are set forth in Schedule II to this
Purchase Offer and Consent Solicitation.
Except as otherwise described in this Purchase Offer and Consent
Solicitation, neither the Partnership nor any of its affiliates nor, to the best
of the Partnership's knowledge, any of the persons listed in Schedule II hereto,
nor any associate or majority-owned subsidiary of any of the foregoing,
beneficially owns or has a right to acquire any Units. Except as otherwise
described in this Purchase Offer and Consent Solicitation, neither the
Partnership nor any of its affiliates nor, to the best of the Partnership's
knowledge, any of the persons or entities referred to above, nor any director,
executive officer or subsidiary of the Partnership, has effected any transaction
in such Units during the past 60 days.
Except as described in this Purchase Offer and Consent Solicitation,
neither the Partnership nor any of its affiliates nor, to the best of the
Partnership's knowledge, any of the persons listed on Schedule II hereto, has
any contract, arrangement, understanding or relationship with another person
with respect to any securities of the Partnership, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or voting of such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees or loans, guarantees against loss or the
giving or withholding of proxies.
The Partnership is currently subject to the information and reporting
requirements of the Exchange Act and, as a result, is required to file reports
and other information with the SEC relating to its business, financial condition
and other matters. Certain information, as of particular dates, concerning the
Partnership, the General Partner's managers and executive officers, the
principal holders of the Partnership's securities, any material interests of
these persons in transactions with
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the Partnership and other matters is required to be disclosed in reports filed
with the SEC. Such reports and other information can be inspected and copied at
the public reference facilities maintained by the SEC in Washington, D.C., New
York, New York and Chicago, Illinois. Information regarding the public reference
facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The
Partnership's filings are also available to the public on the SEC's Internet
site (http://www.sec.gov). Copies of such materials may also be obtained by mail
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
Certain Information Concerning the Purchaser, the Joint Venture, Marriott
International, MI Investor and Rockledge
The Purchaser. The Purchaser, a Delaware limited liability company and a
wholly owned subsidiary of the Joint Venture, was formed on April 19, 2000, for
the purpose of acquiring the Units pursuant to the Purchase Offer, and has
engaged in no activities to date, other than those incidental to its organizing
as an entity and making the Purchase Offer. Because the Purchaser is newly
formed and has minimal assets and capitalization, no meaningful financial
information with respect to the Purchaser is available. Similarly, because the
Purchaser has yet to establish an office, it should be contacted through either
MI Investor or Rockledge at the address and telephone numbers shown below.
The Joint Venture. The Joint Venture, a Delaware limited liability
company, is owned 50% by Marriott International, through MI Investor, and 50% by
Rockledge (through wholly owned subsidiaries). The Joint Venture was formed by
MI Investor and Rockledge (through wholly owned subsidiaries) on April 19, 2000
in order to effectuate the terms of the Settlement Agreement and has engaged in
no activities to date, other than those incidental to its organization and
satisfying the terms of the Settlement Agreement. Because the Joint Venture has
yet to establish an office, it should be contacted through either MI Investor or
Rockledge at the address and telephone numbers shown below.
MI Investor. MI Investor, a Delaware limited liability company, is a
wholly owned indirect subsidiary of Marriott International. MI Investor was
formed on April 13, 2000, for the purpose of investing in the Joint Venture, and
has engaged in no activities to date, other than those incidental to its
organization and the formation of the Joint Venture. The principal office of MI
Investor is located at 10400 Fernwood Road, Bethesda, Maryland 20817 and its
telephone number is (301) 380-3000.
Marriott International. Marriott International, a Delaware corporation,
was incorporated on September 19, 1997 and became a public company when it was
spun off as a separate entity by the company formerly named "Marriott
International, Inc." (now known as Sodexho Marriott Services, Inc.) on March 27,
1998. Marriott International is a worldwide operator and franchisor of hotels
and related lodging facilities, an operator of senior living communities, and a
provider of distribution services. Its operations are grouped in three business
segments, lodging, senior living services and distribution services, which
represented 81, six, and 13 percent, respectively, of total sales in the fiscal
year ended December 31, 1999. The principal office of Marriott International is
located at 10400 Fernwood Road, Bethesda, Maryland 20817 and its telephone
number is (301) 380-3000.
Marriott International is subject to the information and reporting
requirements of the Exchange Act and, in accordance therewith, files reports and
other information with the SEC relating to its business, financial condition and
other matters. Certain information, as of particular dates, concerning Marriott
International's directors and officers, the principal holders of Marriott
International's securities, any material interests of these persons in
transactions with Marriott International and other matters is required to be
disclosed in proxy statements distributed to Marriott International's
stockholders and filed with the SEC. Such reports, proxy statements, and other
information can be inspected at the public reference facilities maintained by
the SEC in Washington, D.C., New York, New York and Chicago, Illinois.
Information regarding the public reference facilities may be obtained from the
SEC by telephoning 1-800-SEC-0330. Marriott
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International's filings are also available to the public on the SEC's Internet
site (http://www.sec.gov). Copies of such materials may also be obtained by mail
from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C., 20549. Such reports, proxy statements and other information
can be inspected and copied at prescribed rates. Such information should also be
available for inspection at the New York Stock Exchange at 20 Broad Street, New
York, NY 10005.
Rockledge. Rockledge, a Delaware corporation, was formed in connection
with Host Marriott's efforts to reorganize its business operations to qualify as
a "real estate investment trust," or REIT, for federal income tax purposes.
Rockledge was formed to own various assets through a contribution of
approximately $264 million from Host Marriott to its operating partnership, the
direct ownership of which by Host Marriott or its operating partnership could
jeopardize Host Marriott's status as a REIT. These assets primarily consist of
partnership or other interests in hotels which are not leased and certain
furniture, fixtures and equipment used in the hotels. In exchange for the
contribution of these assets, the operating partnership received only non-voting
common stock, representing 95% of the total economic interests therein. The Host
Marriott Statutory Employee/Charitable Trust, the beneficiaries of which are
certain employees of Host LP, concurrently acquired all of the voting common
stock representing the remaining 5% of the total economic interest. The
principal office of Rockledge is 10400 Fernwood Road, Bethesda, Maryland 20817
and its telephone number is (301) 380-9000.
The name, business address, present principal occupation, five-year
employment history and citizenship of each of the directors and executive
officers of the Purchaser, the Joint Venture, Marriott International, MI
Investor and Rockledge are set forth in Schedule I hereto.
Except as set forth in this Purchase Offer and Consent Solicitation and in
Schedule I, neither the Joint Venture, the Purchaser, Marriott International, MI
Investor or Rockledge, nor any person controlling the Joint Venture, the
Purchaser, Marriott International, MI Investor or Rockledge, nor, to the best
knowledge of the Joint Venture, the Purchaser, Marriott International, MI
Investor or Rockledge, any of the persons listed in Schedule I or any associate
or majority-owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Units or has effected any transactions in the Units during
the past 60 days. Except as described in this Purchase Offer and Consent
Solicitation, neither the Joint Venture, the Purchaser, Marriott International,
MI Investor or Rockledge, nor any of their affiliates nor, to the knowledge of
the Joint Venture, the Purchaser, Marriott International, MI Investor or
Rockledge, any of the persons listed on Schedule I hereto, has any contract,
arrangement, understanding or relationship with another person with respect to
any securities of the Partnership, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, joint ventures, loan or option arrangements, puts or calls,
guarantees or loans, guarantees against loss or the giving or withholding of
proxies, consents, or authorizations. Except as described in this Purchase
Offer and Consent Solicitation, neither the Joint Venture, the Purchaser,
Marriott International, MI Investor or Rockledge, nor any of their affiliates
nor, to the knowledge of the Joint Venture, the Purchaser, Marriott
International, MI Investor or Rockledge, any of the persons listed on Schedule I
hereto, has since January 1, 1998 engaged in any business relationship or
transaction with the Partnership or any of its affiliates that would require
disclosure herein under the rules and regulations of the SEC applicable to the
Purchase Offer. Except as described in this Purchase Offer and Consent
Solicitation, there have been no contacts, negotiations or transactions since
January 1, 1998 between the Purchaser, the Joint Venture, Marriott
International, MI Investor or Rockledge, and their respective affiliates or any
of the persons listed on Schedule I hereto, on the one hand, and the Partnership
or its affiliates on the other hand, concerning a merger, consolidation,
acquisition, tender offer or other acquisition of securities, election of
directors or sale or other transfer of a material amount of assets of the
Partnership.
Source and Amount of Funds
The total amount of funds required to purchase the Units in the Purchase
Offer and to consummate the Merger will be up to approximately $152.2 million,
depending upon the number of Units held by limited partners who elect to opt-out
of the class and the appraised value determined
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for those Units under the Merger Agreement. The Purchaser will obtain the
necessary funds, indirectly, from Marriott International, and from Rockledge,
which will obtain funds from the operating partnership of Host Marriott through
a loan or capital contribution. MI Investor and Rockledge will provide a portion
of the funds for the Purchase Offer and the Merger by equity contributions to
the Joint Venture, and a subsidiary of Marriott International will provide a
portion of the funds through a loan. There is no financing contingency to
consummation of the Purchase Offer and the Merger. Host Marriott and Marriott
International have guaranteed the obligations of the Haas Litigation Defendants
and Rockledge to provide the funds necessary to fund payments under the
Settlement Agreement, if the judgment order becomes final.
The Joint Venture, Marriott International, Host Marriott, and Rockledge
will be responsible for payment of expenses of the Purchase Offer and the
Merger. See "Other Matters - Fees and Expenses."
Certain Transactions with the Partnership
The following paragraphs describe certain transactions between the
Partnership, on the one hand, and Host Marriott, Rockledge, Marriott
International, and certain affiliates and related persons, on the other hand.
Management Agreement. The Hotels owned by the Partnership's subsidiaries
are managed by the Manager, a wholly owned subsidiary of Marriott International,
under a management agreement (the "Management Agreement"). The following
paragraphs summarize the principal provisions of the Management Agreement.
The Management Agreement has an initial term expiring December 31, 2017 and
can be renewed for four successive ten-year periods as to one or more of the
Hotels. The Partnership may terminate the Management Agreement if, during any
three consecutive years, the average operating profit, as defined, does not
exceed $40,198,000 plus 8% of the sum of owner funded capital expenditures. In
addition, upon the sale of a Hotel, the Partnership may terminate the Management
Agreement with respect to that Hotel with payment of a termination fee. Prior to
December 31, 2001, a maximum of fifteen Hotels can be sold free and clear of the
Management Agreement with payment of the termination fee. The termination fee is
calculated by the Manager as the net present value of reasonably anticipated
future incentive management fees.
The Management Agreement provides for annual payments of (1) the base
management fee equal to 3% of gross Hotel sales, (2) the Courtyard management
fee equal to 3% of gross Hotel sales, and (3) the incentive management fee not
to exceed 15% of operating profit, as defined, payable from available cash as
described in the following paragraph. A portion of the Courtyard management fee
equal to 1% of gross Hotel sales is subordinate to debt service on the mortgage
loan.
As part of the Partnership's debt financing in March 1997, the Partnership
agreed to pay $4.2 million of deferred incentive management fees and the Manager
agreed to forgive approximately $14.9 million of these fees. This left a
remaining balance of $6.5 million of accrued incentive management fees as of
each of March 21, 1997 and December 31, 1997. The Partnership paid $823,000 and
$876,000 of deferred incentive management fees during 1998 and 1999,
respectively, leaving a balance of $4.8 million of deferred incentive management
fees as of December 31, 1999. Deferred and current year incentive management
fees are payable from 50% of available cash after the payment of: (1) debt
service, (2) deferred Courtyard management fees, if any, (3) deferred Marriott
International ground rent, if any, and (4) a priority return to the Partnership
equal to 10% of cumulative capital less sale and refinancing proceeds. Deferred
management fees are not payable to the Manager from sale or refinancing
proceeds. Unpaid incentive management fees will not accrue.
The Management Agreement provides for the establishment of a repairs and
equity reserve (property improvement fund) for the Hotels to ensure that the
physical condition and product quality of the Hotels are maintained.
Contributions to the property improvement fund were equal to 5% of gross Hotel
sales through 1998 and were increased to 6% of gross Hotel sales in 1999 and
2000 and
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may be increased, at the option of the Manager, to 7% thereafter. For
the years ended December 31, 1999 and 1998, the Partnership reported
contributions of $12,361,000 and $10,540,000, respectively, to the property
improvement fund.
Following the Merger, the Partnership will be owned, directly and
indirectly, by Marriott International, Rockledge and Host Marriott. See "The
Settlement -- Plans for the Partnership; Certain Effects of the Purchase Offer."
Subject to contractual obligations to third parties, Rockledge and MI Investor
intend to make certain changes to the arrangements under which the Manager
provides management services to the subsidiaries of the Partnership that own the
Hotels to make such arrangements more consistent with arrangements that the
Manager and its affiliates currently have with other properties in which
Rockledge and Host Marriott have an interest. These changes include eliminating
the ability of the Management Agreement to be terminated with respect to a Hotel
upon the sale of such Hotel by payment of a termination fee, decreasing the
amount to which the incentive fee would increase under certain circumstances and
increasing annual contributions to the repairs and equipment reserve.
The following table sets forth the Partnership's reported breakdown of
amounts paid to Marriott International and affiliates under the Management
Agreement for the years ended December 31, 1999 and 1998:
1999 1998
------- -------
(in thousands)
Incentive management fee...................................... $ 9,165 $ 9,426
Ground rent................................................... 7,479 7,383
Chain services and MRP allocation............................. 10,185 9,676
Base management fee........................................... 6,182 6,037
Courtyard management fee...................................... 6,182 6,037
Deferred incentive management fee............................. 876 823
------- -------
$40,069 $39,382
======= =======
Ground Leases. The land on which 31 of the Hotels are located is leased
from affiliates of Marriott International. In addition, two of the Hotels are
located on land leased from third parties. The ground leases have remaining
terms (including all renewal options) expiring between the years 2058 and 2081.
The Marriott International ground leases provide for rent based on specific
percentages (from 4% to 8.5%) of certain sales categories subject to minimum
amounts. The minimum rentals are adjusted at various anniversary dates
throughout the lease terms, as defined in the agreements. The affiliates of
Marriott International, as land lessors, agreed to continue to subordinate their
ownership interest, as well as receipt of ground rent, to debt service on the
Partnership's existing debt financing and qualified refinancing.
Payments to Host Marriott and Subsidiaries. The following sets forth
amounts paid by the Partnership to Host Marriott and its subsidiaries for the
years ended December 31, 1999 and 1998:
1999 1998
---- ----
(in thousands)
Cash distributions (as a limited and a general partner*)....... $ 831 $ 755
Administrative expenses reimbursed............................. 146 523
----- ------
$ 977 $1,278
===== ======
__________________________
* These cash distributions were made with respect to the limited and general
partnership interests held by the General Partner. Prior to December 28, 1998,
the General Partner was a wholly owned subsidiary of Host Marriott. On December
28, 1998, Host Marriott, which owns approximately 78% of the equity interests in
Host LP, transferred its interest in the General Partner to Host LP. Host LP
currently owns a 1% managing partnership interest in the General Partner.
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Security Ownership of Certain Beneficial Owners and Management
As of December 31, 1999, Palm Investors, LLC, an unrelated third party,
owned approximately 5.4% of the 1,150 Units outstanding. The General Partner
owns a total of 15 Units representing a 1.24% limited partnership interest in
the Partnership.
Neither the Purchaser, Rockledge, Marriott International, CBM Joint Venture
nor MI Investor own any Units. As of December 31, 1999, two individuals that
are officers and managers of the General Partner and officers of Host Marriott
each owned a quarter Unit. In addition, two officers of Marriott International
owned one Unit each.
In connection with the Settlement Agreement, the Purchaser intends to
acquire all of the outstanding Units (other than Units held by the General
Partner). The Purchaser is a subsidiary of a joint venture between Rockledge
and Marriott International.
Regulatory Matters
General. The Purchaser is not aware of any license or regulatory permit
that appears to be material to the business of the Partnership that might be
adversely affected by the Purchaser's acquisition of Units as contemplated
herein, the Merger or the other provisions of the Settlement Agreement.
Based upon an examination of available information relating to the
businesses in which the Partnership is engaged, the Purchaser, the Joint
Venture, Marriott International, MI Investor and Rockledge believe that the
acquisition of Units pursuant to the Purchase Offer or the Merger would not
violate the antitrust laws. The Purchaser, the Joint Venture, Marriott
International, MI Investor and Rockledge believe that retention of all of the
operations of the Partnership should be permitted under the antitrust laws.
Nevertheless, no one can assure you that a challenge to the Purchase Offer on
antitrust grounds will not be made or, if such challenge is made, what the
result will be.
Except as set forth in this section entitled "-- Regulatory Matters," the
Purchaser is not aware of any filings, approvals or other action by any federal
or state governmental administrative or regulatory authority that would be
required for the acquisition of Units by the Purchaser as contemplated herein or
the Merger. Should any such other approval or action be required, it is
currently contemplated that such approval or other action would be sought. We
cannot assure you that any such additional approval or other action, if needed,
would be obtained without substantial conditions or that adverse consequences
might not result to the Partnership's business in the event that such other
approvals were not obtained or such other actions were not taken.
Final Court Hearing and Right to Appear
At the present time, the Court has only determined that the Settlement
falls within a range of reasonableness that justifies sending class members the
Notice of Pendency and Settlement of Claim and Derivative Action related to
Courtyard by Marriott LP and Final Approval Hearing (the "Notice"), which is
being distributed by Class Counsel with this Purchase Offer and Consent
Solicitation, and the holding of a formal final approval hearing on the merits
of the proposed Settlement.
The Court must determine whether the proposed Settlement is fair,
reasonable, and adequate, whether a judgment order should be entered dismissing
the Haas Litigation, and whether the Court will retain jurisdiction over
implementation of the Settlement. The factors the Court will consider in making
this determination are:
(1) whether the Settlement was negotiated at arms' length or was a product
of fraud or collusion;
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[FN]
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(2) the complexity, expense and likely duration of the Litigation;
(3) the stage of the proceedings, including the status of discovery;
(4) the factual and legal obstacles that could prevent the plaintiffs from
prevailing on the merits;
(5) the possible range of recovery and the certainty of damages; and
(6) the respective opinions of the participants, including Class Counsel,
class representatives and the absent class members.
The Court will make these determinations on the fairness of the proposed
Settlement at the final approval hearing, which is scheduled for August 28, 2000
at 9 a.m. in the courtroom of the Honorable Michael Peden, 285/th/ District
Court, Bexar County Courthouse, 100 Dolorosa, San Antonio, Texas. The final
approval hearing may be continued or adjourned from time to time by the Court
without further notice to you.
Any class member who has not opted-out of the Settlement may appear at the
final approval hearing to demonstrate why the proposed Settlement should not be
approved as fair, reasonable, and adequate, why the Haas Litigation should not
be dismissed with prejudice, or to present any opposition to the proposed
distribution of the settlement funds or to Class Counsel's application for an
award of attorney's fees and expenses.
Unitholders will only be heard at the final approval hearing if they, on or
prior to August 18, 2000, submit written notice of their intention to appear at
the hearing to:
Robert M. Haas, Sr. et al. v. Marriott International, Inc. et al., No. 98-
CI 04092
District Clerk
Bexar County Courthouse
100 Dolorasa Street
San Antonio, Texas 78205
and copies to:
Co-Lead Counsel:
Stephen M. Hackerman
Hackerman Peterson Frankel & Manela
1122 Bissonnet Street
Houston, Texas 77005
and upon counsel for Defendants:
Tom A. Cunningham, Esq.
Cunningham, Darlow, Zook & Chapoton, LLP
600 Travis, Suite 1700
Houston, Texas 77002
Attorneys for Host Marriott Corporation
Seagal C. Wheatley, Esq.
Jenkens & Gilchrist, P.C.
1800 Frost Bank Tower
100 West Houston Street
San Antonio, Texas 78205
Attorneys for Marriott International, Inc.
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As indicated in the Notice, the written notice of intention to appear at
the hearing should state: (1) all grounds for objection or other statement of
position, (2) a detailed description of the facts underlying each objection,
(3) a detailed description of the legal authorities supporting each objection,
(4) a statement of whether the objector intends to appear and argue at the
hearing and, if so, how long the objector anticipates needing to present the
objection, (5) a list of witnesses who the objector may call by testimony or
affidavit, (6) a list of exhibits which the objector may offer during the
hearing, along with copies of such exhibits, showing proof of service on the
attorneys of record for all parties as indicated above.
Failure to timely submit a written notice of intention to appear at the
hearing will constitute a waiver of any objections and will foreclose the
raising of objections to the Settlement, to the dismissal with prejudice of the
action, to the proposed distribution of the settlement funds, and to the fees
and expenses requested by Class Counsel.
Procedures for Opting-Out of the Settlement
Unitholders who do not wish to participate in the Settlement may exclude
themselves from the Settlement class by submitting to GEMISYS Corporation, which
has been retained by Class Counsel to act as the claims administrator (the
"Claims Administrator"), at the address set forth on the back cover page of the
Purchase Offer and Consent Solicitation, a written request to be excluded (an
"Opt-Out Notice"). As indicated in the Notice, the Opt-Out Notice must be
received by the Claims Administrator on or prior to the Expiration Date. The
Opt-Out Notice must include: (1) the name of the case (Haas), (2) the
Unitholder's name, address and telephone number, social security number or
taxpayer identification number, (3) the number of Units held by the Unitholder,
(4) the date on which the Unitholder purchased the Units, (5) the name of the
Partnership (Courtyard by Marriott Limited Partnership), (6) a statement that
the Unitholder is requesting to be excluded from the settlement class, and
(7) the Unitholder's signature. Units held by holders who have opted-out of the
Settlement will be converted into the right to receive a cash amount equal to
the appraised value of such Units in accordance with the procedures described
under the heading "The Settlement--the Merger--Rights of Unitholders Who
Have Elected to Opt-Out of the Settlement." The appraised value of Units will
not include any amount representing the value of the settlement of the claims in
the Haas Litigation. Any amounts to be received in the Merger will be reduced
by any amount owed on the original purchase price of such Units.
Unitholders who wish to opt-out of the Settlement should also complete,
execute and include with their Opt-Out Notice the Certificate of Non-Foreign
Status included in the Proof of Claim. Failure to include the Certificate of
Non-Foreign Status will result in certain amounts being withheld from the cash
payment representing the appraised value of Units to be received by Unitholders
who opt-out of the Settlement. See "Federal Income Tax Considerations--Federal
Tax Withholding Applicable to Participating and Nonparticipating Unitholders" in
the Purchase Offer and Consent Solicitation and Instruction 8 to the Proof of
Claim.
Unitholders who fail to timely and validly submit an Opt-Out Notice will be
bound by all orders and judgments entered in the Haas Litigation, whether
favorable or unfavorable to them. See "The Settlement--The Merger--Rights
of Unitholders Who Have Elected to Opt-Out of the Settlement," page 21
and 22.
The Merger
Pursuant to the Settlement Agreement, and in accordance with the provisions
of Section 17-211 of the Delaware Revised Uniform Limited Partnership Act (the
"Partnership Act"), the Partnership, the Joint Venture and CBM I Acquisition,
L.P., a Delaware limited partnership and a subsidiary of the Purchaser ("Merger
Sub") have entered into the Merger Agreement. The following summary of certain
provisions of the Merger
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Agreement is qualified in its entirety by reference to the complete text of the
Merger Agreement. You can obtain a copy of the Merger Agreement by following the
procedures set forth under the heading "Other Matters-- Miscellaneous." The
following summary may not contain all the information that is important to
you.
The Merger Agreement provides that Merger Sub will be merged with and into
the Partnership, with the holders of partnership interests in the Partnership
receiving cash in specified amounts (except that the Units held by the General
Partner and the Units held by the Purchaser will be converted into percentage
interests in the surviving entity), and the General Partner and the Purchaser
will become the only partners in the Partnership. The Partnership will be the
surviving entity in the Merger and Merger Sub will cease to exist. The
Partnership will continue its existence as a limited partnership under the laws
of the State of Delaware, and its name shall continue to be "Courtyard by
Marriott Limited Partnership."
Effects of Merger
The Merger will have the effects set forth in the Partnership Act. The
sole General Partner of the Partnership following the Merger will continue to be
CBM One LLC, until it withdraws or is removed in accordance with the Partnership
Agreement, as amended, and the General Partner and the Purchaser will be the
only limited partners of the Partnership following the Merger. Assuming the
Unitholders consent to the Merger and the Amendments and the other conditions to
the Purchase Offer and the Merger are satisfied (or waived, if waivable), the
Partnership Agreement will be amended as soon as practicable following the
Expiration Date, but in any event prior to the consummation of the Purchase
Offer to give effect to the Amendments. The Partnership Agreement will be
amended and restated as soon as practicable after the Merger to reflect the
acquisition of the Units by the Purchaser and other changes in accordance with
the terms and conditions thereof and applicable Delaware law.
Conversion of Partnership Interests in the Merger
In connection with the Merger: (1) all partnership interests in the Merger
Sub will be cancelled, (2) each Unit held by a Unitholder (other than the
Purchaser or the General Partner) who has not delivered a Proof of Claim prior
to the Expiration Date and who has not elected to opt-out of the Settlement will
be converted into the right to receive $134,130 per Unit (or a pro rata portion
thereof) in cash. If the Court approves legal fees and expenses of
approximately $18,000 per Unit to Class Counsel in the Haas Litigation, the net
amount that each Unitholder will receive in the Merger is approximately $116,000
per Unit, which amount will be reduced by any amount owed by the holder on the
original purchase price of his or her Units, (3) the Units held by Purchaser
(including Units acquired in the Purchase Offer) will be converted into a 93.76%
limited partnership interest in the Partnership, and (4) the 15 Units held by
the General Partner will be converted into a 1.24% limited partnership interest
in the Partnership, and the General Partner's general partnership interest in
the Partnership will remain outstanding so that the General Partner will
continue to own a 5% general partnership interest in the Partnership.
Rights of Unitholders Who Have Elected to Opt-Out of the Settlement
If you elect not to participate in the Settlement by timely delivering an
Opt-Out Notice to the Claims Administrator as described herein, your Units will
be converted in the Merger into the right to receive cash in an amount equal to
the appraised value of such Units, determined in the following manner. The
appraised value of your Units in the Merger will be an amount that you would
receive if the entire equity interest in the Partnership were sold for an amount
equal to (i) the average of the appraised values of the Hotels determined by two
appraisers (in the manner described in the paragraph below) plus (or minus) (ii)
the net working capital of
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the Partnership (to the extent not distributed to the partners) minus (iii) the
aggregate amount of indebtedness of the Partnership and its subsidiaries minus
(iv) the fair value of deferred management fees accrued under the Management
Agreement minus (v) the amount of any commitments for owner funded capital
expenditures and the estimated cost of any deferred maintenance with respect to
the Partnership's properties, and the proceeds of such sale were then
distributed among the partners of the Partnership in the same manner as
liquidation proceeds in accordance with the terms of the Partnership Agreement.
The liquidity of the Units will not be a factor in determining the fair market
value of the Units.
In order to determine the appraised value of the Hotels, two independent,
nationally recognized hotel valuation firms _____________________________ and
____________________________, have been selected in consultation with Class
Counsel and will be approved by the Court (or, if the Court does not approve
such firms, such substitutes as may be approved by the Court). These
independent valuation firms will appraise the market value of the Partnership's
portfolio of Hotels as of the Effective Date, which appraisals will be completed
within 60 days after the effective time of the Merger and set forth in a report
certified by a MAI appraiser as having been prepared in accordance with the
requirements of the Standards of Professional Practice of the Appraisal
Institute and the Uniform Standards of Professional Appraisal Practice of the
Appraisal Foundation (which may be based on site visits to 10 or more Hotels and
a limited scope review deemed appropriate by such appraisal firm). The Court
will have no involvement in the appraisal process, other than approving the
independent valuation firms that will conduct the appraisals.
In the fall of 1999, in connection with Merrill Lynch's efforts to sell the
Partnership, the Partnership received a preliminary nonbinding proposal from a
third party to acquire all of the equity of the Partnership at a price
equivalent to approximately $82,000 per Unit. The proposal was based on a
methodology of adjustments similar to the methodology described in the first
paragraph of this section. The third party's proposal was never formalized and
an agreement in principle was never reached because of uncertainties regarding
future operating results of the Partnership's Hotels.
The appraised value of Units payable in the Merger to persons who opt-out
of the Settlement may be more or less than $82,000 per Unit, depending upon the
market values of the Hotels determined by the independent appraisers and the
actual amount of the foregoing adjustments at the time of the Merger, which may
differ materially from the amounts on which the 1999 acquisition proposal was
based. In addition, the appraised value of the Units may differ from the price
that a third party would be willing to pay for the Partnership's entire
portfolio of Hotels and the appraised value per Unit may be lower or higher than
the Net Settlement Amount per Unit. If you opt-out of the settlement class and
elect not to participate in the Settlement, the amount you will receive in the
Merger will not include any amount representing the value of the settlement of
the claims asserted against the Defendants in the Haas Litigation. Any
consideration to be received in the Merger by any limited partner will be
reduced by any amount owed on the original purchase price of his or her Units.
The Joint Venture will pay any expenses incurred in connection with the
appraisal process.
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The Amendments
The proposed amendments to the Partnership Agreement are discussed
below. Capitalized terms used herein but not defined have the meanings set forth
in the Partnership Agreement. In general, the proposed amendments are intended
to clarify that the terms of the Settlement Agreement (including the Purchase
Offer and the Merger) are consistent with the provisions of the Partnership
Agreement and to facilitate the consummation of the Purchase Offer and the
Merger. If for any reason the Purchase Offer is not consummated, the Amendments
to the Partnership Agreement will not be implemented, even if they receive
Unitholder approval. You can obtain a copy of the Partnership Agreement by
following the procedures set forth under the heading "Other Matters
--Miscellaneous."
1. Amendments to Voting Provisions. The Partnership Agreement
contains various provisions that inhibit the ability of the General Partner and
its affiliates to vote Units beneficially owned by them. In the event the
Purchase Offer is consummated and such parties become the owners of a majority
of the outstanding Units, such parties believe it would be appropriate to amend
the voting provisions of the Partnership Agreement to provide such parties with
the voting rights described below. The proposed Amendments would affect
provisions of the Partnership Agreement that (1) impose restrictions on voting,
and (2) establish certain voting standards.
Section 10.01.G of the Partnership Agreement currently provides that
the General Partner or its Affiliates are not entitled to any voting,
determinative or consensual rights with respect to any Units owned or controlled
by them and such Units held by the General Partner or its Affiliates are not
taken into account in determining the presence or absence of a quorum. Under the
current definition of "Consent" in Section 1.01 of the Partnership Agreement, if
the General Partner or any of its Affiliates purchases any Units, it shall not
have any voting rights with respect to such Units. The proposed Amendments would
delete or revise as appropriate the provisions limiting the voting of the
General Partner and its Affiliates to permit the General Partner and its
Affiliates to have full voting rights with respect to all Units held by the
General Partner or its Affiliates on all matters affecting the Partnership in
the same manner as other holders are entitled.
Purpose and Effect of the Amendments. This change has been proposed in
order to facilitate the consummation of the Merger. Absent the proposed
amendments, in the unlikely event that some action needs to be taken between the
time the Purchase Offer is consummated and the time the Merger is effective, the
General Partner and its Affiliates would not be permitted to vote such Units
even if they held a significant portion of the outstanding Units. The proposed
voting amendments would allow the General Partner and its Affiliates to have
full voting rights during the interim period. The General Partner will only vote
the Units acquired in the Purchase Offer if necessary or advisable to consummate
the Merger. In addition, in the absence of the proposed amendments, after the
Merger, the Purchaser, as an Affiliate of the General Partner, will not be
allowed to vote its Units on items presented to the limited partners for their
approval, including amendments to the Partnership Agreement.
Text of the Amendments. Section 10.01.G of the Partnership Agreement,
which currently reads as follows, would be deleted in its entirety.
If any Consents, determinations or votes of Limited Partners, with or
without a meeting, are to be requested, made or taken, the General Partner or
any of its Affiliates (other than officers, directors or employees of the
General Partner or any of its Affiliates) shall not be entitled to any voting,
determinative or consensual rights with respect to any Interests owned or
controlled by any of them nor shall any Interests be taken into account in
determining the presence or absence of a quorum.
Section 1.01 of the Partnership Agreement, which defines "Consent,"
would be revised by the Amendments to delete the strike through language as set
forth below:
"Consent" means either (a) the approval given by vote at a
meeting called and held in accordance with the provisions of Section
10.01, or
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(b) a prior written approval required or permitted to be given pursuant
to this Agreement or the act granting such approval, as the context may
require. Unless otherwise specified, Consent of the Limited Partners shall
mean Consent of a majority in interest of the Limited Partners entitled to
vote. However, if the General Partner or any Affiliate of the General
Partner (other than officers, directors or employees of the General Partner
or its Affiliates) purchases any Units, it shall have no voting rights with
respect to such Units.
2. Elimination of Fifty Percent Transfer Restriction. Section 7.01.B of
the Partnership Agreement effectively prohibits the transfer of 50% or more of
the outstanding Units within a 12-month period. The proposed Amendment would
eliminate this restriction on the transfer of Units.
Purpose and Effect of the Amendment. Under Section 708 of the Internal
Revenue Code of 1986, as amended (the "Code"), a partnership is considered to
"terminate" for federal income tax purposes if 50% or more of the interests in
profits and capital are sold within a 12-month period (a "Section 708
Termination"). The Partnership Agreement, as currently written, prohibits any
assignment of Units that would result in a Section 708 Termination. Thus, the
Partnership Agreement, when read in conjunction with Section 708, permits the
transfer of up to, but not including, 50% of the total number of outstanding
Units in any consecutive 12-month period. The Purchase Offer and the Merger
would result in a transfer of all of the outstanding Units (except the 15 Units
held by the General Partner). Accordingly, the General Partner is proposing, at
the request of the Joint Venture and the Purchaser, the deletion of Section
7.01.B from the Partnership Agreement to facilitate consummation of the Purchase
Offer and the Merger.
Text of the Amendment. Section 7.01.B of the Partnership Agreement, which
currently reads as follows, would be deleted entirely by the Amendment:
No assignment of any Interest may be made if the assignment is pursuant to
a sale or exchange of the Interest and if the Interest sought to be assigned,
when added to the total of all other Interests assigned within a period of 12
consecutive months prior thereto, would, in the opinion of legal counsel for the
Partnership, result in the Partnership being deemed to have been terminated
within the meaning of section 708 of the Code. The General Partner shall give
Notification to all Limited Partners in the event that sales or exchanges should
be suspended for such reason. Any deferred sales or exchanges shall be made (in
chronological order to the extent practicable) as of the first day of an
Accounting Period after the end of any such 12-month period, subject to the
provisions of this Article Seven.
3. Revision of Restriction on Timing of Transfers. Section 7.01.A of the
Partnership Agreement permits the assignment of Units only on the first day of
an Accounting Period. The Amendment to Section 7.01.A would eliminate this
restriction for the transfer of Units to the Purchaser pursuant to the Purchase
Offer, and would exempt the Purchaser from this restriction for any subsequent
transfer of Units to another entity.
Purpose and Effect of the Amendment. Section 7.01A of the Partnership
Agreement permits the assignment of Units only on the first day of each
Accounting Period. Without amending the Partnership Agreement to permit the
waiver of this requirement, the closing date for the Purchase Offer would have
to fall on the first day of an Accounting Period, rather than an earlier or
later date that otherwise would be chosen as the closing date. Accordingly, the
General Partner has proposed, at the request of the Joint Venture and the
Purchaser, the inclusion in Section 7.01.A of a provision that would eliminate
the Section 7.01.A transfer restrictions for Units transferred pursuant to the
Purchase Offer. This change would permit the transfer of such Units and the
closing of the Purchase Offer to occur on the earliest date practicable
following the expiration of the Purchase Offer, and in any event, on such date
as is necessary to facilitate the orderly consummation of the Purchase Offer.
The General Partner also has proposed, at the request of the Joint Venture and
the Purchaser, that Unitholders exempt the Purchaser from this restriction for
all subsequent assignments of its Units to any other entity in order to provide
the Purchaser with the flexibility to transfer its Units on such date that may
be necessary to facilitate the transfer. Because such transfers would occur in
isolated
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transactions, the General Partner does not believe that, as a result of such
transfers, the Partnership would be treated as an association taxable as a
corporation under Section 7704 of the Code.
Text of the Amendment. Section 7.01.A of the Partnership Agreement would
be revised to add the underlined language set forth below:
No assignment of any Interest may be made other than on the first day
of an Accounting Period, provided, however, that this restriction on the
-----------------------------------------------
timing of assignment shall not apply to (i) any transfer of Units by
--------------------------------------------------------------------
Limited Partners to CBM I Holdings LLC or (ii) any subsequent assignment of
---------------------------------------------------------------------------
any Units by CBM I Holdings LLC.
--------------------------------
4. Amendments to Provisions Relating to Allocations of Profits and Losses
and Distributions of Cash. Section 4.05 of the Partnership Agreement provides
that net profits, gains, net losses or losses attributable to Units that are
transferred during the taxable year shall be allocated between the transferor
and transferee according to the number of accounting periods in such taxable
year that each owned the Units. If Units are transferred on a date other than
the first day of an accounting period, in violation of the transfer restriction
imposed by Section 7.01.A of the Partnership Agreement (discussed above under "-
-Revision of Restriction on Timing of Transfers"), Section 4.05 requires that
net profits, gains, net losses or losses attributable to the Units for the
accounting period in which the transfer occurs shall be prorated between the
transferor and the transferee if, and to the extent, legally required in the
opinion of legal counsel. Section 4.07 of the Partnership Agreement provides
that cash available for distribution with respect to each fiscal year of the
Partnership shall be distributed at least annually. Section 4.10 of the
Partnership Agreement provides that cash available for distribution with respect
to Units shall be distributed to the limited partners pro rata in accordance
with the number of Units held by each as of the end of the accounting period
with regard to which the distribution relates. The Amendments to these
provisions would clarify that Unitholders (1) would receive allocations of
profit or loss on their Units up through the Effective Date rather than through
the end of the preceding accounting period, (2) would receive a distribution
from cash available for distribution for the period ending on the day prior to
the date of the entry of the judgment order, and (3) would not receive any
additional cash distributions (including any sale or refinancing proceeds)
relating to periods beginning on or after the date of the entry of the judgment
order (which cash distributions would inure to the benefit of the Purchaser),
unless an appeal is filed with regard to the judgment order (other than an
appeal that relates solely to counsel fees and expenses), in which case the
Unitholders also would receive a distribution of cash available for distribution
for the period beginning on the date the judgment order is entered and ending on
the Effective Date.
Purpose and Effect of the Amendments. The change to Section 4.07 of the
Partnership Agreement has been proposed to permit Unitholders to receive a
distribution of cash available for distribution from the Partnership for the
period ending on the day prior to the date of the entry of the judgment order,
as required by the terms of the Settlement Agreement. In the event an appeal is
timely filed with regard to the judgment order after it is entered (other than
an appeal that relates solely to counsel fees and expenses), the proposed change
to Section 4.07 also would permit the Unitholders to receive a distribution of
cash available for distribution from the Partnership for the period beginning on
the date the judgment order is entered and ending on the Effective Date.
Because the Partnership distributes cash available for distribution on an annual
basis in accordance with Section 4.07.A, Section 4.10 otherwise would cause all
cash distributions (including sale or refinancing proceeds) with respect to the
Units to be made to the Purchaser if the Unitholders disposed of their Units
before the end of the accounting period ending prior to the date of any such
distributions from the Partnership. As a result of amending Section 4.07 so as
to require the distributions described in the Settlement Agreement, the
Unitholders will receive a distribution of cash available for distribution for
the period ending on the day prior to the entry of the judgment order and, if an
appeal is filed with regard to the judgment order (other than an appeal that
relates solely to counsel fees and expenses), a distribution of cash available
for distribution for the period beginning on the date the judgment order is
filed and ending on the Effective Date but will receive no distributions for any
period after the Effective Date.
The proposed Amendment to Section 4.05 would require the Partnership to
allocate net profits, gains, net losses and losses with respect to the Units for
the fiscal year of the Partnership in
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which the judgment order becomes final between the Purchaser and each Unitholder
based upon the number of days that each held such Units during such fiscal year
(including any short fiscal year for tax purposes resulting from a "technical"
termination of the Partnership pursuant to Section 708(b)(1)(B) of the Code).
Because the Partnership currently is generating net income, if the judgment
order becomes final on a date other than the first day of an Accounting Period,
the Amendment would result in a greater amount of taxable income being allocated
to the Unitholders than would be the case currently under the Partnership
Agreement. However, the additional allocation of taxable income would increase
each Unitholder's adjusted tax basis in his Units and, thus, would decrease the
amount of capital gain, or increase any capital loss, recognized by the
Unitholder in the Purchase Offer or as a result of the Merger. See "Federal
Income Tax Considerations--Allocations of Profits and Losses to Participating
and Nonparticipating Unitholders."
Text of the Amendments. Section 4.05 of the Partnership Agreement would be
amended to add the underlined language set forth below:
Any Net Profits or Net Losses for any Fiscal Year allocable to the
Limited Partners shall be allocated among the Limited Partners pro rata in
accordance with the number of Units owned by each as of the end of such
Fiscal Year; provided that if any Unit is assigned during the Fiscal Year
in accordance with this Agreement, the Net Profits or Net Losses that are
so allocable to such Unit shall be allocated between the assignor and
assignee of such Unit according to the number of Accounting Periods in such
Fiscal Year each owned such Unit. Any Gains or Losses allocable to the
Limited Partners shall be allocated among the Limited Partners who held
Units on the last day of the Accounting Periods in which the sale or
disposition giving rise to such Gains or Losses occurred, pro rata in
accordance with the number of Units owned by each such Limited Partner. If
any Unit is assigned by a Limited Partner other than on the first day of an
Accounting Period (in contravention of the Agreement), then the Partnership
shall recognize such assignment for the purposes of allocating Net Profits,
Gains, Net Losses or Losses if, and to the extent, it is legally required
to do so in the opinion of legal counsel. Notwithstanding the foregoing,
------------------------------
each transfer of Units to CBM I Holdings LLC or acquisition of Units
--------------------------------------------------------------------
pursuant to the merger of CBM Acquisition L.P., an affiliate of CBM I
---------------------------------------------------------------------
Holdings LLC, with and into the Partnership (the "Merger") pursuant to an
-------------------------------------------------------------------------
agreement and plan of merger (the "Merger Agreement"), with the Partnership
---------------------------------------------------------------------------
surviving, in connection with the settlement of certain claims brought by
-------------------------------------------------------------------------
the Limited Partners against the General Partner and other defendants, as
-------------------------------------------------------------------------
described in the Settlement Agreement, dated as of March 9, 2000 (the
---------------------------------------------------------------------
"Settlement Agreement"), shall be considered to be in accordance with this
--------------------------------------------------------------------------
Agreement and the Net Profits, Gains, Net Losses or Losses for the Fiscal
-------------------------------------------------------------------------
Year (including any short Fiscal Year resulting from the termination of the
---------------------------------------------------------------------------
Partnership pursuant to Section 708(b)(1)(B) of the Code) in which the
----------------------------------------------------------------------
transfer occurs shall be allocated between the transferor and the
-----------------------------------------------------------------
transferee based upon the number of days that each held such Units during
-------------------------------------------------------------------------
such Fiscal Year.
----------------
Section 4.07 of the Partnership Agreement would be amended to renumber
Section 4.07 as Section 4.07.A and to add new Section 4.07.B, as set forth
below:
Section 4.07.B. To effectuate the terms of the Settlement Agreement,
--------------------------------------------------------------------
the Partnership shall make the following extraordinary distributions of
-----------------------------------------------------------------------
Cash Available for Distribution within 90 days after the end of the
-------------------------------------------------------------------
relevant distribution period:
-----------------------------
(i) To each Limited Partner, his pro rata share of Cash Available for
---------------------------------------------------------------------
Distribution, as determined in accordance with the provisions of Section
------------------------------------------------------------------------
4.07.A. above, with regard to the period ending on the day prior to the
-----------------------------------------------------------------------
date of the entry of the judgment order relating to the Settlement
------------------------------------------------------------------
Agreement (the "Judgment Order"). Subject to Section 4.07.B(ii) below,
----------------------------------------------------------------------
after receipt of this distribution, no Limited Partner shall have a right
-------------------------------------------------------------------------
to any other distribution from the Partnership pursuant to this Article
-----------------------------------------------------------------------
Four or any other provision of this Agreement.
----------------------------------------------
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(ii) To each Limited Partner, if and only if an appeal with regard to
----------------------------------------------------------------------
the Judgment Order is timely filed within the time permitted for such
---------------------------------------------------------------------
appeal (other than an appeal that relates solely to counsel fees and
--------------------------------------------------------------------
expenses), his pro rata share of Cash Available for Distribution, as
--------------------------------------------------------------------
determined in accordance with the provisions of Section 4.07.A. above, with
---------------------------------------------------------------------------
regard to the period beginning on the date of the entry of the Judgment
-----------------------------------------------------------------------
Order and ending on the day on which the Judgment Order becomes "final" (as
---------------------------------------------------------------------------
such term is defined in the Settlement Agreement).
--------------------------------------------------
Notwithstanding the last sentence of Section 4.10, for allocation and
---------------------------------------------------------------------
distribution purposes, each Limited Partner who transfers Units pursuant to
---------------------------------------------------------------------------
the Settlement Agreement or the Merger shall be deemed to be a Limited
----------------------------------------------------------------------
Partner of record as of the end of the Accounting Period prior to each
----------------------------------------------------------------------
distribution described in Section 4.07.B(i) and (ii) and Section 4.10 shall
---------------------------------------------------------------------------
be applied accordingly.
-----------------------
5. Amendment to Provisions Relating to Authority of the General Partner
to Manage the Partnership.
The Partnership Agreement contains provisions providing for appraisal
procedures in the event that the Partnership sells any Hotels to the General
Partner or any affiliate of the General Partner, and in the event of a
distribution of the Partnership's assets in connection with a liquidation.
Those appraisal procedures are intended to establish a fair purchase price for
the Hotels and the Partnership's assets in those limited circumstances. The
Partnership is not currently selling any Hotels or liquidating the Partnership.
Accordingly, the Partnership Agreement does not require the Partnership, in
connection with the Purchase Offer and the Merger, to conduct an appraisal
procedure of the type that would be required in the event of a sale of Hotels to
the General Partner or any of its affiliates or in the event of a distribution
of the Partnership's assets in connection with a liquidation
The procedure set forth in the Settlement Agreement and the Merger
Agreement providing for appraisal of the fair market value of the Units by one
or more third parties to establish the value of Units held by holders who have
elected to opt-out of the Settlement is not required by the Partnership
Agreement. Rather, in connection with the Settlement, a purchase price for the
Units in the Purchase Offer, as well as the appraisal process for determining
the value of Units held by limited partners who have elected to opt-out of the
Settlement, was established through arms-length negotiations between Defendants
and Class counsel.
Purpose and Effect of the Amendment. Section 5.01A of the Partnership
Agreement currently provides that, except as expressly provided in the
Partnership Agreement, the authority of the General Partner to conduct the
business of the Partnership shall be exercised only by the General Partner.
Section 5.01C of the Partnership Agreement delineates certain powers that the
General Partner may exercise without the consent of the limited partners. To
the extent that the appraisal procedure for determining the value of Units held
by limited partners who have elected to opt-out of the Settlement could
otherwise be deemed to fall within the exclusive authority of the General
Partner to conduct the business of the Partnership, the proposed amendment to
Section 5.01C would clarify that the General Partner has the power to delegate
the authority to conduct such appraisal procedures in accordance with the
Settlement Agreement and the Merger Agreement.
Text of the Amendment. Section 5.01.C of the Partnership Agreement, would
be amended to add the underlined language set forth below:
(vii) sell up to 20 hotels (no more than five Hotels at
less than the Partnership's purchase price);
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<PAGE>
(viii) retain such persons or entities as the General
----------------------------------------------
Partner, in its sole discretion, shall deem necessary or
--------------------------------------------------------
appropriate in order to appraise the fair market value of
---------------------------------------------------------
the Hotels and the value of the Units in accordance with
--------------------------------------------------------
the terms of the Settlement Agreement and the Merger
----------------------------------------------------
Agreement; and
--------------
(ix) take such actions as the General Partner
determines are advisable or necessary, and will not result
in any material adverse effect on the economic position of
holders of a majority of the Units, to preserve the tax
status of the Partnership as a partnership for Federal
income tax purposes.
Federal Income Tax Considerations
Summarized below are the material United States federal income tax
considerations of the Settlement.
General. The following discussion summarizes certain federal income tax
considerations related to the Settlement that may be relevant to (i) a
Unitholder who tenders his Units and submits the required Proof of Claim to the
Claims Administrator pursuant to the terms of the Purchase Offer and a
Unitholder who does not tender his Units and submit the Proof of Claim but who
does not affirmatively "opt-out" of the Settlement (in either case, hereinafter,
a "Participating Unitholder"), or (ii) a Unitholder who affirmatively "opts out"
of the Settlement and therefore exchanges his Units in the Merger (hereinafter,
a "Nonparticipating Unitholder").
The information in this section is based upon the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations thereunder, rulings, and
other pronouncements and decisions now in effect, all of which are subject to
change (perhaps with retroactive effect). The General Partner has not requested,
and does not plan to request, any rulings from the IRS concerning the tax
treatment of the Unitholders in connection with the Settlement. Thus, it is
possible that the IRS would challenge the statements in this discussion, which
do not bind the IRS or the courts, and that a court would agree with the IRS.
The discussion set forth herein is not intended to be exhaustive of all
possible tax considerations. For example, this summary does not give a detailed
discussion of any state, local, or foreign tax considerations. Nor does it
discuss all aspects of federal income taxation that may be relevant to specific
Unitholders in light of their particular circumstances. Except where
specifically indicated, the discussion below describes general federal income
tax considerations applicable to individuals who are citizens or residents of
the United States. Accordingly, the following discussion has limited
application to domestic corporations and persons subject to specialized federal
income tax treatment, such as foreign persons, tax-exempt entities, regulated
investment companies and insurance companies.
The following discussion includes an estimate by the General Partner, on a
per Unit basis, of a Unitholder's adjusted tax basis in his Units (including the
amount of syndication costs includible in his basis), the amount of the
Partnership's liabilities allocable to such Unitholder, the passive activity
loss carry forward, if any, attributable to his ownership of Units and the
amount of "unrecaptured Section 1250 gain" that such Unitholder would recognize
at the time of the disposition of his Units. These amounts are only estimates,
and there could be material differences between these estimated amounts and the
actual numbers due to a variety of factors. In addition, these estimates apply
only to a Unitholder who purchased his Units on the date of the original
offering of the Units and who has held his Units continuously since that time.
The estimated amounts could differ considerably for a Unitholder who acquired
some or all of his Units after the date of the original offering. The amount of
gain recognized by such Unitholders in connection with the disposition of their
Units pursuant to the Settlement will depend upon when they acquired their Units
and the price they paid for the Units (as adjusted for subsequent allocations of
Partnership income and loss and subsequent Partnership distributions).
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<PAGE>
UNITHOLDERS SHOULD BOTH REVIEW THE FOLLOWING DISCUSSION AND CONSULT WITH
THEIR TAX ADVISORS TO DETERMINE THE TAX CONSEQUENCES TO THEM -- INCLUDING ANY
STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES -- IN LIGHT OF THEIR PARTICULAR TAX
SITUATION, OF CHOOSING TO PARTICIPATE IN THE SETTLEMENT OR OPTING OUT OF THE
SETTLEMENT.
The class of Participating Unitholders is represented by Class Counsel, who
have engaged Chamberlain, Hrdlicka, White, Williams, and Martin ("Chamberlain
Hrdlicka") as special tax counsel. Chamberlain Hrdlicka is separately providing
to the Unitholders its summary regarding the potential federal income tax
consequences resulting from the Settlement. You should review this summary
carefully with your tax advisor. That summary is solely the responsibility of
such special tax counsel, and none of the Purchaser, the Partnership, the
General Partner, the Joint Venture, Rockledge, the MI Investor, any of the
Defendants nor any of their affiliates or advisors express any views with
respect to the matters set forth therein or have any responsibility with respect
thereto.
Tax Treatment of Participating Unitholders. Each Participating Unitholder
will receive, either in the Purchase Offer or pursuant to the Merger, cash in
the amount of $134,130 per Unit (or a pro rata portion thereof), before
reduction (in the case of class members) for such Unitholder's pro rata share of
legal fees and expenses ("Class Counsel's Attorneys' Fees") awarded by the court
to Class Counsel (the "Gross Per Unit Settlement Amount"). Each Participating
Unitholder very likely will be deemed, solely for federal income tax purposes,
to have received two separate amounts, on a per Unit basis: (1) an amount in
exchange for his Units (for purposes of this discussion, the "Deemed Unit
Purchase Amount"), and (2) a separate amount in settlement of the claims
asserted in the Haas Litigation (for purposes of this discussion, the "Deemed
Claim Value," which, as described below, may or may not be considered to include
the Unitholder's pro rata share of Class Counsel's Attorneys' Fees).
The correct allocation of the Gross Per Unit Settlement Amount between the
Deemed Unit Purchase Amount and the Deemed Claim Value for federal income tax
purposes is a question of fact and may depend in part upon the fair market value
of the Units. None of the Defendants nor any of their affiliates are taking any
position regarding the allocation by the Participating Unitholders of the Gross
Per Unit Settlement Amount between the Deemed Unit Purchase Amount and the
Deemed Claim Value for federal income tax purposes. As described above in "The
Merger -- Rights of Unitholders Who Have Elected to Opt-Out of the Settlement,"
however, Nonparticipating Unitholders will receive cash in the Merger in an
amount per Unit equal to the appraised value of a Unit, as determined pursuant
to a separate appraisal process that will be completed within 60 days after the
Merger. In addition, Class Counsel will assert in court, for purposes of
determining their legal fees, that the plaintiffs are receiving in the
Settlement benefits resulting from the Haas Litigation with a value that is in
excess of the value of the Units under the existing partnership structure and
agreements. Finally, the Purchaser and the Defendants will make an allocation
between the Deemed Unit Purchase Amount and the Deemed Claim Value for the
purpose of determining the Purchaser's initial tax basis in the Units acquired
by it through the Purchase Offer and pursuant to the Merger, the Purchaser's
share of the Partnership's tax basis in its property and the consequences to the
Defendants of the Settlement for tax and financial accounting purposes. There
can be no assurance that the IRS would not assert that a Participating
Unitholder must treat the appraised value of the Units held by the
Nonparticipating Unitholders, the value of the benefits received by the
plaintiffs in settlement of the Haas Litigation that is asserted by Class
Counsel in their petition for legal fees and expenses, the amounts used by the
Purchaser and the Defendants for determining the tax and financial accounting
consequences to them of the Settlement, or some other measurement of value as
determinative for purposes of allocating the Gross Per Unit Settlement Amount
between the Deemed Unit Purchase Amount and the Deemed Claim Value.
Federal Tax Consequences of Disposition of Units. Each Participating
Unitholder will be treated as having made a taxable disposition of his Units in
the Purchase Offer or pursuant to the Merger. The disposition likely would be
deemed to occur, with regard to a Participating Unitholder who tenders his Units
and submits the Proof of Claim, on the date his right to receive the Gross Per
Unit Settlement Amount becomes fixed, which would be the Effective Date, and,
with regard to a Participating Unitholder who does not tender his Units and
submit the Proof of Claim, on the
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<PAGE>
effective date of the Merger. The gain or loss recognized by a Unitholder upon
the disposition of his Units will equal the difference between the amount
considered realized by the Unitholder for tax purposes in exchange for his Units
(as described in the next paragraph) and the Unitholder's adjusted tax basis in
such Units (described below under "Basis of Units of Participating and
Nonparticipating Unitholders").
The amount considered realized by each Participating Unitholder will equal
the sum of the following items: (1) the cash received for his Units at the time
of the disposition (which will equal the Deemed Unit Purchase Amount and will be
deemed to include any amount owed by the Unitholder on the original purchase
price of his Units), and (2) the portion of the Partnership's liabilities
allocable to the Participating Unitholder's Units for federal income tax
purposes immediately prior to the date of the disposition of such Units. The
General Partner estimates that, as of December 31, 1999, the dollar amount of
the Partnership's liabilities allocable to each Participating Unitholder was
approximately $238,000 per Unit.
A Unitholder will recognize gain to the extent that the amount realized by
him in exchange for his Units (as determined in the preceding paragraph) exceeds
his adjusted tax basis in the Units (as described below under "Basis of Units of
Participating and Nonparticipating Unitholders"). The taxable gain recognized
by the Participating Unitholder will exceed the cash amount received with
respect to his Units by an amount equal to the excess (if any) of his share of
the Partnership's liabilities allocable to him for federal tax purposes over his
adjusted tax basis in his Units (which is commonly referred to as a "negative
capital account").
For a discussion of the federal income tax rates applicable to the gain
recognized by a Unitholder from the disposition of a Unit that has been held as
a capital asset by the Unitholder, see "Federal Income Tax Rates Applicable to
Gain from Disposition of Units by Participating and Nonparticipating
Unitholders" below.
Federal Tax Consequences of Receipt of Deemed Claim Value. As noted above,
there can be no certainty as to what portion of the Gross Per Unit Settlement
Amount would be considered allocable to the Deemed Claim Value (rather than the
Deemed Unit Purchase Amount). Moreover, there is considerable uncertainty in
the law as to how amounts that are treated as allocable to the Deemed Claim
Value received by a Participating Unitholder would be characterized for federal
income tax purposes.
The determination of the character and amount of income and gain recognized
by a plaintiff in connection with payments received in settlement of litigation
depends on many factors, including the nature and relative merits of the claims
made in the litigation that is being settled, and whether a portion of the
settlement payment that may otherwise be characterized as capital in nature is
subject to recharacterization as ordinary income to reflect certain tax benefits
realized by the plaintiff in prior years. In general, an amount received in
settlement of a claim may be characterized as ordinary income (if the amount
relates to lost profits or punitive damages) or a return of capital or capital
gain (if the amount relates to injury to capital assets).
The complaints of the plaintiffs in the Haas Litigation are specified in
their pleadings filed in that litigation. As described in the preceding
paragraph, to the extent the plaintiffs' complaints might be construed as
relating to injury to capital assets, a recovery attributable to those
complaints may result in the recognition of capital gain by the plaintiffs.
Conversely, to the extent the plaintiffs' complaints might be construed as
asking for lost profits or punitive damages, a recovery attributable to those
complaints may result in the recognition of ordinary income by the plaintiffs.
The Settlement Agreement does not address the relative merits of any of the
claims and does not provide for an allocation of all or a part of the Gross Per
Unit Settlement Amount to any specific claim. Moreover, there will be no
judicial determination of the merits of any of the various claims or the proper
allocation of the Gross Per Unit Settlement Amount among the claims. To the
extent that a Participating Unitholder takes the position that the Deemed Claim
Value should be characterized as a return of capital or capital gain, there can
be no assurance that the IRS would not challenge this position and determine
that some or perhaps even all of the Deemed Claim Value should be treated by a
Participating Unitholder as ordinary income for federal income tax purposes.
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<PAGE>
In the event that any interest accrued on the Deemed Claim Value is payable
to a Participating Unitholder, such Participating Unitholder will be required to
treat the interest as ordinary income for federal income tax purposes.
Tax Treatment of Class Counsel's Attorneys' Fees. As described above in
"The Settlement--The Settlement Agreement," the Net Settlement Amount reflects a
reduction for each Participating Unitholder's pro rata share of Class Counsel's
Attorneys' Fees. The IRS could take the position that each Participating
Unitholder must include in income his share of Plaintiff's Counsel's Attorneys'
Fees. There is existing judicial authority that would support a position that,
under certain circumstances, a plaintiff's attorneys' fees and expenses that are
paid by a defendant in litigation pursuant to a judgment or settlement are
excludable from the income of the plaintiff; however, the facts in these cases
are distinguishable from the facts underlying the Haas Litigation, and there can
be no assurance that a court would follow the decisions in those cases. The
determination of whether a Participating Unitholder must include in income his
share of Class Counsel's Attorneys' Fees may depend upon the laws of Texas or
that of another state (including the Participating Unitholder's state of
residence) regarding the relative rights under state law of a particular
Participating Unitholder and of Class Counsel to that portion of the Deemed
Claim Value represented by legal fees and expenses.
In the event that a Participating Unitholder must include his share of the
Class Counsel's Attorneys' Fees in income, the characterization of that amount
as ordinary income or capital gain would depend on the manner in which the
balance of the Deemed Claim Value is correctly characterized. For example, if
the Deemed Claim Value were determined to be allocable between claims for lost
profits and claims for injury to a capital asset, the legal fees allocated to
lost profits will be treated as ordinary income and the legal fees allocated to
the capital asset claim likely will be treated as a return of capital or capital
gain.
A Participating Unitholder may be able to claim a deduction on his federal
income tax return with regard to all or a portion of the Class Counsel's
Attorneys' Fees paid on his behalf by the Defendants to the extent those amounts
are required to be included in income. If the Participating Unitholder is
required to treat part of the Deemed Claim Value as ordinary income, the
corresponding part of the legal fees and expenses paid on his behalf that are
required to be included in income may be deductible currently under Section 162
(which addresses trade or business expenditures) or Section 212 (which addresses
expenditures for the production of income) of the Code. Because (among other
things) each Participating Unitholder is a limited partner rather than a general
partner, such Participating Unitholder may not be able to prove that legal fees
and expenses incurred in the Litigation are properly characterized as trade or
business expenditures, which is the necessary prerequisite for an ordinary
deduction under Section 162. Even if a Participating Unitholder takes the
position that all or a portion of the Class Counsel's Attorneys' Fees that he is
required to include in income relates to the production of income and such
position is respected (with the result that the fees and expenses fall under
Section 212), if such Participating Unitholder is an individual, the Class
Counsel's Attorneys' Fees would be treated as a miscellaneous itemized deduction
that is allowable as a deduction only to the extent that the Participating
Unitholder's total miscellaneous itemized deductions (including the Class
Counsel's Attorneys' Fees) exceeds two percent (2%) of his adjusted gross
income. Such deduction will be subject to reduction if the Participating
Unitholder's "adjusted gross income" for the tax year with regard to which the
deduction relates exceeds a specified amount (which amount, for 2000, is
$128,950 (or $64,475 in the case of a married individual filing a separate
return)). In calculating his "alternative minimum taxable income," a
Participating Unitholder who is an individual will not be able to utilize any
miscellaneous itemized deductions.
A Participating Unitholder will be required to capitalize (i.e., add to the
adjusted tax basis in his Units) any portion of the Class Counsel's Attorneys'
Fees that are paid on his behalf by the Defendants and that relate to capital
asset claims, resulting in a reduction of the total amount of capital gain, or
an increase in any capital loss, recognized by the Participating Unitholder as a
result of the Settlement.
Tax Treatment of Nonparticipating Unitholders. Each Nonparticipating
Unitholder will be treated as having made a taxable disposition of his Units
pursuant to the Merger, which
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<PAGE>
disposition would be deemed to occur on the effective date of the Merger. The
gain or loss recognized by a Nonparticipating Unitholder upon the disposition of
his Units will equal the difference between the amount considered realized by
the Unitholder for tax purposes in exchange for his Units in the Merger and the
Unitholder's adjusted tax basis in such Units. See "Basis of Units of
Participating and Nonparticipating Unitholders" below.
The amount realized by each Nonparticipating Unitholder will equal the sum
of the following items: (1) the cash received for his Units at the time of the
Merger (as determined in accordance with the procedures described above in "The
Settlement--The Merger--Rights of Unitholders Who Have Elected to Opt-Out of the
Settlement"), which will be deemed to include any amount owed by the
Nonparticipating Unitholder on the original purchase price of his Units, and (2)
the portion of the Partnership's liabilities allocable to the Nonparticipating
Unitholder's Units for federal income tax purposes immediately prior to the
Merger. The General Partner estimates that, as of December 31, 1999, the dollar
amount of the Partnership's liabilities allocable to each Nonparticipating
Unitholder was approximately $238,000 per Unit.
To the extent that the amount realized, as determined in the preceding
paragraph, exceeds the Nonparticipating Unitholder's adjusted tax basis in the
Units, such Nonparticipating Unitholder will recognize gain. The taxable gain
recognized by the Nonparticipating Unitholder will exceed the cash amount
received with respect to his Units by an amount equal to the excess (if any) of
his share of the Partnership's liabilities allocable to him for federal tax
purposes over his adjusted tax basis in his Units (which is commonly referred to
as a "negative capital account").
For a discussion of the federal income tax rates applicable to the gain
recognized by a Nonparticipating Unitholder from the disposition of a Unit that
has been held as a capital asset by the Nonparticipating Unitholder, see "--
Federal Income Tax Rates Applicable to Gain from Disposition of Units by
Participating and Nonparticipating Unitholders" below.
Allocations of Profits and Losses to Participating and Nonparticipating
Unitholders. Pursuant to the Amendments, Unitholders will be allocated
Partnership profits and losses through the period ending on the date that the
judgment order relating to the Settlement becomes final. However, if no appeal
is filed after the judgment order is entered, Unitholders will receive a final
distribution of cash available for distribution (in accordance with the terms of
the Partnership Agreement) for the period ending on the day before the date the
judgment order is entered. Unitholders will not receive any distribution that
relates to the period beginning on the date of the entry of the judgment order
and ending on the date the judgment order becomes final (the "Appeal Period")
unless an appeal is filed with regard to the judgment order during the Appeal
Period (other than an appeal relating solely to counsel's fees), in which event
Unitholders also will receive a distribution of cash available for distribution
(in accordance with the terms of the Partnership Agreement) for the Appeal
Period. Any allocation of taxable income received by a Unitholder with regard
to the Appeal Period will increase such Unitholder's adjusted tax basis in his
Units and, thus, will decrease the amount of capital gain, or increase any
capital loss, recognized by the Unitholder as a result of the disposition of his
Units in the Purchase Offer or pursuant to the Merger. Any distribution
received by a Unitholder will decrease such Unitholder's adjusted tax basis in
his Units and, consequently, will increase the amount of capital gain, or
decrease any capital loss, recognized by the Unitholder as a result of the
disposition of his Units.
Basis of Units of Participating and Nonparticipating Unitholders. In
general, a Unitholder had an initial tax basis in his Units ("Initial Basis")
equal to his cash investment in the Partnership, plus his share of the
Partnership's liabilities allocable to him for tax purposes at the time he
acquired his Units. A Unitholder's Initial Basis generally has been increased by
(1) such Unitholder's share of Partnership taxable income, and (2) any increases
in his share of liabilities of the Partnership. Generally, such Unitholder's
Initial Basis has been decreased (but not below zero) by (a) his share of
Partnership cash distributions, (b) any decreases in his share of liabilities of
the Partnership, (c) his share of losses of the Partnership, and (d) his share
of nondeductible expenditures of the Partnership that are not chargeable to
capital. A Unitholder's basis in his Units would include his share of the
syndication costs incurred by the Partnership at formation if he acquired his
Units in the original offering.
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The General Partner estimates that, as of December 31, 1999, a Unitholder
who acquired his Units at the time of the original offering of such Units and
has held such Units at all times since the offering would have an adjusted basis
in each Unit of approximately $201,000 (which amount includes approximately
$238,000 attributable to his share of the Partnership's nonrecourse
liabilities). Accordingly, such a Unitholder has a "negative capital account"
with respect to his Units of approximately $37,000, and thus the gain recognized
on any disposition of those Units would exceed the cash received therefor by
that amount. Such Unitholder's share of syndication costs would be
approximately $11,000 per Unit.
Federal Income Tax Rates Applicable to Gain from Disposition of Units by
Participating and Nonparticipating Unitholders. The disposition of Units by a
Unitholder in the Purchase Offer or pursuant to the Merger generally will result
in the recognition of capital gain by the Unitholder with respect to the Deemed
Unit Purchase Amount if the Units have been held by the Unitholder as a capital
asset. For corporations, the maximum rate of tax on the net capital gain from a
sale or exchange of a capital asset held for more than twelve months is
currently 35%. Generally, non-corporate Unitholders (i.e., individuals, trusts
and estates) who have held their Units as capital assets for more than 12 months
will be taxed at a maximum long-term capital gain rate of 20% on the disposition
of those Units. However, a maximum rate of 25% for non-corporate Unitholders may
apply to capital gain that is recognized as a result of the transfer of Units in
the Purchase Offer or pursuant to the Merger to the extent such capital gain is
treated as "unrecaptured section 1250 gain" (i.e., previously claimed
depreciation deductions with respect to depreciable real property that would not
be recaptured as ordinary income pursuant to Sections 751 and 1250 of the Code,
as described in the next paragraph). While there is some uncertainty regarding
the issue, the IRS takes the position, for which there is support in legislative
history, that a Unitholder who has held his Units for more than one year prior
to the disposition of those Units will be subject to the 25% capital gain tax
rate on his share of the Partnership's "unrecaptured Section 1250 gain."
Regulations proposed by the IRS that were issued in August of 1999 would treat
the amount of "unrecaptured Section 1250 gain" that a partner must recognize
upon the disposition of his partnership interest as his share of the amount that
would result if his partnership had transferred all of its Section 1250 property
in a fully taxable transaction immediately prior to the disposition of his
partnership interest. There can be no assurance that such proposed regulations,
if adopted, would be adopted in their proposed form without substantive
revisions. Accordingly, Unitholders are urged to consult with their own tax
advisors with respect to their capital gain tax liability.
In addition, to the extent that the amount realized on the disposition of
the Units attributable to a Unitholder's share of the Partnership's inventory
items and/or "unrealized receivables" (as defined in Section 751 of the Code)
exceeds the basis attributable to those assets, such excess will be treated as
ordinary income, taxable to non-corporate Unitholders at a maximum statutory
rate of 39.6%. Unrealized receivables include amounts that would be subject to
recapture as ordinary income if the Partnership had sold its assets at their
fair market value at the time of the disposition of the Units, such as
"depreciation recapture" under Sections 1245 and 1250 of the Code.
The General Partner estimates that, as of December 31, 1999, the
"unrecaptured Section 1250 gain" of the Partnership that is taxable to non-
corporate Unitholders at the 25% capital gain rate was approximately $87,000 per
Unit with regard to a Unitholder who acquired his Units in the original offering
of Units by the Partnership.
The General Partner has not estimated the fair market value of the
Partnership's personal property, and thus takes no position at this time as to
whether the value is such that a Unitholder would recognize ordinary income
pursuant to Sections 751 and 1245 upon the disposition of his Units. In any
event, the ordinary income amount would be equal to the Unitholder's share of
the excess, if any, of the value of such personal property at the time of
disposition of the Units over its adjusted basis at such time. For purposes of
determining its share of the Partnership's tax basis in its personal property
after the Purchase Offer and the Merger, however, the Purchaser will take the
position that the fair market value of the Partnership's personal property is
equal to its adjusted tax basis at the time of the Purchase Offer and the
Merger. If this position is respected by the IRS, no ordinary income would be
recognized pursuant to Sections 751 and 1245; however, there can be no assurance
that the IRS will respect the Purchaser's position.
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<PAGE>
Passive Activity Income and Loss Carryforwards of Participating and
Nonparticipating Unitholders. Any gain recognized by a Unitholder in connection
with the disposition of his Units pursuant to the Settlement will constitute
"passive activity income" for purposes of the "passive activity loss" limitation
rules. Accordingly, such income generally may be offset by losses from all
sources, including "passive activity loss" carryforwards with respect to the
Partnership and "passive" or active losses from other activities. The General
Partner estimates that, as of December 31, 1999, a Unitholder who purchased his
Units at the time of the original offering, has held those Units continuously
since that time, and whose Units have been his only investment in a passive
activity would not have any passive activity loss carryforward with respect to
his Units.
Federal Tax Withholding Applicable to Participating and Nonparticipating
Unitholders. The federal income tax laws require that taxes be withheld on
amounts payable to foreign persons by reason of a disposition of certain United
States real property interests, which includes interests in certain partnerships
that hold real property in the United States. Withholding of ten percent (10%)
of the amount realized by a Unitholder pursuant to the Purchase Offer or the
Merger may be required unless the Unitholder completes, executes and returns the
Certificate of Non-Foreign Status included in the Proof of Claim. Because
uncertainty exists as to the correct allocation of the amount received by a
Participating Unitholder in the Purchase Offer or pursuant to the Merger between
the Deemed Unit Purchase Amount and the Deemed Claim Value, solely for purposes
of determining any amounts required to be withheld, the "amount realized" by a
Participating Unitholder will be treated as the sum of (1) the amount of
$134,130 per Unit (or a pro rata portion thereof) plus (2) the Participating
Unitholder's share of the Partnership's nonrecourse liabilities immediately
prior to the disposition of his Units. The "amount realized" by a
Nonparticipating Unitholder will be treated as the sum of (a) the cash amount
received for his Units at the time of the Merger (which will be deemed to
include any amount owed by the Nonparticipating Unitholder on the original
purchase price of his Units), plus (b) the Nonparticipating Unitholder's share
of the Partnership's nonrecourse liabilities immediately prior to the
disposition of his Units. See "Important Tax Information" in the Proof of
Claim.
Even if a Unitholder chooses not to return the rest of the Proof of Claim,
he should return the Certificate of Non-Foreign Status to prevent federal income
tax withholding on the amounts payable to him pursuant to the Settlement.
* * * * *
BECAUSE THE INCOME TAX CONSEQUENCES OF THE DISPOSITION OF UNITS PURSUANT TO
THE SETTLEMENT WILL NOT NECESSARILY BE THE SAME FOR ALL UNITHOLDERS, UNITHOLDERS
CONSIDERING TENDERING THEIR UNITS SHOULD CONSULT THEIR TAX ADVISORS WITH
SPECIFIC REFERENCE TO THEIR OWN TAX SITUATIONS.
-46-
<PAGE>
Selected Historical Consolidated Financial Data
<TABLE>
<CAPTION>
1Q 2000 1Q 1999 1999 1998 1997 1996 1995
----------------------------------------------------------------------
(in thousands, except for per unit amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues $ 48,013 $ 48,230 $206,074 $201,250 $189,552 $181,639 $170,799
Operating profit 10,074 10,730 43,896 44,276 40,683 35,985 30,752
Net Income before
extraordinary items 4,551 4,865 19,601 18,885 15,340 13,454 4,988
Net income 4,551 4,865 19,601 18,885 27,813 13,454 4,988
Net income before 3,759 4,019 16,192 15,601 12,672 11,114 4,120
extraordinary items per LP
unit (1,150 Units)
Net Income per LP unit (1,150 Units) 3,759 4,019 16,192 15,601 22,976 11,114 4,120
Ratio of earnings to
fixed charges (1) 1.90 1.92 1.88 1.84 1.72 1.70 1.33
Balance Sheet Data:
Total assets: $326,768 $333,025 $328,860 $331,246 $331,406 $330,509 $338,740
Total liabilities: 344,915 352,965 347,321 356,046 362,991 349,839 369,224
Cash distributions per LP unit
(1,150 Units) 3,500 3,000 11,000 10,000 35,000 2,000 -
</TABLE>
(1) The ratio of earnings to fixed charges is unaudited and is computed by
dividing the Partnership's net income before interest expense, and other fixed
charges by total fixed charges. Fixed charges consist of interest expense
(including amortization of deferred financing costs) and the portion of rent
expense attributed to interest.
-47-
<PAGE>
Description of Real Estate
Hotels. The Partnership was formed on July 15, 1986 to acquire and own 50
Courtyard by Marriott hotels and the respective fee or leasehold interests in
the land on which the Hotels are located. The Hotels are located in 16 states
and contain a total of 7,223 guest rooms as of December 31, 1999. The
Partnership commenced operations on August 20, 1986 and will terminate on
December 31, 2086, unless earlier dissolved.
Each of the Partnership's Courtyard by Marriott Hotels is designed around a
courtyard area containing a swimming pool (indoor pool in northern climates),
walkways, landscaped areas and a gazebo. Each Hotel generally contains a small
lobby, a restaurant with seating for approximately 50 guests, a lounge, a
hydrotherapy pool, a guest laundry, an exercise room and two small meeting
rooms. The Hotels do not contain as much public space and related facilities as
full-service hotels.
The properties consisted of 50 Hotels as of December 31, 1999. The Hotels
range in age between 12 and 17 years. The Hotels are geographically diversified
among 16 states, and no state has more than nine Hotels.
The following table summarizes certain attributes of each of the Hotels.
-48-
<PAGE>
SUMMARY OF PROPERTIES
(50 COURTYARD HOTELS)
<TABLE>
<CAPTION>
Location Rooms Location Rooms
-------------------------------------------------- ------------ ------------------------------- -------------
<S> <C> <C> <C>
Alabama Michigan
Montgomery (1) 146 Dearborn (1) 147
Southfield 147
Arizona Troy 147
Phoenix Airport (1) 145 Warren 147
California North Carolina
Buena Park (1) 145 Charlotte-Arrowood Road (1) 146
Freemont (1) 146 Raleigh-Wake Forest Road 153
Pleasanton 145
Sacramento-Rancho Cordova 144 New York
San Francisco Airport (2) 147 Tarrytown 139
Santa Ana (1) 145
Ohio
Connecticut Cincinnati-Blue Ash (1) 140
Windsor (1) 149 Columbus-Dublin (1) 147
Columbus-Worthington (1) 145
Florida
Melbourne (1) 146 Pennsylvania
Miami Airport-West (1) 145 Valley Forge (1) 150
Tallahassee (1) 154
Tennessee
Georgia Brentwood (1) 145
Atlanta-Delk Road (1) 146 Memphis-Park Avenue East (1) 146
Atlanta-Executive Park (1) 145
Atlanta-Northlake (2) 128 Texas
Atlanta-Peachtree Corners 131 Arlington 147
Atlanta-Peachtree Dunwoody 128 Bedford (1) 145
Atlanta-Windy Hill 127 Dallas-Addison (1) 145
Augusta 130 Dallas-Las Colinas 147
Columbus 139 Dallas-LBJ Northwest (1) 146
Savannah 144 San Antonio Airport (1) 145
San Antonio-Medical Center (1) 146
Illinois
Naperville (1) 147 Virginia
Fair Oaks 144
Maryland Herndon (1) 146
Hunt Valley (1) 146 Hampton (1) 146
Landover 152 Richmond (1) 145
Rockville (1) 147 Virginia Beach (1) 146
---
Total rooms: 7,223
=====
</TABLE>
(1) Land is leased from an affiliate of Marriott
International.
(2) Land is leased from a third party.
Property Improvement Fund. The Hotels routinely purchase furniture and
equipment. The Partnership has a property improvement fund for the Hotels. The
funding of this reserve is based on a percentage of gross Hotel revenues. The
contribution to the property improvement fund has been established at 6% for all
Hotels and may be increased, at the option of the Manager, to 7% of gross Hotel
revenues in 2001.
-49-
<PAGE>
Debt. On March 21, 1997 both the Partnership's existing mortgage debt on
49 of the Partnership's Hotels and the Partnership's existing mortgage debt on
the Windsor CT Hotel (collectively, the "Loan") were refinanced. The total
amount of the debt was increased from $280.8 million to $325.0 million. The
$44.2 million of excess refinancing proceeds were used to: (i) make a $7
million contribution to the property improvement fund to cover anticipated
shortfalls; (ii) pay approximately $7 million of refinancing costs; and (iii)
make a $30.2 million partial return of capital distribution to the partners.
The Loan is non-recourse and requires monthly payments of interest at a fixed
rate of 7.865% and principal based on a 20-year amortization schedule. The Loan
has a scheduled maturity of April 10, 2012; however, the loan maturity can be
extended for an additional five years. During the extended loan term, the Loan
bears interest at an Adjusted Rate, as defined, and all cash flow from
Partnership operations will be used to amortize the principal balance of the
Loan. As of December 31, 1999, the principal balance of the Loan was $305.1
million.
The refinanced mortgage Loan is secured by first mortgages on all 50 of the
Partnership's Hotels, related personal property, and the land on which the
Hotels are located or an assignment of the Partnership's interest under the land
leases. No guarantees have been provided by Host Marriott or Marriott
International. As additional security, affiliates of Marriott International, as
the land lessors, agreed to continue to subject their ownership interest as well
as receipt of ground rent to debt service on the mortgage loan.
Leases. The land on which 31 of the Hotels are located is leased from
affiliates of Marriott International. In addition, two of the Hotels are
located on land leased from third parties. The land leases have remaining terms
(including renewal options) expiring between the years 2058 and 2081. The
Marriott International land leases and the third party land leases provide for
rent based on specific percentages (from 2% to 9.75%) of gross sales in certain
categories, subject to minimum amounts. The minimum rentals are adjusted at
various anniversary dates throughout the lease terms, as defined in the
agreements. See "The Settlement--Certain Transactions with the Partnership."
Competitive Conditions. The moderately priced lodging segment continues to
be highly competitive. An increase in supply growth continued through 1999 with
the introduction of a number of new national brands. The Partnership is
continually making improvements at the Hotels intended to enhance the overall
value and competitiveness of the Hotels. It is expected that the Partnership
will continue outperforming both national and local competitors. The brand is
continuing to carefully monitor the introduction and expansion of new mid-priced
brands including Wingate Hotels, Hilton Garden Inns, Four Points by Sheraton,
AmeriSuites, Hampton Inn and Hampton Inn and Suites.
Insurance. The General Partner believes that the Hotels are adequately
covered by insurance.
Operating Data
The following chart sets forth the combined average occupancy and the
combined average daily room rates of the Hotels for each of the last five years.
<TABLE>
<CAPTION>
First Quarter 2000 First Quarter 1999 1999 1998 1997 1996 1995
------------------ ------------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Combined average occupancy 76.4% 79.1% 79.1% 79.7% 80.0% 79.2% 81.0%
Combined average room rate $93.48 $90.18 $89.54 $87.09 $81.10 $76.39 $71.23
</TABLE>
-50-
<PAGE>
The Partnership's tax basis of its property and equipment is recorded at
cost. The Partnership depreciates its assets using the Modified Accelerated
Cost Recovery System method ("MACRS") for tax purposes. Under MACRS, buildings
and improvements are depreciated over 15 to 39 years while furniture and
equipment is depreciated over five years.
The Partnership's 50 Hotels are located in various real estate taxing
jurisdictions. Therefore, the real estate tax rates vary by jurisdiction. 1999
real estate tax expense was $6.6 million.
The Partnership is engaged solely in the business of owning and operating
Hotels and, therefore, is engaged in one industry segment.
-51-
<PAGE>
THE PURCHASE OFFER
Terms of the Purchase Offer
Upon the terms, and subject to the conditions of, the Purchase Offer
(including, if the Purchase Offer is extended or amended, the terms and
conditions of any such extension or amendment), the Purchaser will accept for
payment and thereby purchase all Units validly tendered on or prior to the
Expiration Date and not validly withdrawn in accordance with the procedures
described under the heading "--Withdrawal Rights" of this Purchase Offer and
Consent Solicitation. The term "Expiration Date" means 12:00 midnight, New York
City time, on [weekday], _______ __, 2000, unless and until the Purchaser, in
its sole discretion, shall have extended the period of time during which the
Purchase Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Purchase Offer, as so extended by the
Purchaser, shall expire.
The Purchaser expressly reserves the right, in its sole discretion, at any
time or from time to time, to extend the period during which the Purchase Offer
is open by giving oral or written notice of such extension to the Claims
Administrator and making a public announcement thereof. There can be no
assurance that the Purchaser will exercise its right to extend the Purchase
Offer. During any such extension, all Units previously tendered and not
withdrawn will remain subject to the Purchase Offer and subject to the right of
a tendering Unitholder to withdraw such Units. See "--Withdrawal Rights." For
purposes of this Purchase Offer, a "business day" means any day other than a
Saturday, Sunday, or federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, New York City time.
Subject to applicable rules and regulations of the SEC and to the
provisions of the Settlement Agreement and any applicable court order, the
Purchaser reserves the right, at any time or from time to time, to (a) terminate
the Purchase Offer and not accept for payment any Units, (b) delay acceptance
for payment or, regardless of whether such Units were accepted for payment,
payment for, any Units and not pay for any Units not accepted for payment or
paid for, until such time as the first condition referred to under the heading
"The Settlement--Conditions of the Purchase Offer and the Merger" is satisfied,
(c) waive any unsatisfied condition (if it is waivable) to its obligation to
acquire Units pursuant to the Purchase Offer, (d) extend the period of time
during which the Purchase Offer is open, or (e) otherwise amend the Purchase
Offer. Whenever the Purchaser extends the period during which the Purchase
Offer is open, makes a material change in the terms of the Purchase Offer,
waives a condition of the Purchase Offer, terminates the Purchase Offer or
otherwise amends the Purchase Offer, it will give oral or written notice of such
event to the Claims Administrator and make a public announcement thereof in the
manner provided below. The Purchaser acknowledges that (a) Rule 14e-1(c) under
the Exchange Act requires the Purchaser to pay the consideration offered or
return the Units tendered promptly after the termination or withdrawal of the
Purchase Offer (except as provided in clause (b) of the first sentence of this
paragraph) and (b) upon and after the Expiration Date, the Purchaser may not
delay acceptance for payment of, or payment for (except as provided in clause
(b) of the first sentence of this paragraph), any Units if the second or third
conditions specified under the heading "The Settlement--Conditions of the
Purchase Offer and the Merger" have been satisfied, without extending the period
of time during which the Purchase Offer is open.
Any extension, delay in payment, termination, waiver of conditions, or
material amendment to the terms of the Purchase Offer will be followed as
promptly as practicable by a public announcement thereof, and such announcement
in the case of an extension will be made no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
Without limiting the manner in which the Purchaser may choose to make any public
announcement, subject to applicable law (including Rules 14d-4(c), 14d-6(d) and
14e-1 under the Exchange Act, which require that material changes be promptly
disseminated to holders of Units), the Purchaser shall have no obligation to
publish, advertise or otherwise communicate any
-52-
<PAGE>
such public announcement other than by issuing a release to the Dow Jones News
Service or by letter sent to the Unitholders.
If the Purchaser makes a material change in the terms of the Purchase Offer
or the information concerning the Purchase Offer, or waives a material condition
of the Purchase Offer, the Purchaser will extend the Purchase Offer and
disseminate additional tender offer materials to the extent required by Rules
14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. Those rules prescribe that
the minimum period during which a tender offer must remain open following
material changes in the terms of the tender offer or information concerning the
tender offer, other than a change in price or a change in percentage of
securities sought or in any dealer's soliciting fee, will depend upon the facts
and circumstances, including the relative materiality of the terms or
information changed. The SEC has announced in a published release that in its
view a tender offer must remain open for a minimum period of time following a
material change in the terms of a tender offer or in information concerning a
tender offer. The release states that a tender offer should remain open for a
minimum of five business days from the date the material change is first
published, sent or given to security holders and that, if material changes are
made with respect to information that approaches the significance of price and
share levels, a minimum of 10 business days may be required to allow for
adequate dissemination and investor response.
If, by the Expiration Date, the second condition to the Purchase Offer set
forth under the heading "The Settlement--Conditions of the Purchase Offer and
Merger," has not been satisfied, the Purchaser may, in its sole discretion,
elect to (a) extend the Purchase Offer and, subject to applicable withdrawal
rights, retain all tendered Units until the expiration of the Purchase Offer, as
extended, subject to the terms of the Purchase Offer, (b) waive the unsatisfied
condition and not extend the Purchase Offer or (c) terminate the Purchase Offer
and return all tendered Units to tendering Unitholders and be relieved from any
obligations under the Settlement Agreement.
If an order of an appropriate court denying approval of the Settlement
becomes final after all applicable appeals have been exhausted or if the parties
to the Settlement Agreement decide to terminate the Settlement as to the
Partnership, the Purchase Offer will terminate and all tendered Units will be
returned to the tendering Unitholders as soon as practicable.
The Partnership has provided the Purchaser and the Claims Administrator
with a list of Unitholders and security position listings for the purpose of
disseminating the Purchase Offer and Consent Solicitation to Unitholders. This
Purchase Offer and Consent Solicitation and the related documents and, if
required, other relevant materials will be mailed to record holders of Units and
will be furnished for subsequent transmittal to beneficial owners of Units to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Unitholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Units.
The Purchaser does not currently intend to make available a "subsequent
offering period" as provided for in Rule 14d-11 of the Exchange Act.
Settlement Fund; Acceptance for Payment; Payment for Units
Upon the terms and subject to the conditions of this Purchase Offer and
Consent Solicitation (including, if the Purchase Offer is extended or amended,
the terms and conditions of any such extension or amendment), on or before the
third business day following the entry by the Court of an executed judgment
order approving the Settlement, the Purchaser or the Joint Venture, or one or
more of their designees, will pay or cause to be paid by wire transfer the
settlement funds to the Escrow Agent. The Escrow Agent will deposit the
settlement funds in an interest-bearing account.
-53-
<PAGE>
If the judgment order becomes final without an appeal (other than an appeal
that relates solely to counsel fees and expenses) and you have submitted a valid
Proof of Claim to the Claims Administrator on or before the Effective Date,
within seven business days following such date, the Escrow Agent will distribute
to you the Net Settlement Amount for each Unit held by you. If you submit a
valid Proof of Claim after the Effective Date, the Escrow Agent will distribute
to you the Net Settlement Amount for each Unit held by you within seven business
days following the receipt of the Proof of Claim by the Claims Administrator.
If a class action plaintiff has not submitted a valid Proof of Claim to the
Claims Administrator within 90 days following the Effective Date and such
plaintiff has not opted out of the Settlement, Class Counsel may execute a Proof
of Claim on behalf of that limited partner. The execution of the Proof of Claim
by Class Counsel on behalf of a limited partner will entitle the limited partner
to receive the Net Settlement Amount for each Unit held by such limited partner
and release, on behalf of such limited partner, all claims that are released,
settled and discharged as part of the Settlement as provided in the Proof of
Claim. The Escrow Agent will not distribute funds from the settlement fund to
any limited partner unless and until a valid Proof of Claim for that limited
partner is received, whether from such limited partner or from counsel to the
class action plaintiffs. The Net Settlement Amount to be received by any holder
of a Unit will be reduced by any amount owed by the holder on the original
purchase price of such Unit.
If you or any other plaintiffs file an appeal of the judgment order (other
than an appeal that relates solely to counsel fees and expenses), the Escrow
Agent will return the settlement fund, with interest, to the Purchaser or the
Joint Venture, or their designees, within two days after receiving documentation
of such event. If an order of an appellate court affirming the judgment order
subsequently becomes final, then the Purchaser or the Joint Venture, or their
designees, will return the settlement fund to the Escrow Agent within three
business days thereafter, without interest.
The Purchaser and the Escrow Agent expressly reserve the right to delay the
acceptance for payment of, or payment for, Units in order to comply in whole or
in part with any applicable law and the terms of the Settlement Agreement and
any applicable court order.
Units tendered pursuant to the Purchase Offer may be withdrawn at any time
on or prior to the Expiration Date and, unless accepted for payment by the
Purchaser pursuant to the Purchase Offer, may also be withdrawn at any time
after _____, 2000. Units will be returned promptly at such time as it is
finally determined that such conditions will not be satisfied or waived. In
addition, written consents submitted prior to the Expiration Date will remain
valid and outstanding after the Expiration Date and will not expire until the
conditions for consummation of the Purchase Offer are satisfied or waived (if
waivable) or until such time as it is finally determined that such conditions
will not be satisfied or waived.
For purposes of the Purchase Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Units validly tendered and not
withdrawn as, if and when the Purchaser gives oral or written notice to the
Claims Administrator that the "Effective Date" under the Settlement Agreement
has occurred.
If, prior to the Expiration Date, the Purchaser increases the consideration
offered per Unit, the Purchaser will pay such increased consideration to all
holders of those Units purchased pursuant to the Purchase Offer, whether or not
such Units have been tendered prior to such increase in the consideration.
Procedures for Accepting the Purchase Offer and Tendering Units
In order for a Unitholder to validly tender Units pursuant to the Purchase
Offer, a properly completed and duly executed Proof of Claim (or facsimile
thereof) and any other documents required by the Proof of Claim must be received
by the Claims Administrator at its address set forth on the back cover of this
Purchase Offer and Consent Solicitation on or prior to the Expiration Date.
-54-
<PAGE>
If the Units are registered in the name of a person other than the signer
of the Proof of Claim, or if payment is to be made to a person other than the
registered holder of the Units surrendered, then the Proof of Claim must be
accompanied by duly executed powers signed exactly as the name or names of the
registered holder or holders appear in the records of the Partnership. See
Instructions 4 and 6 of the Proof of Claim.
The method of delivery of the Proof of Claim and all other required
documents is at the option and risk of each tendering Unitholder. If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
Notwithstanding any other provision hereof, payment for Units accepted for
payment pursuant to the Purchase Offer will in all cases be made only after
timely receipt by the Claims Administrator of a properly completed and duly
executed Proof of Claim (or facsimile thereof) and any other documents required
by the Proof of Claim.
Appointment as Proxy. By executing the Proof of Claim, a tendering
Unitholder irrevocably appoints designees of the Purchaser, and each of them, as
such Unitholder's attorneys-in-fact and proxies in the manner set forth in the
Proof of Claim, each with full power of substitution, to the full extent of such
Unitholder's rights with respect to the Units tendered by such Unitholder and
accepted for payment by the Purchaser and with respect to any and all other
Units or other securities or rights issued or issuable in respect of such Units
after the date of this Purchase Offer and Consent Solicitation. All such proxies
shall be considered coupled with an interest in the tendered Units. This
appointment will become effective when the judgment order rendered by the Court
becomes final. Upon such acceptance for payment, all prior proxies given by
such Unitholder with respect to such Units or other securities or rights will,
without further action, be revoked, and no subsequent proxies may be given (and,
if given, will not be deemed effective) by such Unitholder. The designees of
the Purchaser will, with respect to such Units and other securities or rights,
be empowered to exercise all voting and other rights of such Unitholder as the
designees, in their sole discretion, may deem proper at any annual, special or
adjourned meeting of the Unitholders, by written consent in lieu of any such
meeting or otherwise. The Purchaser reserves the right to require that, in
order for Units to be deemed validly tendered, immediately after the judgment
order rendered by the Court becomes final, the Purchaser must be able to
exercise full voting and other rights with respect to such Units and other
securities or rights including voting at any meeting of Unitholders then
scheduled or acting by written consent. In addition, by executing a Proof of
Claim, a tendering Unitholder agrees promptly to remit and transfer to the
Claims Administrator for the account of the Purchaser any and all cash
dividends, distributions, rights, other Units and other securities issued or
issuable in respect thereof on or after the date that the Court renders a
judgment order (assuming there is no appeal of the order) or, in the event of an
appeal, the date that the judgment order becomes final accompanied by
appropriate documentation of transfer. Pending such remittance or appropriate
assurance thereof, the Purchaser shall be entitled to all rights and privileges
as owner of any such other Units or other securities or property and may
withhold the entire purchase price or deduct from the purchase price the amount
or value thereof, as determined by the Purchaser in its sole discretion.
Determination of Validity. The Claims Administrator will review the
validity, form and eligibility (including the timeliness of receipt) of Units
tendered pursuant to any of the procedures described above. All issues as to
the validity, form, eligibility and acceptance for payment of any tendered Units
will be determined by the Court. No tender of Units will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of the Purchaser, the Joint Venture, Rockledge or Marriott International,
any of their affiliates or assigns, if any, the Claims Administrator, or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
It is a violation of Section 14(e) of the Exchange Act and Rule 14e-4
promulgated thereunder for a person to tender Units for his or her account
unless the person so tendering (1) owns such Units or (2) owns other securities
convertible into or exchangeable for such Units or owns an option, warrant or
right to purchase such Units and intends to acquire such Units for tender by
conversion,
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exchange or exercise of such option, warrant or right. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person.
A tender of Units made pursuant to any one of the procedures set forth
above will constitute the tendering Unitholder's acceptance of the terms and
conditions of the Purchase Offer, including the tendering Unitholder's
representation that (1) such Unitholder owns the Units being tendered within the
meaning of Rule 14e-4 and (2) the tender of such Units complies with Rule 14e-4.
Please note, however, that tendering your Units in the Purchase Offer does
not in itself constitute your consent to the Merger and the Amendments. You can
only consent to the Merger and the Amendments by executing the GREEN Consent
Form and returning it to the Claims Administrator prior to the Expiration Date
in the manner described under the heading "The Written Consents 3/4Voting and
Revocation of Consents."
Withdrawal Rights
Except as otherwise provided in this Section, tenders of Units made
pursuant to the Purchase Offer are irrevocable. Units tendered pursuant to the
Purchase Offer may be withdrawn at any time on or prior to the Expiration Date
and, unless theretofore accepted for payment by the Purchaser pursuant to the
Purchaser Offer, may also be withdrawn at any time after _______, 2000, but any
Consent Form properly executed and received and not withdrawn prior to the
Expiration Date will become binding and irrevocable after the Expiration Date
and will be deemed coupled with an interest. See "The Written Consents - Voting
and Revocation of Consents." Units will be returned promptly at such time as it
is finally determined that such conditions will not be satisfied or waived.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Claims Administrator at one of its addresses or numbers set forth on the back
cover of this Purchase Offer and Consent Solicitation. Any such notice of
withdrawal must specify the name of the person who tendered the Units to be
withdrawn, the number of Units to be withdrawn, and the name of the registered
holder of the Units to be withdrawn, if different from that of the tendering
Unitholder.
Withdrawals of Units may not be rescinded and any Units properly withdrawn,
thereafter, will be deemed not validly tendered for purposes of the Purchase
Offer. However, withdrawn Units may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described under the heading
"--Procedures for Accepting the Purchase Offer and Tendering Units."
All questions as to the form and validity (including the timeliness of
receipt) of any notice of withdrawal will be determined by the Court. Neither
the Purchaser, the Joint Venture, Marriott International, MI Investor or
Rockledge any of their affiliates or assigns, if any, the Claims Administrator
nor any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or incur any liability for failing
to give any such notification.
Market for the Partnership's Limited Partnership Units and Related Security
Holder Matters
There is currently no established public trading market for the Units, and
it is not anticipated that a public market for the Units will develop. Transfers
of Units are limited to the first date of each Accounting Period (as defined in
the Partnership Agreement) and may be made only to accredited investors. All
transfers are subject to approval by the General Partner. As of December 31,
1999, there were 1,076 holders (including holders of half-units) of record of
the 1,150 Units.
During 1999, 12.5 Units were sold by Unitholders at prices ranging from
$65,000 to $86,000 per Unit. Between January 1, 2000 and May 1, 2000, 2 Units
were sold by
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Unitholders at prices ranging from $73,190 to $80,000 per Unit. Since May 1,
2000, 3.5 Units have been sold by Unitholders at a price of $80,000 per Unit.
However, these transfers have not been approved by the General Partner and the
purchasers of these 3.5 Units have not been admitted as limited partners to the
Partnership. The Partnership does not have any information regarding the
circumstances surrounding any of the above sales and believes any of the above
sales prices are not necessarily indicative of the market value of the Units.
The Settlement Agreement provides that, until the judgment order approving
the Settlement becomes final, the limited partners in the Partnership will
continue to own their respective Units. The General Partner will cause the
Partnership to make distributions of Cash Available for Distribution (as defined
in the Partnership Agreement) for the period until the judgment order is
entered. Following entry of the judgment order, and until the order becomes
final, assuming there is no appeal other than an appeal as to counsel fees and
expenses only, no further Cash Available for Distribution will be distributed.
If an appeal is filed, the General Partner will cause the Partnership to make
distributions of Cash Available for Distribution for the period until the
judgment order becomes final.
As of December 31, 1999, the Partnership had distributed a total of $4.9
million to the General Partner and $92.2 million to the limited partners
($80,181 per Unit) since inception. Included in the $80,181 of distributions per
Unit was a $4,000 distribution per Unit from excess refinancing proceeds that
was distributed to the partners in 1988 and the $25,000 per Unit from 1997
excess refinancing proceeds. During 1999, the Partnership distributed $666,000
to the General Partner and $12.7 million ($3,000 and $8,000 per Unit from 1998
and 1999 operations, respectively) to the limited partners. An additional
$3,500 per Unit from 1999 operations was distributed in February 2000.
Transfer Fees and Taxes
Except as set forth in this paragraph, the Purchaser will pay or cause to
be paid any transfer taxes and fees with respect to the transfer and sale of
purchased Units to it or its order, pursuant to the Purchase Offer. If,
however, payment of the purchase price for the Units is to be made to, or if
tendered Units are registered in the name of, any person other than the
person(s) signing the Proof of Claim, the amount of any transfer taxes (whether
imposed on the registered holders(s) or such person) payable on account of the
transfer to such person will be deducted from the purchase price for the Units
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted. See also Instruction 5 to the Proof of Claim. The Purchaser will
not subtract any transfer fees from the Net Settlement Amount per Unit, other
than as described in this paragraph.
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THE WRITTEN CONSENTS
In accordance with the terms of the Settlement Agreement, the General
Partner is soliciting the consent of the Unitholders to (1) the Merger and (2)
the Amendments to the Partnership Agreement. As discussed more fully under "The
Settlement--The Settlement Agreement," the Merger and the proposed Amendments
must receive Unitholder approval in order for Unitholders to have the
opportunity to receive the cash price per Unit offered pursuant to the Purchase
Offer. For a discussion of the interests that the Purchaser, the General
Partner and their respective affiliates have in the Amendments, the Merger and
the Purchase Offer, see "The Settlement--Certain Transactions with the
Partnership."
Record Date and Outstanding Units
The General Partner has set the close of business on ________, 2000 as the
record date for the determination of Unitholders entitled to consent to the
Merger and the Amendments. The only Unitholders who will be entitled to consent
to the Merger and the Amendments will be Unitholders of record as of the record
date who have been admitted to the Partnership as limited partners and who are
not in default with respect to the original purchase price of their Units. On
the record date, there were 1,150 Units issued and outstanding, held of record
by 1076 Unitholders. The Partnership has no other class of securities.
Majority Vote Required; Voting Rights
Under the Partnership Agreement, approval of the Merger and the Amendments
require the affirmative consent of Unitholders (excluding the General Partner
and its affiliates) holding a majority of the issued and outstanding Units. An
abstention or failure to timely return the enclosed Consent Form will have the
same effect as not consenting to the Merger and the Amendments. With the
exception of the General Partner, the Purchaser, and their respective
affiliates, each Unitholder who has been admitted to the Partnership as a
limited partner is entitled to cast one vote for each Unit held of record on the
Merger and the Amendments, other than Unitholders who are in default with
respect to the original purchase price of their Units who shall not be entitled
to cast a vote with respect to such Units. Holders of half-Units are entitled
to cast half a vote for each half-Unit held of record. Units held by the
General Partner, the Purchaser and their affiliates cannot be voted on the
Merger and the Amendments. The Claims Administrator, an independent
intermediary, has been retained by Class Counsel to tabulate and validate the
written consents. The Claims Administrator also currently serves as the
Partnership's transfer agent. All issues regarding the validity of any written
consents will be determined by the Court.
Solicitation Period
The solicitation period is the time during which Unitholders may vote for
or against the Merger and the Amendments. The solicitation period will commence
upon delivery of this Purchase Offer and Consent Solicitation and will continue
until 12:00 midnight, New York City time, on __________ ___, 2000 unless the
Purchase Offer is extended by the Purchaser, in which case the solicitation
period will be extended to such later date that coincides with the expiration
date of the Purchase Offer, and as to which notice is given to Unitholders.
Voting and Revocation of Consents
A GREEN Consent Form is included with this Purchase Offer and Consent
Solicitation. The Consent Form should be properly executed and returned to the
Claims Administrator, GEMISYS Corporation, Proxy Department, 7103 South Revere
Parkway, Englewood, Colorado 80112. Any properly executed Consent Forms
received by GEMISYS prior to the Expiration Date will be voted in accordance
with the instructions contained therein. All properly executed Consent Forms
that contain no voting instructions will be deemed to
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have consented to the Merger and all of the Amendments. Consent Forms will be
effective only when actually received by the Claims Administrator prior to the
Expiration Date. Consent Forms may be withdrawn at any time prior to the
Expiration Date. In addition, subsequent to the submission of a Consent Form,
but prior to the Expiration Date, Unitholders may change their vote. For a
withdrawal or change of vote to be effective, Unitholders must execute and
deliver to the Claims Administrator, prior to the Expiration Date, a
subsequently dated Consent Form or a written notice stating that the consent is
revoked. Consent Forms and notices of withdrawal or change of vote dated after
the Expiration Date will not be valid. All properly executed Consent Forms that
are received and not withdrawn prior to the Expiration Date will become binding
and irrevocable after the Expiration Date and will be deemed coupled with an
interest. Valid written consents submitted prior to the Expiration Date will
remain valid and outstanding after the Expiration Date and will not expire until
the conditions for consummation of the Purchase Offer are satisfied or waived
(if waivable) or until such time as it is finally determined that such
conditions will not be satisfied or waived. Questions concerning (1) how to
complete the Consent Form, (2) where to remit the Consent Form and (3) obtaining
additional Consent Forms should be directed to the Claims Administrator.
Substantive questions concerning the Consent Form should be directed to David
Berg or Jim Moriarty, counsel to the class action plaintiffs. Mr. Berg's
telephone number is (713) 529-5622 and Mr. Moriarty's telephone number is (713)
528-0700.
Effective Time of Amendments
If approved by the Unitholders, the Amendments will become effective when
the General Partner executes and delivers an Amended and Restated Agreement of
Limited Partnership incorporating the Amendments in accordance with the
Partnership Agreement. Assuming the Unitholders will consent to the Merger and
the Amendments and the conditions to the Purchase Offer and the Merger will be
satisfied, it is contemplated that the General Partner will execute and deliver
the Amended and Restated Agreement of Limited Partnership as soon as practicable
following the Expiration Date, but in any event immediately prior to the
consummation of the Purchase Offer. If for any reason the Purchase Offer is not
consummated, however, the Amendments to the Partnership Agreement will not be
implemented, even if they receive Unitholder approval.
Effective Time of the Merger
As soon as practicable after all conditions of the Purchase Offer and the
Merger have been satisfied (or waived, if waivable), the General Partner will
file a certificate of merger with the Secretary of State of the State of
Delaware. The Merger shall become effective upon the filing of the certificate
of merger with the Secretary of State of the State of Delaware or such later
time as provided in the certificate of merger.
No Special Meeting
The Partnership Agreement does not require a special meeting of Unitholders
to consider the Merger or the Amendments. Accordingly, no such meeting will be
held.
Rights of Appraisal
The Partnership was organized under the Partnership Act. Under the
Partnership Act a limited partnership agreement or a merger agreement may
contractually provide for appraisal rights with respect to limited partnership
interests. Neither the Partnership Agreement nor the Merger Agreement provides
for a judicial appraisal of Units in connection with the Merger. However, the
Settlement Agreement and the Merger Agreement provide that upon consummation of
the Merger, each Unit held by a holder who elects not to participate in the
Settlement by delivering an Opt-Out Notice to the Claims Administrator no later
than the Expiration Date will be converted into the right to receive the
appraised value of such Unit, not including any amount relating to the claims
asserted in the litigation, as determined in accordance with the provisions in
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the Settlement Agreement and the Merger Agreement, and reduced by any amount
owed by the holder on the original purchase price of such Unit. Unitholders who
wish to opt-out of the Settlement must follow the procedures described under the
heading "The Settlement - Procedures for Opting-Out of Settlement."
Interests of Certain Persons in the Matters to be Acted Upon
In considering whether to vote for or against the Merger and the
Amendments, you should be aware that the General Partner is a Defendant.
Accordingly, the General Partner has a conflict of interest with respect to this
consent solicitation and makes no recommendation to any Unitholder as to whether
to vote for or against the Merger and the Amendments.
Your vote in favor of the Merger and the Amendments does not require that
you tender your Units pursuant to the Purchase Offer. If you desire to receive
the Net Settlement Amount for each of your Units, you should submit the Proof of
Claim and consent to the Merger and the Amendments. If you desire to have the
value of your Units appraised pursuant to the terms of the Settlement Agreement
and the Merger Agreement, you should consent to the Merger and the Amendments,
not tender your Units and submit an Opt-Out Notice to the Claims Administrator
no later than the Expiration Date.
OTHER MATTERS
Fees and Expenses
Counsel to the class action plaintiffs has retained GEMISYS Corporation to
act as the Claims Administrator in connection with the Purchase Offer and the
Consent Solicitation. The costs of sending the Notice and the Purchase Offer
and Consent Solicitation and related materials to the Partnership's limited
partners will be paid by the Joint Venture. Other fees and expenses will be
paid out of any interest accrued on the settlement funds during the time the
settlement funds (including the settlement funds relating to the other Marriott
Partnerships) are in escrow. See "The Settlement -- The Settlement Agreement."
To the extent such accrued interest is insufficient to cover the Claims
Administrator's fees and expenses, the fees will be paid by the Joint
Venture.
The Court has approved the retention of Chase Bank of Texas, N.A. to act as
escrow agent for the settlement funds relating to all of the Litigation covered
by the Settlement Agreement. The Escrow Agent will be paid out of any interest
accrued during the time the settlement funds (including the settlement funds
relating to the other Marriott Partnerships) are in escrow. To the extent such
accrued interest is insufficient to cover the fees, the fees will be paid by the
Joint Venture.
Neither the Purchaser, the Joint Venture, Marriott International, MI
Investor nor Rockledge will pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Units pursuant to this Purchase
Offer and Consent Solicitation (other than the fees to the Claims
Administrator). Brokers, dealers, commercial banks and trust companies will,
upon request, be reimbursed by the Joint Venture for customary mailing and
handling expenses incurred by them in forwarding materials to their customers.
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Miscellaneous
The Purchase Offer and Consent Solicitation is being made to all holders of
Units, other than the General Partner. The Purchaser is not aware of any state
where the making of the Purchase Offer or the soliciting of consents is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Purchase Offer or the acceptance of Units pursuant thereto, or
the soliciting of consents, the Purchaser will make a good faith effort to
comply with such state statute. If, after such good faith effort, the Purchaser
cannot comply with such state statute, the Purchase Offer and Consent
Solicitation will not be made to nor will tenders be accepted from or on behalf
of the holders of Units in such state.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, the Purchaser, the Joint Venture, Marriott International, MI
Investor and Rockledge have filed with the SEC a Tender Offer Statement on
Schedule TO, and pursuant to Rule 14d-9 and Rule 14a-6 of the Exchange Act, the
Partnership has filed with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 and a Consent Solicitation Statement on Schedule 14A,
respectively, together with exhibits in each case, furnishing certain additional
information with respect to the Purchase Offer and the Consent Solicitation.
Such statements and any amendments thereto, including exhibits, may be inspected
and copies may be obtained with the SEC at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. These
SEC filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
www.sec.gov.
Any exhibits filed herewith may be obtained from the Partnership, without
charge, by requesting them in writing or by telephone from the Partnership at
the following address:
Courtyard by Marriott Limited Partnership
10400 Fernwood Road
Bethesda, Maryland 20817
Telephone: (301) 380-9000
You should rely only on the information contained or incorporated by
reference in this Purchase Offer and Consent Solicitation. We have not
authorized anyone to provide you with information that is different from what is
contained in this Purchase Offer and Consent Solicitation. This Purchase Offer
and Consent Solicitation is dated ________ __, 2000. You should not assume that
the information contained in this Purchase Offer and Consent Solicitation is
accurate as of any date other than that date. The mailing of this Purchase Offer
and Consent Solicitation does not create any implication of the contrary.
No person has been authorized to give any information or make any
representation on behalf of the Partnership, the General Partner or the
Purchaser not contained herein or in the Proof of Claim and, if given or made,
such information or representation must not be relied on as having been
authorized.
CBM I HOLDINGS LLC
CBM ONE LLC
_____________ __, 2000
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF MARRIOTT INTERNATIONAL, INC.,
MI CBM INVESTOR LLC, ROCKLEDGE HOTEL PROPERTIES, INC.,
CBM JOINT VENTURE LLC AND CBM I HOLDINGS LLC
The following table sets forth the name, business address and principal
occupation or employment at the present time and during the last five years, and
the name, principal business and address of any corporation or other
organization in which such employment is or was conducted, of each director and
executive officer of Marriott International, Inc., MI CBM Investor LLC,
Rockledge Hotel Properties, Inc., CBM Joint Venture LLC and CBM I Holdings LLC.
The business address of each such person is 10400 Fernwood Road, Bethesda,
Maryland 20817. Except as otherwise noted, each occupation set forth below a
person's name refers to employment with Marriott International, Inc., MI CBM
Investor LLC, Rockledge Hotel Properties, Inc., CBM Joint Venture LLC and CBM I
Holdings LLC, respectively, and each such person has held such occupation for at
least the past five years and, other than Dr. Cheng, each such person is a
citizen of the United States. Except as otherwise noted, where an office with
Marriott International, Inc. is set forth opposite a person's name, that person
has held that office since March 1998, when the present Marriott International,
Inc. was spun off from the prior corporation of the same name ("Old Marriott
International," now known as Sodexho Marriott Services, Inc.) and prior to that
spin-off held the same office with Old Marriott International.
I. MARRIOTT INTERNATIONAL, INC.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment and
Material Occupations, Offices or Employment
Name Held During the Past Five Years
---- -----------------------------------------------
<S> <C>
J.W. Marriott, Jr.Chairman J.W. Marriott, Jr. is Chairman of the Board and
of the Board and Chief Chief Executive Officer of Marriott
Executive Officer International. He joined Marriott Corporation
(now known as Host Marriott Corporation) in
1956, became President and a director in 1964,
Chief Executive Officer in 1972 and Chairman of
the Board in 1985. Mr. Marriott also is a
director of Host Marriott Corporation, General
Motors Corporation and the Naval Academy
Endowment Trust. He serves on the Board of
Trustees of the National Geographic Society and
The J. Willard & Alice S. Marriott Foundation,
and the Board of Directors of Georgetown
University, and is a member of the Executive
Committee of the World Travel & Tourism Council
and the Business Council. Mr. Marriott has
served as Chief Executive Officer of Marriott
International since its inception in 1997, and
served as Chairman and Chief Executive Officer
of Old Marriott International from October 1993
to March 1998. Mr. Marriott has served as a
director of Marriott International since March
1998.
</TABLE>
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Todd Clist Todd Clist joined Marriott Corporation in 1968.
Vice President; Mr. Clist served as general manager of several
President, North American hotels before being named Regional Vice President,
Lodging Operations Midwest Region for Marriott Hotels, Resorts and
Suites in 1980. Mr. Clist became Executive Vice
President of Marketing for Marriott Hotels,
Resorts and Suites in 1985, and Senior Vice
President, Lodging Products and Markets in 1989.
Mr. Clist was named Executive Vice President and
General Manager for Fairfield Inn in 1990, for
both Fairfield Inn and Courtyard in 1991, and for
Fairfield Inn, Courtyard and Residence Inn in
1993. Mr. Clist was appointed to his current
position in January 1994.
Edwin D. Fuller Edwin D. Fuller joined Marriott Corporation in
Vice President; President 1972 and held several sales positions before being
and Managing Director appointed Vice President of Marketing in 1979. He
--Marriott Lodging became Regional Vice President in the Midwest
International Region in 1985, Regional Vice President of the
Western Region in 1988, and in 1990 was promoted
to Senior Vice President & Managing Director of
International Lodging, with a focus on developing
the international group of hotels. He was named
Executive Vice President and Managing Director of
International Lodging in 1994, and was promoted to
his current position of President and Managing
Director of International Lodging in 1997.
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Gilbert M. Grosvenor Gilbert M. Grosvenor is Chairman of the Board of
Director the National Geographic Society (a publisher of
books and magazines and producer of television
documentaries) and a director or trustee of Chevy
Chase Federal Savings Bank, Ethyl Corporation,
B.F. Saul REIT and Saul Centers, Inc. He is on the
Board of Visitors of the Nicholas School of the
Environment of Duke University. Mr. Grosvenor
served as a member of the Board of Directors of
Old Marriott International (and prior to October
1993 of Marriott Corporation) from 1987 to March
1998, and has served as a director of Marriott
International since March 1998.
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Henry Cheng Kar-Shun Henry Cheng Kar-Shun has served as Managing
Director Director of New World Development Company Limited
("New World Development"), a publicly held Hong
Kong real estate development and investment
company, since 1989. He is the Chairman of New
World China Land Limited, New World CyberBase
Limited, New World Infrastructure Limited and Tai
Fook Group Limited and a director of HKR
International Limited and Kwoon Chung Bus Holding
Limited, all of which are publicly-held Hong Kong
companies. Dr. Cheng serves as an executive
officer of Chow Tai Fook Enterprises Limited, a
privately-held family company that controls New
World Development. Dr. Cheng served as Chairman
and Director of Renaissance Hotel Group N.V. from
June 1995 until its purchase by the Company in
March 1997. He is Chairman of the Advisory Council
for The Better Hong Kong Foundation. Dr. Cheng
serves as a member of the Services Promotion
Strategy Group, a unit under the Hong Kong
Financial Secretary's Office, and as a Committee
Member of the Eighth and Ninth Chinese People's
Political Consultative Committee of the People's
Republic of China. Dr. Cheng has also served as a
member of the Election Committee of the Hong Kong
Special Administrative Region. Dr. Cheng served as
a director of Old Marriott from June 1997 to March
1998, and has served as a director of the Company
since March 1998.
Brendan M. Keegan Brendan M. Keegan joined Marriott Corporation in
Vice President; Executive 1971, in the Corporate Organization Development
Vice President Department and subsequently held several human
---Human Resources resources positions, including Vice President of
Organization Development and Executive Succession
Planning. In 1986, Mr. Keegan was named Senior
Vice President, Human Resources, Marriott Service
Group. In April 1997, Mr. Keegan was appointed
Senior Vice President of Human Resources for
Marriott International's worldwide human resources
functions, including compensation, benefits, labor
and employee relations, employment and human
resources planning and development. In February
1998, he was appointed to his current
position.
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Richard E. Marriott Richard E. Marriott is Chairman of the Board of
Director Host Marriott Corporation. He is also Chairman of
the Board of First Media Corporation and serves as
a trustee of Gallaudet University, Polynesian
Cultural Center, Primary Children's Medical
Center, Boys and Girls Clubs of America SE Region
and The J. Willard & Alice S. Marriott Foundation.
He is President and a member of the Board of
Trustees of the Marriott Foundation for People
with Disabilities and President and a director of
the R.E.M. Family Foundation, Inc. He also serves
on the Board of Trustees of Federal City Council
and the Advisory Committee for the International
Hotel and Restaurant Association. Prior to 1993,
Mr. Marriott served as an Executive Vice President
and member of the Board of Directors of Marriott
Corporation. Mr. Marriott has been a director of
Marriott Corporation (now known as Host Marriott
Corporation) since 1979, served as a director of
Old Marriott International from October 1993 to
March 1998, and has served as a director of
Marriott International since March 1998.
Floretta Dukes McKenzie Floretta Dukes McKenzie is the founder, Chairwoman
Director and Chief Executive Officer of The McKenzie Group,
Inc. (an educational consulting firm). She is also
a director or trustee of Potomac Electric Power
Company (PEPCO), National Geographic Society,
Acacia Group, Group Hospitalization and Medical
Services, Inc. (GHMSI), Howard University, White
House Historical Association, American Association
of School Administrators Leadership of Learning
Foundation, Lightspan Partnership, Inc., Impact II
- The Teachers Network, National School Board
Foundation, Institute for Educational Leadership,
Inc., Forum for the American School
Superintendent, Harvard Graduate School of
Education Urban Superintendents Program and Johns
Hopkins Leadership Development Program. From 1981
to 1988, she served as Superintendent of the
District of Columbia Public Schools and Chief
State School Officer. Dr. McKenzie served as a
director of Old Marriott (and prior to October
1993 of Marriott Corporation) from 1992 to March
1998, and has served as a director of the Company
since March 1998.
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Harry J. Pearce Harry J. Pearce is Vice Chairman of the Board of
Director General Motors Corporation (an automobile
manufacturer) and a director of General Motors
Acceptance Corporation, Hughes Electronics
Corporation, Alliance of Automobile Manufacturers,
MDU Resources Group, Inc. and the Bone Marrow
Foundation and is a member of the U.S. Air Force
Academy's Board of Visitors. He also serves on the
Board of Trustees of Howard University and
Northwestern University and is a member of the
Northwestern University School of Law's Law Board.
Mr. Pearce served as a director of Old Marriott
International from 1995 to March 1998, and has
served as a director of Marriott International
since March 1998.
William T. Petty William T. Petty joined Marriott Corporation in
Vice President; Executive 1984 as Vice President of Planning & Business.
Vice President, North He has since held a number of positions with
American Lodging Operations Marriott Corporation and Marriott International,
becoming Vice President of Market Planning in
1985; General Manager of the Atlanta Perimeter
Marriott Hotel in 1989; Vice President of
Operations for Marriott's time share division in
1990; Regional Vice President for Lodging
Operations in 1991; and Senior Vice President for
the Western Region in 1995. Mr. Petty was
appointed to his present position in December
1998.
Robert T. Pras Robert T. Pras joined Marriott Corporation in
Vice President; President-- 1979 as Executive Vice President of Fairfield
Marriott Farm Kitchens, the predecessor of Marriott
Distribution Services Distribution Services. In 1981, Mr. Pras became
Executive Vice President of Procurement and
Distribution. In May 1986, Mr. Pras was appointed
to the additional position of General Manager of
Marriott Corporation's Continuing Care Retirement
Communities. He was named Executive Vice President
and General Manager of Marriott Distribution
Services in 1990. Mr. Pras was appointed to his
current position in January 1997.
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<PAGE>
W. Mitt Romney W. Mitt Romney was appointed President and Chief
Director Executive Officer of the Salt Lake Olympic
Committee on February 19, 1999. He is a director,
President and Chief Executive Officer of Bain
Capital, Inc. (a private equity investment firm).
He is also a director of Staples, Inc. Mr. Romney
is a member of the Executive Board of the Boy
Scouts of America and the board of the National
Points of Light Foundation. Mr. Romney served as
a member of the Board of Directors of Old Marriott
(and of Marriott Corporation prior to October 1993)
from 1993 to March 1998 and has served as a
director of Marriott International since March
1998.
Joseph Ryan Joseph Ryan joined Old Marriott in December 1994 as
Executive Vice President Executive Vice President and General Counsel. Prior
and General Counsel to that time, he was a partner in the law firm of
O'Melveny & Myers, serving as the Managing Partner
from 1993 until his departure. He joined O'Melveny
& Myers in 1967 and was admitted as a partner in
1976.
Roger W. Sant Roger W. Sant is Chairman of the Board of The AES
Director Corporation (a global power company) which he co-
founded in 1981. Since 1994, Mr. Sant has chaired
the Board of World Wildlife Fund (U.S.). He also
chairs the Board of The Summit Foundation, and is
a Board member of WWF-International and The
National Symphony. Mr. Sant served as a director of
Old Marriott International from 1993 to March 1998,
and has served as a director of Marriott
International since March 1998.
Horst H. Schulze Horst H. Schulze has served as the President and
Vice President ; President Chief Operating Officer of The Ritz-Carlton since
and Chief Operating Officer, 1988. Mr. Schulze joined The Ritz-Carlton in 1983
The Ritz-Carlton as Vice President, Operations and was appointed
Hotel Company, LLC Executive Vice President in 1987. Prior to 1983, he
spent nine years with Hyatt Hotels Corporation
where he held several positions including Hotel
General Manager, Regional Vice President and
Corporate Vice President.
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<PAGE>
William J. Shaw William J. Shaw has served as President and Chief
Director, President Operating Officer of Marriott International since
and Chief Operating March 1997 (including service in the same capacity
Officer with Old Marriott International until March 1998).
Mr. Shaw joined Marriott Corporation in 1974, was
elected Corporate Controller in 1979 and a Vice
President in 1982. In 1986, Mr. Shaw was elected
Senior Vice President--Finance and Treasurer of
Marriott Corporation. He was elected Chief
Financial Officer and Executive Vice President of
Marriott Corporation in April 1988. In February
1992, he was elected President of the Marriott
Service Group. Mr. Shaw is also Chairman of the
Board of Directors of Sodexho Marriott Services,
Inc. He also serves on the Board of Trustees of the
University of Notre Dame and the Suburban Hospital
Foundation. Mr. Shaw has served as a director of
Old Marriott International (now named Sodexho
Marriott Services, Inc.) since May 1997, and as a
director of Marriott International since March
1998.
Lawrence M. Small Lawrence M. Small is the Secretary of the
Director Smithsonian Institution, the world's largest
combined museum and research complex, a position to
which he was elected in September, 1999. Prior to
becoming the 11th Secretary, he served as President
and Chief Operating Officer of Fannie Mae, the
nation's largest housing finance company, since
1991. Before joining Fannie Mae, Mr. Small had
served as Vice Chairman and Chairman of the
Executive Committee of the Board of Directors of
Citicorp and Citibank, N.A., since January 1990. He
had been associated with Citibank since 1964. He is
also a director of The Chubb Corporation, New York
City's Spanish Repertory Theatre, the John F.
Kennedy Center for the Performing Arts, the
National Gallery, the Woodrow Wilson Center
International Center for Scholars and Mt. Sinai-NYU
Medical Center and Health System. Mr. Small served
as director of Old Marriott from 1995 to March
1998, and he has served as a director of the
Company since March 1998.
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<PAGE>
Arne M. Sorenson Arne M. Sorenson joined Old Marriott in 1996 as
Executive Vice President Senior Vice President of Business Development. He
and Chief Financial Officer was instrumental in Marriott International's
acquisition of the Renaissance Hotel Group in 1997.
Prior to joining Marriott, he was a partner in the
law firm of Latham & Watkins in Washington, D.C.,
where he played a key role in 1992 and 1993 in the
distribution of Old Marriott International by
Marriott Corporation. Effective October 1, 1998,
Mr. Sorenson was appointed Executive Vice President
and Chief Financial Officer.
James M. Sullivan James M. Sullivan joined Marriott Corporation in
Executive Vice President 1980, departed in 1983 to acquire, manage, expand
---Lodging Development and subsequently sell a successful restaurant
chain, and returned to Marriott Corporation in
1986 as Vice President of Mergers and
Acquisitions. Mr. Sullivan became Senior Vice
President, Finance - Lodging in 1989, Senior Vice
President - Lodging Development in 1990 and was
appointed to his current position in December
1995.
William R. Tiefel William R. Tiefel joined Marriott Corporation in
Vice Chairman; Chairman 1961 and was named President of Marriott Hotels,
---The Ritz-Carlton Resorts and Suites in 1998. He had previously
Hotel Company, LLC served as resident manager and general manager at
several Marriott hotels prior to being appointed
Regional Vice President and later Executive Vice
President of Marriott Hotels, Resorts and Suites
and Marriott Ownership Resorts. Mr. Tiefel was
elected Executive Vice President of Marriott
Corporation in November 1989. In March 1992, he was
elected President-Marriott Lodging Group and
assumed responsibility for all of Marriott's
lodging brands. In May 1998 he was appointed to his
current position.
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<PAGE>
<TABLE>
<S> <C>
Stephen P. Weisz Stephen P. Weisz joined Marriott Corporation in 1972
Vice President; President - and was named Regional Vice President of the
Marriott Vacation Club International Mid-Atlantic Region in 1991. Mr. Weisz had
previously served as Senior Vice President of Rooms
Operations before being appointed as Vice President
of the Revenue Management Group. Mr. Weisz became
Senior Vice President of Sales and Marketing for
Marriott Hotels, Resorts and Suites in August 1992
and Executive Vice President - Lodging Brands in
August 1994. In December 1996, Mr. Weisz was
appointed President - Marriott Vacation Club
International.
II. ROCKLEDGE HOTEL PROPERTIES, INC.
Richard A. Burton Richard A. Burton joined Host Marriott in 1996
Vice President as Senior Vice President--Taxes. Prior to
joining Host Marriott, Mr. Burton was Senior
Tax Counsel at Mobil Oil Corporation. Prior to
that, Mr. Burton also practiced law at
Sutherland, Asbill & Brennan and served as
Attorney Advisor to the United States Tax Court
in Washington, D.C.
Robert E. Parsons, Jr. Robert E. Parsons, Jr. joined the Corporate
President and Director Financial Planning staff of Host Marriott
Corporation ("Host Marriott") in 1981, became
Assistant Treasurer in 1988, Senior Vice
President and Treasurer in 1993 and in 1995, he
was elected Executive Vice President and Chief
Financial Officer. He also serves as a director,
manager and officer of numerous Host Marriott
subsidiaries.
Christopher G. Townsend Christopher G. Townsend joined Host Marriott's
Vice President, Secretary and Director Law Department in 1982 as a Senior Attorney,
became Assistant Secretary in 1984, Assistant
General Counsel in 1986, Senior Vice President,
Corporate Secretary and Deputy General
Counsel in 1993 and in January 1997, he was
made General Counsel. He also serves as a
director, manager and officer of numerous Host
Marriott subsidiaries.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
W. Edward Walter W. Edward Walter joined Host Marriott in 1996
Vice President and Treasurer as Senior Vice President--Acquisitions and, in
1998 was made Treasurer. He also serves as a
director, manager and officer of numerous Host
Marriott subsidiaries. Prior to joining Host
Marriott, Mr. Walter was a partner at Trammell
Crow Residential Company and President of
Bailey Capital Corporation, a real estate firm
focusing on tax-exempt real estate investments.
</TABLE>
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<PAGE>
III. MI CBM INVESTOR LLC
<TABLE>
<CAPTION>
Present Principal Occupation or Employment
and Material Occupations, Offices or
Name Employment Held During the Past Five Years
---- ---------------------------------------------
<S> <C>
Executive Officers and Managers:
-------------------------------
Kevin M. Kimball Kevin M. Kimball joined Marriott Corporation in
President and Manager 1976 as an analyst in the Treasury Department.
In 1980 he was promoted to Director, Partnerships
and Syndications, and was named Vice President
and Assistant Corporate Controller in 1986, Vice
President, Financial Planning and Analysis in
1989, and Vice President Finance, Residence Inn in
1990. In 1993, Mr. Kimball was appointed Senior
Vice President and Corporate Controller of
Marriott International, Inc. In 1994 he was named
Senior Vice President and Chief Financial Officer
for Marriott Lodging, and promoted to Executive
Vice President and Chief Financial Officer for
Marriott Lodging in 1996. Mr. Kimball was
appointed President and Manager of MI Investor
on April 13, 2000.
Carolyn B. Handlon Carolyn B. Handlon joined Marriott Corporation in
Treasurer and Manager 1987 as Manager of Corporate Finance. In 1992,
she was promoted to Vice President and named
Assistant Treasurer of Marriott International in
October 1993, and Senior Vice President, Finance
and Treasurer in June 1999. Ms. Handlon was
appointed Treasurer and Manager of MI Investor
on April 13, 2000.
Ward R. Cooper Ward R. Cooper joined Marriott Corporation in
Assistant Secretary and Manager 1988 as an Attorney. In addition to that position
he was appointed Assistant Secretary of Marriott
Corporation in 1992. He assumed the same
positions with Marriott International in October,
1993, and was promoted to Assistant General
Counsel and Assistant Secretary in January, 1994.
Mr. Cooper was appointed Assistant Secretary and
Manager of MI Investor on April 13, 2000.
</TABLE>
IV. CBM JOINT VENTURE LLC
CBM Joint Venture LLC does not have any directors or executive officers.
It is managed by its members, Rockledge Hotel Properties, Inc. and MI CBM
Investor LLC. Information concerning the directors and executive officers of
Rockledge Hotel Properties, Inc. and MI CBM Investor LLC is set forth elsewhere
on this Schedule I.
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<PAGE>
V. CBM I HOLDINGS LLC
CBM I Holdings LLC does not have any directors or executive officers. It
is managed by its sole member CBM Mezzanine Borrower LLC, which is managed by
its sole member CBM Joint Venture LLC. CBM Joint Venture LLC is managed by its
members, Rockledge Hotel Properties, Inc. and MI CBM Investor LLC. Information
concerning the directors and executive officers of Rockledge Hotel Properties,
Inc. and MI CBM Investor LLC is set forth elsewhere on this Schedule I.
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<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS OF CBM ONE LLC
The following table sets forth the name, business address and principal
occupation or employment at the present time and during the last five years, and
the name, principal business and address of any corporation or other
organization in which such employment is or was conducted, of each manager and
executive officer of CBM One LLC. Except as otherwise noted, each such person
is a citizen of the United States and the business address of each such person
is 10400 Fernwood Road, Washington, D.C. 20058. Except as otherwise noted, each
occupation set forth below a person's name refers to employment with CBM One LLC
and each such person has held such occupation for at least the past five years.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment
and Material Occupations, Offices or
Name Employment Held During the Past Five Years
---------------------------------- -------------------------------------------
<S> <C>
Robert E. Parsons, Jr. Robert E. Parsons, Jr. joined the Corporate
President and Manager Financial Planning staff of Host Marriott
Corporation ("Host Marriott") in 1981, became
Assistant Treasurer in 1988, Senior Vice
President and Treasurer in 1993 and in 1995,
he was elected Executive Vice President and
Chief Financial Officer. He is also an
Executive Vice President and Chief Financial
Officer of Host Marriott L.P. and serves as a
director, manager and officer of numerous Host
Marriott subsidiaries
Christopher G. Townsend Christopher G. Townsend joined Host Marriott's
Executive Vice President, Secretary Law Department in 1982 as a Senior Attorney,
and Manager became Assistant Secretary in 1984, Assistant
General Counsel in 1986, Senior Vice
President, Corporate Secretary and Deputy
General Counsel in 1993 and in January 1997,
he was made General Counsel. He is also a
Senior Vice President, Corporate Secretary and
General Counsel of Host Marriott L.P. and
serves as a director, manager and officer of
numerous Host Marriott subsidiaries.
W. Edward Walter W. Edward Walter joined Host Marriott in
Treasurer 1996 as Senior Vice President--Acquisitions
and, in 1998 was made Treasurer. He is also a
Senior Vice President and Treasurer of Host
Marriott L.P. and serves as a director, manager
and officer of numerous Host Marriott
subsidiaries. Prior to joining Host Marriott,
Mr. Walter was a partner at Trammell Crow
Residential Company and President of Bailey
Capital Corporation, a real estate firm focusing
on tax-exempt real estate investments.
</TABLE>
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<PAGE>
[PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
[Back cover page]
Questions and requests for assistance concerning (1) how to complete
the Consent Form or the Proof of Claim, (2) where to remit the Consent Form or
the Proof of Claim or (3) obtaining additional copies of this Purchase Offer and
Consent Solicitation, the Proof of Claim and the Consent Form and other Purchase
Offer and Consent Solicitation materials should be directed to the Claims
Administrator at its address and telephone number listed below. You may also
contact your broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Purchase Offer or the Merger. Substantive questions
concerning the Consent Form and the Proof of Claim should be directed to David
Berg or Jim Moriarty, counsel to the class action plaintiffs. Mr. Berg's
telephone number is (713) 529-5622 and Mr. Moriarty's telephone number is (713)
528-0700.
Facsimile copies of the BLUE Proof of Claim properly completed and duly
executed, will be accepted. However, the GREEN consent form, properly completed
and duly executed, should be sent to the Claims Administrator in the enclosed
envelope with pre-paid postage. The Proof of Claim and the Consent Form, and
any other required documents should be sent or delivered by you or your broker,
dealer, commercial bank, trust company or other nominee to the Claims
Administrator, at one of the addresses set forth below:
The Claims Administrator for the Purchase Offer and Consent Solicitation is:
GEMISYS Corporation
<TABLE>
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight Delivery:
Attention: Proxy Department 303-705-6171 Attention: Proxy Department
7103 South Revere Parkway (For Eligible Institutions Only) 7103 South Revere Parkway
Englewood, CO 80112-9523 Englewood, CO 80112-9523
Telephone:
(800) 326-8222
</TABLE>
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<PAGE>
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<PAGE>
CONSENT FORM
THIS WRITTEN CONSENT IS SOLICITED BY THE GENERAL PARTNER OF COURTYARD BY
MARRIOTT LIMITED PARTNERSHIP FOR ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS
TO BE EFFECTIVE AS SET FORTH IN THE PURCHASE OFFER AND CONSENT SOLICITATION
ACCOMPANYING THIS CONSENT FORM
The undersigned, with respect to each unit in Courtyard by Marriott Limited
Partnership (the "Partnership") held of record by the undersigned on
_____________, 2000, hereby sets forth his, her or its vote in connection with
the written consent solicited by the General Partner of the Partnership as
described in the Purchase Offer and Consent Solicitation accompanying this
consent form. You are encouraged to indicate your vote by marking the
appropriate box on the reverse side. Failure to check any of the boxes with
respect to the proposed authorization will, if this consent card has been signed
and dated, constitute a vote "FOR" the proposed authorization. Please sign and
date this card. A postage-paid return envelope is enclosed for your convenience
in returning this form.
IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE.
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<PAGE>
Authorization of the General Partner's grant of consent on behalf of the
Partnership to:
(1) the proposed amendments to Partnership Agreement as described in the
accompanying Purchase Offer and Consent Solicitation Statement dated
____________, 2000.
FOR [_] AGAINST [_] ABSTAIN [_]
(2) the proposed Merger as described in the accompanying Purchase Offer and
Consent Solicitation Statement dated ____________, 2000.
FOR [_] AGAINST [_] ABSTAIN [_]
__________________________
(SIGNATURE(S) OF LIMITED PARTNERS(S))
Dated: _________________, 2000
(NOTE: Please sign exactly as your name
or names appear on the label. If more
than one name appears, all persons so
designated should sign. When signing in a
representative capacity, please give your
full title.)
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