Counsel For Trimont Real Estate Advisors, Inc. As Special Servicer

US2008 1517450.
3

KILPATRICK STOCKTON LLP Hearing Date: September 1, 2010 at 8:30 a.m.
Todd C. Meyers, Esq.
Rex R. Veal, Esq.
Mark A. Fink, Esq.
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309-4530
Telephone: (404) 815-6500
Facsimile: (404) 541-6555

Michael D. Crisp, Esq.
Jonathan E. Polonsky, Esq.
31 West 52nd Street, 14th Floor
New York, NY 10019
Telephone: (212) 775-8703
Facsimile: (212) 775- 8819

Counsel for TriMont Real Estate Advisors, Inc.
as Special Servicer

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK

In re:
)
)

Chapter 11
)
INNKEEPERS USA TRUST, et al., ) Case No. 10-13800 (SCC)
)
Debtors. ) Jointly Administered
)

OMNIBUS DECLARATION OF TRAVIS SHELHORSE IN SUPPORT OF:
(I) OBJECTION OF TRIMONT REAL ESTATE ADVISORS, INC.,
AS SPECIAL SERVICER, TO DEBTORS MOTION FOR AN ORDER
(A) AUTHORIZING THE DEBTORS TO ASSUME THE PLAN SUPPORT
AGREEMENT AND (B) GRANTING RELATED RELIEF; AND
(II) LIMITED OBJECTION OF TRIMONT REAL ESTATE ADVISORS, INC.,
AS SPECIAL SERVICER, TO DEBTORS MOTION FOR THE ENTRY OF
AN ORDER AUTHORIZING THE DEBTORS TO OBTAIN
POSTPETITION FINANCING FROM AN AFFILIATE OF LEHMAN ALI INC.
ON A PRIMING BASIS PURSUANT TO SECTIONS 364(c)(1),
364(c)(2), 364(c)(3), 364(d)(1), AND 364(e) OF THE BANKRUPTCY CODE.

I, Travis Shelhorse, am an authorized representative of TriMont Real Estate Advisors,
Inc. (TriMont), as special servicer for the benefit of SASCO 2008-C2, LLC, as 100%

US2008 1517450.3

participant and owner of all economic and beneficial interests in the loans described on Exhibit
A (SASCO or the Mezzanine Lender).
I am authorized to submit this Declaration in support of the Objection of TriMont Real
Estate Advisors, Inc., as Special Servicer, to Debtors Motion for an Order (A) Authorizing the
Debtors to Assume the Plan Support Agreement and (B) Granting Related Relief (the PSA
Objection). The PSA Objection was filed in opposition to the Debtors Motion for an Order (A)
Authorizing the Debtors to Assume the Plan Support Agreement and (B) Granting Related Relief
filed on July 19, 2010 [Docket No. 15] (the PSA Motion).
This Declaration is also in support of the Limited Objection of TriMont Real Estate
Advisors, Inc., as Special Servicer, to Debtors Motion for the Entry of an Order Authorizing the
Debtors to Obtain Postpetition Financing From an Affiliate of Lehman ALI Inc. on a Priming
Basis Pursuant to Sections 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the
Bankruptcy Code (the Solar DIP Objection). The Solar DIP Objection was filed in opposition
to the Debtors Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition
Financing from an Affiliate of Lehman ALI Inc. on a Priming Basis Pursuant to Sections
364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e) of the Bankruptcy Code also filed on July
19, 2010 [Docket No. 23] (the Solar DIP Motion).
I declare, in accordance with section 1746 of title 28 of the United States Code
that the following is true and correct to the best of my knowledge, information and belief
based on my personal knowledge, as well as review of pleadings filed in the above-
captioned jointly-administered cases, and the documents prepared and/or maintained by
TriMont in the ordinary course of business.

US2008 1517450.3

1. On July 19, 2010 (the Petition Date), Innkeepers USA Trust and certain of its
affiliates, including the Floating Rate Property Level Borrowers, the Floating Rate Mezzanine
Borrower, KPA HS Anaheim and the Anaheim Mezzanine Borrower (collectively, the
Debtors), filed voluntary petitions for relief under chapter 11 of Title 11, United States Code
(the Bankruptcy Code).
The Mezzanine Lenders Mezzanine Loans
2. Twenty separate property level owners (the Floating Rate Property Level
Borrowers)
1
are co-borrowers under a loan agreement dated as of June 29, 2007 (as amended,
the Floating Rate Mortgage Loan Agreement) with Lehman ALI, Inc. (Lehman ALI) as
lender. The Floating Rate Mortgage Loan Agreement provides for a mortgage loan (the
Floating Rate Mortgage Loan) to the Floating Rate Property Level Borrowers in the original
principal amount of $250 million, collateralized by the twenty hotels owned by the Floating Rate
Property Level Borrowers (the Floating Rate Property Level Collateral).
2

3. Grand Prix Mezz Borrower Floating 2, LLC (the Floating Rate Mezzanine
Borrower) is the owner of the membership interests in the Floating Rate Property Level
Borrowers. On or about June 29, 2007, Lehman ALI made a loan to the Floating Rate
Mezzanine Borrower in the original principal amount of $117,658,725.00 (the Floating Rate
Mezzanine Loan) evidenced by, among other things, that certain mezzanine loan agreement (as
amended, the Floating Rate Mezzanine Loan Agreement) dated as of June 29, 2007, and a

1
A list of the Floating Rate Property Level Borrowers is set forth on Exhibit B.

2
TriMont understands the outstanding principal balance of the Floating Rate Mortgage Loan as of the Petition Date
(defined below) to be approximately $220.2 million after application to the debt shortly before the Petition Date of
approximately $17.5 million that had been deposited with Lehman ALI to fund certain property improvement
programs, or PIPs and to fund other reserves. As discussed in further detail in the Solar DIP Objection, a Lehman
ALI affiliate now proposes to fund the same PIPs through debtor-in-possession financing, albeit with significant
additional entitlements not available to Lehman ALI had it funded the PIPs with the deposited funds as
contemplated.

US2008 1517450.3

promissory note of even date therewith. As of May 22, 2008, certain Lehman ALI affiliates,
namely, Lehman Brothers Holdings Inc. (LBHI) and/or Lehman Commercial Paper Inc.
(LCPI), owned the Floating Rate Mezzanine Loan. On or about May 22, 2008, LBHI and
LCPI, as sellers, sold and conveyed to SASCO, as purchaser, among other things, a 100%
participation interest in the Floating Rate Mezzanine Loan. As a consequence of this sale and
conveyance, the sellers retained only bare legal title and no economic interest in the Floating
Rate Mezzanine Loan, and SASCO, the Mezzanine Lender, became the holder of all of the
economic and beneficial interests in the Floating Rate Mezzanine Loan.
3
The membership
interests in the Floating Rate Property Level Borrowers owned by the Floating Rate Mezzanine
Borrower secure repayment of the Floating Rate Mezzanine Loan, 100% of the economic and
beneficial interests in which is held by SASCO. As a result, the equity in the Floating Rate
Property Level Collateral, consisting principally of 20 hotel properties, constitutes the primary
collateral and source of recovery for the Floating Rate Mezzanine Loan.
4. KPA HS Anaheim LLC (KPA HS Anaheim) is the obligor under a loan
agreement dated as of June 14, 2005 (as amended, the Anaheim Mortgage Loan Agreement)
with Lehman ALI as lender. The Anaheim Mortgage Loan Agreement provides for a mortgage
loan under which KPA HS Anaheim is obligated in the original principal amount of $13.7
million, collateralized by a property known as the Hilton Suites in Anaheim, California (the
Anaheim Hotel).
5. Grand Prix Mezz Borrower Term LLC (the Anaheim Mezzanine Borrower), is
the owner of 100% of the membership interest in KPA HS Anaheim. On or about June 29, 2007,
Lehman ALI made a loan (the Anaheim Mezzanine Loan; collectively with the Floating Rate

3
See Master Participation Agreement, dated as of May 22, 2008, between LBHI and LCPI (as Sellers) and SASCO
(as Purchaser), pp. 6-8, a true copy of which is attached as hereto as Exhibit C.

US2008 1517450.3

Mezzanine Loan, the Mezzanine Loans) to the Anaheim Mezzanine Borrower in the original
principal amount of $21,300,000.00, evidenced by, among other things, a mezzanine loan
agreement dated as of June 29, 2007 (as amended, the Anaheim Mezzanine Loan Agreement)
and a promissory note of even date therewith. As of May 22, 2008 LBHI and/or LCPI owned the
Anaheim Mezzanine Loan. See Exhibit C. On or about May 22, 2008, LBHI and LCPI, as
sellers, sold and conveyed to SASCO, as purchaser, among other things, a 100% participation
interest in the Anaheim Mezzanine Loan. As a consequence of this sale and conveyance, the
sellers retained only bare legal title and no economic interest in the Anaheim Mezzanine Loan,
and SASCO became the holder of all of the economic and beneficial interests in the Anaheim
Mezzanine Loan. The Anaheim Mezzanine Borrowers membership interest in KPA HS
Anaheim secures repayment of the Anaheim Mezzanine Loan, 100% of the economic and
beneficial interests in which is held by SASCO. As a result, the equity in the Anaheim Hotel
constitutes the primary collateral and source of recovery for the Anaheim Mezzanine Loan.
4

Capital Improvement Documents Affecting Floating Rate Property Level Collateral
6. At the time the Floating Rate Mezzanine Loan was closed, on or about June 29,
2007, it was recognized that certain capital improvements were necessary to be made to the
Floating Rate Hotel Properties in accordance with certain property improvement plans (the
PIPs) that had been developed for the properties. The Floating Rate Mezzanine Loan
Agreement required that the PIPs be effectuated and the capital improvements (the Required

4
Contrary to the averment in paragraph 31 of the Amended Declaration of Dennis Craven, Chief Financial Officer
of Innkeepers USA Trust, in Support of First-Day Pleadings [Docket No. 33] (the Craven Declaration) that,
pursuant to an intercreditor agreement, the Anaheim Mezzanine Loan is subordinate to not only the obligations due
pursuant to the Anaheim Mortgage Loan Agreement but also obligations due under the Floating Rate Mortgage
Loan Agreement, the Anaheim Mezzanine Loan is only subordinate to the obligations due under the Anaheim
Mortgage Loan Agreement (and such subordination is subject to certain exceptions).

US2008 1517450.3

Capital Improvements) be made as set forth in the agreement. It also required that reserves be
established for the funding of the Required Capital Improvements.
5

7. With respect to the reserves otherwise required to be funded to pay for the Required
Capital Improvements, the Floating Rate Loan Agreements permitted the substitution of
guaranties from Apollo in lieu thereof. Opting for this alternative, on or about June 29, 2007,
Apollo executed and delivered, in connection with the Floating Rate Mezzanine Loan, a
Required Capital Improvements Guaranty (Mezzanine Loan) (the Apollo Guaranty),
guaranteeing the payment and performance of the Floating Rate Mezzanine Borrowers
obligations and liabilities to complete the Required Capital Improvements (other than Immediate
PIP Work and Initial Construction Work to the extent sufficient cash reserves for such work
were deposited with the Mezzanine Lender or the Floating Rate Mortgage Lender).
6

8. On or about July 31, 2009, pursuant to, among other agreements, a third amendment
to the Floating Rate Mezzanine Loan Agreement, Lehman ALI released the Apollo Guaranty in
return for the funding of reserves to be held by Lehman ALI to pay for the Required Capital
Improvements (the RCI Funds).
7
Thereafter, Lehman ALI held RCI Funds that could have
been used to pay for the Required Capital Improvements.
9. In the spring of 2010, Lehman ALI and affiliates entered into discussions with
Apollo about a restructuring of the debt of Innkeepers USA Trust and its affiliates (collectively,

5
The Floating Rate Mezzanine Loan and the Floating Rate Mortgage Loan were made substantially
contemporaneously. In many respects, the respective loan agreements (the Floating Rate Loan Agreements)
mirrored each other. In this regard, the Floating Rate Property Level Borrowers and the Floating Rate Mezzanine
Borrower were obligated under their respective loan agreements to cause the Required Capital Improvements to be
made and to fund reserves for such improvements.

6
A copy of the Apollo Guaranty is attached hereto as Exhibit D. A similar guaranty was also executed and
delivered by Apollo for the benefit of Lehman ALI as the Floating Rate Mortgage Lender.

7
See Confirmation of Termination of Documents, by Lehman ALI Inc in favor of Apollo Investment Corporation
dated as of July 31, 2009 (the Apollo Guaranty Release), attached hereto as Exhibit E.

US2008 1517450.3

Innkeepers).
8
These discussions resulted in a plan support agreement that envisioned that
Innkeepers would file for chapter 11 relief and restructure pursuant to a prenegotiated plan of
reorganization that, among other things, would extinguish the equity in the Floating Rate
Property Level Borrowers, the principal source of recovery for the Floating Rate Mezzanine
Loan.
10. Fully aware that the pre-planned Innkeepers bankruptcy filing was imminent, on or
about July 16, 2010 (just 3 days before the Petition Date), Lehman ALI applied the RCI Funds
and certain other funds held as reserves under the Floating Rate Mortgage Loan Agreement
(collectively, the Applied Funds) to the Floating Rate Mortgage Loan. The purpose of this
action appears to have been to convert approximately $17.5 million of prepetition secured debt
into superlien, superpriority postpetition debt by lending the Applied Funds back to the Debtors
through a Lehman affiliate in the form of debtor-in-possession financing (the DIP Financing).
The Debtors Plan Support Agreement
11. On the Petition Date, the Debtors filed the Craven Declaration. A Plan Support
Agreement (the PSA) by and among the Debtors and Lehman ALI was filed as an exhibit to
the Craven Declaration. At the same time, the Debtors filed the PSA Motion in which they seek,
among other things, to assume the PSA in accordance with section 365 of the Bankruptcy Code.
12. The plan envisioned by the PSA provides, among other things, that Lehman ALI
will receive, in satisfaction of its secured mortgage claims in respect of the Floating Rate
Mortgage Loan debt, 100% of the issued and outstanding new shares of common stock issued by

8
Motion of Lehman Commercial Paper Inc. Pursuant to Section 363 of the Bankruptcy Code for Authority to (I)
Consent to Its Non-Debtor Affiliate Lehman ALI Inc. (A) Entry Into Plan Support Agreement Related to the
Restructuring of Innkeepers USA Trust; and (B) Consummation of the Transactions Set Forth in the Plan Term
Sheet; and (II) Provide Funds to Solar Finance Inc., a Non-Debtor Affiliate, to Provide Debtor-In-Possession
Financing, p.13, attached hereto as Exhibit F.

US2008 1517450.3

the reorganized Debtors. Other key elements of the Debtors plan dictated by the PSA include
the following:
The remaining property level secured lenders will receive new secured notes with
a value that is no less than the value of the collateral securing their pre-petition
debt;

The Mezzanine Loans will be deemed cancelled and the Mezzanine Lender will
receive no distribution;

Unsecured creditors (including, it appears, creditors holding unsecured deficiency
claims) will receive a share of a cash allocation; and

Holders of interests in the Debtors, including common and preferred stock, will
have their interests cancelled, and no distributions will be made on account of
such interests.

13. On information and belief, Lehman ALI is the only significant creditor of the
Debtors that has agreed to the terms of the PSA.
14. The PSA prohibits both Lehman ALI and the Debtors from negotiating, supporting,
or engaging in any discussions relating to any alternate chapter 11 plan. PSA, Section 4(a)(iii).
15. The PSA obligates the Debtors to meet certain Plan Milestones or risk
termination of the PSA. For instance, the Debtors must, among other things: (1) file a plan and
disclosure statement consistent with the PSA no later than 45 days after the Petition Date; (2)
obtain approval of a disclosure statement consistent with the PSA no later than 120 days after the
Petition Date; (3) obtain an order confirming a plan consistent with the PSA no later than 240
days after the Petition Date; and (4) implement a Plan Effective Date no later than 270 days after
the Petition Date. Failure of the Debtors to meet any of these timelines constitutes a Termination
Event.
9

9
All capitalized undefined terms used herein shall have the meanings ascribed to them in either the Declaration or
the PSA.

US2008 1517450.3

16. Additionally, Section 8(b) of the PSA provides that, upon the occurrence of select
Termination Events, the Debtors must choose between immediate stay relief in favor of Lehman
ALI or a section 363 sale of the Floating Rate Property Level Collateral at which Lehman ALI
will have the right to credit bid the unpaid balance of the Floating Rate Mortgage Loan:
As long as this Agreement has not otherwise been terminated, (x) upon
the occurrence of a Termination Event set forth in Section 6(a)(vii) or
6(a)(viii); (y) if a trustee is appointed for the Chapter 11 Cases of all those
Debtors obligated under the Floating Rate Debt, Fixed Rate Debt,
Mezzanine Debt, and Other Secured Debt, or (z) if the company files a
motion to dismiss all of the Chapter 11 Cases for those Debtors obligated
under the Floating Rate Debt, Fixed Rate Debt, Mezzanine Debt, and Other
Secured Debt, the Company shall, immediately upon the occurrence of such
Termination Event, elect one of the following remedies, provided, however,
that if the company fails to make such election within one day after the
occurrence of the applicable Termination Event, Lehman shall have the
right to elect either option:

(i) The Company will be deemed to have consented to the
modification of the automatic stay to permit Lehman to exercise any and all
remedies with respect to the [Floating Rate Property Level Collateral], the
automatic stay shall be so modified and no further Bankruptcy Court
approval shall be required; or

(ii) The Company will sell the [Floating Rate Property
Level Collateral] pursuant to Section 363 of the Bankruptcy Code, subject
to the following conditions, which shall be incorporated into any order
approving this Agreement: (i) the sale procedures shall be agreed upon no
later than 120 days after the Petition Date; (ii) Lehman shall have the right
to credit bid the Floating Rate Debt; (iii) if sale proceeds are not paid to
Lehman within 60 days of the Termination Event, title to the [Floating Rate
Property Level Collateral] shall be conveyed to Lehman free and clear of all
liens, claims and encumbrances; (iv) the 60-day period shall not be
extended and the Company waives its right to seek any extension (sic) such
period.

PSA, Section 8(b).

17. Specifically, Lehman ALI will be entitled to immediate relief from stay or a section
363 sale of the Floating Rate Property Level Collateral if the Debtors do not (1) obtain an order
confirming a plan consistent with the PSA within 240 days after the Petition Date and (2)

US2008 1517450.3

implement a Plan Effective Date within 270 days after the Petition Date. PSA, Sections
6(a)(vii)-(viii) and 8(b)(i)-(ii).
18. Moreover, what is not set forth in the PSA or the accompanying term sheet is that
Lehman ALI already has agreed to sell a 50% interest in reorganized Innkeepers to Apollo
Investment Corporation (Apollo), the direct or indirect parent of all of the Debtors. Indeed,
despite knowing of an executed agreement between Apollo and Lehman ALI prior to the Petition
Date, the Debtors made only a passing reference to this transaction in their amended
Declaration. Compare Declaration, 13 (disclosing only that [i]t is the Debtors understanding
that, subject to certain terms and conditions, [Apollo] may become the purchaser[] of the 50%
interest in reorganized Innkeeprs) with Beilinson Deposition, 35:1-12 (admitting that the Debtors
were aware, prior to the Petition Date, that Apollo and Lehman ALI had executed an agreement
on July 16, 2010 for the acquisition of the 50% interest in reorganized Innkeepers).
19. Likewise, the Debtors have not marketed the 100% interest in reorganized
Innkeepers to anyone other than Lehman ALI nor has Lehman ALI marketed the 50% interest in
reorganized Innkeepers to anyone other than Apollo. Beilinson Deposition, 138:8-140:14;
Lascher Deposition 155:5-21.
The Debtors Proposed Solar DIP Facility
20. On the Petition Date, the Debtors filed the Solar DIP Motion seeking approval for a
$17,498,095.52 debtor-in-possession financing facility (the DIP Facility) to be provided by
Solar Finance Inc. (an affiliate of Lehman ALI) (Solar or the DIP Lender).
10

21. The proceeds from the DIP Facility are to be used principally to fund the Required
Capital Improvements.

10
All capitalized undefined terms used herein shall have the meanings ascribed to them in the Motion.

US2008 1517450.3

22. The DIP Facility is to be secured by, among other things, a priming lien on the
Floating Rate Property Level Collateral. As discussed above, the equity in the Floating Rate
Property Level Collateral constitutes the primary collateral and source of recovery for the
Floating Rate Mezzanine Loan.
23. On August 13, 2010, the Debtors filed their Notice of Filing of Supplement to the
Debtors Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition
Financing from an Affiliate of Lehman ALI Inc. on a Priming Basis Pursuant to Sections
364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code [Docket No. 200]
(the Supplement). A proposed order (the Proposed Order) and a form of credit agreement
for the DIP Facility (the DIP Credit Agreement) were attached as exhibits to the Supplement.
24. Section 8.2(d) of the DIP Credit Agreement provides that any final order approving
the DIP Facility will contain a waiver of the automatic stay in favor of the DIP Lender. DIP
Credit Agreement, 8.2(d). In furtherance of this provision, Paragraph 13 of the Proposed Order
provides:
Modification of Automatic Stay to Permit Exercise of Remedies Upon
Termination. The automatic stay provisions of section 362 of the
Bankruptcy Code are hereby modified as necessary to effectuate all of the
terms and provisions of this Final Order, including, without limitation,
that the automatic stay shall be vacated and modified, and the Floating
Rate Debtors shall be deemed to have consented to such vacatur and
modification, upon the occurrence of a Termination Event or an Event of
Default, to the extent necessary to permit the Floating Rate DIP Lender to
take any or all of the following actions without further order of or
application to the Court; provided, however, that the Floating Rate DIP
Lender shall provide the Floating Rate Debtors with five (5) business days
prior written notice, with a copy of such notice to counsel for the
Committee and counsel to the Floating Rate Debtors, prior to exercising
remedies (excluding acceleration of the Floating Rate DIP Indebtedness)
under this Final Order or the Floating Rate DIP Loan Documents:
(i) accelerate the Floating Rate DIP Indebtedness upon the occurance and
during the continuation of an Event of Default and (ii) exercise rights and
remedies as to all or such part of the Floating Rate Collateral that the

US2008 1517450.3

Floating Rate DIP Lender shall elect in its sole and absolute discretion,
including, without limitation: (a) the right to realize on all Floating Rate
Collateral securing the Floating Rate DIP Facility; (b) the right to exercise
any remedy available under the Floating Rate DIP Facility, the Floating
Rate DIP Documents, including the Floating Rate DIP Agreement, and
applicable law (including, without limitation, the right (but not the
obligation) to complete the Marriott PIP Work, the Other Franchise PIP
Work and the Cycle Renovations (as such terms are defined in the Floating
Rate DIP Agreement) and to apply any of the proceeds of the DIP Facility
on account thereof); and (c) the right to foreclose upon and sell all or a
portion of the Floating Rate Collateral. Notwithstanding the occurrence of
a Termination Event, Event of Default, or termination of the commitments
under the Floating Rate DIP Agreement or anything herein, all of the rights,
remedies, benefits, and protections provided to the Floating Rate DIP
Lender under the Floating Rate DIP Documents and this Final Order shall
survive the occurrence of a Termination Event or an Event of Default. If
the Debtors and/or the Committee request entry of an order to re-impose or
continue the automatic stay following a Termination Event or an Event of
Default (and it being a term of this Final Order that no other party
shall have standing to do so), then the only issue the Floating Rate
Debtors and/or the Committee shall be allowed to assert in support of
such relief is whether such Termination Event or an Event of Default
actually occurred or was properly cured under the Floating Rate DIP
Documents. This Court shall retain exclusive jurisdiction to hear and
resolve any disputes and enter any orders required by the provisions of this
paragraph and relating to the application, re-imposition, or continuance of
the automatic stay as provided hereunder.

Proposed Order, 13 (emphasis added).

25. Forty-two Events of Default are specified in the DIP Credit Agreement, including
events such as termination of the exclusive period for Borrower to file a plan of reorganization in
the Debtors chapter 11 cases.
11
DIP Credit Agreement 8.1(a)(v)(R). In addition, if the cost of
certain renovations actually exceeds the amounts budgeted therefor, an Event of Default will
occur under the DIP Credit Agreement. Id. 8.1(a)(ix). Moreover, among the Events of Default

11
The plan the Debtors intend to file proposes to extinguish all equity interests in the Debtors, including equity
interests in solvent Debtors. That parties will seek to propose competing plans is evident.

US2008 1517450.3

enumerated in the DIP Credit Agreement are breaches of any of the fourteen negative covenants
set forth in Section 5.2 of the agreement. Id. 8.1(a)(xi).
12

26. The negative covenants section of the DIP Credit Agreement provides, inter alia,
with certain exceptions not here relevant, that Borrower shall not permit, without the prior
written consent of the DIP Lender, a Sale or Pledge of an interest in any Restricted Party and
denotes such a Sale or Pledge as an impermissible Transfer. Id. 5.2.10(a). Sale or Pledge
is defined as a voluntary or involuntary sale conveyance, transfer or pledge of a direct or
indirect legal or beneficial interest. Id. 1.1 (emphasis added). Impermissible Transfers are
stated in the negative covenants section to include, if a Restricted Party is a limited liability
company (such as the Floating Rate Property Level Borrowers), the Sale or Pledge of the
membership interest of a managing member (or if no managing member, any member) . . . or the
Sale or Pledge of non-managing membership interests . . . . Id. 5.2.10(b) (emphasis added).
27. Restricted Party is defined to mean Borrower or Operating Lessee or any
Affiliated Manager or any shareholder, partner, member or non-member manager, or any direct
or indirect legal or beneficial owner of Borrower or Operating Lessee or any Affiliated Manager
or any non-member manager. Id. at 1.1 (emphasis added). Because each of the Floating Rate
Property Level Borrowers is included within the definition of Borrower in the DIP Credit
Agreement (Id., Preamble, Signature Page) and is thus a Restricted Party, even an involuntary
transfer of the Floating Rate Mezzanine Borrowers membership interest in a Floating Rate
Property Level Borrower would trigger an Event of Default under the DIP Credit Agreement.
28. As previously stated, the Mezzanine Lenders primary collateral and source of
recovery for the Floating Rate Mezzanine Loan is the equity in the Floating Rate Property Level

12
A cure period limited to only thirty days is provided for breaches of negative covenants the DIP Lender believes,
in its reasonable discretion, are capable of being cured in such thirty-day period. There is no cure period for other
negative covenant breaches. Credit Agreement 8.1(a)(xi).

US2008 1517450.3

Collateral represented by the Floating Rate Mezzanine Borrowers membership interests in the
Floating Rate Property Level Borrowers, which are pledged to the Mezzanine Lender. The
Floating Rate Mezzanine Borrower (a Debtor in these chapter 11 cases) is a party to the
prenegotiated plan that provides for the cancellation of its membership interests in the Floating
Rate Property Level Borrowers, thereby extinguishing the collateral it pledged to the Mezzanine
Lender to secure repayment of the Floating Rate Mezzanine Loan. The Mezzanine Lender,
accordingly, has no choice but to seek relief from the automatic stay in order to exercise its
remedies under the Uniform Commercial Code with respect to the membership interests in the
Floating Rate Property Level Borrowers, so that it can realize the value of the interests by sale to
a third party or take control of the Floating Rate Property Level Borrowers and restructure their
debt under chapter 11. Yet, a transfer of these membership interests pursuant to the exercise of
these remedies would trigger an Event of Default under the DIP Credit Agreement, and the
automatic stay relief afforded in advance to the DIP Lender under the Proposed Order would
enable the DIP Lender to deprive the Floating Rate Property Level Borrowers of the opportunity
to reorganize under chapter 11 for the benefit of all their constituents, including their equity
holder.
29. Under the provisions of the Proposed Order, upon the occurrence of an Event of
Default or Termination Event, the DIP Lender would be free, after providing five days notice to
the Floating Rate Property Level Borrowers, their counsel and counsel for the Committee only,
to foreclose on the Floating Rate Property Level Collateral. The Mezzanine Lender would have
no standing to seek re-imposition or continuation of the automatic stay. Moreover, the only issue
the Floating Rate Property Level Borrowers or the Committee would be permitted to assert in

US2008 1517450.3

seeking re-imposition or continuation of the stay would be whether an Event of Default or
Termination Event actually had occurred or was properly cured. Proposed Order, 13.

I declare under penalty of perjury that the foregoing is true and correct to the best of my
knowledge, information and belief.
15
Travis Shelhorse
Authorized Signatory
EXHIBIT A
TriMont Real Estate Advisors, Inc. is the Special Servicer with respect to the mezzanine
loans identified below and is authorized to act on behalf of SASCO 2008-C2, LLC, the
owner of all of the economic and beneficial interests in such mezzanine loans.
1. Borrower: Grand Prix Mezz Borrower Term LLC
Guarantor: Grand Prix Holding, LLC
Operating Lessee: Grand Prix Anaheim Orange Lessee LLC
Date: June 29, 2007 (and as subsequently amended from time to time)
Original Principal Balance: $21,300,000.00
2. Borrower: Grand Prix Mezz Borrower 2 Floating LLC
Guarantor: Grand Prix Holdings , LLC
Operating Lessee: Grand Prix Floating Lessee LLC
Date: June 29, 2007 (and as subsequently amended from time to time)
Original Principal Balance: $117,658,725.00
EXHIBITB
FLOATING RATE PROPERTY LEVEL BORROWERS
Borrower Name Bankruptcy Case Property
Number
KP A/GP Valencia LLC 10-13893 Embassy Suites, Valencia, CA
Grand Prix West Palm Beach 10-13875 Best Western, West Palm Beach, FL
LLC
K.PAIGP Ft. Walton LLC 10-13890 Sheraton Four Points, Fort Walton
Beach, FL
Grand Prix Ft. Wayne LLC 10-13829 Residence Inn, Fort Wayne, IN
Grand Prix Indianapolis LLC 10-13838 Residence Inn, Indianapolis, IN
KP A/GP Louisville (HI) LLC 10-13892 Hampton Inn Louisville Downtown,
Louisville, KY
Grand Prix Bulfinch LLC 10-13816 Bulfinch, Boston, MA
Grand Prix Woburn LLC 10-13879 Hampton Inn, Woburn, MA
Grand Prix Rockville LLC 10-13862 Sheraton, Rockville, MD
Grand Prix East Lansing LLC 10-13822 Residence Inn, East Lansing, MI
Grand Prix Grand Rapids LLC 10-13833 Residence Inn, Grand Rapids, MI
Grand Prix Troy (Central) 10-13871 Residence Inn Troy Central, Troy, MI
LLC
Grand Prix Troy (SE) LLC 10-13872 Residence Inn Troy Southeast,
Madison Heights, MI
Grand Prix Atlantic City LLC 10-13811 Courtyard, Atlantic City, NJ
Grand Prix Montvale LLC 10-13849 Courtyard, Montvale, NJ
Grand Prix Morristown LLC 10-13850 Westin Inn, Morristown, NJ
Grand Prix Albany LLC 10-13805 Hampton Inn Albany, Cohoes, NY
Grand Prix Addison (SS) LLC 10-13804 Summerfield Suites, Addison, TX
Grand Prix Harrisburg LLC 10-13834 Residence Inn, Harrisburg, P A
Grand Prix Ontario LLC 10-13855 Residence Inn, Ontario, CA
EXHIBITC
Master Participation Agreement dated as of May 22, 2008, between LBHI and LCPI (as Sellers)
and SASCO (as Purchaser)
EXECUTION VERSION
MASTER PARTICIPATION AGREEMENT
Dated as of May 22, 2008
by and among
LEHMAN BROTHERS HOLDINGS INC.
and
LEHMAN COMMERCIAL PAPER INC.,
(as the Sellers)
SASCO 2008-C2, LLC
(as the Purchaser)
USActive 12824081.13
This Master Participation Agreement (this "Agreement") is entered into as of May 22,
2008, between (i) Lehman Brothers Holdings Inc. whose office is at 745 7th Avenue, New York,
New York 10019; and (ii) Lehman Brothers Commercial Paper Inc., whose office is at whose
office is at 745 7th Avenue, New York, New York 10019 (each a "Seller" and together, the
"Sellers"); and (iii) SASCO 2008-C2, LLC (the "Purchaser").
RECITALS:
WHEREAS, each Seller owns interests (each a "Lehman Asset" and collectively, the
"Lehman Assets") in the loans and other securities and investments (each a "Loan" and
collectively, the "Loans") identified in Schedule A (as supplemented and amended from time to
time) belonging to it and consisting of loans, advances, as well as participations in the foregoing
pursuant to various credit agreements, indentures, note purchase agreements and other similar
documents, each between a borrower (each, a "Borrower" and collectively, the "Borrowers"), and
a lender or noteholder, or where applicable, an agent for the relevant lenders or noteholders (such
credit agreements, note purchase agreements and/or participation agreements, as amended,
supplemented, novated or otherwise modified from time to time, together with all guarantees,
security agreements, mortgages, deeds of trust, letters of credit, reimbursement agreements,
waivers and any other documents executed in connection therewith, hereinafter are referred to as
the "Underlying Instruments"); and
WHEREAS, each Seller desires to sell, assign and transfer to Purchaser, without recourse,
a participation interest in all or a specified portion of that Seller's Lehman Assets and Purchaser
desires to purchase and assume from each Seller, without recourse, a participation interest in such
portion of that Seller's Lehman Assets (each such participation interest, a "Transferred Interest"
and collectively, the "Transferred Interests").
AGREEMENT
NOW THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the each of the
Sellers and the Purchaser hereby agree as follows:
Section I. Definitions. Capitalized terms used herein and not defined herein
shall have the respective meanings attributed to them in the Indenture. In addition, as used herein,
the following terms shall have the following respective meanings:
"A Note": A promissory note secured by a mortgage on commercial real estate
property that is not subordinate in right of payment to any separate promissory note
secured by a direct or beneficial interest in the same property.
"B Note": A promissory note secured by a mortgage on commercial real estate
property that is subordinate in right of payment to one or more separate promissory notes
secured by a direct or beneficial interest in the same property.
"CDO Servicing Agreement": That certain servicing agreement dated May 22,
2008, between the Purchaser, as Issuer, the Sellers, Wachovia Bank, National Association,
as CDO Servicer, and TriMont Real Estate Advisors, Inc., as CDO Special Servicer.
"CDO Special Servicer": TriMont Real Estate Advisors, Inc.
"CMBS Security": As defined in the Indenture
"Collateral File": Means the following, as applicable:
(a) With respect to each Transferred Interest as to which the related Lehman
Asset is a Mortgage Loan, a copy of the original promissory note, a copy of the mortgage,
a copy of the loan agreement and of the assignment of leases and rents (and any
intervening assignments thereof) and copies of all other documents and instruments in the
seller's possession evidencing or guaranteeing or otherwise materially affecting such
Mortgage Loan.
(b) With respect to each Transferred Interest as to which the related Lehman
Asset is a Mezzanine Loan, a copy of the original promissory note and a copy of the
security or pledge agreement, the loan agreement, the intercreditor agreement, the
assignment and assumption agreement and all other documents and instruments in the
Seller's possession evidencing or guaranteeing or otherwise materially affecting such
Mezzanine Loan.
(c) With respect to each Transferred Interest as to which the related Lehman
Asset is a REBL Term Loan or REBL Revolving Credit Facility, a copy of the credit
agreement or equivalent instrument (or senior and/or subordinate participations therein), a
copy of the guarantee (if any) and all other documents and instruments in the Seller's
possession evidencing or guaranteeing or otherwise materially affecting such interest.
(d) With respect to each Transferred Interest as to which the related Lehman
Asset is a Participation Interest, a copy of the participation certificate (if any) endorsed by
the most recent endorsee prior to the seller and a copy of the participation agreement, the
assignment and assumption agreement and a copy of all other documents and instruments
in the Seller's possession evidencing or guaranteeing or otherwise materially affecting
such interest.
(e) With respect to each Transferred Interest as to which the related Lehman
Asset is a B Note, a copy of the promissory note endorsed to the Seller or endorsed in
blank, a copy of the mortgage, the loan agreement, the assignment of leases and rents (and
any intervening assignments thereof) and a copy of all other documents and instruments in
the seller's possession evidencing or guaranteeing or otherwise materially affecting such
interest.
3
"Collections": All payments or distributions received by or on behalf of a Seller
from any Borrower in respect of the Lehman Assets (without any adjustments with respect
to any subsequent acquisitions or transfers by the applicable Seller of interests in the
applicable Loan or any subsequent funding of a Retained Future Advance Obligation) and
the proceeds of any collateral applied by a Seller to such Lehman Assets.
"CRE COO Security": As defined in the Indenture.
"Delayed-Draw Loan": A loan with respect to which a Seller may, under the terms
of the relevant Underlying Instruments, be obligated to make or otherwise fund future
term-loan advances to a borrower; provided, that once such loan (or portion thereof) has
been funded, such loan (or portion thereof) shall cease to constitute a Delayed-Draw Loan.
"Document Defect": Any document or documents constituting a part of a
Collateral File which has not be properly executed, has not been delivered or contains
information that does not conform in any material respect to the information on Schedule
A.
"Exception Schedule": The schedule identifying any exceptions to the
representations and warranties made with respect to the Transferred Interests conveyed
hereunder, which is attached hereto as Schedule C.
"Future Advance": With respect to any Future Advance Loan, Delayed-Draw Loan
or REBL Revolving Credit Facility, amounts to be advanced by a lender under the relevant
Underlying Instrument to provide additional funding on any future date to the relevant
Borrower.
"Future Advance Loan": As defined in the Indenture.
"Indenture": The indenture dated as of May 22, 2008 between the Purchaser as the
Issuer, Wachovia Bank, National Association as Advancing Agent and Wells Fargo Bank,
National Association as the Trustee, as amended or supplemented from time to time.
"Loan": As defined in the recitals hereto.
"Material Document Defect": (i) A Document Defect that materially and adversely
affects the value of a Transferred Interest or the ownership interests of the Issuer or its
assignee therein, and (ii) with respect to the Transferred Interest identified on Schedule A
as "The Hotel Portfolio" a defect in the remaining documents to be provided by the Seller
to the Rating Agencies for their review that does not conform materially to such Rating
Agencies' criteria for the inclusion of such Transferred Interest in the Collateral Interests
(as defined in the Indenture).
"Mezzanine Loan": Any loan secured by one or more direct or indirect ownership
interests (which may be only partial ownership interests) in a company, partnership or
other entity owning, operating or controlling, directly or through subsidiaries or affiliates,
one or more commercial or multifamily properties, including a participation interest
therein.
4
"Mortgage": The mortgage, deed of trust, deed to secure debt or similar
instrument that secures a note and creates a lien on the fee or leasehold interest in
commercial or multi-family real property or properties.
"Mortgage Loan": Each loan (including, without limitation, an A Note) secured by
a Mortgage on commercial or multi-family real property or properties.
"Obligors": Collectively, the Borrowers and each guarantor, pledgor, subordinator
or other person or entity directly or indirectly obligated in respect of the Lehman Assets.
"Participation Interest": A participation interest in a Mortgage Loan, a Mezzanine
Loan, a B Note, a REBL Term Loan or a REBL Revolving Credit Facility.
"Rating Agencies" shall have the meaning specified in the Indenture.
"REBL Loan": A bank loan (or a participation interest therein) that is an
obligation (direct or by way of guarantee) of a corporation, partnership or other entity
organized under the laws of the United States (or any State thereof) that is engaged
primarily in the business of real estate, all or a portion of which may be unsecured, for
which the expected source of repayment is income from real estate assets.
"REBL Revolving Credit Facility": A REBL Loan that provides a borrower with a
line of credit against which one or more borrowings may be made up to the stated principal
amount of such facility and provides that such borrowed amount may be repaid and re-
borrowed from time to time.
"REBL Term Loan": A REBL Loan that requires the repayment of amounts due
thereunder at a specified maturity date.
"REIT Debt Securities": As defined in the Indenture.
"Retained Future Advance Obligation": The portion of a Future Advance Loan,
Delayed-Draw Loan or Revolving Credit Facility retained by the Seller (and not
transferred to the Purchaser hereunder) consisting of the obligation to provide Future
Advances to the relevant Borrower in accordance with the relevant Underlying Instrument.
"Transferred Interest": As defined in Section 2(a) herein.
"Transferred Percentage Interest": With respect to each Transferred Interest, as of
the Transfer Date, a fraction, expressed as a percentage, in which the numerator is the
outstanding principal balance of such Transferred Interest and the denominator is the
outstanding principal balance of the related Lehman Asset (without any adjustments with
respect to any subsequent acquisitions or transfers by the applicable Seller of interests in
the applicable Loan, or any subsequent funding of a Retained Future Advance Obligation).
"Transferred Interest Repurchase Price": An amount equal to the sum of the
following (in each case, without duplication) as of the date of such repurchase: (i) the
outstanding principal amount thereof, plus (ii) accrued and unpaid interest on such
Collateral Interest, plus (iii) any unreimbursed advances, plus (iv) accrued and unpaid
5
interest on advances on the Collateral Interest, plus (v) any reasonable costs and expenses
(including, but not limited to, the cost of any enforcement action, incurred by the
Purchaser or the Trustee in connection with any such purchase by a Seller).
"Underlying Instruments": The indenture, Joan agreement, note, mortgage,
intercreditor agreement, pooling and servicing agreement, participation agreement or other
agreement pursuant to which a Lehman Asset has been issued or created and each other
agreement that governs the terms of or secures the obligations represented by such
Lehman Asset.
"Underlying Mortgage Property": With respect to (i) a Loan (other than a
Participation or Mezzanine Loan), the commercial mortgage property or properties
securing the Loan, (ii) a Participation, the commercial mortgage property or properties
securing the related Mortgage Loan, or (iii) a Mezzanine Loan, the commercial mortgage
property or properties related to the Mezzanine Loan.
Section 2. Participations.
(a) Subject to the terms and conditions of this Agreement, each Seller hereby
sells, and Purchaser shall be entitled to, and by its acceptance hereof purchases, as of the Transfer
Date (as hereinafter defined), a pro rata participation interest in each of the Lehman Assets owned
by such Seller in an amount equal to the initial principal balance of the Transferred Interest as
indicated on Schedule A hereto (each, a "Transferred Interest" and, collectively, the "Transferred
Interests"), which shall entitle the Purchaser to receive:
(i) the Transferred Percentage Interest of all Collections (as hereinafter defined)
received in respect of the principal on such Lehman Assets;
(ii) the Transferred Percentage Interest of all Collections of interest, fees and
make-whole amounts, if any, on the Lehman Assets accruing from and after the Transfer
Date and with respect to Transferred Interests that are indicated on Schedule A as being
transferred with accrued interest, any Collections related to accrued interest purchased by
the Purchaser;
(iii)the Transferred Percentage Interest in the proceeds of all claims, suits,
causes of action and any other right of the Seller (in its capacity as a lender under the
Lehman Asset or purchaser under any participation interest), whether known or unknown,
against the Borrower, lender, any other Obligor or any of their respective affiliates, agents,
representatives, contractors, advisors or any other Person arising under or in connection
with the Underlying Instruments or that is in any way based on or related to any of the
foregoing or the loan transactions governed thereby, including the proceeds of any contract
claims, tort claims, malpractice claims, statutory claims and all other claims at Jaw or in
equity related to the rights and obligations sold and purchased pursuant to this Agreement;
and
(iv) the Transferred Percentage Interest of any other amounts received by the
Seller on the Lehman Assets.
6
(b) The parties hereto hereby acknowledge and agree that with respect to the
Transferred Interests set forth in Schedule A, the sale, transfer, assignment, grant and conveyance
of such Transferred Interests is being effected via the sale, transfer, grant and conveyance of a
participation interest in such Lehman Assets instead of an assignment of the Sellers' title to the
related Lehman Assets. The transfer of the Transferred Interests shall have the consequence that
the Seller holds only legal title but not any economic interest in such Transferred Interests and the
Purchaser shall hold all of the economic interests in such Transferred Interests. Each of the
Sellers hereby acknowledges and consents to the Issuer's assignment pursuant to Indenture of the
all of its right, title and interest in, to and under this Master Participation Agreement and agrees
that all of the representations and agreements made hereunder are also for the benefit of, and
enforceable by, the Trustee under the Indenture.
(c) From and after the date hereof, administration of the Transferred Interests
and the Lehman Assets shall be governed by this Agreement, the Indenture and (except with
respect to any Lehman Assets that are REBL Loans) the CDO Servicing Agreement.
(d) With respect to each Lehman Asset, each of the Purchaser and the related
Seller (or its successors and assigns) shall be entitled to vote and otherwise exercise any rights that
it may have with respect to any servicing or other matters under the related Underlying Instrument
or servicing agreements, in accordance with the respective outstanding principal amounts of their
beneficial interests in such Lehman Asset. With respect to the Lehman Assets serviced under the
CDO Servicing Agreement, the CDO Servicer will have the sole authority to service and
administer such Lehman Asset, except:
(i) with respect to (A) any extension of the maturity date of any Lehman Asset,
except as permitted by the Underlying Instruments without the lender's consent, (B) any
decrease ofthe interest rate of any Lehman Asset, (C) any increase in the principal amount
of any Lehman Asset, and (D) the substitution or release of material collateral securing a
Lehman Asset except as permitted by the Underlying Instruments without the lender's
consent, the CDO Special Servicer will be required to obtain the consent of I 00% of the
beneficial interests of such Lehman Asset (based on the outstanding principal balances of
the beneficial interests of the Purchaser and the applicable Seller (or its successors and
assigns)), subject to the Servicing Standard Override (as defined in the CDO Servicing
Agreement);
(ii) with respect to (A) any proposal to release the Borrower or guarantor from
liability, including by acceptance of an assumption of the Lehman Asset by a successor
borrower and (B) an assumption of the guaranty by a replacement guarantor, the CDO
Special Servicer will be required to obtain the consent of 66-2/3% of the beneficial
interests of such Lehman Asset (based on the outstanding principal balances of the
beneficial interests of the Purchaser and the applicable Seller (or its successors and
assigns)), subject to the Servicing Standard Override (as defined in the CDO Servicing
Agreement);
(iii)with respect to all other Major Decisions (as defined in the CDO Servicing
Agreement), the CDO Special Servicer will be required to obtain the consent of a majority
of the beneficial owners of such Lehman Asset (based on the outstanding principal
balances of the beneficial interests of the Purchaser and the applicable Seller (or its
7
successors and assigns)), subject to the Servicing Standard Override (as defined in the
CDO Servicing Agreement); provided that if a majority of such beneficial owners are
unable to agree on a particular course of action, the CDO Servicer will be required to
determine the course of action with respect to such Major Decision in accordance with the
CDO Servicing Agreement and Accepted Servicing Practices (as defined in the COO
Servicing Agreement).
Section 3. Intention of the Parties. It is the intention of the parties hereto that
each sale ofthe Transferred Interests hereunder shall be absolute and irrevocable and will provide
the Purchaser with the full risks and benefits of ownership of the Transferred Interests so
purchased (such that the Transferred Interests would not constitute property of any Seller's estate
in the event of a Seller's bankruptcy) and shall constitute a "sale of accounts," as such term is
used in Article 9 of the UCC of the State of New York, to the extent applicable, and not a loan
secured by such Transferred Interests. In the event that, contrary to the mutual intent of the
Sellers and the Purchaser, any purchase of Transferred Interests hereunder is not characterized as
a sale but rather as a collateral transfer for security (or the transactions contemplated hereby are
characterized as a financing transaction), it is the intent of the parties hereto that this Agreement
shall constitute a security agreement under applicable law and that each purchase of the
Transferred Interests shall be deemed to be a secured loan made by the Purchaser to each Seller in
an amount equal to the aggregate of all amounts due and owing by such Seller to the Purchaser
hereunder, whether now or hereafter existing, due or to become due, direct or indirect or absolute
or contingent, which loan shall be secured by a security interest in all of such Seller's right, title
and interest now or hereafter existing and hereafter arising in, to and under (i) all of its respective
Transferred Interests, (ii) all of its respective Collections (as defined herein) and (iii) all proceeds
of the foregoing (collectively, with regard to each Seller, its "Seller's Collateral"). In furtherance
of the foregoing, each Seller hereby grants (A) to the Purchaser in order to secure the repayment
of all amounts due and owing by such Seller to the Purchaser hereunder, whether now or hereafter
existing, due or to become due, direct or indirect, or absolute or contingent, and (B) to the Trustee
under the Indenture in order to secure the Purchaser's obligations under the Indenture, but only to
the extent an event of default under the Indenture shall have occurred as a result of the failure of
such Seller to perform any of its obligations hereunder, a security interest in all of such Seller's
right, title and interest now or hereafter existing in, to and under its Seller's Collateral.
Section 4. Transfer Date. With respect to each Transferred Interest, from and
after the date as indicated on Schedule A on which such Transferred Interest is purchased by the
Purchaser hereunder (such date of transfer, as applicable to each Transferred Interest, the
"Transfer Date"), the Transferred Interests purchased hereunder shall be for the account and risk
of the Purchaser, without any recourse to the Sellers, except as expressly provided herein. The
transfer of the Transferred Interests shall be deemed effective as of the Transfer Date. The
Purchaser hereby assumes full risk and responsibility with respect to repayment of the Transferred
Interests without recourse to the Sellers and, in the event of any failure by any Borrower to fulfill
any of its obligations under the terms of the related Underlying Instruments, none of the Sellers
shall be under any liability to the Purchaser for payment of principal, interest or fees other than as
provided in Section 5.
Section 5. Payments. Each Seller or the CDO Servicer, as applicable, shall
promptly remit or cause to be remitted to Purchaser, as received, all amounts received in respect
of its respective Transferred Interests described in clauses (i) through (iv) of Section 2(a) of this
8
Agreement without set-off, counterclaim or deduction of any kind within one (1) business day
after receipt thereof from a Borrower, to the account specified by the Purchaser to such Seller in
writing. If the applicable payment is received by a Seller not later than 12:00 noon (New York
City time) on any day, the corresponding payment shall be made to the Purchaser not later than
5:00p.m. (New York City time) on such day, and otherwise not later than 5:00p.m. (New York
City time) on the immediately succeeding business day.
Section 6. Sharing of Liabilities and Expenses. each of the Sellers and the
Purchaser shall be responsible for their pro rata share of all liabilities, losses, out-of-pocket costs
and expenses (including reasonable attorneys' fees) (collectively, the "Liabilities") suffered or
incurred by such Seller or CDO Servicer (as applicable) from and after the Transfer Date in
administering and collecting on their respective Lehman Assets and Transferred Interests or which
otherwise arise in connection therewith or in connection with preserving any collateral security
therefor, except for such Liabilities as may be caused by the negligence or willful misconduct of
such Seller or CDO Servicer (as applicable) and except to the extent that such Seller or CDO
Servicer (as applicable) has theretofore been reimbursed for such Liabilities by or on behalf of any
Borrower. Each of the Sellers and the Purchaser shall be entitled to any such amounts recovered
from, or on behalf of, any Borrower after such Seller or Purchaser has paid such Liabilities. Each
Seller and each CDO Servicer shall promptly remit to the Purchaser an amount equal to any
payment received by that Seller or CDO Servicer (as applicable) on account of increased costs,
break funding payments or expenses incurred by the Purchaser in connection with the
Participation Interest.
Section 7. Information; No Recourse or Warranty; Responsibilities. Each
Seller represents that it, or a custodian acting on its behalf, holds in its possession for the benefit
of itself and the Purchaser true and complete originals of all of the documents in connection with
its respective Lehman Assets which constitute all documents that the Seller considers necessary in
deciding to enter into this Agreement and participate in the Lehman Assets as provided herein. It
is understood and agreed that none of the Sellers make any express or implied representations or
warranties of any kind or character with respect to the genuineness, validity, effectiveness,
enforceability, value, priority, perfection or collectability of the Lehman Assets, any collateral
security therefor or the Underlying Instruments, nor with respect to the solvency, financial
condition or financial statements of any of the Borrowers, and by its acceptance hereof, Purchaser
agrees that the Sellers shall be free of liability on account of Purchaser's Transferred Interests
described herein with respect to anything a Seller may do or refrain from doing in good faith and
in the exercise of its judgment, provided, however, that each Seller agrees to use the same care in
protecting the interests of the Purchaser in the Lehman Assets as it uses for similar interests held
by it solely for its own account and each Seller agrees to account to Purchaser as herein set forth
for the share from time to time applicable to Purchaser's Transferred Percentage Interest in
Collections. Whenever the Seller or the CDO Servicer, as applicable, receives a payment of
principal of, or interest, fees and make-whole amounts, if any, on the Transferred Interests, the
Seller or CDO Servicer, as applicable, will be instructed to accept such payment for the account
and sole benefit of, and as agent for, the Purchaser and promptly pay over to the Purchaser the
amount so received. In administering the Lehman Assets and the Underlying Instruments, the
CDO Servicer shall not be bound to ascertain or inquire as to the performance of any of the terms,
provisions or conditions of any thereof on the part of any Borrower or any other person, shall be
entitled to rely upon any statement or notice, however sent, believed by it to be genuine and
9
correct and believed by it to be sent by the proper person, may consult with counsel and shall be
fully protected in any action taken or omitted to be taken by it in accordance with the advice or
opinion of such counsel, may employ agents or attorneys-in-fact and shall not be liable for the
default or misconduct of any such person selected by it with due care, and shall not be responsible
for the performance of the payment or other obligations of the Borrowers or the value of any
collateral securing the same.
Section 8. Borrower Information. Upon request of Purchaser, a Seller shall
provide Purchaser with copies o( any information in that Seller's possession which was received
pursuant to the provisions of any Underlying Instrument and, to the extent not otherwise available
to Purchaser, the relevant Seller shall use commercially reasonable efforts to provide Purchaser,
following Purchaser's written request therefor, such current factual information that Purchaser
specifically requests that is then in the Seller's possession and relating to the status of the Lehman
Assets or any Borrower's financial condition; provided that that Seller shall not be required to
provide Purchaser with any information in violation of any law or any contractual restriction set
forth in the Underlying Instruments on the disclosure thereof.
Section 9. Representations and Warranties.
(a) Each party hereby represents and warrants to the other party that (i) it is
duly organized or incorporated, as the case may be, and validly existing as an entity under the
laws of the jurisdiction in which it is incorporated, chartered or organized, (ii) it has the requisite
power and authority to enter into and perform this Agreement and (iii) this Agreement has been
duly authorized by all necessary action, has been duly executed by one or more duly authorized
officers and is the valid and binding agreement of such party enforceable against such party in
accordance with its terms.
(b) Each Seller further represents and warrants to the Purchaser, as of the
Transfer Date, as to the Transferred Interests being sold by such Seller, that:
(i) none of the execution, delivery or performance by such Seller of this
Agreement (x) conflicts with, results in any breach of or constitutes a default (or an event
which, with the giving of notice or passage of time, or both, would constitute a default)
under, any term or provision of the organizational documents of such Seller, or any
material indenture, agreement, order, decree or other material instrument to which such
Seller is party or by which such Seller is bound which materially adversely affects such
Seller's ability to perform its obligations hereunder or (y) violate any provision of any law,
rule or regulation applicable to such Seller of any regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over such Seller or its properties
which has a material adverse effect;
(ii) no consent, license, approval or authorization from, or registration or
qualification with, any governmental body, agency or authority, nor any consent, approval,
waiver or notification of any creditor, lessor or any other Person is required in connection
with the execution, delivery and performance by such Seller of this Agreement the failure
of which to obtain would have a material adverse effect except such as have been obtained
and are in full force and effect; and
10
(iii)such Seller shall use reasonable efforts to give proper notice under each
Underlying Instrument or servicing agreement, instructing any obligor, paying agent or
servicer, as applicable, responsible for forwarding or distributing payments to the holders
of the Transferred Interest, to make such payments to the COO Servicer or the Trustee and
shall promptly remit to the COO Servicer or Trustee any payment on the Transferred
Interests received on or after the Transfer Date.
(c) Each Seller further represents and warrants to the Purchaser as of the
Transfer Date with respect to the Transferred Interests being sold by that Seller, that:
(i) the sale of the initial Transferred Interests by such Seller to the Purchaser
and the Purchaser's Grant to the Trustee does not contravene the terms of the restrictions
relating to transfer of such Transferred Interests contained in the Underlying Instruments
with respect to such related Transferred Interests;
(ii) the information set forth with respect to the related Transferred Interests in
Schedule A hereto is true and correct; and
(iii)with respect to each Transferred Interest, except as set forth in the Exception
Schedule, the representations and warranties set forth in Schedule B(3) are true and
correct;
provided that with respect to representations and warranties made by a Seller with respect
to Transferred Interests sold by such Seller on an Transfer Date occurring after May 22,
2008, such representations and warranties may be subject to any modification, exception,
limitation or qualification as permitted pursuant to the terms of the Indenture.
(d) Each Seller further represents and warrants to the Purchaser as of the
Transfer Date with respect to the Transferred Interests being sold by that Seller, that:
(i) the Seller owns and has good and marketable title to such Transferred
Interest free and clear of any lien, claim or encumbrance of any Person (subject to the fees,
penalties and contingent interest payments retained by the Sellers herein);
(ii) in the case of each Transferred Interest, the Seller has acquired its ownership
in such Transferred Interest in good faith without notice of any adverse claim as defined in
Section 8-102(a)(l) ofthe UCC as in effect on the date hereof;
(iii)the Seller has not, pledged, assigned, sold, granted a security interest in, or
otherwise conveyed any of the Transferred Interests;
(iv) the Seller has not authorized the filing of and is not aware of any financing
statements against the Seller that include a description of collateral covering the
Transferred Interests other than that which has been terminated; the Seller is not aware of
any judgment or Pension Benefit Guarantee Corporation lien and tax lien filings against
the Seller; and
II
(v) the Seller has received all consents and approvals required by the terms of
each Transferred Interest and the Underlying Instruments to grant to the Purchaser its
interest and rights in such Transferred Interest hereunder.
(e) Each Seller hereby acknowledges and consents to the collateral assignment
by the Purchaser ofthis Agreement and all right, title and interest thereto to the Purchaser and by
the Purchaser to the Trustee, for the benefit of the Secured Parties.
(f) Each Seller hereby covenants and agrees that all of the representations,
covenants and agreements made by or otherwise entered into by it in this Agreement shall also be
for the benefit of the Purchaser and the Trustee on behalf of the Secured Parties and agrees that
enforcement of any rights hereunder by the Trustee shall have the same force and effect as if the
right or remedy had been enforced or executed by the Purchaser but that such rights and remedies
shall not be any greater than the rights and remedies of the Purchaser as described herein.
(g) Each Seller has delivered a fully executed original of this Agreement to the
Trustee. For administrative purposes, each Seller agrees to use good faith efforts deliver a copy of
the Collateral File within 30 days of the Transfer Date to the Purchaser or, at the direction of the
Purchaser, to the Trustee, with respect to each Transferred Interest sold by such Seller to the
Purchaser hereunder. Each Seller further represents and warrants that the failure to deliver such
Collateral Files within 30 days of the Transfer Date will not have a material adverse effect on the
value of the Transferred Interests or the Purchaser's rights therein. Each Seller hereby covenants
and agrees that it shall deliver to the Trustee copies of all notices, statements, communications and
instruments delivered or required to be delivered to the Purchaser by each party pursuant to this
Agreement. For the avoidance of doubt, the only original document to be delivered to the Trustee
with respect to the Transferred Interests pursuant to this Agreement shall be this Agreement.
Section 10. Further Assurances. From and after the date hereof, Purchaser and
each Seller each covenants and agrees to execute and deliver all such agreements, instruments and
documents and to take all such further actions as the other party hereto may reasonably deem
necessary from time to time to carry out the intent and purposes of this Agreement and to
consummate the transactions contemplated hereby.
Section 11. Records. Each Seller will at it own expense in order to reflect the
purchase and sale transaction accurately on its books, prepare and execute (or cause to be
prepared) for filing a financing statement relating to the sale of the Transferred Interests set out in
Schedule A or amendments thereto (as permitted pursuant hereto).
Section 12. Other Business Activities. The Purchaser acknowledges that the
Sellers may make loans or otherwise extend credit to, and generally engage in any kind of
business with, any Borrower and its affiliates, and receive on such other loans or
extensions of credit to any Borrower and its affiliates and otherwise act with respect thereto freely
and without accountability in the same manner as if this Agreement and the transactions
contemplated hereby were not in effect.
Section 13. Amendments, Waivers, etc.
USActive 12824081.13 12
(a) Amendments of Underlying Instruments. None of the Sellers may enter
into any amendment or modification of, or waive compliance with the terms of, or vote in relation
to any event, matter or thing under any Underlying Instrument without the consent of Purchaser.
If a Seller shall at any time request in writing Purchaser's consent or direction to any such matter
for which Purchaser's consent or direction is required and shall not receive a response to such
request within seven (7) business days after Purchaser has received such request (or within such
earlier period as a Seller may notify to Purchaser in connection with a specific request), Purchaser
shall be conclusively deemed to have refused to give such consent and that Seller shall be entitled
to thereafter act on the basis that Purchaser has denied such consent.
(b) Amendments of this Agreement. The Purchaser and the Sellers shall not
enter into any agreement amending, modifying or terminating this Master Participation Agreement
(other than in respect of amendments or modifications to cure any inconsistency, ambiguity or
manifest error) without the satisfaction of the Rating Agency Condition.
Section 14. Savings Clause. Notwithstanding any other prov1s1on of this
Agreement, with respect to each Participation Interest: (i) this Agreement shall be deemed to
incorporate any provisions required by any Credit Document to be incorporated in order to
transfer the related Participation Interest hereunder; and (ii) this Agreement ghall be deemed to
omit any provision which any Credit Document requires to be omitted in order to transfer the
related Participation Interest hereunder.
Section 15. Further Sale, Assignment and Repurchase.
(a) Transfer by the Purchaser. To the extent permitted under the related
Underlying Instruments; the Purchaser shall be only entitled to deal with the Transferred Interests
in the manner set out in the Indenture. Purchaser agrees that any sale or disposition of Purchaser's
Transferred Interest will be made in accordance with applicable securities laws.
(b) Transfer by the Seller. With respect to any Lehman Asset, none of the
Sellers may participate, sell, assign, transfer, mortgage, pledge, grant a lien on or otherwise deal
with or encumber any of its retained interest, if any, in or to such Lehman Assets if such transfer
would adversely affect the Transferred Interests or any other distributions or payments with
respect thereto or any of the Purchaser's rights or obligations under this Agreement or if such
transfer involves the transfer of title to the Lehman Asset, without the prior written consent of
Purchaser and the satisfaction of the Rating Agency Condition. None of the Sellers may sell,
assign, transfer pledge or grant a lien on any Retained Future Advance Obligation without
satisfaction of the Rating Agency Condition.
(c) Repurchase by the Seller. If any Seller receives written notice of (i) its
breach of a representation or a warranty made in Section 9(c) of this Agreement that materially
and adversely affects the ownership interests of the Purchaser in a Transferred Interest or the
value of a Transferred Interest, or (ii) a Material Document Defect, then such Seller shall not later
than 90 days from receipt of such notice cure such breach or Material Document Defect or, if such
breach or Material Document Defect cannot be cured in all material respects within such 90-day
period, repurchase the affected Transferred Interest not later than the end of such 90-day period at
the Transferred Interest Repurchase Price; provided, that if any such breach or Material Document
Defect, as the case may be, is capable of being cured in all material respects but not within the
13
initial 90-day period and such Seller has commenced and is diligently proceeding with the cure of
such breach or Material Document Defect, as the case may be, then such Seller shall have such
additional 90-day period to complete such cure or, failing such, to repurchase the affected
Transferred Interest. Such repurchase obligation by the related Seller shall be the Purchaser's sole
remedy for any Material Document Defect or the breach of any representation or warranty
pursuant to this Agreement with respect to any related Transferred Interest sold to the Purchaser
by such Seller; and provided, further, that, if any such Material Document Defect is still not cured
in all material respects after the initial 90-day period and any such additional 90-day period solely
due to the failure of such Seller to have received the recorded document, then such Seller shall be
entitled to continue to defer its cure and repurchase obligations in respect of such Material
Document Defect so long as such Seller certifies to the Trustee every 30 days thereafter that such
Material Document Defect is still in effect solely because of its failure to have received the
recorded document and that such Seller is diligently pursuing the cure of such defect (specifying
the actions being taken). Such repurchase obligation by the related Seller shall be the Purchaser's
sole remedy for any Material Document Defect or the breach of any representation or warranty
pursuant to this Agreement with respect to any related Transferred Interest sold to the Purchaser
by such Seller.
14
Section 16. Waivers. No delay or omission by any party to exercise any right
under this Agreement shall impair any such right, nor shall it be construed to be a waiver thereof.
No waiver of any single breach or default under this Agreement shall be deemed a waiver of any
other breach or default.
Section 17. Withholding Tax. Purchaser represents and warrants that payments
to it under this Agreement are not subject to U.S. withholding tax. Upon request from time to
time, Purchaser shall promptly provide to each Seller an appropriately executed Internal Revenue
Service form or such other evidence as shall be necessary to establish that payments made to
Purchaser hereunder are exempt from U.S. withholding tax. In addition to the foregoing, (a) each
Seller agrees that prior to the final maturity of each Lehman Asset in which it has sold a
participation (or for so long as Purchaser holds each such the Transferred Interest), the relevant
Seller will maintain a register with respect to each applicable Transferred Interest as to the
principal and interest of the Transferred Interest and the name and address of Purchaser and (b)
each Seller agrees that it will (i) notify each Borrower of the participation contemplated hereby
prior to the first date following the Transfer Date on which such Borrower is obligated to make a
payment in respect of the underlying Loan and (ii) provide each relevant paying agent or
withholding agent a copy of an IRS Form W-9 (or appropriate replacement IRS form) duly
completed by Purchaser prior to the Transfer Date, or, in the case the Purchaser ceases to be an
entity disregarded from its owner for U.S. federal tax purposes, or such owner is not a U.S. person
within the meaning of section 7701 (a) (30) of the Internal Revenue Code, such other form as may
be appropriate for this purpose.
Section 18. Notices. Whenever this Agreement requires or permits any consent,
approval, notice, request, or demand from one party to another, the consent, approval, notice,
request, or demand must be in writing and shall be deemed effective when delivered, if sent by
courier or by registered or certified mail, or when receipt is confirmed, if sent by telecopy, each
case at the address or telecopy number set forth below the relevant party's signature hereto or at
such other address or telecopy number as may be provided by either party to the other party.
Section 19. Illegality; Construction; Governing Law. The illegality or
unenforceability of any provision of this Agreement shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this Agreement. Paragraph headings used
in this Agreement are for convenience of reference only and shall not affect the construction of
this Agreement, The laws of the State of New York shall govern the rights and duties of the
parties hereto and the interpretation hereof (without regard to any conflicts of law provision that
would require the application ofthe law of any other jurisdiction).
Section 20. Future Advances.
(a) REBL Revolving Credit Facilities and Future Advance Loans.
(i) With respect to each Transferred Interest indicated on Schedule A as to
which the Seller assigned a Future Advance Obligation to the Purchaser and the Future
Funding Obligations Account or Variable Funding Account (as applicable) has been
funded in accordance with the Indenture with the required funds to all such Future
Advances, upon receipt of notice from a Borrower requesting a Future Advance on a
REBL Revolving Credit Facility or a Future Advance Loan, as applicable, and the
15
satisfaction of any conditions precedent to the funding of such Future Advance, each Seller
shall notify the Purchaser promptly in writing. Each notice shall specify the currency and
amount and date of such Future Advance and the relevant Seller's bank account details for
payment.
(ii) Not later than 2:00 p.m. (New York City time) on the date so specified for
such Future Advance, the Purchaser shall pay to the relevant Seller, by deposit to the
relevant Seller's account, in immediately available funds, without set-off, counterclaim or
deduction of any kind, the amount of such Future Advance. The effectiveness of the
payment of such Future Advance shall be subject to receipt by the Seller of said amount as
provided herein.
(iii)E xcept with respect to Future Advance Loans that are REBL Revolving
Credit Facilities, upon the funding of such Future Advance to a Borrower in accordance
with Section (a)(i), the principal balance of the Transferred Interest as indicated on
Schedule A shall be amended to include such funding.
(b) Retained Future Advance Obligations.
(i) With respect to each Lehman Asset indicated on Schedule A as having a
Retained Future Advance Obligation, the relevant Seller hereby agrees to remit to the
Borrower the Future Advances required to be made under the relevant Underlying
Instrument, it being the specific intent of the parties hereto that the Purchaser shall not be
liable for making the Future Advances. Each Seller shall remit the Future Advances on the
dates that such Future Advances are required to be made pursuant to the applicable
Underlying Instrument. The parties hereto agree that the determination of whether the
Borrower is entitled to receive the Future Advance shall rest solely with the applicable
Seller who shall be solely responsible for funding the Future Advance and conducting any
and all due diligence, loan documentation and pre-funding requirements in connection
therewith.
(ii) With respect to each Lehman Asset indicated on Schedule A as having a
Retained Future Advance Obligation, Lehman Brothers Holdings Inc., (the "Indemnifying
Party") shall indemnify and hold harmless the Purchaser, against any and all losses claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever
kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed
within or outside the judicial process, including, without limitation, reasonable attorneys'
fees and disbursements imposed upon or incurred by or asserted against the Purchaser
arising from the failure of such party to fulfill its Retained Future Advance Obligation
under the related Underlying Instrument, including without limitation, (i) any claims made
by the Borrower or its affiliates or (ii) any failure of payment by the Borrower under the
relevant Lehman Asset, in each case as a result of a failure to make any Future Advance as
required under the relevant Underlying Instrument, except to the extent that it is finally
judicially determined that any losses, claims, damages, costs, expenses or liabilities
resulted primarily from the bad faith or willful misconduct of the Purchaser.
USActive 12824081 .13
16
Section 21. Survival of Certain Provisions. All representations and warranties
made herein by the parties hereto and the provisions of Section 24 and 25 shall survive the
execution, delivery and performance ofthis Agreement.
Section 22. Relationship Between Sellers and Purchaser. The relationship
between the Sellers and Purchaser shall be that of sellers and buyer and not that of debtor and
creditor. Nothing contained in this Agreement shall establish any fiduciary, partnership, joint
venture or similar relationship between or among the parties hereto. This Agreement is intended
to, and upon execution hereof and satisfaction or waiver of the conditions precedent set forth
herein shall, effect a true sale of the Transferred Interests.
Section 23. Entire Agreement. This Agreement (a) embodies the entire
Agreement between the parties, supersedes all prior agreements and understandings between the
parties, if any, relating to the subject matter hereof, and may be amended, and any provision
hereof may be waived, only by an instrument in writing executed by each party hereto and with
the prior consent of each Rating Agency, and (b) may be executed in any number of identical
counterparts, each of which shall be deemed an original for all purposes and all of which shall
constitute, collectively, one Agreement. Transmission by facsimile of an executed counterpart of
this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart.
Section 24. Assignment of the Participation Agreement. Each Seller
acknowledges that the Purchaser is assigning all of its right, title and interest in, to and under this
Agreement to the Trustee for the benefit of the Secured Parties named in the Indenture. Each
Seller consents to the provisions of such assignment.
Section 25. Limited Recourse. Notwithstanding any other provision of this
Agreement, each of the Sellers hereby agrees that the Purchaser's obligations hereunder are
limited in recourse to the proceeds of the collateral available for the payment thereof subject to the
security interest created therein by the Indenture. Upon the realization and distribution of the
proceeds of the collateral in accordance with the Indenture, the outstanding obligations of, and any
claims against the Purchaser shall be extinguished. The Purchaser agrees that no recourse shall be
had for the payment of principal or interest on a Loan against any Seller other than against a Seller
for failure to pay, in accordance with this Agreement, an amount actually and finally received by
such Seller and due to the Purchaser. Each of the Sellers and the Purchaser further agrees to not
take any action against any employee, director, shareholder, affiliate or administrator of a Seller or
the Purchaser, as applicable, in relation to this Agreement.
Section 26. Non-Petition. None of the Sellers shall cause or join in the filing of
a petition in bankruptcy against the other party hereto for any reason until the expiration of the
period which is the later of the applicable preference period then in effect or one year and one day
after the final payment of any debt securities or notes issued by the Purchaser, as applicable and
acknowledge that the Trustee is intended to be a third-party beneficiary hereunder.
Section 27. Guarantee. As further consideration for entering in to this
Agreement, Lehman Brothers Holdings Inc. has guaranteed the obligations of Lehman
Commercial Paper Inc. in favor of the Issuer. Lehman Brothers Holdings Inc. and Lehman
Commercial Paper Inc. hereby agree not to amend or modify the Guarantee (other than in respect
17
of amendments or modifications to cure any inconsistency, ambiguity or manifest error) without
the satisfaction of the Rating Agency Condition.
[THE REMAINDER OF THE PAGE IS INTENTIONALLY BLANK.]
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written by their respective duly authori officers.
Notice Address:
Company:
Department:
Address:
Telephone:
SELLER:
HOLDINGS INC.
By: _____ -H-i------
Name:
Title:
Lehman Brothers
GREG Asset Management
399 Park Avenue, 8th Floor
New York, NY 10022
E ~ M a i l Address:
212 526 1696 ~ Steve Fischler
sfischle@lehman.com
Notice Address:
Company:
Department:
Address:
Telephone:
SELLER:
LEHMAN COMMERCIAL INC.

By: ,.............,
f'on Cho
Title: Authorized Signatory
Lehman Brothers
New York, NY 10022
212 526 1696 - Steve Fischler
E-Mail Address: sfischle@lehman.com
Notice Address:
By: ___ -"-'r--1--------
Company:
Department:
Address:
Telephone:
E-Mail Address:
Name:
Title:
Lehman Brothers
New York, NY 10022
212 526 1696- Steve Fischler
sfisch1e@lehman.com
PURCHASER:
SASCO 2008-C2, LLC
By: LEHMAN COMMERCIAL PAPER INC.,
its Member
By (____., \_(______
Name: l7"'l:: C h
v Yon 10
Title:
~ - ~ u ti:ori:z:od Signatory
Notice Address: Lehman Brothers Inc., as
Administrative Agent
Company: Lehman Brothers
Department: GREG Securitization
Address: 399 Park A venue, 8th Floor
New York, NY 10022
Telephone: 212 526 8829- David Nass
EMail Address: david.nass@lehman.com
SASCO 2008-C2- Master Participation Agreement- Purchaser (Issuer)
SCHEDULE A
SASCO 2008-C2, LLC
Schedule A
Transferred Retained Future
Seller's Interest Percentage Principal Balance of Acquisition Advance Transfer of
Asset Name ($) Interest(%) Transferred Interest($) Price(%) Obligation ($) Transfer Date Accrued Interest
The Multifamily Portfolio- Tenn Loan B I ,425,490,89 I 43.84 625,000,000 98.90 5/22/2008 No
2 The Hotel Portfolio 625,871,420 55.92 350,000,000 89.71 512212008 No
3 The Multifamily Portfolio- Tenn Loan A 548,127,838 59.29 325,000,000 98.53 512212008 No
4 Ritz Carlton Kapalua 232,426,079 100.00 232,426,079 97.87 5/22/2008 No
5 237 Park Avenue Atrium Mczz 225,000,000 100.00 225,000,000 79.70 5/22/2008 No
6 Exhibition City** 179,592,772 100.00 179,592,772 91.85 57,749,323 5/2212008 No
7 Commons Of Mclean 178,26 I, 706 100.00 178,261,706 87.29 5/22/2008 No
8 Innkeepers Floater- Mczz I 16,380,091 100.00 I I 6,380,09 I 95.40 5/22/2008 No
9 One Kansas City Place 87,774,333 100.00 87,774,333 74.05 5/22/2008 No
10 Brookdale Senior Living Revolver 78,593,750 100.00 78,593,750 94.07 5/22/2008 No
II Related Companies Revolver 75,000,000 100.00 75,000,000 95.00 5/22/2008 No
12 Lehman Hotel Portfolio 70,500,000 100.00 70,500,000 87.76 5/22/2008 No
13 The Multifamily P011folio- Poo\9 Mczz A 62,752,370 100.00 62,752,370 99.00 5/22/2008 No
14 Wintcrgamcs (lntrawcst) Canadian Tcm1 Loan 48,642,455 100.00 48,642,455 96.00 5/22/2008 No
15 Tuxedo Tcm1 Loan 48,000,000 100.00 48,000,000 95.00 5/22/2008 No
16 The Multifamily Pmtfolio- SeJJCo Mezz A 46,166,723 100.00 46,166,723 99.00 5/22/2008 No
17 The Mullifamily Pmtfolio- Pool 3 Mezz B 43,140,208 100.00 43,140,208 99.00 5/22/2008 No
18 The Multifamily Portfolio- Pool9 Mczz 8 36,695,673 100.00 36,695,673 99.00 5/22/2008 No
I9 The Multifamily Portfolio- Pool 7 Mezz B 33,709,695 100.00 33,709,695 99.00 5/22/2008 No
20 The Multilamily Pmtfolio- HoldCo Mezz A 32,964,4 I 5 100.00 32,964,415 99.00 5/22/2008 No
21 The Multifamily Portfolio- Pool 4 Mezz B 3 I ,951,268 100.00 31,951,268 99.00 5/22/2008 No
22 The Multifamily Portfolio -Pool 3 Mezz A 31,75 I ,935 100.00 3 I ,75 I ,935 99.00 5/22/2008 No
23 The Multifamily Portfolio- SeJJCo Mezz B 30,890,935 100.00 30,890,935 99.00 5/2212008 No
24 The Multifamily Portfolio- HoldCo Mezz B 30,033,556 100.00 30,033,556 99.00 512212008 No
25 Liberty Square Mezz 24,800,000 100.00 24,800,000 91.98 5/22/2008 No
26 Sienna at Riverview Apartments Mczz 24,735,000 100.00 24,735,000 99.00 5/22/2008 No
27 The Multifamily Portfolio- Poo12 Mezz B 24,164,642 100.00 24,164,642 99.00 5/22/2008 No
28 120 Howard Jr. Mczz 23,215,819 100.00 23,215,819 73.19 5/22/2008 No
29 Austin Centre Sr. Mczz 2 I ,560,499 100.00 21,560,499 94.16 5/22/2008 No
30 Innkeepers Anaheim Mczz 21,300,000 100.00 2 I ,300,000 98.43 5/22/2008 No
3 I 30 I Howard Street Jr. Mezz I 9,890,000 100.00 19,890,000 89.32 5/22/2008 No
32 The Multifamily Portfolio- Pool 2 Mezz A 18,416,926 100.00 18,416,926 99.00 5/22/2008 No
33 Garrison Square Sr Mczz*"' 17,970,567 100.00 I 7,970,567 82.64 2,238,433 5/22/2008 No
34 Vcntana Inn and Spa Sr. Mcu 17,740,000 100.00 17,740,000 92.61 5/22/2008 No
35 The Multifamily Portfolio- Pool I Mezz B 16,361,907 100.00 16,361,907 99.00 5/22/2008 No
36 La Reserve Mczz 16,271,293 100.00 16,271,293 98.46 5/22/2008 No
37 Strathallan Hotel 14,600,000 100.00 14,600,000 98.35 5/22/2008 No
38 Emerald Dunes Golf Club** 12,907,241 100.00 12,907,241 98.96 342,759 5/22/2008 No
39 Storage Deluxe 21St Street 12,750,000 100.00 12,750,000 96.69 5/22/2008 No
40 The Multifamily Portfolio- Pool 7 Mezz A 12,571,184 100.00 12,571,184 99.00 5/22/2008 No
41 The Point I 2,500,000 100.00 12,500,000 100.00 5/22/2008 No
42 Muirfield I 2,150,000 100.00 12,150,000 98.49 5/22/2008 No
43 Guilford Ctr- Greensboro** I 1,977,641 100.00 I I ,977,64 I 87.03 538,46 I 5/22/2008 No
44 The Multifamily Portfolio- Pool4 Mezz A 11,204,339 100.00 I I ,204,339 99.00 5/22/2008 No
45 Vcntana Inn and Spa Jr. Mczz I I ,038,025 100.00 I 1,038,025 87.72 5/22/2008 No
46 Montauk Yacht Club Mezz I I ,025,000 100.00 I I ,025,000 86.87 5/22/2008 No
47 Idlcwood Apartments I I ,022,503 100.00 I I ,022,503 101.45 5/22/2008 No
48 Minnesota Industrial Portfolio Mczz 10,600,000 100.00 10,600,000 94.32 5/22/2008 No
49 Austin Centre Jr. Mczz 10,000,000 100.00 10,000,000 93.60 5122/2008 No
50 Storage Deluxe Southern 8,500,000 100.00 8,500,000 96.69 5/22/2008 No
51 Garrison Square Jr Mczz 5,409,000 100.00 5,409,000 84.57 5/22/2008 No
"'Transferred Interest is a 100% participation interest in a REBL Revolving CrcdirFacility, for which reserve amounts have been deposited in the
Variable Funding Account in accordance with the Indenture.
The Principal Balance of the Transferred Interest reflects the total commitment (whether funded or unfunded) of such REBL Revolving Credit Facility.
**The Transferred Percentage Interest for this Lehman Asset reflects the funded principal balance of such Lehman Asset only, and docs not take into account the
Retained future Advance Obligation.
SCHEDULER
REPRESENTATIONS AND WARRANTIES
SCHEDULE B(l)
REPRESENTATIONS AND WARRANTIES RE:
COLLATERAL INTERESTS CONSISTING OF MORTGAGE LOANS
With respect to each Mortgage Loan, the Seller hereby represents and warrants, as of the date
herein specified or, if no such date is specified, as of the Transfer Date, except as set forth on
Schedule C, that:
1. The information set forth in Schedule A as to the Mortgage Loan is complete, true and
correct in all material respects;
2. The Seller is the sole owner and holder of the Mortgage Loan and has good and
marketable title thereto, has full right, power and authority to sell and assign such
Mortgage Loan free and clear of any interest or claim of a third party, except for any
future funding advance and other retained items enumerated in Schedule A ofthe Master
Participation Agreement;
3. The Mortgage Loan has not been since the date of origination by its originator, and
currently is not, thirty or more days delinquent, and to the knowledge of the Seller, the
Borrower is not in default thereunder beyond any applicable grace period for the payment
of any obligation to pay principal and interest, taxes, insurance premiums and required
reserves;
4. The Seller has not advanced funds, or knowingly received any advance of funds from a
party other than the Borrower subject to the related Mortgage, directly or indirectly, for
the payment of any amount required by the Mortgage Loan;
5. (A) The Mortgage Loan documents have been duly and properly executed, and (B) the
Mortgage Loan documents are legal, valid and binding obligations of the Borrower, and
their terms are enforceable against the Borrower, subject only to bankruptcy, insolvency,
moratorium, fraudulent transfer, fraudulent conveyance and similar laws affecting rights
of creditors generally and to the application of general principles of equity and there is no
valid defense, counterclaim, or right of rescission or right of set-off or abatement
available to any Borrower under the Mortgage Loan documents, except in each case with
respect to the enforceability of any provisions requiring the payment of default interest,
late fees, additional interest, prepayment premiums or yield maintenance charges;
6. The lien of each Mortgage is insured by an ALTA lender's title insurance policy or its
equivalent as adopted in the applicable jurisdiction issued by one or more nationally
recognized title insurance companies, insuring the originator of the Mortgage Loan, its
successors and assigns freely assignable to and will inure to the benefit ofthe Trustee, as
to the first priority lien of the Mortgage in the original principal amount of the Mortgage
Loan after all advances of principal, subject only to (a) the lien of current real property
taxes, ground rents, water charges, sewer rents and assessments not yet due and payable,
(b) covenants, conditions and restrictions, rights of way, easements and other matters of
public record, none of which, individually or in the aggregate, in the reasonable judgment
of the Seller, materially interferes with the current use of the related Underlying
Mortgage Property or the security intended to be provided by such Mortgage or with the
Borrower's ability to pay its obligations when they become due or the value of the related
Underlying Mortgage Property and (c) the exceptions (general and specific) set forth in
such policy, none of which, individually or in the aggregate, in the reasonable judgment
of the Seller, materially interferes with the current use of the related Underlying
Mortgage Property or security intended to be provided by such Mortgage, with the
Borrower's ability to pay its obligations when they become due or the value of the related
Underlying Mortgage Property (or if a title insurance policy has not yet been issued in
respect of the Mortgage Loan, a policy meeting the foregoing description is evidenced by
a commitment for title insurance "marked-up" at the closing of the Mortgage Loan) and
none of which relate to matters on the survey of the related Underlying Mortgage
Property which are material. To the actual knowledge of the Seller, no material claims
have been made under such title policy;
7. As of the date of origination of the Mortgage Loan there were no mechanics',
materialman's or other similar liens or claims which were filed for work, labor or
materials affecting the Underlying Mortgage Property which are or may be liens prior to,
or equal or coordinate with, the lien of the Mortgage, unless such lien is insured against
under the related title insurance policy;
8. (A) Except with respect to Mortgage Loans secured by unimproved land or properties
intended to be demolished and redeveloped, as of the origination date, and to the
knowledge of the Seller, as of the Transfer Date, each building or other improvement
located on any Underlying Mortgage Property is insured by a fire and extended perils
insurance policy, issued by an insurer or reinsured by an insurer meeting the requirements
of the Mortgage Loan Documents, in an amount not less than the replacement cost ofthe
Underlying Mortgage Property; except with respect to Mortgage Loans secured by
unimproved land or properties intended to be demolished and redeveloped, each
Underlying Mortgage Property was also covered by business interruption insurance for a
period of not less than twelve months (or in the case of hotel loans, for a period not less
than the period of restoration with a 30 day extended indemnity period); each Underlying
Mortgage Property was also covered by comprehensive general liability insurance in
amounts generally required by institutional lenders for similar properties; to the
knowledge of the Seller, all premiums on such insurance policies required to be paid as of
the date hereof have been paid; such insurance policies require prior notice to the insured
of termination or cancellation, and no such notice has been received; and (B) the loan
documents obligate the Borrower to maintain all such insurance and, at the Borrower's
failure to do so, authorize the mortgagee to maintain such insurance at the Borrower's
cost and expense and to seek reimbursement therefor from such Borrower;
9. As of the most recent date of inspection of each Underlying Mortgage Property by the
Seller in connection with the origination of the Mortgage Loan, except with respect to
Mortgage Loans secured by unimproved land or properties intended to be demolished and
USActive 12824081.13 -5-
redeveloped, based solely on the Seller's review of the report ("Engineering Report")
prepared by the engineer who inspected the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general conditions of the site,
buildings and other improvements with respect to the Mortgage Loan (which report
indicated, where appropriate, a variety of deferred maintenance items and recommended
capital improvements with respect to such Underlying Mortgage Property, as well as the
estimated cost of such items and improvements) and the most recent visual inspection (as
described in (18) below) of the Underlying Mortgage Property by the Seller in connection
with the origination of the Mortgage Loan, no building or other improvement on any
Underlying Mortgage Property has been affected in any material manner or suffered any
material loss as a result of any fire, wind, explosion, accident, riot, war, or act of God or
the public enemy, and each Underlying Mortgage Property is free of any material damage
that would affect materially and adversely the value ofthe Underlying Mortgage Property
as security for the Mortgage Loan and is in good repair. The Seller has neither received
notice, nor is otherwise aware, of any proceedings pending for the total condemnation of
any Underlying Mortgage Property or a partial condemnation of any pmtion material to
the Borrower's ability to perform its obligations under its related Mortgage Loan;
I 0. To the Seller's best knowledge, after review of compliance confirmations from applicable
municipalities, surveys and/or title insurance endorsements or other evidence that a
prudent lender would accept, except with respect to Mortgage Loans secured by
unimproved land or properties intended to be demolished and redeveloped, none of the
improvements included for the purpose of determining the appraised value of each
Underlying Mortgage Property at the time of the origination of the Mortgage Loan lies
outside of the boundaries and building restriction lines of the Underlying Mortgage
Property, and no improvements on adjoining properties materially encroach upon the
Underlying Mortgage Property, in each case, except those which are insured against by
the title insurance policy (including endorsements thereto) issued in connection with the
Mortgage Loan and all improvements on the Underlying Mortgage Property comply with
the applicable zoning laws and/or set-back ordinances in force when improvements were
added;
11. Without taking into account prov1s1ons relating to Default Interest, Exit Fees and
Prepayment Charges, the Mortgage Loan does not violate applicable usury laws in effect
as of its date of origination;
12. Since the date of origination of the Mortgage Loan, to the knowledge of the Seller, the
terms of the Mortgage Loan have not been impaired, waived, altered, satisfied, canceled,
subordinated or modified in any respect and the Borrower (and the guarantor, if
applicable) has not been released from any material obligation under the Mortgage Loan
(except with respect to modifications the economic terms of which are reflected in
Schedule A and which are evidenced by documents in the Mortgage Loan file delivered
to the Trustee) and no portion of the Underlying Mortgage Property has been released
from the lien of the Mortgage in any manner, other than in accordance with the terms of
the related mortgage loan documents;
USActive 12824081.13 -6-
13. All applicable mortgage recording taxes and other filing fees have been paid in full or
deposited with the issuer of the title insurance policy issued in connection with the
Mortgage Loan for payment upon recordation ofthe relevant documents;
14. Each assignment of leases and rents, if any, creates a first priority lien, a valid assignment
of, or a valid security interest in, certain rights under the related leases, subject only to a
license granted to the relevant Borrower to exercise certain rights and to perform certain
obligations of the lessor under such leases, including the right to operate the related
Underlying Mortgage Property, subject only to those exceptions described in clause (vi)
above. To the Seller's knowledge and without affirmative investigation, no person other
than the relevant Borrower owns any interest in any payments due under such leases that
is superior to or of equal priority with the mortgagee's interest therein, subject only to
those exceptions described in clause ( 6) above;
15. As of the origination date, and to the knowledge of the Seller, as of the Transfer Date,
each Mortgage, upon due recordation, is a valid and enforceable first lien on the related
Underlying Mortgage Property, subject only to those exceptions described in clause (6)
above. A UCC financing statement has been filed and/or recorded in all places necessary
to perfect a valid security interest in the personal property granted under the Mortgage
Loan to the extent that such lien can be created under the UCC by filing; any security
agreement, chattel mortgage or equivalent document related to and delivered in
connection with the Mortgage Loan establishes and creates a valid and enforceable first
lien and first priority security interest on the property described therein (except as
enforceability may be limited by bankruptcy or other laws affecting creditor's rights
generally or by the application of general principles of equity);
16. Except as otherwise identified in any exceptions to any other representation, the Seller
has not taken any action, nor has knowledge that the Borrower has taken any action, that
would cause the representations and warranties made by the Borrower in the Mortgage
Loan documents not to be true;
17. The proceeds of the Mortgage Loan have been fully disbursed and there is no
requirement for future advances thereunder and the Seller covenants that it will not make
any future advances under the Mortgage Loan to the Borrower (except for (i) escrows
established at the origination of the Mortgage Loan and maintained by the related
servicer, (ii) future funding loans where the maximum future funding amount under the
terms of such asset have been deposited in an account with the Purchaser, and (iii) the
future funding loans identified ih Schedule A. Any Borrower requirements for on or off-
site improvements as to disbursement of any escrow funds therefor have been complied
with;
18. The Seller has inspected or caused to be inspected each Underlying Mortgage Property
within the twelve months preceding the date of origination thereof;
19. The Mortgage Loan does not have a shared appreciation feature, other contingent interest
feature or negative amortization;
USActive 12824081.13 -7-
20. Each Mortgage Loan is a whole loan (except for Mortgage Loans which are B Notes or
participation interests in whole loans) and contains no equity participation by the lender
and is not convertible into an equity interest in the Borrower;
21. No fraudulent acts were committed by the Seller in connection with the origination
process ofthe Mortgage Loan;
22. All taxes and governmental assessments that prior to the date of origination of the
Mortgage Loan (and, to the knowledge of the Seller, prior to the Transfer Date) became
due and owing in respect of each Underlying Mortgage Property have been paid, or an
escrow of funds in an amount sufficient to cover such payments has been established or
are insured against by the title insurance policy issued in connection with the origination
ofthe Mortgage Loan;
23. To the extent required under applicable law, the Seller was authorized to transact and do
business in each jurisdiction in which an Underlying Mortgage Property is located at all
times when it held the Mortgage Loan;
24. The Seller does not have any knowledge of a material default, breach, violation or event
of acceleration existing under any of the Mortgage Loan documents and the Seller does
not have any knowledge of any event (other than payments due but not yet delinquent)
which, with the passage of time or with notice and the expiration of any grace or cure
period, would and does constitute a material default, breach, violation or event of
acceleration; no waiver ofthe foregoing exists and no person other than the holder of the
Note may declare any of the foregoing provided, however, that this representation and
warranty does not address or otherwise cover any default, breach, violation or event of
acceleration that specifically pertains to any matter otherwise covered by any other
representation and warranty made by the Seller in this Schedule B(l );
25. Each Note and each Mortgage contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for the realization against
each related Underlying Mortgage Property of the material benefits of the security,
including realization by judicial or, if applicable, non-judicial foreclosure, and there is no
exemption available to the Borrower which would materially interfere with such right to
foreclosure;
26. (A) With respect to each Underlying Mortgage Property, a Phase I environmental report
and, in certain cases, a Phase II environmental report or an update to such Phase I report
was conducted by a licensed qualified engineer in connection with the origination of the
Mortgage Loan (not longer than twelve months prior to the origination date). The Seller
has reviewed each such report and update. (B) The Seller, having made no independent
inquiry other than reviewing the environmental reports and updates referenced herein and
without other investigation or inquiry, has no knowledge of any material and adverse
environmental condition or circumstance affecting any Underlying Mortgage Property
that was not disclosed in the related report and/or update. The Seller has not received any
actual notice of a material violation of CERCLA or any applicable federal, state or local
environmental law with respect to any Underlying Mortgage Property that was not
USActive 12824081.13 -8-
disclosed in the related report and/or update. (C) The Seller has not taken any actions
which would cause any Underlying Mortgage Property not to be in compliance with all
federal, state and local laws pertaining to environmental hazards;
27. The Mortgage Loan agreement contains provisions for the acceleration of the payment of
the unpaid principal balance of the Mortgage Loan if (A) the Borrower voluntarily
transfers or encumbers all or any portion of any related Underlying Mortgage Property, or
(B) any direct or indirect interest in Borrower is voluntarily transferred or assigned, other
than, in each case, as permitted under the terms and conditions of the Mortgage Loan
documents and, to the best of the Seller's knowledge, the Borrower is not a debtor in a
state or federal bankruptcy or insolvency proceeding;
28. To the Seller's knowledge and without affirmative investigation or inquiry, there is no
pending action, suit or proceeding, arbitration or governmental investigation against the
Borrower or any Underlying Mortgage Property an adverse outcome of which could
materially affect the Borrower's performance of its obligations under the Mortgage Loan
documents;
29. The servicing and collection practices used by the Seller, and to the Seller's knowledge,
the origination practices of the originator of the mortgage loan, have been in all respects
legal, proper and prudent and have met customary industry standards except to the extent
that, in connection with its origination, such standards were modified by the originator of
the Mortgage Loan in its reasonable discretion;
30. In connection with the assignment, transfer or conveyance of any individual Mortgage,
the Note and Mortgage contain no provision limiting the right or ability of the originator
of the Mortgage Loan to assign, transfer and convey the Mortgage to any other person or
entity;
31. If any Underlying Mortgage Property is subject to any leases (other than any ground lease
referred to in (35) below), to the best of the Seller's knowledge, the Borrower is the
owner and holder of the landlord's interest under such leases and the related Mortgage
and Assignment of Leases, Rents and Profits, if any, provides for the appointment of a
receiver for rents or allows the mortgagee to enter into possession to collect rent or
provide for rents to be paid directly to mortgagee in the event of a default, subject to the
exceptions described in clause (6) hereof;
32. If a Mortgage is a deed of trust, a trustee, duly qualified under applicable law to serve as
such, has been properly designated and currently so serves and is named in the deed of
trust, and no fees or expenses are or will become payable to the trustee under the deed of
trust, except in connection with the sale or release of the Underlying Mortgage Property
following default or payment of the loan;
33. Except with respect to Mortgage Loans secured by unimproved land or properties
intended to be demolished and redeveloped, any insurance proceeds in respect of a
casualty loss or taking will be applied either to the repair or restoration of all or part of
the related Underlying Mortgage Property, with the mortgagee or a trustee appointed by it
USActive 12824081.13 -9-
having the right to hold and disburse such proceeds (provided that such proceeds exceed
the threshold amount described in the loan documents) as the repair or restoration
progresses, or to the payment of the outstanding principal balance of the Mortgage Loan
together with any accrued interest thereon, except to the extent of any excess proceeds
after restoration;
34. Based on the Seller's review of the 1 00-year flood plain map provided by FEMA or the
related survey, with respect to the Mortgaged Properties with improvements located in a
special flood hazard area (Zone A) as defined by the Federal Insurance Administration,
flood insurance coverage has been obtained;
35. With respect to any Mortgage which is secured in whole or in part by the interest of a
Borrower as a lessee under a ground lease either (i) such Mortgage is also secured by the
fee interest in the entire Underlying Mortgage Property or (ii) based upon the terms of the
ground lease or an estoppel letter from the ground lessor the following apply to such
ground lease:
(A) The ground lease or a memorandum thereof has been duly recorded, the ground
lease permits the interest of the lessee thereunder to be encumbered by the related
Mortgage, does not restrict the use ofthe Underlying Mortgage Property by the lessee or
its successors and assigns in a manner that would adversely affect the security provided
by the related Mortgage, and there has not been a material change in the terms of the
ground lease since its recordation, with the exception of written instruments which are
part of the related Mortgage Loan documents delivered to the Trustee.
(B) As of the origination date, and, to the Seller's knowledge, as of the Transfer Date,
the ground lease was not subject to any liens or encumbrances superior to, or of equal
priority with, the related Mortgage, other than the related ground lessor's related fee
interest and any permitted encumbrances on such fee interest and any permitted
encumbrance with respect to such ground lease did not include any mortgage that is prior
to the interest of the ground lease.
(C) The Borrower's interest in the ground lease is assignable to the holder of the
Mortgage upon notice to, but without the consent of, the lessor thereunder and, in the
event that it is so assigned, it is further assignable by the trustee and its successors and
assigns upon notice to, but without a need to obtain the consent of, such lessor.
(D) As of the origination date of the Mortgage Loan, based on due diligence
customarily performed in the origination of comparable mortgage loans by the originator
of the Mortgage Loan, the ground lease was in full force and effect and, based solely on
an estoppel received from the ground lessor, the Seller does not have any knowledge that
any material default has occurred under the ground lease and there was no existing
condition which, but for the passage of time or the giving of notice, would result in a
default under the terms of the ground lease. No notice of default under the ground lease
has been received by the Seller.
USActive 12824081 .13 -10-
(E) The ground lease requires the lessor thereunder to give notice of any default by
the lessee to the mortgagee; and the ground lease, or an estoppel letter received by the
mortgagee from the lessor, further provides that notice of termination given under the
ground lease is not effective against the mortgagee unless a copy of the notice has been
delivered to the mortgagee in the manner described in such ground lease or estoppel
letter.
(F) The mortgagee is permitted a reasonable opportunity (including, where necessary,
sufficient time to gain possession of the interest of the lessee under the ground lease) to
cure any default under the ground lease which is curable after the receipt of notice of any
default, before the lessor thereunder may terminate the ground lease.
(G) The ground lease either (i) has a term which extends not less than 20 years
beyond the maturity date ofthe related Mortgage Loan or (ii) grants the lessee the option
(which may be exercised by the mortgagee)to extend the term of the lease for a period
(in the aggregate) which exceeds 20 years beyond the maturity date of the related
Mortgage Loan.
(H) The ground lease requires the lessor to enter into a new lease with the mortgagee
upon termination of the ground lease for any reason, including rejection of the ground
lease in a bankruptcy proceeding, provided the mortgagee cures the lessee's defaults to
the extent they are curable.
(I) Under the terms of the ground lease and the related Mortgage, taken together, any
related insurance proceeds will be applied either to the repair or restoration of all or part
of the related Underlying Mortgage Property, with the mortgagee or a trustee appointed
by it having the right to hold and disburse the proceeds as the repair or restoration
progresses, or to the payment of the outstanding principal balance of the Mortgage Loan
together with any accrued interest thereon.
(J) Such ground lease does not impose any material restrictions on subletting.
(K) Either the ground lease or the related Mortgage contains the Borrower's covenant
that such ground lease shall not be amended, canceled, or terminated without the prior
written consent of the mortgagee.
36. [Intentionally left blank.];
intended to be demolished and redeveloped, to the best knowledge of the Seller, all
required certificates of occupancy and building permits, as applicable, have been issued
with respect to the Underlying Mortgage Property and, to the best knowledge of the
Seller, are valid and in full force and effect;
38. Any escrow accounts for taxes or other reserves required to be funded on the date of
origination of the Mortgage Loan pursuant to the Mortgage Loan documents have been
funded and to the knowledge of the Seller, all such escrow accounts required to have
USActive 12824081.13 -11-
been funded as of the Transfer Date (taking into account any applicable notice and grace
period) have been funded;
39. The related Assignment of Mortgage is in recordable form and constitutes a legal, valid
and binding assignment of such Mortgage to the Purchaser, and the related Assignment of
Assignment of Leases, Rents and Profits, if any, is in recordable form and constitutes a
legal, valid and binding assignment thereof to the Purchaser;
40. The related Note is not, and was not as of the date of origination of the Mortgage Loan,
and to the knowledge of the Seller, is not as of the Transfer Date, secured by any
collateral except the lien of the related Mortgage, any related Assignment of Leases,
Rents and Profits and any related letter of credit, security agreement and escrow
agreement, all of which are being conveyed to the Purchaser; the security for the
Mortgage Loan consists only of the related Underlying Mortgage Property or Properties,
any leases (including without limitation any credit leases) thereof, any related letter of
credit and any appurtenances, fixtures and other property located thereon; and such
Underlying Mortgage Property or Properties do not secure any mortgage loan other than
the Mortgage Loan being transferred and assigned to the Purchaser hereunder (except for
Mortgage Loans, if any, which are cross-collateralized with other Mortgage Loans being
conveyed to the Purchaser or subsequent transferee hereunder and identified on the
Schedule A);
41. To the Seller's knowledge, based on due diligence that it customarily performs in the
origination of comparable mortgage loans, as of the date of origination of each Mortgage
Loan, the related Borrower was in possession of all material licenses, permits and
franchises required by applicable law for the ownership and operation of the related
Underlying Mortgage Property as it was then operated, except for such licenses, permits
and authorizations the failure of which to obtain would not materially adversely affect the
value of the Mortgage Loan;
42. To the Seller's knowledge, as of the origination date, the Borrower complied with all
legal requirements applicable to it and the Underlying Mortgage Property;
43. No Mortgage Loan is a loan in which the originator of the Mortgage Loan (in the case of
a Mortgage Loan not originated by the Seller, to the Seller's knowledge) paid the
Borrower a premium in exchange for a higher Interest Rate ("Buy-up Loan");
intended to be demolished and redeveloped, each Mortgage Loan requires the Borrower
to provide the holder of the Mortgage Loan with quarterly and annual operating
statements, rent rolls {other than for hotel properties) and related information, which
annual financial statements shall be audited by an independent certified public accountant
upon request;
45. Each Underlying Mortgage Property constitutes one or more complete separate tax lots or
is subject to an endorsement under the related title insurance policy;
USActive 12824081.13 -12-
46. Except in cases where either (a) a release of a portion of the Underlying Mortgage
Property was contemplated at origination of the Mortgage Loan and such portion was not
considered material for purposes of underwriting the Mortgage Loan or (b) release is
conditioned upon the satisfaction of ce11ain underwriting and legal requirements and
either written confirmation from each Rating Agency that such release will not result in
the withdrawal, qualification or downgrade of the securities or the payment of a release
price or the substitution of other real property collateral to the extent required under the
Mortgage Loan, the related Note or Mortgage does not require the holder thereof to
release all or any portion of the Underlying Mortgage Property from the lien of the
related Mortgage except upon payment in full of all amounts due under such Mortgage
Loan;
47. (A) The Borrower is an entity whose organizational documents provide that it is, and at
least so long as the related Mortgage Loan is outstanding will continue to be, a single-
purpose entity (for this purpose, "single-purpose entity" shall mean a person, other than
an individual, which is formed or organized solely for the purpose of owning and
operating the related Underlying Mortgage Property and does not engage in any business
unrelated to such property and its financing); (B) a non-consolidation opinion was
obtained for each Borrower; and (C) the organizational documents for each Borrower
require that the Borrower have one or two independent directors, as the case may be;
48. All terms of the related Mortgage pertaining to interest rate adjustments, payment
adjustments and principal balance adjustments are enforceable and will not affect the
priority ofthe lien ofthe related Mortgage.
USActive 12824081.13 -13-
SCHEDULE B(2)
REPRESENTATIONS AND WARRANTIES RE: COLLATERAL INTERESTS CONSISTING
OF B NOTES
With respect to each B Note, the Seller hereby represents and warrants, as of the date herein
specified or, if no such date is specified, as ofthe Transfer Date, except as set forth on Schedule
C, that:
I. Accuracy of Information. The information pertaining to each B Note set forth in
Schedule A was true and correct in all material respects as of the Transfer Date.
2. Compliance with Law. On the date of its origination, and, in the case of B Notes that
were not originated by the Seller, to the Seller's knowledge, the B Note complied in all
material respects with, or was exempt from, all requirements of federal, state or local law
relating to the origination, funding and servicing of the B Note and the B Note complied
with, or is exempt from, applicable state or federal laws, regulations or other
requirements pertaining to usury.
3. Title to Asset; No Consents Required. Immediately prior to the sale, transfer and
assignment to the Purchaser, the Seller had good title to, and was the sole owner of, the B
Note, the Seller is transferring the B Note free and clear of any and all liens, pledges,
charges or security interests of any nature encumbering the B Note, and the transfer of the
B Note complies with all requirements and no consents, approvals or authorizations are
necessary under any related B Note documents and/or intercreditor agreements to transfer
the B Note to the Purchaser or any such consent which is required has been obtained.
4. Absence ofFraud. In the origination (or acquisition, if the B Note was not originated by
the Seller or any of its Affiliates) and servicing of the B Note, neither Seller nor, to
Seller's knowledge, any prior holder of the B Note participated in any fraud or intentional
material misrepresentation with respect to the B Note. To Seller's knowledge, no
Borrower or guarantor originated the B Note.
5. Secured by a First Lien. The B Note is performing and is secured by a first lien on the
Underlying Mortgage Property, subject to the exceptions set forth in paragraph (8) of
Schedule B(l) and the Title Exceptions.
6. Delivery of Documents. Seller has delivered to Purchaser or its designee the original
promissory note, certificate or other similar indicia of ownership of such B Note,
however denominated, together with an original assignment thereof, executed by Seller in
blank (or such other name as designated by the Purchaser).
7. Absence of Defaults re: Other Interests. To the knowledge of the Seller, no default or
event of default has occurred under any agreement pertaining to any lien or other interest
that ranks pari passu with or senior to the interests of the holder of such B Note in respect
of the related Underlying Mortgage Property and there is no provision in any such
agreement which would provide for any increase in the principal amount of any such lien
or other interest other than an increase in the principal amount of any such lien due to a
protective property advance made by the related servicer.
8. Absence of Defaults. There is no monetary event of default and, to the knowledge of the
Seller, no material non-monetary event of default existing under the B Note or any B
Note document and the Seller has no knowledge of any substantial and material event or
circumstance with respect to which the expiration of an applicable default grace period is
imminent that would result in a monetary or non-monetary event of default under the B
Note or the B Note documents; Seller has not waived any of the foregoing and to Seller's
knowledge no waiver of any of the foregoing exists and no person other than the holder
of the B Note, the holder of the A Note or Servicers acting on their respective behalf may
declare any of the foregoing.
9. Absence of Liabilities. Seller has not received written notice of any outstanding
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind for which the holder of such B Note is or may
become obligated.
10. Absence of Bankruptcy Debtors. To the knowledge of the Seller, as of the Transfer Date,
no issuer of such B Note was a debtor in any outstanding proceeding pursuant to the
federal bankruptcy code.
11. Absence of Amendments and Waivers. Except as set forth in the related Collateral File,
(a) no provision of the related intercreditor agreement, the related B Note documents or
any other document, agreement or instrument executed in connection with the B Note has
been waived, modified, altered, satisfied, canceled, subordinated or rescinded, and no
related collateral for the B Note has been released from the lien of the related documents
in any manner that materially interferes with the security intended to be provided by such
documents, and (b) neither the related B Note issuer nor any other party to the B Note
documents has been released from any material obligation thereunder.
12. Collateral File. The Seller has delivered to the Purchaser or its designee an accurate and
complete Collateral File.
13. Representations and Warranties with respect to Related Mortgage Loan. With respect to
each B Note, to Seller's knowledge, the representations and warranties set forth on
Schedule B(l), other than those contained in paragraphs 2 and 20 of Schedule 8(1), are
true and correct with respect to the related Mortgage Loan as to which such B Note
evidences a portion thereof.
USActive 12824081.13 -15-
SCHEDULE B(3)
OF PARTICIPATION INTERESTS
With respect to each participation interest in a mortgage loan or a mezzanine loan (for purposes
ofthis Schedule B(3), a "Participation Interest"), the Seller hereby represents and warrants, as of
the date herein specified or, if no such date is specified, as of the Transfer Date, except as set
forth on the Schedule C, that:
I. Accuracy of Information. The information pertaining to each Participation Interest set
forth in Schedule A was true and correct in all material respects as ofthe Transfer Date.
2. Compliance with Law. On the date of its origination (or acquisition if the Participation
Interest was not originated by the Seller or any of its Affiliates), and, in the case of
Participation Interests that were not originated by the Seller, to the Seller's knowledge,
the Participation Interest complied in all material respects with, or was exempt from, all
requirements of federal, state or local law relating to the origination, funding and
servicing of the Participation Interest and the Participation Interest complied with, or is
exempt from, applicable state or federal laws, regulations or other requirements
pertaining to usury.
3. Title to Asset; No Consents Required. Immediately prior to the sale, transfer and
assignment to the Purchaser, the Seller had good title to, and was the sole owner of, the
Participation Interest, the Seller is transferring the Participation Interest free and clear of
any and all liens, pledges, charges or security interests of any nature encumbering the
Participation Interest, and the transfer of the Participation Interest complies with all
requirements and no consents, approvals or authorizations are necessary under any
related Participation Interest documents and/or intercreditor agreements to transfer the
Participation Interest to the Purchaser or any such consent which is required has been
obtained.
4. Absence of Fraud. In the origination (or acquisition if the Participation Interest was not
originated by the Seller or any of its Affiliates) and servicing of the Participation Interest,
the Seller did not participate in any fraud or intentional material misrepresentation with
respect to the Participation Interest. To Seller's knowledge, no Borrower or guarantor
originated the Participation Interest.
5. Delivery of Documents. If such Participation Interest is certificated, Seller has delivered
to Purchaser or its designee the original certificate, however denominated, together with
an original assignment thereof, executed by Seller in blank.
6. Absence of Defaults re: Other Interests. To the knowledge of the Seller, no default or
event of default has occurred under any agreement pertaining to any lien or other interest
that ranks pari passu with or senior to the interests of the holder of such Participation
Interest in respect of the related Underlying Mortgage Property, and there is no provision
in any such agreement which would provide for any increase in the principal amount of
USActive 128.24081.13
any such lien or other interest that is senior to the interests of the holder of such
Participation Interest other than an increase in the principal amount of any such lien due
to a protective property advance made by the related servicer.
Seller, no material non-monetary event of default existing under the Participation Interest
or any Participation Interest document and the Seller has no knowledge of any substantial
and material event or circumstance with respect to which the expiration of an applicable
default grace period is imminent that would result in a monetary or non-monetary event
of default under the Participation Interest or the Participation Interest documents; Seller
has not waived any of the foregoing and to Seller's knowledge, no waiver of any of the
foregoing exists; and no person other than the holder of the Participation Interest may
declare any ofthe foregoing.
8. Absence of Liabilities. Seller has not received written notice of any outstanding
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind for which the holder of such Participation Interest
is or may become obligated.
9. Absence of Bankruptcy Debtors. To the actual knowledge of the Seller, as of the
Transfer Date, no issuer of such Participation Interest was a debtor in any outstanding
proceeding pursuant to the federal bankruptcy code.
10. Absence of Amendments or Waivers. Except as set forth in the related Collateral File,
(a) no provision of the related intercreditor agreement to which a Seller is a party, if any,
nor to Seller's knowledge, the related Participation Interest documents or any other
document, agreement or instrument executed in connection with the Participation Interest
has been waived, modified, altered, satisfied, canceled, subordinated or rescinded, and no
related collateral for the Participation Interest has been released from the lien of the
related documents in any manner that materially interferes with the security intended to
be provided by such documents, and (b) neither the related Participation Interest issuer
nor to Seller's knowledge, any other party to the Participation Interest documents has
been released from any material obligation thereunder.
12. Representations and Warranties with respect to Related Mortgage Loan. With respect to
each Participation Interest that is an interest in a Mortgage Loan, to Seller's knowledge,
the representations and warranties set forth in Schedule B( 1 ), other than the
representations and warranties contained in Paragraphs 2, 20 and 39 of Schedule 1 (a), are
true and correct with respect to the related Mortgage Loan, as to which such Participation
Interest represents an interest therein.
13. Representations and Warranties with respect to Related Mezzanine Loan. With respect to
each Participation Interest that is an interest in a Mezzanine Loan, to the Seller's
knowledge the representations and warranties set forth in Schedule B( 4), other than the
USActive 12824081.13 -17-
representations and warranties contained in Paragraphs 2, 5, 7, I 0, 15, 24, 32 and 33 are
true and correct with respect to the related Mezzanine Loan as to which such
Participation Interest represents an interest therein.
14. Representations and Warranties with respect to Related REBL. With respect to each
Participation Interest that is an interest in a REBL, to the Seller's knowledge the
representations and warranties set forth in Schedule B(7), other than the representations
and warranties contained in Paragraph 3 are true and correct with respect to the related
REBL as to which such Participation Interest represents an interest therein.
USActive 12824081.13 -18-
SCHEDULE B(4)
OF MEZZANINE LOANS
With respect to each Mezzanine Loan, the Seller hereby represents and warrants, as of the date
herein specified or, if no such date is specified, as of the Transfer Date, except as set forth on the
Schedule C, that:
1. Accuracy of Information. The information pertaining to each Mezzanine Loan set forth
in Schedule A was true and correct in all material respects as of the Transfer Date.
2. Compliance with Law. On the date of its origination, , and, in the case of Mezzanine
Loans that were not originated by the Seller, to the Seller's knowledge, the Mezzanine
Loan complied in all material respects with, or was exempt from, all requirements of
federal, state or local law relating to the origination, funding and servicing of the
Mezzanine Loan, and the Mezzanine Loan complied with, or is exempt from, applicable
state or federal laws, regulations or other requirements pertaining to usury.
3. Absence of Amendments or Waivers. Except as set forth in the related Collateral File,
(a) no provision of the related intercreditor agreement, the related Mezzanine Loan
documents or any other document, agreement or instrument executed in connection with
the Mezzanine Loan has been waived, modified, altered, satisfied, canceled, subordinated
or rescinded, and no related collateral for the Mezzanine Loan has been released from the
lien of the related documents in any manner that materially interferes with the security
intended to be provided by such documents, and (b) neither related mezzanine borrower
nor any other party to the Mezzanine Loan documents has been released from any
material obligation thereunder.
4. Enforceability of Documents. The notes executed by the related mezzanine borrower in
connection with the related Mezzanine Loan and the pledge of the ownership interests
securing the related Mezzanine Loan are the legal, valid and binding obligations of the
related mezzanine borrower and the Seller, as applicable (subject to any non-recourse
provisions therein and any state anti-deficiency, one action, or market value limit
deficiency legislation), enforceable in accordance with its terms, except (i) that certain
provisions contained in such Mezzanine Loan documents are or may be unenforceable in
whole or in part under applicable state or federal laws, but neither the application of any
such laws to any such provision nor the inclusion of any such provisions renders any of
the Mezzanine Loan documents invalid as a whole and such Mezzanine Loan documents
taken as a whole are enforceable to the extent necessary and customary for the practical
realization of the rights and benefits customarily afforded institutional mortgage lenders
and (ii) as such enforcement may be limited by bankruptcy, insolvency, receivership,
reorganization, moratorium, redemption, liquidation or other laws affecting the
enforcement of creditors' rights generally, or by general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at law).
5. Title to Asset. Immediately prior to the sale, transfer and assignment to the Purchaser,
the Seller had good title to, and was the sole owner of, the Mezzanine Loan, the Seller is
transferring the Mezzanine Loan free and clear of any and all liens, pledges, charges or
security interests of any nature encumbering the Mezzanine Loan, and the transfer of the
Mezzanine Loan complies with all requirements in, and no consents, approvals or
authorizations are necessary under, any related Mezzanine Loan documents and/or
intercreditor agreements to transfer the Mezzanine Loan to the Purchaser or any such
consent which is required has been obtained.
6. Absence of Defenses. As of the date of its origination, there was no right of offset,
diminution or rescission or valid defense or counterclaim with respect to the mezzanine
note or the Mezzanine Loan documents and, to Seller's knowledge, as of the date such
Mezzanine Loan is acquired by the Purchaser, there is no right of offset, diminution or
rescission or valid defense or counterclaim with respect to such mezzanine note or
Mezzanine Loan documents.
7. Valid Assignment. The assignment ofthe Mezzanine Loan and the agreements executed
in connection therewith in favor of the Purchaser has been duly authorized, executed and
delivered by the Seller and constitutes the legal, valid and binding assignment of such
Mezzanine Loan to the Purchaser, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, liquidation, receivership, moratorium or other
laws relating to or affecting the enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law). The Mezzanine Loan and the agreements executed in
connection therewith are freely assignable to any person or entity.
8. Security Interest. The pledge of the collateral for the Mezzanine Loan creates a legal,
valid and enforceable first priority perfected security interest in such collateral, except as
the enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
liquidation, receivership, moratorium or other laws relating to or affecting the
enforcement of creditors' rights generally, or by general principles of equity.
9. Escrows and Deposits. All escrow deposits and payments required pursuant to the
Mezzanine Loan documents are in the possession, or under the control, of the related
servicer of the Assets, and to the knowledge of the Seller there are no deficiencies in
connection therewith.
I 0. Absence of Fraud. In the origination (or acquisition, if the Mezzanine Loan was not
originated by the Seller or any of its Affiliates) and servicing of the Mezzanine Loan,
neither Seller nor, to Seller's knowledge, any prior holder of the Mezzanine Loan
participated in any fraud or intentional material misrepresentation with respect to the
Mezzanine Loan. To Seller's knowledge, no Borrower or guarantor originated the
Mezzanine Loan.
II. Full Disbursement of Proceeds. The proceeds of the Mezzanine Loan have been fully
disbursed and there is no requirement for future advances thereunder (except for (i)
escrows established at the origination of the Mezzanine Loan and maintained by the
USActive 12824081.13 -20-
related servicer, (ii) Future Advanc.e Loans where the maximum Future Advance under
the terms of such asset have been deposited in an account with the Purchaser, and (iii) the
Retained Future Advance Obligations identified in Schedule A.
12. Source of Payments. The Seller has not (nor to Seller's knowledge, has any prior holder
of the Mezzanine Loan) advanced funds or induced, solicited or knowingly received
funds from a party other than the mezzanine borrower (or any manager or agent of
mezzanine borrower) for the payment of any amounts due in connection with the
Mezzanine Loan.
13. No Contingent Interest. The Mezzanine Loan does not have a shared appreciation feature
or other contingent interest features.
14. Absence of Negative Amortization. The Mezzanine Loan does not have a negative
amortization or deferred interest feature.
15. Outstanding Principal Amount. The total balance of each Mezzanine Loan is set forth on
Schedule 2 hereto, and no party other than the Seller holds an interest in the related
Mezzanine Loan.
Seller, no material non-monetary event of default existing under the Mezzanine Loan or
any Mezzanine Loan document and the Seller has no knowledge of any substantial and
material event or circumstance with respect to which the expiration of an applicable
default grace period is imminent that would result in a monetary or non-monetary event
of default under the Mezzanine Loan or the Mezzanine Loan documents; Seller has not
waived any ofthe foregoing and to Seller's knowledge, no waiver of any of the foregoing
exists; and no person other than the holder ofthe Mezzanine Loan may declare any of the
foregoing.
17. Absence of Delinquencies. The Mezzanine Loan is not, as of the Transfer Date, nor has
it been since origination, delinquent for 30 or more days.
18. Security for Mezzanine Loan. The Mezzanine Loan is secured solely by the collateral
described in the Mezzanine Loan documents (including, without limitation, the related
pledge agreements for such Mezzanine Loan).
19. Absence of Bankruptcy Debtors. To the knowledge of the Seller, as of the Transfer Date,
no mezzanine borrower was a debtor in any outstanding proceeding pursuant to the
federal bankruptcy code.
20. Pledged Equity. The Mezzanine Loan is secured by a pledge of 100% of the direct or
indirect equity interests in the related Underlying Property Owner. As ofthe origination
date, the Underlying Property Owner was duly organized and validly existing and in good
standing under the laws of its jurisdiction of organization, with requisite power and
authority to own its assets and to transact the business in which it was engaged as of the
origination date and the sole purpose of the Underlying Property Owner under its
organizational documents was to own, finance, sell or otherwise manage the related
USActive 12824081.13 -21-
Underlying Mortgage Property and to engage in any all activities related or incidental
thereto.
21. UCC 9 Policies. If Seller's security interest in the Mezzanine Loan is covered by a UCC
9 insurance policy, with respect to the "UCC 9" policy relating to the Mezzanine Loan:
(i) such policy is assignable by the Seller to the Purchaser, and to the Seller's knowledge,
(ii) such policy is in full force and effect, (iii) all premiums thereon have been paid, (iv)
no claims have been made by or on behalf of Seller thereunder, and (v) no claims have
been paid thereunder.
22. Cross-Defaults. An event of default under the related Mortgage Loan will constitute an
event of default with respect to the related Mezzanine Loan.
23. Payment Procedure. If a cash management agreement is in place with respect to the
Mortgage Loan and Mezzanine Loan, except following the occurrence and during the
occurrence of a Mortgage Loan event of default or cash trap event, any funds remaining
in the related lockbox account for the Mortgage Loan after payment of all amounts due
under the Mortgage Loan documents are required (i) to be distributed to the holder of the
Mezzanine Loan or (ii) distributed by the holder or the servicer of the Mortgage Loan to
the holder of the Mezzanine Loan in accordance with and in the amount set forth in the
Mezzanine Loan documents.
24. Conditions to Transfer Mezzanine Loan. Pursuant to the terms of the Mezzanine Loan
documents, the Seller satisfied any transfer conditions or requirements (or such
conditions or requirements were validly waived by any requisite parties) in the
Mezzanine Loan documents with respect to the transfer of the Mezzanine Loan to the
Purchaser.
25. Insurance Proceeds. The Mezzanine Loan documents require that all insurance policies
procured by the Mortgage Loan borrower with respect to the property under the related
Mortgage Loan documents name the mezzanine lender and their respective successors
and assigns as the insured or additional insured, as their respective interests may appear.
26. Notice of Defaults. Pursuant to the terms of the Mezzanine Loan documents and
intercreditor agreements, the related senior lender is required to provide written notice of
defaults under a Mortgage Loan to the holder of the related Mezzanine Loan at the same
time such notices are delivered by the related senior lender to the related senior borrower.
27. Cure Rights. Pursuant to the terms of the related intercreditor agreements, if any, the
holder of the related Mortgage Loan is not permitted to exercise any rights it may have
under the related Mortgage Loan documents or applicable law with respect to a
foreclosure or other realization upon the collateral for the related Mortgage Loan without
providing prior notice and opportunity to cure to the related holder of the Mezzanine
Loan (subject to the rights of any subordinate mezzanine lenders).
28. Purchase Option. Pursuant to the terms of the related intercreditor agreement, if any, the
holder of the related Mezzanine Loan has the right to purchase the related Mortgage Loan
upon certain Mortgage Loan events of default and/or acceleration.
USActive 12824081.13 -22-
29. Property Insurance. (A) Except with respect to Mortgage Loans secured by unimproved
land or properties intended to be demolished and redeveloped, each building or other
improvement located on any Underlying Mortgage Property securing any related
Mortgage Loan is insured by a fire and extended perils insurance policy, issued by an
insurer or reinsured by an insurer meeting the requirements of the Mortgage Loan
Documents, in an amount not less than the replacement cost of the related Underlying
Mortgage Property; except with respect to Mortgage Loans secured by unimproved land
or properties intended to be demolished and redeveloped, each related Underlying
Mortgage Property was also covered by business interruption insurance for a period of
not less than twelve months (or in the case of hotel loans, for a period not less than the
period of restoration with a 30 day extended indemnity period); each related Underlying
Mortgage Property was also covered by comprehensive general liability insurance in
amounts generally required by institutional lenders for similar properties; all premiums
on such insurance policies required to be paid as of the date hereof have been paid; such
insurance policies require prior notice to the insured of termination or cancellation, and
no such notice has been received; and (B) the loan documents obligate the mortgagor to
maintain all such insurance and, at the mortgagor's failure to do so, authorize the
mortgagee to maintain such insurance at the mortgagor's cost and expense and to seek
reimbursement therefor from such mortgagor. Based on the Seller's review of the I 00-
year flood plain map provided by FEMA or the related survey, except for the properties
set forth on Schedule I (h), with respect to the properties securing the related Mortgage
Loans with improvements located in a special flood hazard area (Zone A) as defined by
the Federal Insurance Administration, flood insurance coverage has been obtained;
30. Licenses and Permits. To the Seller's knowledge, based on due diligence that it
customarily performs in the origination of comparable mezzanine loans, as of the date of
origination of the related Mortgage Loan, the related mortgagor was in possession of all
material licenses, permits and franchises required by applicable law for the ownership
and operation of the related Underlying Mortgage Property as it was then operated,
except for such licenses, permits and authorizations the failure of which to obtain would
not materially adversely affect the value of the Mezzanine Loan.
31. Absence of Litigation. To Seller's knowledge, there is no pending action, suit or
proceeding, arbitration or governmental investigation against the mezzanine borrower or
the collateral for the Mezzanine Loan, an adverse outcome of which would materially and
adversely affect the mezzanine borrower's performance under the Mezzanine Loan
documents or the collateral for the Mezzanine Loan.
32. Collateral File. The Seller has delivered to the Purchaser or its designee accurate and
complete copies of the related Collateral File. No material adverse modifications were
made to the Mezzanine Loan except as included in the Collateral File.
33. Record Ownership. Upon the transfer to the Purchaser, the Purchaser will be the owner of
the Mezzanine Loan and the related intercreditor agreements sufficient to ensure the
Purchaser has all rights to receive principal and interest payments with respect to the
Mezzanine Loan accrued after the Transfer Date.
USActive 12824081.13 -23-
34. Taxes. All taxes and governmental assessments that prior to the date of origination of the
related Mortgage Loan (and, to the knowledge of the Seller, prior to the Transfer Date)
became due and owing in respect of each related Underlying Mortgage Property have
been paid, or an escrow of funds in an amount sufficient to cover such payments has been
established or are insured against by the title insurance policy issued in connection with
the origination of the related Mortgage Loan.
35. Zoning Compliance. To the Seller's best knowledge, after review of compliance
confirmations from applicable municipalities, surveys and/or title insurance
endorsements or other evidence that a prudent lender would accept, all improvements on
the Underlying Mortgage Property comply with the applicable zoning laws and/or set-
back ordinances in force when improvements were added.
36. Absence of Encroachments. To the Seller's best knowledge, after review of compliance
confirmations from applicable municipalities, surveys and/or title insurance
endorsements or other evidence that a prudent lender would accept, none of the
improvements included for the purpose of determining the appraised value of each
Underlying Mortgage Property at the time of the origination of the related Mortgage
Loan lies outside of the boundaries and building restriction lines of the Underlying
Mortgage Property, and no improvements on adjoining properties materially encroach
upon the Underlying Mortgage Property, in each case, except those which are insured
against by the title insurance pol icy (including endorsements thereto) issued in
connection with the related Mortgage Loan.
37. Environmental Conditions. (A) With respect to each Underlying Mortgage Property, a
Phase I environmental report and, in certain cases, a Phase II environmental report or an
update to such Phase I report was conducted by a licensed qualified engineer in
connection with the origination of the related Mortgage Loan (not longer than twelve
months prior to the origination date). The Seller has reviewed each such report and
update. (B) The Seller, having. made no independent inquiry other than reviewing the
environmental reports and updates referenced herein and without other investigation or
inquiry, has no knowledge of any material and adverse environmental condition or
circumstance affecting any Underlying Mortgage Property that was not disclosed in the
related report and/or update. The Seller has not received any actual notice of a material
violation of CERCLA or any applicable federal, state or local environmental law with
respect to any Underlying Mortgage Property that was not disclosed in the related report
and/or update. (C) The Seller has not taken any actions which would cause any
Underlying Mortgage Property not to be in compliance with all federal, state and local
laws pertaining to environmental hazards
38. No Material Default. The Seller does not have any knowledge of a material default,
breach, violation or event of acceleration existing under any of the related Mortgage Loan
documents and the Seller does not have any knowledge of any event (other than
payments due but not yet delinquent) which, with the passage of time or with notice and
the expiration of any grace or cure period, would and does constitute a material default,
breach, violation or event of acceleration; no waiver of the foregoing exists and no person
other than the holder of the Note may declare any of the foregoing; provided, however,
USActive 12824081.13 -24-
that this representation and warranty does not address or otherwise cover any default,
breach, violation or event of acceleration that specifically pertains to any matter
otherwise covered by any other representation and warranty made by the Seller in this
Schedule l(d).
USActive 12824081.13 -25-
SCHEDULE B(5)
OF CRE <:;:DO SECURITIES, CMBS SECURITIES, RAKE BONDS AND SYNTHETIC
SECURITY (EACH, A "SECURITY")
With respect to each Security, the Seller hereby represents and warrants, as of the date herein
specified or, if no such date is specified, as of the Transfer Date, except as set forth on Schedule
C, that:
1. Accuracy of Information. All information contained in the related Collateral File (or as
otherwise provided to Purchaser) in respect of such Security is accurate and complete in
all material respects.
2. Title to Asset. Immediately prior to the sale, transfer and assignment to Purchaser, (i)
Seller had good and marketable title to, and was the sole owner and holder of, such
Security, (ii) Seller full right, power and authority to transfer, and is transferring, such
Security free and clear of any and all liens, pledges, encumbrances, charges, security
interests or any other ownership interests of any nature encumbering such Security, and
(iii) no consent, approval or authorization of any Person is required for any such transfer
or assignment by the holder of such Security.
3. Valid Assignment. Upon consummation ofthe purchase contemplated to occur in respect
of such Security on the Transfer Date, Seller will have validly and effectively conveyed
to Purchaser all legal and beneficial interest in and to such Security free and clear of any
and all liens, pledges, encumbrances, charges, security interests or any other ownership
interests of any nature.
4. Form of Security. With respect to any Security that is a certificated security, such
Security is a certificated security in registered form, or is in uncertificated form and held
through the facilities of (a) The Depository Trust Company in New York, New York, or
(b) such other clearing organization or book-entry system as is designated in writing by
the Purchaser.
5. Transfer Documents. With respect to any Security that is a certificated security, Seller
has delivered to Purchaser or its designee such certificated security, along with any and
all certificates, assignments, bond powers executed in blank, necessary to transfer such .
certificated security under the issuing documents of such Security.
6. Absence of Adverse Events. Based on the most recently available trustee report, (i) no
interest shortfalls have occurred and no realized losses have been applied to any Security
and (ii) the Seller is not aware of any circumstances that could have a material adverse
effect on such Security.
SCHEDULE B(6)
OF A LOAN OR REPURCHASE FACILITY SECURED BY A LOAN
With respect to each loan or repurchase facility (a "Repurchase Facility") that is secured by any
ofthe instruments set forth in the definition of Loan (an "Underlying Asset"), the Seller hereby
represents and warrants, as ofthe date herein specified or, if no such date is specified, as ofthe
Transfer Date, except as set forth in Schedule C, that:
1. Accuracy of Information. The information pertaining to each Repurchase Facility set
forth in Schedule A was true and correct in all material respects as of the Transfer Date.
2. Title to Asset. Immediately prior to the sale, transfer and assignment to the Purchaser, (i)
the Seller had good and marketable title to, and was the sole owner and holder of, such
Repurchase Facility, (ii) the Seller had full right, power and authority to transfer, and is
transferring, such Repurchase Facility free and clear of any and all liens, pledges,
encumbrances, charges, security interests or any other ownership interests of any nature
encumbering such Repurchase Facility, and (iii) no consent, approval or authorization of
any Person is required for any such transfer or assignment by the holder of such
Repurchase Facility.
3. Valid Assignment. Upon consummation of the purchase contemplated to occur in respect
of such Repurchase Facility on the Transfer Date, the Seller will have validly and
effectively conveyed to the Purchaser all legal and beneficial interest in and to such
Repurchase Facility free and clear of any and all liens, pledges, encumbrances, charges,
security interests or any other ownership interests of any nature.
4. Underlying Assets. Any and all representations and warranties related to an Underlying
Asset set forth in the other Schedules B will be incorporated in this Schedule B(6) for
such Repurchase Facility and be applicable to such Repurchase Facility (except for those
that are factually inapplicable by virtue of the fact that the Seller does not own and is not
assigning ownership interests in the underlying asset).
SCHEDULE B(7)
OF REAL ESTATE BANK LOAN
With respect to each Real Estate Bank Loan (a "REBL"), the Seller hereby represents and
warrants, as of the date herein specified or, if no such date is specified, as of the Transfer Date,
except as set forth on Schedule C, that:
I. Accuracy of Information. The information pertaining to each REBL in Schedule A was
true and correct in all material respects as ofthe Transfer Date.
2. Title to Asset. Immediately prior to the sale, transfer and assignment to Purchaser, (i)
Seller had good and marketable title to, and was the sole owner and holder of, such
REBL, (ii) Seller full right, power and authority to transfer, and is transferring, such
REBL free and clear of any and all liens, pledges, encumbrances, charges, security
interests or any other ownership interests of any nature encumbering such REBL, and (iii)
no consent, approval or authorization of any Person is required for any such transfer or
assignment by the holder of such REBL.
3. Valid Assignment. Upon consummation ofthe purchase contemplated to occur in respect
of such REBL on the Transfer Date, Seller will have validly and effectively conveyed to
Purchaser all legal and beneficial interest in and to such REBL free and clear of any and
all liens, pledges, encumbrances, charges, security interests or any other ownership
interests of any nature.
4. Compliance with Law. As of the date of its origination, such REBL complied in all
material respects with, or was exempt from, all requirements of federal, state or local law
relating to the origination of such REBL.
5. Absence of Default. In the case of each REBL: (A) Other than payments due but not yet
30 days or more delinquent, there is no monetary default, breach, violation or event of
acceleration existing under the related Underlying Note or the related security agreement,
and to the Seller's knowledge no non-monetary default has occurred and no event has
occurred (other than payments due but not yet delinquent) which, with the passage of
time or with notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration under the related security
agreement or the related Underlying Note, provided, however, that this representation and
warranty does not address or otherwise cover any default, breach, violation or event of
acceleration that specifically pertains to any matter otherwise covered by any other
representation and warranty made by the Seller in any other paragraph of this Schedule
B(7), and (B) neither the Seller nor any servicer on its behalf has waived any material
default, breach, violation or event of acceleration under such security agreement or
Underlying Note, except for a written waiver contained in the related Collateral File
being delivered to the Purchaser or its designee, and no such waiver has been granted
since the date upon which the due diligence file related to the applicable Loan was
delivered to the Trustee, and pursuant to the terms of the related security agreement or the
related Underlying Note and other documents in the related Collateral File no Person or
party other than the holder (or any servicer or other party acting on behalf of holder) of
such Underlying Note may declare any event of default or accelerate the related
indebtedness under either of such security agreement or Underlying Note.
6. Absence of Delinquencies. As of the Transfer Date, each REBL, in the prior I 2 months
(or since the date of origination if such REBL has been originated within the past 12
months), has not been, 30 days or more past due in respect of any scheduled payment.
7. Absence of Bankruptcy Debtors. As of the date of origination of each REBL, no
Borrower was a debtor in any state or federal bankruptcy or insolvency proceeding and to
Seller's knowledge, no Borrower is a debtor in any state or federal bankruptcy or
insolvency proceedings.
8. Absence of Litigation. In the case of each REBL as of the date of origination and, to the
Seller's knowledge, as of the Transfer Date, there was no pending action, suit or
proceeding, or governmental investigation, against the related Borrower the adverse
outcome of which could reasonably be expected to materially and adversely affect such
Borrower's ability to pay principal, interest or any other amounts due under such Loan or
the security intended to be provided by the REBL documents.
9. Usury. The REBL and the interest (exclusive of any default interest, late charges or
prepayment premiums) contracted for on such REBL complied as of the date of
origination with, or is exempt from, applicable state or federal laws, regulations and other
requirements pertaining to usury.
USActive 12824081.13 -29-
SCHEDULEC
EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
USActive 12824081.13 C-1
SASCO 2008-C2 Exceptions to Representations and Warranties
Unless otherwise specified, all capitalized ten11S undefined herein have the meaning specified in the Master
Participation Agreement.
Mortgage Loans
Representation numbers referred to below relate to the corresponding representations and warranties set forth in
Schedule B(l) to the Master Participation Agreement
Schedule A
Loan
Number# Collateral Interest Exception
Exception to Representation 8: Insurance.
9 One Kansas City Place The Underlying Instrument does not include the notification
regarding force-placed insurance required by RSMo. 427 .120.
As a result, the Lender could not add the cost of insurance it
places on the collateral to the debt.
Exception to Representation 9: Engineering Re[!orts.
9 One Kansas City Place The Seller purchased the Mortgage Loan from a third party and
Engineering Reports were not obtained or reviewed as of the
closing of such purchase.
Exception to Representation 10: Zoning ComQliance.
37 Strathallan Hotel Blacktop and parking areas on the Underlying Mortgage
Property encroach onto adjoining properties, which
encroachments are subject to easement agreements of record.
The Underlying Mortgage Property is also subject to
encroachments of blacktop from adjoining properties onto two
boundaries, each by no more than 1.5 inches.
41 The Point The site office building and utility building are legally non-
confonning as to set-back requirements. The boathouse and
dock are legally non-conforming in that they exceed the height
and square footage limitations.
Exceptions to Representation 19: Contingent Interest.
9 One Kansas City Place The Borrower must pay Additional Interest in connection with
prepaying of the Joan, at maturity, or upon acceleration.
Exceptions to Representation 20: Egui!x ParticiQations/Interests.
USActive 12907150.7
Schedule A
Loan
7 Commons of Mclean The Mortgage Note provides the lender with a profit
participation of 56% of the first $19,000,000 generated by a
sale of the Underlying Mortgage Property and a 45% of the
amount in excess of $19,000,000.
43 Guilford Ctr- Greensboro The Mortgage Note provides the lender with a profit
participation of 50% of the net proceeds in the event of a sale
of the Underlying Property.
Exceptions to Representation 24: Acceleration UI!On Transfer of Mortgage
Prol!er!):.
38 Emerald Dunes Golf Club A portion of the Underlying Mortgage Property, consisting of
an undeveloped parcel, may be transferred for consideration
without triggering the acceleration of the Mortgage Loan
subject to certain conditions contained in the Underlying
Instruments.
Exceptions to Representation 26: Environmental Rel!orts.
9 One Kansas City Place The Seller purchased the Mortgage Loan from a third party and
Environmental Reports were not obtained or reviewed as of the
closing of such purchase.
Exceptions to Representation 35: Ground Leases.
50 Storage Deluxe Southern As to sub-clause (B), the ground lease may be subordinated to
a fee mortgage, but only if the fee mortgagee delivers a non-
disturbance agreement confim1ing that it will not disturb the
ground Jessee, provided that there is no default under the
ground lease.
As to sub-clause (C), the ground lease is assignable to the
holder of the Mortgage without consent of the ground lessor,
provided the holder of the Mortgage delivers a copy of the
Mortgage, notice of such assignment and the name and address
of the assignee.
As to sub-clause (I), any insurance proceeds equal to or Jess
than $375,000 are to be deposited with the ground lessee; all
proceeds over $375,000 are to be deposited with and held by
the most senior leasehold mortgagee or the fee mortgagee to be
disbursed in accordance with the tenns of the ground lease.
USActive 12907150.7
Schedule A
Loan
Exceptions to Representation 40: Other Collateral.
41 The Point The Mortgage Loan is also secured by (i) a Principal's
Agreement for non-recourse carveouts, and (ii) an
Environmental Indemnity Agreement, each made by Robert L.
Burch, Everlands Founders Company, L.P. and White Badge
LLC.
4 Ritz-Carlton Kapalua The Mortgage Loan is secured in part by a grant to the Seller of
a security interest in the Underlying Obligor's right, title and
interest in and to the FF&E Reserve (as defined in the Second
Amended and Restated Management Agreement, dated as of
the origination date, by and between the Underlying Obligor
and The Ritz-Carlton Hotel Company, L.L.C. (the
"Management Agreement")). Marriott Intemational Capital
Corporation (the "FF&E Lender") separately made a loan to the
Underlying Obligor in the original principal amount of
$5,000,000 (the "FF&E Loan"). The FF&E Loan is secured by
a grant to the FF &E Lender of a security interest in the
Underlying Obligor's right, title and interest in and to the
FF&E Reserve. Pursuant to the terms of a Subordination and
Intercreditor Agreement, dated as of February 21, 2008, by and
between the Seller and the FF&E Lender, the Seller, for itself
and each future holder of the Mortgage Loan, agreed in part
that during the period from February 21,2008, to February 21,
2011 (the "Shared Collateral Period"), the Mortgage Loan
security interests held by the Seller in those funds that are
actually and properly deposited in the FF&E Reserve during
the Shared Collateral Period in accordance with the
Management Agreement (such funds, the "Shared Collateral")
will be subordinated and junior only to the FF&E Loan security
interests held by the FF&E Lender in the Shared Collateral. In
addition, the FF&E Lender stipulated and agreed in the
Subordination and Intercreditor Agreement that the FF&E
Lender has no legal or equitable interest in any other sums or
property owned or controlled by the Underlying Obligor.
Exceptions to Representation 44: O[!erating Statements.
39 Storage Deluxe 21" Street The Mortgage Loan does not require that any financial
50 Storage Deluxe Southem
statements be audited by an independent certified public
42 Muirfield Multifamily
accountant.
47 Idlewood Apartments The Mortgage Loan requires annual audited statements only.
USActive 12907150.7
Schedule A
Loan
4 Ritz-Carlton Kapalua
43 Guilford Ctr- Greensboro The Mortgage Loan does not require that the annual financial
statements be audited unless the Lender requests the Borrower
to do so.
Exceptions to Representation 47: Non-consolidation.
39 Storage Deluxe 21" Street A non-consolidation opinion has not been obtained with
50 Storage Deluxe Southern
respect to the Borrower and neither the Underlying Instruments
42 Muirfield Multifamily
nor the organizational documents of the Borrower require
independent directors.
7 Commons of Mclean A non-consolidation opinion has not been obtained with
38 Emerald Dunes Golf Club
respect to the Borrower.
Mezzanine Loans
Representation numbers referred to below relate to the corresponding representations and warranties set forth in
Schedule B(4) to the Master Participation Agreement
Schedule A
Loan
Exceptions to Representation 3: Amendments/Waivers.
30 Innkeepers Anaheim A Fourth Amendment to the Mezzanine Loan agreement was
executed by the Seller and the Borrower and has been
submitted to the applicable servicer of the Mortgage Loan for
consent, as required by the intercreditor agreement, but the
servicer has not yet provided its consent. The Fourth
Amendment to the Mezzanine Loan agreement, among other
things, increases the spread, extends the maturity date by one
year and adds a six-month extension option.
46 Montauk Yacht Club The Lender has granted 60 day grace period to Borrower to
deliver a complete copy of Borrower's annual financial
statements in accordance with the tenns of the Mezzanine Loan
Agreement.
USActive 12907150.7 4
Schedule A
Loan
Number# Collateral Interest
Exceptions to Representation 14:
36
26
La Reserve
Sienna at Riverview
Exceptions to Representation 20:
17
21
19
18
24
Archstone Pool 3 Mezz B
Archstone Holdco Mezz B
USActive 12907150.7
Exception
Deferred Interest.
Pursuant to the Mezzanine Loan agreement, the Borrower is
required to pay a monthly installment of interest only, accruing
at the Applicable Interest Rate (generally, one month Libor
plus 3%), but capped at a rate not to exceed 7% ("Pay Rate"),
and the difference between the interest accruing on the Loan at
the Pay Rate and the Applicable Interest Rate, shall be deferred
and to the extent permitted by law, accrue interest at the
Applicable Interest Rate and shall be due and payable on the
Maturity Date.
Mezzanine Security.
With respect to the Mezzanine Loans defined on Exhibit A
hereto as: Archstone Pool 3 Mezz B, Archstone Pool 4 Mezz B,
Archstone Pool 7 Mezz B, Archstone Pool 9 Mezz B and
Archstone HoldCo Mezz B, such loans are not secured by a
pledge of the direct or indirect equity interests in the
Underlying Property Owners of the following Underlying
Mortgage Properties:
Pool 3 Mezz B:
I. Connecticut Heights, Washington, DC
2. Park Connecticut, Washington, DC
Pool4 Mezz B:
I. Alban Towers (land and garage), Washington, DC
2. Alban Towers (building), Washington, DC
3. 250 I Porter Street; Washington, DC
4. Calvert Woodley, Washington, DC
5. Cleveland House, Washington, DC
Pool 7 Mezz B:
1. Corcoran House, Washington, DC
2. The Statesman, Washington, DC
3. The Consulate, Washington, DC
Pool 9 Mezz B:
1. The Albemarle, Washington, DC
2. Tunlaw Park, Washington, DC
3. Tunlaw Gardens, Washington, DC
4. Van Ness South, Washington, DC
HoldCo Mezz B:
I. The Flats at Dupont Circle, Washington, DC
Schedule A
Loan
Exceptions to Representation 25: Insurance Proceeds.
35 Archstone Pool 1 Mezz B The Underlying Instruments require that all insurance policies
32 Archstone Pool 2 Mezz A name the mezzanine lender (but not its respective successors
27 Archstone Pool 2 Mezz B
and assigns) as the insured or additional insured, as their
22 Archstone Pool 3 Mezz A
interest may appear.
16 Archstone Sellco Mezz A
23 Archstone Sellco Mezz B
20 Archstone Holdco Mezz A
24 Archstone Holdco Mezz B
29 Austin Centre Sr. Mezz The related Underlying Instruments do not require that the
49 Austin Centre Jr. Mezz mezzanine lender and their respective successors and assigns
34 Ventana Inn Sr. Mezz
be named as the insured or additional insured, as their
45 Ventana Inn Jr. Mezz
respective interests may appear, in connection with certain
insurance, including, but not limited to: ( 1) blanket fidelity
bond coverage insuring against losses resulting from dishonest
or fraudulent acts committed by pennanent employees or
temporary contract employees and (2) such insurance as
required to be maintained pursuant to the related management
agreement or any franchise agreement, and to the extent that
such insurance is not duplicative of insurance otherwise
required by the Underlying Instruments.
Exceptions to Representation 26: Notice of Default.
35 Archstone Pool 1 Mezz B The lender of the related Mortgage Loan is not required to
provide written notice of all defaults to the holder(s) of the
related Mezzanine Loan(s). However, the lender of the related
Mortgage Loan is required to provide written notice of any
defaults giving rise to a Mezzanine Lender's right to cure a
default on the Mortgage Loan.
16 Archstone Sell co Mezz A
23 Archstone Sellco Mezz B
USActive 12907150.7
Schedule A
Loan
20 Archstone Holdco Mezz A
24 Archstone Holdco Mezz B
48 Minnesota Industrial Portfolio
29 Austin Centre Sr. Mezz
49 Austin Centre Jr. Mezz
46 Montauk Yacht Club
36 La Reserve Mezz
26 Sienna at Riverview
Exceptions to Representations 35 & 36: Zoning Comi!Iiance and Encroachments.
8 Innkeepers Floater Six of the underlying properties are legally non-conforn1ing as
to zoning, with minor portions of the improvements
encroaching into building setback areas. The setbacks range
from less than one foot to a maximum of 22 feet.
Exceptions to Representation 37: Environmental Conditions.
34 Ventana Inn Sr. Mezz Seller has been advised of various notices received by the
45 Ventana Inn Jr. Mezz owner of the Underlying Property from the State of California
Regional Water Quality Control Board and the Monterey
County Department of Health and/or its representatives. Such
correspondence disclosed certain violations of applicable laws
related to the Underlying Property's wastewater treatment and
disposal system. Seller has also been advised that the State of
California Regional Water Quality Control Board issued a
Cleanup and Abatement Order for the Underlying Property
requiring the implementation of a facility-wide wastewater
treatment and disposal system. To Seller's knowledge, the
owner of the Underlying Property is in compliance with such
Cleanup and Abatement Order, there is no current violation of
applicable laws related to the Underlying Property's
wastewater treatment, and there has been no material adverse
effect to the Underlying Property as a result of the original
violation and the issuance such Cleanup and Abatement Order.
31 301 Howard Street Jr. Mezz The Seller received a letter from Environmental Resources
Management (ERM) on June 26, 2007 recommending further
steps to address elevated concentrations ofTPH-g and BTEX
in the ground water. In March 2007, ERM conducted a Phase I
Environmental Site Assessment at 195 Beale Street and 301
Howard Street in San Francisco, California. The results of the
Phase I ESA Subsequent to the Phase I Environmental Site
Assessment and Limited Compliance Review, ERM conducted
USActive 12907150.7
Schedule A
Loan
a limited Phase II investigation at the property at 195 Beale
Street in San Francisco, California. There was evidence of
TPH-g and BTEX impacts observed at the site, however no
strong evidence was observed during this investigation that
indicates the impacts are necessarily related to a release from a
UST at the site. The impacts observed appear to be related to
groundwater conditions.
The ERM made the following recommendations: (1) Present
the results of the Limited Phase II Investigation to the San
Francisco Department of Public Health's Environmental Health
Section. This agency will determine if additional investigation
activities are necessary or if no further action status is
appropriate for the site; and (2) If the San Francisco
Environmental Health Section detem1ines that additional
investigation activities are needed for 195 Beale Street before a
no further action status can be issued, ERM recommends
installing 3 monitoring wells at the site. Ground water in the 3
wells would be monitored on a quarterly basis for one year for
TPH-g and BTEX to evaluate if the elevated TPH-g and BTEX
ground water concentrations resulted from an on-site source or
an off-site source.
The Borrower presented the results of the Limited Phase II in
July 2007. As of May 21, 2008, no response has been received
by Archon from the San Francisco Department of Public
Health's Environmental Health Section.
USActive 12907150.7
EXHIBITD
Apollo Guaranty
(Mezzanine Loan)
REQUIRED CAPITAL IMPROVEMENTS GUARANTY (MEZZANINE LOAN)
TIDS REQUIRED CAPITAL . IMPROVEMENTS GUARANTY
(MEZZANINE LOAN) (this "Guaranty") is executed as of this 29th day of June, 2007 by
APOLLO INVESTMENT CORPORATION, llaving an address at 9 West 57th Street, New
York, New York 10019 ("Guarantor"), for the benefit of LEHMAN ALI INC., having an
address at 399 Park A venue, New York, New York 10022 ("Lender'').
W IIN ~ . S . . S . ~ T H:
WHEREAS, GRAND PRIX MEZZ BORROWER 2 FLOATING LLC, a
Delaware limited liability company ("Borrower") is indebted to Lender for the loan made to
Borrower (the "Loan") pursuant to a Mezzanine Loan Agreement dated as ofthe date hereof(as
amended or modified from time to time, the "Loan Agreement");
WHEREAS, pursuant to Section 7.4 of the Loan Agreement, Borrower is
obligated to perform certain Required Capital Improvements (as defined in the Loan Agreement)
at the Property and to fund to Lender certain reserve deposits in connection therewith, and may
deliver to Lender this Guaranty in lieu of making certain of such reserve deposits; and
WHEREAS, Guarantor is the owner of an indirect interest in Borrower, and
Guarantor has directly benefited from Lender's making the Loan to Borrower and will directly
benefit from Borrower undertaking the Required Capital Improvements.
NOW, THEREFORE, for good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I.
NATURE AND SCOPE OF GUARANTY
1.1. Guaranty of Obligation. Guarantor hereby irrevocably and
unconditionally guarantees to Lender and its successors and assigns the payment and
performance of the Guaranteed Obligations as and when the same shall be due and payable,
whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably
and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a
primary obligor.
1.2. Definition of Guaranteed Obligations. As used herein, the term
"Guaranteed Obligations" means all obligations and liabilities of Borrower to Lender (a) to
complete the Required Capital Improvements (other than the Immediate PIP Work and Initial
Construction Work to the extent sufficient cash reserves for such work are deposited with Lender
or Mortgage Lender) in a timely manner in accordance with the terms and requirements of
Section 7 A. I of the Loan Agreement, (b) to keep the applicable Individual Properties free from
all Liens arising from or relating to the construction of the Required Capital Improvements (other
13701407.3
than the Immediate PIP Work and Initial Construction Work to the extent sufficient cash reserves
for such work are deposited with Lender or Mortgage Lender), and (c) to pay for all hard costs,
soft costs and other costs and expenses incurred or required to be incurred, and for all obligations
and liabilities incurred or assumed, in connection with the completion of the Required Capital
Improvements (other than the hnmediate PIP Work and Initial Construction Work to the extent
sufficient cash reserves for such work are deposited with Lender) in accordance with the Loan
Agreement.
1.3. Nature of Guaranty. This Guaranty is an irrevocable, absolute,
continuing guaranty of payment and performance and not a guaranty of collection. This Guaranty
may not be revoked by Guarantor and shall continue to be effective with respect to any
Guaranteed Obligations arising or created after any attempted revocation by Guarantor and after
(if Guarantor is a natural person) Guarantor's death (in which event this Guaranty shall be
binding upon Guarantor's estate and Guarantor's legal representatives and heirs). The fact that
at any time or from time to time the Guaranteed Obligations may be increased or reduced shall
not release or discharge the obligation. of Guarantor to Lender with respect to the Guaranteed
Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Note
and shall not be discharged by the assignment or negotiation of all or part of the Note.
1.4. Guaranteed Obligations Not Reduced by Offset. The Guaranteed
Obligations and the liabilities and obligations of Guarantor to Lender hereunder shall not be
reduced, discharged or released because or by reason of any existing or future offset, daim or
defense of Borrower or any other Person against Lender or against payment of the Guaranteed
Obligations, whether such offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.
1.5. Payment By Guarantor. If all or any part of the Guaranteed Obligations
shall not be punctually paid and performed when due, whether at demand, maturity, acceleration
or otherwise, Guarantor shall, within five (5) Business Days of demand by Lender and without
presentment, protest, notice of protest, notice of non .. payment, notice of intention to accelerate
the maturity, notice of acceleration of the maturity or any other notice whatsoever, pay in lawful
money of the United States .of America, the amount due on the Guaranteed Obligations to Lender
at Lender's address as set forth herein. Such demand(s) may be made at any time coincident
with or after the time for payment and performance of all or part of the Guaranteed Obligations
and may be made from time to time with respect to the same or different items of Guaranteed
Obligations. Such demand shall be deemed made, given and received in accordance with the
notice provisions hereof.
1.6. No Duty To Pursue Others. It shall not be necessary for Lender (and
Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to
enforce the obligations of Guarantor hereunder, first to (i) institute suit or exhaust its remedies
against Borrower or others liable on the Loan or the Guaranteed Obligations or any other person,
(ii) enforce Lender's rights against any collateral which shall ever have been given to secure the
Loan, (iii) enforce Lender's rights against any other guarantors of the Guaranteed Obligations,
-2-
(iv) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to
enforce this Guaranty, (v) exhaust any remedies available to Lender against any collateral which
shall ever have been given to secure the Loan, or (vi) resort to any other means of obtaining
payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take
any other action to reduce, collect or enforce the Guaranteed Obligations.
1.7. Waivers. Guarantor agrees to the provisions of the Loan Documents and
hereby waives notice of (i) any loans or advances made by Lender to Borrower, (ii) acceptance
of this Guaranty, (iii) any amendment or extension of the Note, the Pledge Agreement, the Loan
Agreement or of any other Loan Documents, (iv) the execution and delivery by Borrower and
Lender of any other loan or credit agreement or of Borrower's execution and delivery of any
promissory notes or other documents arising under the Loan Documents or in connection with
the Properties, (v) the occurrence of any breach by Borrower or an Event of Default, (vi)
Lender's transfer or disposition of the Guaranteed Obligations, or any part thereof, (vii) sale or
foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed
Obligations, (viii) protest, proof of non-payment or default by Borrower, or (ix) any other action
at any time taken or omitted by Lender and, generally, all demands and notices of every kind in
connection with this Guaranty, the Loan Documents, any documents or agreements evidencing,
securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed.
1.8. Payment of Expenses. In the event that Guarantor should breach or fail to
timely perform any provisions of this Guaranty, Guara,ntor shall, within five (5) Business Days
of demand by L e n d e r ~ pay Lender all costs and expenses (including court costs and reasonable
attorneys' fees) actually incurred by Lender in the enforcement hereof or the preservation of
Lender's rights hereunder. The covenant contained in this Section shall survive the payment and
performance of the Guaranteed Obligations.
1.9. Effect of Bankruptcy. fu the event that pursuant to any insolvency,
bankruptcy, reorganization, receivership or other debtor relief law or any judgment, order or
decision thereunder, Lender must rescind or restore any payment or any part thereof received by
Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or
discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect
and this Guaranty shall remain in full force and effect. It is the intention of Borrower and
Guarantor that Guarantor's obligations hereunder shall not be discharged except by Guarantor's
performance of such obligations and then onlyto the extent of such performance.
1.10. Waiver of Subrogation, Reimbursement and Contribution.
Notwithstanding anything to the contrary contained in this Guaranty, until the Debt is paid in
full, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates any and
all rights it may now or hereafter have under any agreement, at law or in equity (including,
without limitation, any law subrogating Guarantor to the rights of Lender), to assert any claim
against or seek contribution, indemnification or any other form of reimbursement from Borrower
or any other party liable for payment of any or all of the Guaranteed Obligations for any payment
made by Guarantor under or in connection with this Guaranty or otherwise.
-3-
1.11. Termination. 1bis Guaranty and the obligations of Guarantor hereunder
shall terminate upon the payment in full of the Loan.
1.12. Completion of Work. Guarantor shall be in default of this Guaranty if, in
Lender's judgment, Guarantor (a) fails to pursue completion of the Required Capital
Improvements diligently or (b)fails to complete the Required Capital Improvements by the time
required by the Loan Documents. In any such event, Lender may (in addition to all other
remedies available to Lender), upon written notice to Guarantor, take any action Lender believes
necessary to complete the Required Capital Improvements (but Lender shall not be obligated to
do so and may suspend or terminate any such actions at any time, without completion). No such
actions by Lender shall release or limit the liability of Guarantor and Guarantor agrees to pay
Lender all sums expended by Lender in undertaking to complete such Required Capital
Improvements, whether or not such Required Capital Improvements are actually completed.
ARTICLE II.
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Guarantor hereby consents and agrees to each of the following and agrees that
Guarantor's obligations under this Guaranty shall not be released, diminished, impaired, reduced
or.adversely affected by any of the follo.wing and waives any common law, equitable, statutory
or other rights (including without limitation rights to notice) relating to Guarantor's obligations
hereunder which Guarantor might otherwise have as a result of or in connection with any of the
following:
2.1. Modifications. Any renewal, extension, increase, modification, alteration
or rearrangement of all or any part of the Guaranteed Obligations, the Loan Agreement, the other
Loan Documents or any other document, instrument, sontract or understanding between
Borrower and Lender or any other parties pertaining to the Guaranteed Obligations or any failure
of Lender to notify Guarantor of any such action.
2.2. Adjustment. Any adjustment, indulgence, forbearance or compromise
that might be granted or given by Lender to Borrower or any Guarantor.
2.3. Condition of Borrower or Guarantor. The insolvency, bankruptcy,
arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of
Borrower, Guarantor or any other party at any time liable for the payment of all or part of the
Guaranteed Obligations; or any dissolution of Borrower or Guarantor o.r any sale, lease or
transfer of any or all of the assets of Borrower or Guarantor or any changes in the shareholders,
partners or members of Borrower or Guarantor, or any reorganization of Borrower or Guarantor.
2.4. Invalidity of Guaranteed Obligations. The invalidity, illegality or
unenforceability of all or any part of the Guaranteed Obligations or any document or agreement
executed in connection with the Guaranteed Obligations for any reason whatsoever, including
-4-
without limitation the fact that (i) the Guaranteed Obligations or any part thereof exceeds the
amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof
is ultra vires, (iii) the officers or representatives executing the Note, the Pledge Agreement, the
Loan Agreement or the other Loan Documents or otherwise creating the Guaranteed Obligations
acted in excess of their authority, (iv) the Guaranteed Obligations violate applicable usury laws,
(v) Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) .
which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi)
the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery
and performance of any document or instrument representing part of the Guaranteed Obligations
or executed in connection with the Guaranteed Obligations or given to secure the repayment of
the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note, the
Pledge Agreement, the Loan Agreement or any of the other Loan Documents have been forged
or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain
liable hereon regardless of whether Borrower or any other person be found not liable on the
Guaranteed Obligations or any part thereof for any reason.
2.5. Release of Obligors. Any full or partial release of the liability of
Borrower on the Guaranteed Obligations or any part thereof, or of any co-guarantors, or any
other Person now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly
and severally, to pay, perform; guarantee or assure the payment of the Guaranteed Obligations,
or any part thereof (except for the express release. in writing by Lender of any or all ,of
Guarantor's obligations under this Guaranty), it being recognized, acknowledged and agreed by
Gu&:rantor that Guarantor may be required to pay the Guaranteed Obligations in full without
assistance or support of any other party, and Guarantor has not been induced td enter into this
Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties
will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other
parties to pay or perform the Guaranteed Obligations.
2.6. Other Collateral. The taking or accepting of any other security, collateral
or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.
2.7. Release of Collateral. Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation negligent, willful,
unreasonable or unjustifiable impairment) of any collateral, property or security at any time
existing ~ n connection with, or assuring or securing payment of, all or any part of the Guaranteed
Obligations.
2.8. Care and Diligence. The failure of Lender or any other party to exercise
diligence or reasonable care in the preservation, protection, enforcement, sale or other handling
or treatment of all or any part of any collateral, property or security, including but not limited to
any neglect, delay, omission, failure or refusal of Lender (i) to take or, prosecute any action for
the collection of any of the Guaranteed Obligations or (ii) to foreclose, or initiate any action to
foreclose, or, once commenced, prosecute to completion any action to foreclose upon any
-5-
security therefor, or (iii) to take or prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the Guaranteed Obligations.
2.9. Unenforceability. The fact that any collateral, security, security interest or
lien contemplated or intended to be given, created or granted as security for the repayment of the
Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall
prove to be unenforceable or subordinate to any other security interest or lien, it being
recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance
on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of
any of the collateral for the Guaranteed Obligations.
2.1 0. Offset. The Note, the Guaranteed Obligations and the liabilities and
obligations of Guarantor to Lender hereunder shall not be reduced, discharged or released
because of or by reason of any existing or future right of offset, claim or defense of Borrower
against Lender, or any other party, or against payment of the Guaranteed Obligations, whether
such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or
the transactions creating the Guaranteed Obligations) or otherwise.
2.11. Merger. The reorganization, merger or consolidation of Borrower into or
with any o t h ~ r Person.
2.12. Preference. Any payment by Borrower to Lender is held to constitute a
. preference under bankruptcy laws or for any reason Lender is required to refund such payment or
pay such amount to Borrower or someone else.
2.13. Other Actions Taken or Omitted. Any other action taken or orriitted to
be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and
. collateral therefor, whether or not such action or omission prejudices Guarantor or increases the
likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the
terms hereof, it js the unambiguous and unequivocal intention:ofGuarantor that Guarantor shall
be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence,
circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated,
and whether or not otherwise or particularly described herein, which obligation shall be deemed
satisfied only upon the full and final payment and satisfaction ofthe Guaranteed Obligations.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into the Loan Documents and extend credit to
Borrower, Guarantor represents and warrants to Lender as follows:
3.1. Benefit. Guarantor is an Affiliate of Borrower, is the owner of a direct or
indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the
making of this Guaranty with respect to the Guaranteed Obligations.
-6-
3.2. Familiarity and Reliance. Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of the Borrower
and is familiar with the value of any and all collateral intended to be created as security for the
payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such
financial condition or the collateral as an inducement to enter into this Guaranty.
3.3. No Representation By Lender. Neither Lender nor any other party has
made any representation, warranty or statement to Guarantor in order to induce Guarantor to
execute this Guaranty.
3.4. Guarantor's Financial Condition. As of the date hereof, and after giving
effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is and will be
solvent and has and will have assets which, fairly valued, exceed its obligations, liabilities
(including contingent liabilities) and debts, and has and will have property and assets sufficient
to satisfy and repay its obligations and liabilities.
3.5. Legality. The execution, delivery and performance by Guarantor of this
Guaranty and the consummation of the transactions contemplated hereunder do not and will not
contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is
subject or constitute a default (or an event which with notice or lapse of time or both would
constitute a default) under, or result in the breach of, any indenture, mortgage, charge, lien, or
any contract, agreement or other instrument to. which Guarantor is a party or which may be
applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is
enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to the enforcement of creditors' rights.
3.6. Survival. All representations and warranties made by Guarantor herein
shall survive the execution hereof.
ARTICLE IV.
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1. Subordination of All Guarantor Claims. As used herein, the term
"Guarantor Claims" shall mean all debts and liabilities of Borrower to Guarantor, whether such
debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of
Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract,
open account, or otherwise, and irrespective of the person or persons in whose favor such debts
or liabilities may, at their inception, have been, or may hereafter be created, or the manner in
which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall
include without limitation all rights and claims of Guarantor against Borrower (arising as a result
of subrogation or otherwise) as a result of Guarantor's payment of all or a portion of the
Guaranteed Obligations. After the occurrence of an Event of Default or the occurrence of an
event which would, with the giving of notice or the passage of time, or both, constitute an Event
-7-
of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any
other party any amount upon the Guarantor Claims.
4.2. Claims in Bankruutcv. In the event of receivership, bankruptcy,
reorganization, arrangement, debtor's relief, or other insolvency proceedings involving
Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as
to establish its rights hereunder and receive directly from the receiver, trustee or other court
custodian dividends and payments which would otherwise be payable upon Guarantor Claims.
Guarantor hereby assigns such dividends and payments to Lender. Should Lender receive, for
application against the Guaranteed Obligations, any dividend or payment which is otherwise
payable to Guarantor and which, as between Borrower and Guarantor, shall constitute a credit
against the Guarantor Claims, then, upon payment to Lender in full of the Guaranteed
Obligations, Guarantor shall become subrogated to .the rights of Lender to the extent that such
payments to Lender on the Guarantor Claims have contributed toward the liquidation of the
Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the
Guaranteed Obligations which would have been unpaid if Lender had not received dividends or
payments upon the Guarantor Claims.
4.3. Payments Held in Trust. In the event that, notwithstanding anything to
the contrary in this Guaranty, Guarantor should receive any fimds, payment, claim or distribution
which is prohibited by this Guaranty, Guarantor agrees to :hold in trust for Lender an amount
equal to the amount of all funds, payments, claims or distributions so. received, arid agrees that it
shall have absolutely no dominion over the amount of such finids, payments, claims or
distributions so received except to pay them promptly to Lender, and Guarantor covenants
promptly to pay the sane to Lender.
4.4. Liens Subordinate. Guarantor agrees that any liens, security mterests,
judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the
Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests,
judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or
Lender presently exist or are hereafter created or attach. Without the prior written consent of
Lender, Guarantor shall not (i) exercise or enforce any creditor's right it may have against
Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or
proceedings (judicial or otherwise, including without limitation the commencement of, or joinder
in, any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to
enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or
other encumbrances on assets of Borrower held by Guarantor.
ARTICLE V.
MISCELLANEOUS
5.1. Waiver. No failure to exercise, and no delay in exercising, on the part of
Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial
-8-
exercise thereof preclude any other or further exercise thereof or the exercise of any other right.
The rights of Lender hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to departure therefrom,
shall be effective unless in writing and no such consent or waiver shall extend beyond the
particular case and purpose involved. No notice or demand given in any case shall constitute a
waiver of the right to take other action in the same, similar or other instances without such notice
or demand.
5.2. Notices. All notices, consents, approvals and requests required or
permitted hereunder shall be given in writing and shall be effective for all purposes if hand
delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt
requested or (b) expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged),
addressed as follows (or at such other address and Person as shall be designated from time to
time by any party hereto, as the case may be, in a written notice to the other parties hereto in the
manner provided for in this Section):
If to Guarantor:
With a copy to:
With a copy to:
With a copy to:
Ifto Lender:
Apollo Investment Corporation
9 West 57th Street
New York, New York 10019
Attention: Aaron. N. Sack
Facsimile No.: {212}515-3443
Apollo Investment Corporation
9 West 57th Street
Attention: Justin M. Korval
Facsimile No.: (212) 515-3442
Innkeepers USA
340 Royal Poinciana Way
Suite 306
Palm Beach, Florida 33480
Attention: Dennis Craven and Mark Murphy
Facsimile No.: {561) 650-0958
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036-6522
Attention: NeilL. Rock, Esq.
Facsimile No.: {917) 777-3787
Lehman ALI Inc.
399 Park Avenue
-9-
With a copy to:
Attention: Michael E. Lascher
Facsimile No.: (646) 758-2744
Lehman ALI fuc.
399 Park Avenue
Attention: Charlene Thomas
Facsimile No.: (646) 758-4544
and
DechertLLP
CiraCentre
2929 Arch Street
Philadelphia, Pennsylvania 19103
Attention: David Forti, Esq.
Facsimile No.: (215) 994-2222
5.3. Governing Law. THIS GUARANTY WAS NEGOTIATED IN THE
STATE OF NEW YORK, AND MADE BY GUARANTOR .AND ACCEPTED BY
LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN
WERE DISBURSED FROM THE STATE OF NEW YORK, WHICif STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL
RESPECTS,. INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS GUARANTY AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED
IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS)
AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. TO THE
FULLEST EXTENT PERMITTED BY LAW, GUARANTOR HEREBY
UNCONDITIONALLY AND IRREVOCABLY W AlVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS GUARANTY,
AND THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
GUARANTOR ARISING OUT OF OR RELATING TO THIS GUARANTY MAY AT
LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE
CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402
OF THE NEW YORK GENERAL OBLIGATIONS LAW, AND GUAAANTOR W AlVES
-10-
ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFfER HAVE BASED ON
VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
5.4. Invalid Provisions. If any provision of this Guaranty is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term of this Guaranty,
such provision shall be fully severable and this Guaranty shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and
the remaining provisions of this Guaranty shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty,
unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic
understandings and intentions of the parties as expressed herein.
5.5. Amendments. This Guaranty may be amended only by an instrument in
writing executed by the party or an authorized representative of the party against whom such
amendment is sought to be enforced.
5.6. Parties Bound; Assignment; Joint and Several. This Guaranty shall be
binding upon and inure to the benefit of the parties hereto and their respective successors, assigns
and legal representatives; provid.ed., however, that Guarantor may not, without the prior written
consent ofLender, assign anyofits rights, powers, duties or obligations hereJl!lder. If Guarantor
consists of more than one person or party, the obligations and liabilities of each .such person or
party shall be joint and severaL
5.7 ~ Headings. Section headings are for convenience of reference only and
shall in no way affect the interpretation of this Guaranty.
5.8. Recitals. J'he recital and introductory paragraphs hereof are a part hereof,
form a basis for this Guaranty and shall be considered. prima facie evidence of the facts and
documents referred to therein.
5.9. Counterparts. To facilitate execution, this Guaranty may be executed in
as many counterparts as may be convenient ~ r required. It shall not be necessary that the
signature of, or on behalf of, each party, or that the signature of all persons required to bind any
party, appear on each counterpart. All counterparts shall collectively constitute a single
instrument. It shall not be necessary in making proof of this Guaranty to produce or account for
more than a single counterpart containing the respective signatures of, or on behalf of, each of
the parties hereto. Any signature page to any counterpart may be detached from such counterpart
without impairing the legal effect of the signatures thereon and thereafter attached to another
counterpart identical thereto except having attached to it additional signature pages.
5.10. Rights and Remedies. If Guarantor becomes liable for any indebtedness
owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty,
such liability shall not be in any manner impaired or affected hereby and the rights of Lender
-11-
hereunder shall be cumulative of any and all other rights that Lender may ever have against
Guarantor. The exercise by Lender of any right or remedy hereunder or under any other
instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any
other right or remedy.
5.11. Other Defined Terms. Any capitalized term utilized herein shall have the
meaning as specified in the Loan Agreement, unless such term is othexwise specifically defined
herein.
5.12. Entirety. TillS GUARANTY EMBODIES THE FINAL, ENTIRE
AGREEMENT OF GUARANTOR AND LENDER vnTH RESPECT TO
GUARANTOR'S GUARANTY OF THE GUARANTEED OBLIGATIONS AND
SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. TIDS GUARANTY IS INTENDED
BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF
THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN
GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE
PRACTICES, AND NO EVIDENCE OF . PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC
EVIDENCE OF A . . ~ NATURE SHALL. BE USED TO CONTRADICT, VARY,
SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
5.13. Waiver of Right To Trial By Jury. GUARANTOR HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT
BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH
REGARD TO THIS GUARANTY OR ANY CLAIM, COUNTERCLAIM 0 ~ OTHER
ACTION ARISING IN CONNECTION HEREWITH. THIS WAIVER OF RIGHT TO
TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR,
AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND
EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF TIDS
WAIVER..
5 .14. Reinstatement in Certain Circumstances. If at any time any payment of
the principal of or interest under the Note or any other amount payable by the Borrower under
the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Borrower or otherwise, Guarantor's obligations hereunder
with respect to such payment shall be reinstated as though such payment has been due but not
made at such time.
-12-
5.15. Financial Reports. If at any time Guarantor is not a public company,
Guarantor shall provide or cause to be provided to Lender the following:
(i) Updated audited annual .financial statements of Guarantor in form and
content comparable to the financial statements provided to Lender by or on behalf
of Guarantor prior to date hereof, for each fiscal year of Guarantor, as soon as
reasonably practicable and in any event within ninety (90) calendar days after the
close of each such fiscal year;
(ii) Copies of Guarantor's federal and state income tax returns for each taxable
year, as filed with the appropriate governmental authority, within thirty (30) days
after filing of same;
(iii) Within thirty (30} days after the end of each of the first three quarters of
each fiscal year of Guarantor, Guarantor shall deliver to Lender a copy of
Guarantor's unaudited balance sheet, income statement and statement of changes
in financial position for the period from the beginning of such fiscal year to the
end of such quarter in form and content comparable to the financial statements
provided to Lender by or on behalf of Guarantor prior to date hereof. Each such
quarterly report shall be accompanied by a certification by Guarantor to Lender
that such report presents fairly the financial condition of Guarantor as of the
respective dates thereof; and
(iv) From time to time promptly after Lender's reasonable request, such
additional information, reports and statements regarding the business operations
and financial condition Guarantor as Lender may reasonably request.
[NO FURTHER TEXT ON THIS PAGE]
-13-
EXECUTED as of the da and year first a b o v ~ written.
GUARANTOR:
APOLW INVESTMENT CORPORATION, a
Maryland. corporation
By: Apollo Investment Management, L.P ., a
Delaware limited p!Utnetship, .its Investment
Advisor
[Signature Page to Mezzanm Required Capital Improvements Guarantee]
EXHIBITE
Confirmation of Termination of Documents
(Floating Rate Portfolio -Mezzanine)
CONFIRMATION OF TERMINATION OF DOCUMENTS
TillS CONFIRMATION OF TERMINATION OF DOCUMENTS (this ''Termination")
is dated as of July 31, 2009 and made effective as of July 9, 2009 by LEHMAN ALI INC., a
Delaware corporation ("Lender''), in favor of APOLLO INVESTMENT CORPORATION, a
Maryland corporation ("Guarantor").
WITNESSETH
WHEREAS, Grand Prix Mezz Borrower 2 Floating LLC, a Delaware limited liability
company ("Borrower") and Lender entered into a certain Mezzanine Loan Agreement, dated as
of June 29, 2007, which was amended by that certain First Amendment to Mezzanine Loan
Agreement, dated as of September 9, 2008, and that certain Second Amendment to Mezzanine
Loan Agreement, dated as of January 9, 2009, and that certain Agreement, dated as of January 9,
2009 (as so amended, the "Mezzanine Loan Agreement"), pursuant to which Lender made a
mezzanine loan ("Loan") to Borrower in the original principal amount of$117,658,725. Unless
otherwise defined herein, capitalized terms used in this Agreement shall have the meanings set
forth in the Mezzanine Loan Agreement;
WHEREAS, as a condition of Lender making the Loan to Borrower, Guarantor executed
that certain Required Capital Improvements Guaranty (Mezzanine Loan) (the "Required Capital
Improvements Guaranty"), that certain Debt Service Shortfall Guaranty (Mezzanine Loan) (the
"Debt Service Shortfall Guaranty"), that certain Guaranty of Completion (Mezzanine Loan) (the
"Guaranty of Completion") and that certain Litigation Reserve Guaranty (the "Montvale
Guaranty," and together with the Required Capital Improvements Guaranty, the Debt Service
Shortfall Guaranty and the Guaranty of Completion, collectively, the "Guaranties"), each dated
as of June 29, 2007, whereby Guarantor guaranteed to Lender certain obligations and liabilities
of Borrower pursuant to the Loan;
WHEREAS, as of the date hereof, Borrower and Lender are entering into that certain
Third Amendment to Mezzanine Loan Agreement and Other Loan Documents dated as of the
date hereof (the "Third Amendment to Mezzanine Loan Agreement"), pursuant to which
Borrower and Lender have agreed to amend certain terms and provisions of the Loan
Documents, including, without limitation, the termination of the Guaranties; and
WHEREAS, Guarantor has requested that Lender confirm the termination of the
Guaranties and the release and discharge of the Guarantor from any continuing liability or
obligations thereunder.
NOW, THEREFORE, in consideration ofthe sum ofTen and 00/100 ($10.00) Dollars in
hand paid by Guarantor to Lender and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Lender, Lender hereby acknowledges, certifies
and confirms to Guarantor, as follows:
15083 771.6.BUSINESS
(Floating Rate Portfolio -Mezzanine)
1. Lender hereby acknowledges, confirms and certifies to Guarantor that the
Guaranties, and each of them, have been, and are hereby, cancelled and terminated.
2. Lender hereby releases and discharges Guarantor and its Affiliates (other
than Borrower, Mortgage Borrower, Operating Lessee, Grand Prix Holdings, LLC, Innkeepers
USA Limited Partnership, Innkeepers USA Trust (f7k/a Grand Prix Acquisition Trust) and
Manager) from any and all obligations, undertakings, liability, duties and responsibilities arising .
out of, accruing under, relating to, or otherwise expressly surviving the termination of, the
Guaranties.
[Signature Page Follows]
15083771.6.BUSINESS
IN WITNESS WHEREOF, the undersigned has duly signed this Termination as of the
date first written above.
LEHMAN ALI INC., a Delaware corporation

Name: J p. ++::l
Title: .z1... -t'L Q
ZcJ Slj"'o""h!...-1
[Signature Page to Confirmation ofTermination of Documents (Floating Rate Portfolio-
Mezzanine)]
EXHIBITF
Motion of Lehman Commercial Paper Inc. Pursuant to Section 363 of the Bankruptcy Code for
Authority to (I) Consent to Its Non-Debtor Affiliate Lehman ALI Inc. (A) Entry Into Plan
Support Agreement Related to the Restructuring of Innkeepers USA Trust; and (B)
Consummation of the Transactions Set Forth in the Plan Term Sheet; and (II) Provide Funds to
Solar Finance Inc., a Non-Debtor Affiliate, to Provide Debtor-In-Possession Financing
Hearing Date and Time: August 18, 2010 at 10:00 a.m. (Prevailing Eastern Time)
Objection Date and Time: August 11, 2010 at 4:00p.m. (Prevailing Eastern Time)
WElL, GOTSHAL & MANGES LLP
700 Louisiana Street, Suite 1600
Houston, Texas 77002
Telephone: (713) 546-5000
Facsimile: (713) 224-9511
Alfredo R. Perez
Attorneys for Debtors
and Debtors in Possession
-------------------------------------------------------------------X
In re
LEHMAN BROTHERS HOLDINGS INC., et al.,
Debtors.
-------------------------------------------------------------------X
Chapter 11
Case No. 08-13555 (JMP)
(Jointly Administered)
NOTICE OF MOTION OF LEHMAN COMMERCIAL PAPER INC.
PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE
FOR AUTHORITY TO (I) CONSENT TO ITS NON-DEBTOR
AFFILIATE LEHMAN ALI INC. (A) ENTRY INTO PLAN SUPPORT
AGREEMENT RELATED TO THE RESTRUCTURING OF
INNKEEPERS USA TRUST; AND (B) CONSUMMATION OF THE
TRANSACTIONS SET FORTH IN THE PLAN TERM SHEET;
AND (II) PROVIDE FUNDS TO SOLAR FINANCE INC., A NON-DEBTOR
AFFILIATE, TO PROVIDE DEBTOR-IN-POSSESSION FINANCING
PLEASE TAKE NOTICE that a hearing on the annexed motion (the
"Motion") of Lehman Commercial Paper Inc. ("LCPI"), and its affiliated debtors in the
above-referenced chapter 11 cases, as debtors and debtors in possession (together, the
"Debtors") for an order pursuant to section 363 of title 11 of the United States Code (the
"Bankruptcy Code") for authority to (i) consent to its non-Debtor affiliate Lehman ALI
Inc. (a) entry into plan support agreement related to the restructuring of Innkeepers USA
Trust, and (b) consummation ofthe transactions set forth in the Plan Term Sheet (as
US_ ACT! VE:\4 34460 16120158399.0008
defined in the Motion); and (ii) provide funds to Solar Finance Inc., a non-Debtor
affiliate, to provide debtor-in-possession financing, will be held before the Honorable
James M. Peck, United States Bankruptcy Judge, at the United States Bankruptcy Court,
Alexander Hamilton Customs House, Courtroom 601, One Bowling Green, New York,
New York 10004 (the "Bankruptcy Court"), on August 18, 2010 at 10:00 a.m.
(prevailing Eastern Time) (the "Hearing").
PLEASE TAKE FURTHER NOTICE that objections, if any, to the
Motion shall be in writing, shall conform to the Bankruptcy Rules and the Local Rules of
the Bankruptcy Court for the Southern District ofNew York, shall set forth the name of
the objecting party, the basis for the objection and the specific grounds thereof, shall be
filed with the Bankruptcy Court electronically in accordance with General Order M-242
(which can be found at www.nysb.uscourts.gov) by registered users of the Bankruptcy
Court's case filing system and by all other parties in interest, on a 3.5 inch disk,
preferably in Portable Document Format (PDF), WordPerfect, or any other Windows-
based word processing format (with two hard copies delivered directly to Chambers), and
shall be served upon: (i) the chambers of the Honorable James M. Peck, One_ . wling
Green, New York, New York 10004, Courtroom 601; (ii) Weil, Gotshal & Manges LLP,
767 Fifth Avenue, New York, New York 10153, Attn: Alfredo R. Perez, Esq., counsel to
the Debtors; (iii) the Office of the United States Trustee for the Southern District of New
York, 33 Whitehall Street, 21st Floor, New York, New York 10004, Attn: Andy Velez-
Rivera, Esq., Paul Schwartzberg, Esq., Brian Masumoto, Esq., Linda Riffkin, Esq., and
Tracy Hope Davis; Esq., (iv) Milbank, Tweed, Hadley & McCloy LLP, 1 Chase
Manhattan Plaza, New York, New York 10005, Attn: Dennis F. Dunne, Esq., Dennis
US_ ACTIVE:\434460 16120158399.0008 2
O'Donnell, Esq., and Evan Fleck, Esq., counsel to the official committee of unsecured
creditors appointed in these cases, and (v) all parties who have requested notice in these
chapter 11 cases, so as to be so filed and received by no later than August 11, 2010 at
4:00p.m. (prevailing Eastern Time) (the "Objection Deadline").
PLEASE TAKE FURTHER NOTICE that if an objection to the Motion is
not received by the Objection Deadline, the relief requested shall be deemed unopposed,
and the Bankruptcy Court may enter an order granting the relief sought without a hearing.
PLEASE TAKE FURTHER NOTICE that objecting parties are required
to attend the Hearing, and failure to appear may result in relief being granted or denied
upon default.
Dated: July 27, 2010
Houston, Texas
US_ ACTJVE :\4 3446016\20\58399.0008
/s/ Alfredo R. Perez
Alfredo R. Perez
Telephone: (713) 546-5000
Facsimile: (713) 224-9511
3
Hearing Date and Time: August 18,2010 at 10:00 a.m. (Prevailing Eastern Time)
Objection Date and Time: August 11,2010 at 4:00p.m. (Prevailing Eastern Time)
Telephone: (713) 546-5000
Facsimile: (713) 224-9511
Alfredo R. Perez
------------------------------------------------------------------x
In re
Debtors.
------------------------------------------------------------------X
Chapter 11
Case No. 08-13555 (JMP)
MOTION OF LEHMAN COMMERCIAL PAPER INC.
PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE
FOR AUTHORITY TO (I) CONSENT TO ITS NON-DEBTOR
AFFILIATE LEHMAN ALI INC. (A) ENTRY INTO PLAN SUPPORT
AGREEMENT RELATED TO THE RESTRUCTURING OF
INNKEEPERS USA TRUST; AND (B) CONSUMMATION OF.THE
TRANSACTIONS SET FORTH IN THE PLAN TERM SHEET;
AND (II) PROVIDE FUNDS TO SOLAR FINANCE INC., A NON-DEBTOR
TO THE HONORABLE JAMES M. PECK
UNITED STATES BANKRUPTCY JUDGE:
Lehman Commercial Paper Inc. ("LCPI"), as debtor and debtor in
possession (together with its affiliated debtors in the above-referenced chapter 11 cases,
the "Debtors" and, collectively with their non-debtor affiliates, "Lehman"), moves for
authority to (i) consent to Lehman ALI Inc.'s ("ALI"), a non-Debtor affiliate ofLCPI, (a)
entry into a plan support agreement, attached hereto as Exhibit A (the "Plan Support
Agreement"), related to the proposed restructuring of Innkeepers USA Trust (together
US _ACTIVE:\434460 16120158399.0008
with its affiliates, "Innkeepers")
1
; and (b) consummation of the transactions consistent
with the plan term sheet, attached to the Plan Support Agreement and attached hereto as
Exhibit B (the "Plan Term Sheet"); including the subsequent sale of 50% of the equity of
the reorganized Innkeepers for a price not less than $107.5 million, and (ii) provide funds
to Solar Finance Inc. ("Solar"), a non-Debtor affiliate, for the purposes of extending
debtor-in-possession financing to Innkeepers, and respectfully represents:
Introduction
1. In June 2007, ALI originated a $367,658,725 financing (the
"Financing") with Innkeepers. The Financing was bifurcated into a $250,000,000
flqating-rate first mortgage loan (the "Mortgage Loan")
2
and a $117,658,725 floating-rate
mezzanine loan (the "Mezzanine Loan" and, together with the Mortgage Loan, the
"Loans").
3
ALI remains as the lender under the Mortgage Loan, with a current balance
of approximately $220.2 million (plus late fees and any other charges payable under the
Mortgage Loan Agreement). The Mortgage Loan represents a potential significant
source of recovery for creditors of the Debtors.
1
On July 19, 2010, Innkeepers USA Trust and certain of its affiliates filed for chapter 11 protection in the
United States Bankruptcy Court for the Southern District of New York. The chapter 11 case is pending
under case number 10-13800 before the Honorable Shelley C. Chapman. As part of its "first day"
pleadings, Innkeepers filed Debtors' Motion for an Order (A) Authorizing the Debtors to Assume the Plan
Support Agreement and (B) Granting Related Relief[Docket No. 15]. The Innkeepers' pleading is more
than 225 pages long. For purposes of this Motion, only the material agreements and/or documents are
attached.
2
The Mortgage Loan is evidenced by, inter alia, that certain Loan Agreement, dated as of June 29, 2007
(as amended, restated or otherwise modified from time to time, the "Mortgage Loan Agreement").
3
The Mezzanine Loan is currently held by SASCO 2008-C2 LLC (the "Mezzanine Lender"). The Debtors
do not make any representations with respect to the Mezzanine Lender and are not requesting any approval
with respect to the Mezzanine Lender.
US_ ACTIV.E:\434460 16120158399.0008 5
2. As Innkeepers' financial situation has become more dire recently,
this Mortgage Loan has received a significant amount of attention by the Debtors, and,
over the previous several months, the Debtors and their legal and financial advisors have
been focusing on how to maximize recovery on this asset.
3. Beginning in April2010, Innkeepers and ALI engaged in
numerous good faith and arms' -length negotiations to outline a potential restructuring of
Innkeepers that would maximize ALI's recovery on the Mortgage Loan. In conjunction
with these discussions, the Debtors have worked closely with their legal and financial
advisors to determine which alternatives the Debtors should pursue, which included,
among others, seeking to foreclose on the collateral securing the Mortgage Loan, seeking
the appointment of one or more receivers to manage the hotel properties that serve as
collateral, and seeking to lift the automatic stay in a potential Innkeepers' bankruptcy to
pursue rights and remedies. In considering these alternatives, the Debtors' analysis
included economic and non-economic factors, including the expected recovery, the costs
to pursue each alternative, the timing of potential recoveries, and the likelihood of being
able to achieve value through each alternative. Additionally, the Debtors considered the
potential impact on the hotel properties serving as collateral and hotel franchise
agreements. Ultimately, after extensive negotiations with Innkeepers and its legal and
financial advisors, the Debtors determined that the transactions described in this Motion
represent the best alternative for the Debtors to maximize value of the Mortgage Loan.
Relief Requested
4. By this Motion, pursuant to section 363 of chapter 11 of the United
States Code ("the Bankruptcy Code"), LCPI seeks authority (a) to consent to ALI
US_ ACTIVE:\434460 16\20158399.0008 6
entering into the Plan Support Agreement relating to the proposed restructuring of
Innkeepers under chapter 11 of the Bankruptcy Code, (b) for ALI to consummate the
transactions consistent with the Plan Term Sheet which outlines the proposed
restructuring of Innkeepers and contemplates the conversion of ALI's secured debt into
all of the equity in a reorganized Innkeepers and, by means of a separate agreement with
Apollo Investment Corporation ("Apollo"), the sale of 50% of that equity for not less
than $107.5 million, and (c) to loan up to approximately $17.5 million offunds
previously paid by ALI to LCPI to LCPI's non-Debtor affiliate, Solar, for the purposes of
Solar extending a DIP Facility (as defined herein), which is necessary to fund
improvements on the properties. One of the key provisions of the Plan Support
Agreement allows ALI to terminate its obligations under the Plan Support Agreement
after a specified period of time and cause Innkeepers to sell or allow ALI to foreclose on
the properties subject to the Mortgage Loan.
5. Although this Motion seeks relief related to non-Debtor ALI, such
relief is required pursuant to the Order Pursuant to Section 363 of the Bankruptcy Code
and Bankruptcy Rule 6004 Authorizing the Transfer of Loans from Variable Funding
Trust 2007-1 to Non-Debtor Affiliates [Docket No. 9025], entered by this Court on May
13, 2010 (the "Transfer Order"). As set forth in the Transfer Order, LCPI was authorized
to transfer mortgage loans in the possession ofVFT 2007 (as defined below) to any non-
Debtor affiliate subject to certain conditions. Among other things, the Transfer Order
required that any non-Debtor affiliate transferee "obtain all consents and approvals from
the Creditors' Committee and the Court that LCPI would otherwise have been required to
obtain had LCPI been the owner of such [transferred loan] ... " Transfer Order at p. 3.
US_ ACTIYE:\434460 16120158399.0008 7
Jurisdiction
6. This Court has subject matter jurisdiction to consider and
determine this matter pursuant to 28 U.S.C. 1334. This is a core proceeding pursuant to
28 U.S.C 157(b). The statutory basis for the relief requested herein is section 363(b) of
the Bankruptcy Code.
Background
7. Commencing on September 15, 2008, and periodically thereafter
(as applicable, the "Commencement Date"), the Debtors commenced with this Court
voluntary cases under chapter 11 of the Bankruptcy Code. The Debtors' chapter 11 cases
have been consolidated for procedural purposes only and are being jointly administered
pursuant to Rule 1015(b) ofthe Federal Rules of Bankruptcy Procedure. The Debtors are
authorized to operate their businesses and manage their properties as debtors in
possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
8. On September 17, 2008, the United States Trustee for the Southern
District ofNew York (the "U.S. Trustee") appointed the statutory committee of
unsecured creditors pursuant to section 1102 ofthe Bankruptcy Code (the "Creditors'
Committee").
9. On September 19, 2008, a proceeding was commenced under the
Securities Investor Protection Act of 1970 ("SIPA") with respect to Lehman Brothers Inc.
("LBI"). A trustee appointed under SIP A is administering LBI's estate.
10. On January 19,2009, the U.S. Trustee appointed Anton R. Valukas
as examiner in the above-captioned chapter 11 cases (the "Examiner") and by order,
dated January 20, 2009 [Docket No. 2583], the Court approved the U.S. Trustee's
US_ ACTJVE:\434460 16\20\58399.0008 8
appointment of the Examiner. The Examiner issued a report of his investigation pursuant
to section 1106 of the Bankruptcy Code on March 11, 2010 [Docket No. 7531].
11. On April 14, 2010, the Debtors filed a revised joint chapter 11 plan
and disclosure statement [Docket No. 8330 and 8332].
Lehman's Business
12. Prior to the events leading up to these chapter 11 cases, Lehman
was the fourth largest investment bank in the United States. For more than 150 years,
Lehman had been a leader in the global financial markets by serving the financial needs
of corporations, governmental units, institutional clients and individuals worldwide.
13. Additional information regarding the Debtors' businesses, capital
structures, and the circumstances leading to the commencement of these chapter 11 cases
is contained in the Affidavit of Ian T. Lowitt Pursuant to Rule 1007-2 of the Local
Bankruptcy Rules for the Southern District of New York in Support of First-Day Motions
and Applications, filed on September 15, 2008 [Docket No. 2].
Innkeepers
14. In June 2007, ALI originated the Financing to fund a portion of the
approximately $1.8 billion acquisition of all the outstanding shares of Innkeepers by
Apollo. At that time, Innkeepers held 76 hotel properties.
15. The Mortgage Loan currently is secured by 20 hotel properties in
total (the "Collateral Portfolio"), the majority of which are branded extended stay or
limited service hotels, including five Residence Inns (Marriott), three Hampton Inns
(Hilton), and two Courtyards by Marriott (Marriott). The Mezzanine Loan is secured by
pledges of the equity of the entities holding the 20 hotel properties. The current balance
US_ ACTIYE:\434460 16\20\58399.0008 9
of the Mezzanine Loan is approximately $134.3 million (plus late fees and any other
charges payable under the documents evidencing the Mezzanine Loan).
16. Throughout the second half of2008 and during 2009, net operating
income from the Collateral Portfolio declined. Prior to Innkeepers' chapter 11 cases, the
franchise agreements for three of the "Residence Inn" hotels in the Collateral Portfolio
with Marriott terminated by their terms. Additionally, in March and May 2010, four
additional hotels in the Collateral Portfolio received notices of default from Marriott due
to the failure of Innkeepers to complete certain property improvement plan work at the
hotels ("PIPs"). There were similar issues with certain of the other properties held by
Innkeepers. These factors, coupled with the high amount of outstanding debt on
Innkeepers' entire portfolio, similar net operating income declines across Innkeepers
other hotels and payment defaults on all oflnnkeepers' debt obligations have led to the
need for Innkeepers to file for chapter 11 relief.
17. After evaluating all of its strategic options and extensive
negotiations with Innkeepers, the Debtors agreed to convert their debt into substantially
all of the equity in the reorganized Innkeepers, which the Debtors believe will maximize
recovery of their Mortgage Loan. Additionally, the Debtors agreed to provide DIP
financing to address the PIPs and certain other necessary capital expenditure for the
hotels securing the Mortgage Loan.
18. In order to minimize their downside exposure, ALI entered into
separate arrangements with Apollo to sell 50% of the equity it receives under the
Innkeepers' chapter 11 plan to it for $107.5 million. The Debtors further negotiated a
provision in the Plan Term Sheet that provides that if the Debtors are unable to find a
US_ACTIVE:\43446016\20\58399.0008 10
purchaser for such 50% of the equity they receive under Innkeepers' chapter 11 plan for
at least $107.5 million, the Debtors can (but are not required to) terminate the Plan
Support Agreerp.ent. Finally, if the restructuring is not finalized within the time periods
set forth in the Plan Support Agreement, the Plan Support Agreement provides that the
Collateral Portfolio will be sold to a third-party, transferred to ALI, or ALI will be
allowed to foreclose, all as more fully set forth below.
LCPI's Interestin the Mortgage Loan
19. On November 30, 2007, Variable Funding Trust 2007-1 ("VFT
2007"), a Delaware statutory trust, entered into a Note Purchase Agreement pursuant to
which VFT 2007 issued notes (the "VFT 2007 Notes") collateralized by certain mortgage
loans (the "VFT Loans") which were sold and assigned by LCPI to VFT 2007. The
Mortgage Loan, which, upon information and belief, had been repo'd from ALI to LCPI,
was included in the VFT Loans.
20. On February 23, 2010, this Court entered an order (the
"Prepayment Order")
4
authorizing LCPI to prepay, in full, the VFT 2007 Notes, and on
March 19, 2010, LCPI transferred cash to VFT 2007 in an amount sufficient to payoff the
outstanding amount of the VFT 2007 Notes. The Prepayment Order did not specify
whether the VFT Loans were to remain in VFT 2007 or be transferred to LCPI or any
other entities. As a result, on May 13, 2010, this Court entered the Transfer Order, which
authorized LCPI to cause the transfer of the VFT Loans to any non-Debtor affiliate,
provided that (i) such non-Debtor affiliate provides LCPI with a note in the amount of the
4
The Order Pursuant to Section 363 of the Bankruptcy Code and Bankruptcy Rule 6004 Authorizing
Debtor to Prepay Notes Issued by Variable Funding Trusts, dated February 23, 2010 [Docket No. 7220].
US_ ACTIYE:\434460 16120\58399.0008 11
outstanding balance of each such transferred VFT Loan (the "Note") with payment terms
reflecting the payment terms of the applicable VFT Loan, and (ii) such non-Debtor
affiliate provides LCPI with a pledge of the transferred VFT Loan for which control
rights will attach upon non-payment of the Note by such non-Debtor affiliate.
21. The Transfer Order further requires that "any non-Debtor affiliate
to which a [VFT Loan] is transferred shall be required to obtain all consents and
approvals from the Creditors' Committee and the Court that LCPI would otherwise have
been required to obtain had LCPI been the owner of such [VFT Loan] .... " Transfer
Order at p. 3. Pursuant to the Transfer Order, and subject to the requirements thereof, the
Mortgage Loan was transferred to ALI, which currently holds the Mortgage Loan.
Therefore, as required by the Transfer Order, ALI (through LCPI) must obtain Creditors'
Committee and Court approval prior to entering into the Plan Support Agreement, as,
pursuant thereto and detailed below, ALI will, inter alia, consent to the exchange of the
Mortgage Loan for equity in reorganized Innkeepers.
22. Further, on June 24, 2010, ALI and LCPI entered into that certain
(i) Intercompany Promissory Note, dated as of June 24, 2010, by ALI for the benefit of
LCPI (the "Intercompany Note") and (ii) Intercompany Collateral Agreement, dated as of
June 24, 2010, by and between ALI and LCPI (the "Intercompany Collateral Agreement"
and together with the Intercompany Note, the "Intercompany Loan Documents"),
pursuant to which ALI pledged to LCPI ALI's interest in the Mortgage Loan.
US_ ACTIYE:\434460 I 6\20\58399.0008 12
The Plan Support Agreement and Plan Term Sheet
5
23. Beginning in April2010, Innkeepers and ALI engaged in
numerous good faith and arms' -length negotiations to outline a potential restructuring of
Innkeepers that would maximize ALI's recovery on the Mortgage Loan. Following these
negotiations ALI and Innkeepers agreed to the terms of the restructuring embodied in the
Plan Term Sheet, which will be effectuated through a plan of reorganization in
Innkeepers' chapter 11 case.
24. Specifically, with respect to ALI, the Plan Term Sheet contains,
among other provisions, the following terms:
(a) Conversion of Debt to Equity: ALI receiving, in full and final
satisfaction of its approximately $220.2 million secured claim with
respect to the Mortgage Loan, 100% of the new shares of common
stock issued by reorganized Innkeepers pursuant to its chapter 11
plan (the "New Equity"), subject to dilution by a management
equity incentive program;
(b) Releases: Customary, consensual releases of liability by
Innkeepers in favor of ALI and its affiliates, including LCPI, and,
among others, its respective principals, employees, agents, officers,
directors, and professionals under the Plan;
(c) Milestones: Upon the failure to meet one or more of certain
delineated milestones, including, inter alia, the failure by
Innkeepers (i) to secure an order confirming a plan of
reorganization consistent with the terms of the Plan Support
Agreement no later than 240 days from the commencement of the
Innkeepers Chapter 11 Case, or (ii) to go effective on such plan of
reorganization no later than 270 days from the commencement of
the Innkeepers Chapter 11 Case, the Plan Support Agreement shall
terminate upon one business day's notice; and
5
The descriptions and discussions of the Plan Support Agreement and the Plan Term Sheet contained
herein are summary in nature. In the event of any inconsistency between the terms of any of those
documents and their descriptions contained herein, the terms of the actual documents will control.
US_ ACTIVE:\434460 16120158399.0008 13
(d) Remedies Upon Termination - Upon the occurrence of any
Termination Event (as defined in the Plan Support Agreement),
Lehman may terminate the Plan Support Agreement and
Innkeepers' use of its cash collateral. Upon the occurrence of
certain Termination Events related to the timing of confirmation or
the effective date of the plan, Innkeepers shall immediately elect
one of the following remedies or, if Innkeepers does not make the
election within one day, the Debtors will be allowed to elect:
1. Innkeepers will be deemed to have consented to the
modification of the automatic stay to permit ALI to
exercise any and all remedies with respect to its collateral
without any need for further Bankruptcy Court approval;
2. Innkeepers will sell ALI's collateral pursuant to section 363
of the Bankruptcy Code, provided that (i) the sale
procedures shall be agreed upon no later than 120 days
after Innkeepers files for chapter 11; (ii) Lehman shall have
the right to credit bid the Floating Rate Debt; (iii) if sale
proceeds are not paid to Lehman within 60 days of the
Termination Event, title to the Floating Rate Collateral
shall be conveyed to Lehman free and clear of all liens,
claims, and encumbrances; and (iv) the 60-day period shall
not be extended and Innkeepers waives its right to seek any
extension of such period.
25. As means of implementation, the Plan Support Agreement
contemplates, among other things:
(a) all material pleadings filed by Innkeepers during the Innkeepers
Bankruptcy, including so-called "first day" pleadings, being in
form and substance reasonably acceptable to ALI;
(b) entry into two proposed postpetition debtor-in-possession
financing facilities (each a "DIP Facility" and, collectively, the
"DIP Facilities"), consisting of the (a) approximately $50.75
million DIP Facility provided by Five Mile Capital Partners LLC,
which proceeds will be used primarily to perform property
improvement programs on certain hotels securing the Debtors'
obligations under the Fixed Rate Debt, the Residence Inn in San
Diego, and the Residence Inn in Tyson's Corner (each as defined
in the Plan Support Agreement); and (b) approximately $17.5
million DIP Facility provided by an affiliate of Lehman, which
will be used to perform PIPs and certain other investments on
US_ ACTJVE:\434460 16120158399.0008 14
certain hotels securing the Debtors' obligations under the Floating
Rate Mortgage Loan Agreement;
(c) consensual use of ALI's cash collateral, and use of all other
secured lenders' cash collateral, on terms and conditions
acceptable to ALI and subject to the milestones set forth in the
Plan Term Sheet;
(d) Innkeepers securing additional funding of no less than $75 million
to finance its exit from chapter 11; and
(e) this Bankruptcy Court having jurisdiction to hear and decide this
Motion; the Bankruptcy Court presiding over Innkeepers' Chapter
11 Case shall have exclusive jurisdiction with respect to any matter
under or arising out of or in connection with the Plan Support
Agreement or the transactions contemplated therein.
26. As set forth above, the Plan Term Sheet provides the framework
for a chapter 11 plan of reorganization pursuant to which ALI will receive 100% (subject
to dilution for a management incentive program) of the New Equity in exchange for the
Mortgage Loan. ALI's willingness to enter into the Plan Support Agreement is
conditioned on its ability to mitigate its risk by selling a portion of the New Equity. To
that end, ALI has reached an agreement with Apollo (the "AIC Agreement") to sell a
50% stake in its New Equity distribution for not less than $107.5 million, which will be
effectuated after Innkeepers' plan becomes effective. Although the AIC Agreement can
be terminated by ALI or Apollo under certain circumstances subject to a date certain,
ALI is not required to consummate the transactions in the Plan Support Agreement unless
it is able to sell 50% of its New Equity to Apollo or another third-party for a price of no
less than $107.5 million.
The Solar DIP Term Financing
27. Pursuant to the terms of the Mortgage Loan Agreement, ALI held
certain reserves and escrows, including reserves for the performance of the PIPs and
US_ACTJVE:\43446016120158399.0008 15
certain other investments for the hotels securing Innkeepers' obligations under the
Mortgage Loan. On May 19, 2010, events of default occurred under the Mortgage Loan
Agreement, which events of default allowed ALI to apply the reserves and escrows held
by ALI to the principal balance of the Mortgage Loan. On or about July 't6, 2010, ALI
applied substantially all of the reserves and escrows to the principal balance of the
Mortgage Loan, which amounts shall be paid by ALI to LCPI pursuant to the
Intercompany Loan Documents. Such amounts shall then be lent to Solar to fund the
Solar DIP Facility (as defined herein).
28. Innkeepers entered into an agreement with Marriott related to the
PIPs at the hotels securing the Mortgage Loan as well as certain of its other hotels. This
agreement with Marriott provides that subject to certain conditions, including the funding
of the PIPs, Marriott will forbear from exercising its potential rights to terminate its
franchise agreements. This agreement is important to maintain the value of the Collateral
Portfolio. Therefore, the restructuring contemplates the provision by Solar of a DIP
Facility up to approximately $17.5 million to Innkeepers. These funds will be used by
Innkeepers for PIPs and other necessary capital investments in the Collateral Portfolio.
As Solar does not have the necessary funds to provide the DIP Facility, LCPI now wishes
to advance certain ofthe funds paid by ALI to LCPI as set forth in paragraph 25 hereof to
Solar in order to fund the DIP Facility.
29. The key terms of the DIP Facility to be provided by Solar are
summarized herein as follows:
6
6
Any capitalized term used but not defined in the below summary shall have the meaning ascribed to such
term in the DIP Term Sheet, attached hereto as Exhibit C.
US_ ACTIVE:\4 34460 1612015 8399.0008 16
(a) DIP Facility: A term facility of up to $17.5 million (the "Solar
DIP Facility"), allocated to the Collateral Portfolio securing the
Financing, shall be extended to the Borrower pursuant to the terms
and provisions of a DIP loan agreement (the "DIP Loan
Agreement"). The loan funded by the Solar under the Solar DIP
Facility is referred to herein as the "Solar DIP Loan."
(b) Material Terms: A Closing Fee of 0.5% and a Commitment Fee
equal to 1.0%, each of the amounts committed in connection with
the Solar DIP Facility shall be paid by the Borrower (as defined in
the DIP Term Sheet) to Solar on the closing date of the Solar DIP
Facility and shall be fully earned and non-refundable on such date.
Interest on the Solar DIP Loan shall be paid monthly in arrears,
accruing at a per annum floating rate equal to the sum of the 30-
day LIBOR (subject to a floor of 2.0%) plus 5.0% (the "Non-
Default Interest Rate").
(c) Maturity Date: 360 days from the closing of the DIP Facility.
(d) Recoverv: If a plan consistent with the Plan Term Sheet is
confinned and goes effective, the Debtors agreed to waive the right
to a recovery under the Solar DIP Loan except under certain
circumstances.
(e) Termination Date: The earliest to occur of: (a) acceleration by
Solar of the obligations under the Solar DIP Loan due to the
occurrence and continuation of an Event of Default (as defined in
the DIP Tenn Sheet) with respect to the Solar DIP Loan; (b) the
acceleration of the obligations under any other debtor-in-
possession financing provided to Innkeepers due to the occurrence
and continuation of an event of default under such financings; (c)
the effective date of any plan in the bankruptcy proceeding that
provides for payment in full in cash of all obligations owing under
the Solar DIP Facility or is otherwise acceptable to Solar; (d) the
date that is the closing date of any sale of all or substantially all of
any Borrower's assets that constitute collateral for the Solar DIP
Facility; (e) the entry of an order by the Bankruptcy Court granting
relief from the automatic stay permitting foreclosure of any assets
of any Borrower constituting collateral with respect to the DIP
Facility in excess of$1,000,000 in the aggregate; or (f) the entry of
an order of dismissal or conversion of the Chapter 11 Cases with
respect to all of the Borrowers with respect to the Solar DIP
Facility.
US_ ACTIVE:1434460 I 6120158399.0008 17
(f) Additional Terms: The Debtors shall seek an order by the
Bankruptcy Court, which the Debtors are seeking by this Motion,
that includes provisions that (a) the Plan Support Agreement is
approved without condition or delay, including approval for the
Debtors to comply with each provision of the Plan Support
Agreement and (b) the automatic stay in the Debtors' chapter 11
cases is modified to permit any party to the Plan Support
Agreement to take any or all actions permitted by the Plan Support
Agreement.
30. The above summaries set forth the current material terms of the
Plan Term Sheet and Solar DIP Facility. Although LCPI anticipates that the Innkeepers
restructuring will be on terms similar to those set forth above, because this
comprehensive restructuring requires the agreement of a large number of entities and
approval in the Innkeepers' Chapter 11 case, it is possible that certain of the terms of the
restructuring will be different than those set forth herein. As such, ALI and LCPI require
the flexibility to enter into a Plan Support Agreement that contemplates a restructuring
according to modified terms, and submits that allowing ALI and LCPI the flexibility to
do so, subject to the consent of the Creditors' Committee, is in the best interests ofLCPI
and its estate.
The AIC Stock Purchase Agreement
31. As set forth above, before confirmation by the Innkeepers
Bankruptcy Court of Innkeepers' plan of reorganization pursuant to the terms of the Plan
Term Sheet, ALI and Apollo will enter into a stock purchase agreement (the "AIC SPA")
whereby ALI will agree to sell Apollo, and Apollo, subject to the terms therein, will
agree to purchase from ALI the right to receive 50% of the New Equity that ALI receives
in connection with the consummation of the plan in exchange for cash in an amount equal
to $107.5 million. On July 16, 2010, ALI and Apollo entered into a letter agreement (the
US _ACTIVE:\434460 16120\58399.0008 18
"Letter Agreement") evidencing this transaction. The key terms of the transaction with
Apollo are set forth on the AIC Term Sheet, which is attached hereto as Exhibit D.
32. As set forth above, ALI is not required to consummate any of the
transactions set f011h in the Plan Support Agreement or the Plan Term Sheet unless ALI
enters into an agreement with Apollo or another third party which provides for the sale of
50% of the New Equity ALI receives under Innkeepers' chapter 11 plan for a purchase
price of not less than $107.5 million.
ALI's Entry into the Plan Support Agreement,
Consummation of the Transactions Contemplated by the
Plan Term Sheet and the AIC Agreement, and LCPI's Provision of Fund
for Solar's DIP Financing Is in the Best Interests of LCPI and its Creditors
33. ALI's entry into the Plan Support Agreement, and LCPI's consent
to such, is in the best interest of LCPI, its creditors and all parties in interest, is an
exercise of the sound business judgment of both ALI and LCPI, and should be approved
by this Court. Section 363(b)(l) ofthe Bankruptcy Code provides that "It]he trustee,
after notice and a hearing, may use, sell, or lease, other than in the ordinary course of
business, property of the estate." Id. 363(b)(1). When considering a transaction outside
the ordinary course of business, courts in the Second Circuit, and others, require that such
transaction be based upon the sound business judgment of the debtor. Comm. of Equity
Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1070 (2d Cir. 1983);
accord In re Chateaugay Corp., 973 F.2d 141, 143 (2d Cir. 1992); In re Martin, 91 F.3d
389, 395 (3d Cir. 1996) (citing Fulton State Bank v. Schipper (In Re Schipper), 933 F.2d
513, 515 (7th Cir. 1991)); Institutional Creditors ofCont'l Airlines, Inc. v. Cont'l
Airlines, Inc. (In re Cont'l Airlines, Inc.), 780 F.2d 1223, 1226 (5th Cir. 1986).
US_ ACTIVE:I434460 16120158399.0008 19
34. It is generally understood that"[ w]here the debtor articulates a
reasonable basis for its business decisions (as distinct from a decision made arbitrarily or
capriciously), courts will generally not entertain objections to the debtm"s conduct." In
re Johns-Manville Corp., 60 B.R. 612,616 (Bankr. S.D.N.Y. 1986). If a valid business
justification exists, there is a strong presumption that "the directors of a corporation acted
on an informed basis, in good faith and in the honest belief that the action taken was in
the best interests of the company." In reIntegrated Res., Inc., 147 B.R. 650, 656
(S.D.N.Y. 1992) (quoting Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)), appeal
dismissed, 3 F.3d 49 (2d Cir. 1993). The burden of rebutting this presumption falls to
parties opposing the proposed exercise of a debtor's business judgment. Id. (citing
Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984)).
35. The Plan Term Sheet and Plan Support Agreement are the result of
extensive, good-faith, and anns' -length negotiations between ALI/LCPI and Innkeepers,
and their respective counsel and financial advisors. The Debtors and their financial
advisors believe that these transactions will maximize ALI's recovery on the Mortgage
Loan.
36. ALI has determined that the transactions contemplated by the Plan
Support Agreement, including the conversion of its debt to equity under a pre-arranged
plan of reorganization followed by the sale of half of the New Equity to Apollo or a third-
party will provide it with a better recovery than it would likely obtain by restructuring its
debt in a "free fall" bankruptcy. Furthermore, the Plan Support Agreement allows for a
quicker and less costly restructuring of Innkeepers and enables ALI to mitigate its risk by
receiving significant up front cash. If Innkeepers is unable to consummate the plan, the
US_ ACTIVE:\434460 I 6\20158399.0008 20
milestones provided for in the Plan Support Agreement will enable ALI to liquidate its
collateral in a structured sale or foreclosure.
37. The provision of up to approximately $17.5 million by LCPI to
Solar so that Solar can extend the Solar DIP Facility to Innkeepers is a necessary aspect
of the transaction, and benefits LCPI by improving the value of the collateral which is
currently securing the Mortgage Loan (in which LCPI holds a secured interest). Without
this commitment for funds, Marriott's obligation to forebear will cease and it may seek to
exercise its rights with respect to certain hotels in the Collateral Portfolio, a value-
destroying result for the Debtors. Furthermore, the funds being provided by LCPI are
funds that were paid by ALI to LCPI from escrows and reserves that ALI held related to
Innkeepers' debt obligations. As such, the provision of the funds to Solar is in the best
interest of LCPI and its estate and creditors.
38. The agreement between ALI and Innkeepers set forth in the Plan
Support Agreement and Plan Term Sheet is one of several mutually-dependant, global
agreements among Innkeepers and its key constituents. For example, Marriott's entry
into the Marriott Agreement, pursuant to which it has agreed to forbear from exercising
its potential rights to terminate its franchise agreements is conditioned on, among other
things, Innkeepers securing debtor-in-possession financing and completing the property
improvement work plan. The proposed DIP Facilities, in tum, are conditioned on
Marriott's willingness to support the proposed transaction and to forbear from "de-
flagging" substantially all of Innkeepers' properties provided that the property
improvement plan work is completed by Innkeepers in accordance with the Marriott
Agreement. Taken together, these agreements have positioned Innkeepers to accomplish
US_ ACTIYE:\434460 I 6120158399.0008 21
a necessary balance-sheet restructuring that will preserve and maximize Innkeepers'
value for the benefit of all parties. If these agreements were to unravel, it could result in
a protracted non-consensual restructuring of Innkeepers which could severely deplete the
asset value and impair the recovery on the Mortgage Loan.
39. Based on the foregoing, LCPI respectfully submits that the
determination that ALI enter into the Plan Support Agreement and consummate the
transactions set forth in the Plan Term Sheet, the AIC Agreement (or a sale of 50% ofthe
New Equity to a third-party for a purchase price of not less than $107.5 million), and
LCPI's provision of up to approximately $17.5 million to Solar was an exercise of sound
business judgment.
Reservation of Rights
40. The Debtors request that nothing contained herein be deemed to be
a waiver or the relinquishment of any rights, claims, interests, obligations, benefits, or
remedies of LCPI, or any of the Debtors or their non-debtor affiliates except as otherwise
expressly provided in this Motion, that any of the Debtors or non-debtor affiliates may
have or choose to assert on behalf of their respective estates under any provision of the
Bankruptcy Code or any applicable non-bankruptcy law, including against each other or
third parties. Additionally, the parties seek authorization to execute such further
documentation necessary to reflect this reservation of rights.
Notice
41. The Debtors have served notice of this Motion in accordance with
the procedures set forth in the second amended order entered on June 17, 2010 governing
case management and administrative procedures for these cases [Docket No. 9635] on (i)
US_ ACTIVE:1434460 16120158399.0008 22
the U.S. Trustee; (ii) the attorneys for the Creditors' Committee; (iii) the Securities and
Exchange Commission; (iv) the Internal Revenue Service; (v) the United States Attorney
for the Southern District of New York; (vi) the attorneys for ALI; (vii) the attorneys for
Innkeepers; (viii) the attorneys for Apollo; and (ix) all parties who have requested notice
in these chapter 11 cases. The Debtors submit that no other or further notice need be
provided.
42. No previous request for the relief sought herein has been made by
the Debtors to this or any other court.
US_ ACTIVE:\434460 16\20\58399.0008 23
WHEREFORE the Debtors respectfully request that the Court grant the
relief requested herein and such other and further relief as is just.
Dated: July 27, 2010
Houston, Texas
US_ ACTIVE:\434460 16\20\58399.0008
Is/ Alfredo R. Perez
Alfredo R. Nrez
W eil, Gotshal & Manges LLP
700 Louisiana, Suite 1600
Houston, TX 77002
Telephone: (713) 546-5040
Facsimile: (713) 224-9511
24
Exhibit A
(The Plan Support Agreement)
US_ ACTIVE:\434460 16\20158399.0008
EXECUTION COPY
PLAN SUPPORT AGREEMENT
This PLAN SUPPORT AGREEMENT (this "Agreement") is made and entered into as
of July 17, 20 I 0, by and among (i) Innkeepers USA Trust, a Maryland real estate investment
trust ("Innkeepers" and collectively with its subsidiaries, the "Company" or the "Debtors"),
including each obligor under the Floating Rate Debt (defined below) and (ii) Lehman ALI Inc., a
Delaware corporation ("Lehman"), as mortgage lender. The Company and Lehman are
sometimes collectively referred to herein as the "Parties" and individually as a "Party."
The following exhibits are attached hereto and incorporated herein:
Exhibit A Plan Term Sheet
Exhibit B Marriott Agreement
Exhibit C Floating Rate DIP Loan Term Sheet
Exhibit D Fixed Rate DIP Loan Term Sheet
Exhibit E Cash Collateral Order
Exhibit F Form of Joinder
Exhibit G Floating Rate Franchise Agreements
Capitalized terms not defined in this introduction or in the recitals to this Agreement shall
have the meanings assignedthereto in Section 1 hereof.
RECITALS
WHEREAS, the Company is a borrower, and has obligations, under that certain
mortgage loan agreement (the "Floating Rate Debt Agreement"), dated as of June 29, 2007, to
Lehman and the parties thereto, as lenders;
WHEREAS, the Parties, with the assistance of their legal and financial advisors,
have engaged in good faith negotiations with the objective of reaching an agreement with regard
to the conversion ofthe Floating Rate Debt into significantly all of the equity ofthe reorganized
Company, on substantially the terms and conditions set forth in the Plan Term Sheet attached
hereto as Exhibit A (the "Transaction");
WHEREAS, it is anticipated and a fundamental assumption and requirement of
this Agreement, that the Transaction will be effectuated through a prearranged plan of
reorganization (the "Plan") in chapter 11 bankruptcy cases under chapter ll of title 1I of the
United States Code II U.S.C. 101-I532 (the "Bankruptcy Code") filed by the Company (the
"Chapter 11 Cases") in the United States Bankruptcy Court for the Southern District of New
York (the Bankruptcy Court presiding over the Chapter 11 Cases and not the Lehman
Bankruptcy Cases, the "Bankruptcy Court");
!5818454.2
WHEREAS, the Company shall use its commercially reasonable efforts to obtain
Bankruptcy Court approval and confirmation of the Plan in accordance with the Bankruptcy
Code, on terms consistent in all respects with this Agreement;
WHEREAS, Innkeepers has determined that the Transaction is advisable and in
the best interests of its creditors and equity holders;
WHEREAS, entry into this Agreement is within the sound business judgment of
Innkeepers and is in furtherance oflnnkeepers' directors' and officers' fiduciary duties;
WHEREAS, this Agreement sets forth the terms and conditions of the Parties'
respective obligations hereunder.
WHEREAS, Lehman Brothers Holding, Inc. and certain of its affiliates have
commenced chapter 11 cases in the Southern District of New York (the "Lehman Bankruptcy
Cases").
NOW, THEREFORE, in consideration ofthe foregoing, the promises and mutual
covenants, conditions and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto
hereby agree as follows:
Section 1. Definitions.
"Business Day" shall mean any day, other than a Saturday, Sunday, or a legal
holiday, as defined in Rule 9006(a) of the Federal Rules of Bankruptcy Procedure.
"Confirmation Date" shall mean the date of entry by the Bankruptcy Court ofthe
Confirmation Order.
"Confirmation Order" shall have the meaning set forth in Section 6(a)(vi) hereof.
"Disclosure Statement" shall mean the disclosure statement related to the Plan to
be filed in the Chapter II Cases, which shall be in such form and substance as is reasonably
satisfactory to Lehman and with any changes or modifications required by the Bankruptcy Court.
"Effective Date" shall have the meaning set forth in Section 10 hereof.
"Fiduciary Out" shall have the meaning set forth in Section 24 hereof.
"Firm Alternative Transaction" shall have the meaning set forth in Section 24
hereof.
"Fixed Rate Franchise Agreements" shall mean those certain Residence Inn by
Marriott Relicensing Franchise Agreements, between Marriott and Grand Prix Fixed Lessee
LLC, a Delaware limited liability company, dated as of June 29, 2007.
2
"Fixed Rate Collateral" shall mean the forty-five ( 45) properties securing the
Fixed Rate Debt.
"Fixed Rate Debt" shall mean the Company's obligations under that certain
mortgage loan agreement, dated as of June 29, 2007, among Lehman and the affiliates of the
Company parties thereto collateralized by the Fixed Rate Collateral.
"Fixed Rate DIP Facility" shall mean a senior secured super-priority debtor-in-
possession credit facility in conformity with the Fixed Rate DIP Loan Term Sheet.
"Fixed Rate DIP Loan Term Sheet" shall mean the Fixed Rate DIP Loan Term
Sheet attached to this Agreement as Exhibit D.
"Floating Rate Collateral" shall mean the twenty (20) properties securing the
Floating Rate Debt.
"Floating Rate Debt" shall mean the Company's obligations under that certain
mortgage loan agreement, dated as of June 29, 2007, among Lehman and the affiliates of the
Company parties thereto, collateralized by the Floating Rate Collateral.
"Floating Rate DIP Facility" shall mean a senior secured super-priority debtor-
in-possession credit facility in conformity with the Floating Rate DIP Loan Term Sheet.
"Floating Rate DIP Loan Term Sheet" shall mean the Floating Rate DIP Loan
Term Sheet attached to this Agreement as Exhibit C.
"Floating Rate Franchise Agreements" shall mean those agreements set forth on
Exhibit G attached hereto.
"Franchise Agreements" shall mean collectively the Fixed Rate Franchise
Agreements, the Floating Rate Franchise Agreements and the LNR Franchise Agreements.
"Lehman Shares" shall mean shares of the New Equity representing 100% of the
issued and outstanding New Equity, subject to dilution by the Management Equity Incentive
Program (as defined in the Plan Term Sheet) that will be distributed to Lehman pursuant to the
Plan.
"LNR Franchise Agreements" shall mean those certain Residence Inn by
Marriott Relicensing Franchise Agreements, between Marriott and Grand Prix General Lessee
LLC, and Marriott and Grand Prix RIMY Lessee LLC, respectively, dated as of June 29, 2007.
"Marriott" shall mean Marriott International, Inc., a Maryland corporation.
"Marriott Agreement" shall mean the Marriott Agreement attached to this
Agreement as Exhibit B.
3
"Milestones Covenant" shall mean the covenant by the Company not to take any
action, and not to solicit, encourage or support any action by a third party, seeking to amend,
annul, modify, or extend the Plan Milestones.
"New Equity" shall mean the new shares of common stock to be issued by
Innkeepers under the Plan.
"New Equity Sale Transaction" shall have the meaning set forth in Section 6(b)
hereof.
"New Funding" shall mean funding incurred by Innkeepers in the amount of no
less than $75 million, plus such additional amounts in form and substance as may be determined
by the parties.
"Petition Date" shall mean the date on which the Company shall have
commenced the Chapter 11 Cases in the Bankruptcy Court.
"PIP Work" shall mean the construction labor and materials necessary to satisfY
Marriott or any other applicable franchisor that each of the requirements of each of the PIPs has
been satisfied, as identified and approved by Lehman.
"PIP" shall mean the Property Improvement Plans included within and made a
part of the Franchise Agreements covering certain of the hotel properties owned by the
Borrower, which Property Improvement Plans shall have been approved by Marriott or any other
applicable franchisor, and shall have been received and reasonably approved by Lehman, unless
such Property Improvement Plans have been previously approved by Lehman in accordance with
the terms and conditions of the Floating Rate Debt.
"Plan" shall mean a prearranged chapter 11 plan of reorganization for the
Company consistent in all respects with the terms and conditions contained in the Plan Term
Sheet.
"Plan Effective Date" shall mean the effective date of the Plan.
"Plan Milestones" shall have the meaning set forth in Section 6 hereof.
"Plan Related Documents" shall mean the Plan and all documents required to
effectuate the Plan or the Transaction, including, but not limited to, all documents and
agreements contemplated by the Plan Term Sheet and, to the extent not included in the above,
(a) the Disclosure Statement, (b) the materials related to the Solicitation, (c) the proposed
Confirmation Order and (d) any other documents or agreements filed with the Bankruptcy Court
by Innkeepers or at the Company's direction that are necessary to implement the Plan, including
any appendices, amendments, modifications, supplements, exhibits and schedules relating to the
Plan or the Disclosure Statement. All Plan Related Documents shall be in form and substance
reasonably acceptable to Lehman and materially consistent in all respects with this Agreement,
the Plan and the Transaction.
"Plan Term Sheet" shall mean the term sheet attached hereto as Exhibit A.
4
"Pro Forma Capital Structure" shall mean the capital structure of the
reorganized Company following the consummation of the Plan as set forth in the Plan Term
Sheet.
"Solicitation" shall mean the solicitation of votes in respect of the Plan in the
Chapter 11 Cases.
"Termination Date" shall mean the date on which this Agreement is terminated
in its entirety pursuant to Section 6 hereof.
. "Termination Event" shall have the meaning set forth in Section 6 hereof.
"Transfer" shall have the meaning set forth in Section 30 hereof.
Section 2. Approval of the Plan Term Sheet and Related Agreements.
(a) The Parties severally acknowledge and agree that (i) the terms and
conditions set forth in the Plan Term Sheet, the Marriott Agreement, the Floating Rate DIP Loan
Term Sheet, the Fixed Rate DIP Loan Term Sheet and the Cash Collateral Order are acceptable
in all respects to the Parties and their respective counsel and (ii) the Plan Related Documents
shall contain terms and conditions consistent in all material respects with those set forth in the
Plan Term Sheet, the Marriott Agreement, the Floating Rate DIP Loan Term Sheet and the Fixed
Rate DIP Loan Term Sheet.
Section 3. Bankruptcy Process for Innkeepers. The Company hereby agrees to use
commercially reasonable efforts to obtain approval of this Agreement and confirmation and
consummation of the Plan as soon as reasonably practicable on terms consistent in all respects
with the Plan Term Sheet and this Agreement, and each Party shall use their commercially
reasonable efforts to support confirmation and consummation of the Plan; provided, however,
that the Company and Lehman, may from time to time agree in writing to further extend any
time period or deadline set forth herein as provided in this Agreement.
Section 4. Support of the Transaction; Additional Covenants. From the Effective
Date of the Agreement until the occurrence of a Termination Event (as defined herein), and
subject to the conditions set forth in this Agreement, the Company and Lehman, as applicable,
agree and covenant that:
(a) Prior to the Termination Date, no Party will:
(i) object to confirmation of the Plan or object to or otherwise
commence any proceeding to oppose, alter, delay or impede or take any other action, directly or
indirectly, to interfere with entry of one or more orders approving the Plan or other Plan Related
Documents;
(ii) directly or indirectly seek, solicit, negotiate, vote for, consent to,
support or participate in the formulation of any plan of reorganization or other restructuring other
than the Plan;
5
(iii) directly or indirectly seek, solicit, negotiate, support or engage in
any discussions regarding any chapter II plan other than the Plan;
(iv) object to the Solicitation or support any such objection by a third
party; or
(v) take any other action not required by law that is inconsistent with,
or that would materially delay, the confirmation or consummation of the Plan or that is otherwise
inconsistent with this Agreement.
(b) Unless the Termination Date has occurred, (i) so long as its vote has been
solicited in a manner sufficient to comply with the requirements of sections II25 and I126 ofthe
Bankruptcy Code, including but not limited to its receipt of the Disclosure Statement, Lehman
agrees to (A) vote (or cause the voting of) its Claims arising from the Floating Rate Debt to
accept the Plan by delivering its duly executed and completed ballot accepting the Plan on a
timely basis following the commencement of the Solicitation and agrees that the solicitation
period may be as short as five (5) Business Days; provided, however, that such vote shall be
immediately revoked and deemed void ab initio upon termination of this Agreement pursuant to
the terms hereof; and (B) not change or withdraw (or cause to be changed or withdrawn) such
vote and (ii) Lehman consents to the treatment ofthe Floating Rate Debt as set forth in the Plan
Term Sheet and the Plan. The Company hereby agrees that in the event this Agreement
terminates by its terms, the Company shall not challenge or otherwise object to (i) the revocation
of Lehman's vote pursuant to this section or (ii) any action by Lehman to confirm the revocation
or cancellation of its vote.
(c) Nothing in this Agreement shall be construed to (i) prohibit any Party
from appearing as a party-in-interest in any matter to be adjudicated in the Chapter II Cases so
long as such appearance and the positions advocated in connection therewith are not inconsistent
with this Agreement and the Transaction and are not for the purpose of and could not reasonably
be expected to have the effect of, hindering, delaying or preventing the confirmation of the Plan
or consummation of the Transaction pursuant to the Plan and (ii) require Lehman to file any
pleadings or take any other action in support of the Plan that would require it to hire and pay for
counsel to represent it unless the Company agrees to pay the fees and expenses of such counsel.
Section 5. Further Agreements.
(b) Additional Transaction Matters. The Company hereby agrees (i) to use its
reasonable best efforts to prepare or cause the preparation ofthe Plan and the other Plan Related
Documents, (ii) to take all reasonably necessary and appropriate actions to achieve confirmation
and consummation of the Plan and the Transaction contemplated therein, and (iii) that it shall
provide to Lehman draft copies of all pleadings and other documents (including all "first day"
and any other motions, applications and other pleadings and documents, as well as all exhibits,
supplements and related orders) it intends to file in connection with the Chapter II Cases with
the Bankruptcy Court, or any other court, as soon as is reasonably practicable before such
documents are filed with such court, all of which documents (a) shall be in form and substance
reasonably acceptable to Lehman prior to any such proposed filing and (b) shall be consistent in
all respects with the Plan Term Sheet.
6
(c) Approvals. Each Party agrees to use its commercially reasonable efforts
to (i) obtain Bankruptcy Court approval of this Agreement, confirmation of the Plan by the
Bankruptcy Court and consummate the Transaction pursuant to the Plan and all other actions
contemplated under the Plan Related Documents related thereto, (ii) take any and all necessary
and appropriate actions in furtherance of the Transaction and the o'ther actions contemplated
under this Agreement, the Plan Term Sheet and the Plan Related Documents, (iii) obtain any and
all required regulatory approvals and material third-party approvals for the Transaction and
(iv) not take any actions inconsistent with this Agreement, the Plan Term Sheet or other Plan
Related Documents. Neither Party shall, directly or indirectly, seek, solicit, negotiate, support or
engage in any discussions relating to or enter into any agreements relating to, any restructuring,
plan of reorganization, dissolution, winding up, liquidation, reorganization, merger, transaction,
sale or disposition (or all or substantially all of their assets or equity) other than as set forth in the
Plan Term Sheet and the Plan, nor shall either Party solicit or direct any person or entity,
including, without limitation, any member of any of the Parties' board of directors or, as to the
Company, any holder of equity in the Company, to undertake any of the foregoing; provided,
however, that the Parties may agree to modifications to the Plan Related Documents as provided
herein.
(d) Professionals. The Company shall pay all reasonable professional fees
and expenses incurred by Lehman in connection with the Transaction. In connection therewith,
prior to the Petition Date, the Company shall pay all reasonable fees and expenses owing to
Lehman as invoiced by counsel for Lehman on the date hereof.
(e) Compliance With Agreements. The Company shall comply, including to
the extent authorized by an order of the Bankruptcy Court, after the Petition Date and through
the Plan Effective Date, with the terms and conditions of the Floating Rate Debt Agreement, as
such may have been modified by the existing waiver agreements in place as of the date hereof,
including the payment of all interest, fees and expenses owing thereunder, provided, however,
that after the Petition Date, (i) the Company shall not be in default under the foregoing
agreement for purposes of this Agreement as a result of the filing of the Chapter 11 Cases and
(ii) the Company shall not be required to pay interest, fees and expenses absent entry of an order
of the Bankruptcy Court permitting such payment or upon consummation of the Plan to the
extent authorized by an order of the Bankruptcy Court.
(f) Automatic Stay Relief. For the avoidance of doubt, the Parties hereby
waive any requirement under section 362 of the Bankruptcy Code to lift the automatic stay
thereunder solely for purposes of providing any notices, elections, or waivers under this
Agreement (and agree not to object to any non-breaching Party seeking, if necessary, to lift such
automatic stay solely in connection with the giving of any such notice, election, or waiver).
Nothing in this Agreement shall preclude Lehman from delivering any notice of default, waiver,
or election to the Company at any time.
Section 6. Termination of this Agreement. Upon the occurrence of any of the
following events (each, a "Termination Event"), this Agreement shall automatically terminate
on the first calendar day immediately following one (1) Business Day after the date of such
Termination Event, unless (a) Lehman, in its sole discretion, provides the Company with a
written waiver of any such Termination Event in this Section 6 within one ( 1) Business Day from
7
the date of such Termination Event or (b) Lehman and the Company, in their respective sole
discretion, provide the other party with a written waiver of Termination Events in Section 6(r)
and QW. within one (1) Business Day from the date of such Termination Event:
(a) Failure to meet any of the following milestones (each a "Plan Milestone"
and together, the "Plan Milestones"):
(i) Motion to assume this Agreement filed by the Company on the
Petition Date;
(ii) Order entered authorizing the assumption of this Agreement no
later than 45 days after the Petition Date;
(iii) Orders entered on a final (and not interim) basis authorizing the
Fixed Rate DIP Facility, Floating Rate DIP Facility, the use ofLehman's cash collateral
and the use of the cash collateral securing the Fixed Rate Debt consistent with the terms
set forth in the Plan Term Sheet no later than 45 days after the Petition Date;
(iv) Disclosure Statement and Plan consistent with the terms set forth
in the Plan Term Sheet filed no later than 45 days after the Petition Date;
(v) Disclosure Statement consistent with the terms set forth in the Plan
Term Sheet approved by the Bankruptcy Court no later than 120 days after the Petition
Date;
(vi) Lehman and the Company shall have reached mutual agreement no
later than 120 days after the Petition Date on the terms of a sale process upon the
occurrence of the Termination Event set forth in Section 6(a)(vii) or 6(a)(viii) below;
(vii) Order confirming the Plan consistent with the terms set forth in the
Plan Term Sheet entered by the Bankruptcy Court no later than 240 days after the
Petition Date; and
(viii) Occurrence of the Plan Effective Date no later than 270 days after
the Petition Date;
(b) Lehman has not executed definitive agreements with respect to the sale of
50% ofthe Lehman Shares for a purchase price of at least $107.5 million (the "New Equity Sale
Transaction") no later than 45 days after the Petition Date;
(c) Lehman has not consummated the New Equity Sale Transaction no later
than 270 days after the Petition Date;
(d) The entry by the Bankruptcy Court of an interim order authorizing the use
of Lehman's cash collateral in form and substance not acceptable to Lehman;
(e) The entry of any order of the Bankruptcy Court granting relief from the
automatic stay (i) to permit any exercise of remedies by the lenders or special servicer under the
8
Fixed Rate Debt, the Other Secured Debt or the Mezzanine Debt (as each such term is defined in
the Plan Term Sheet) other than limited relief solely to permit the delivery of default notices
under the terms of the Fixed Rate Debt, the Other Secured Debt or the Mezzanine Debt and (ii)
to permit termination of any Franchise Agreement with Marriott or any other hotel brand other
than those Franchise Agreements listed in the Marriott Schedule attached as Exhibit E to the Plan
Term Sheet;
(f) The filing by the Company of any motion or other request for relief
seeking to (i) dismiss any of the Chapter 11 Cases, (ii) convert any of the Chapter 11 Cases to a
case under chapter 7 of the Bankruptcy Code or (iii) appoint a trustee or an examiner with
expanded powers pursuant to section 11 04 of the Bankruptcy Code in any of the Chapter 11
Cases;
(g) (i) The filing by the Company of any motion or other request for relief
seeking an extension of the Plan Milestones or any alteration of the remedies upon termination
set forth herein without the express written consent of Lehman in its sole discretion; (ii) the filing
by the Company of any pleading supporting any motion from any other party to obtain such
extension or alteration; (iii) the failure of the Company to oppose any motion from any other
party to obtain such extension; or (iv) the violation by the Company of the Milestones Covenant;
(h) The entry of an order by the Bankruptcy Court (i) dismissing any of the
chapter 11 cases, (ii) converting any of the Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code, (iii) appointing a trustee or an examiner with expanded powers pursuant to
section 1104 ofthe Bankruptcy Code in any ofthe Chapter 11 Cases or (iv) making a finding of
fraud, dishonesty or misconduct by any officer or director of the Company, regarding or relating
to the Company;
(i) The withdrawal, amendment or modification by the Company of, or the
filing by the Company of a pleading seeking to amend or modify, the Plan or this Agreement,
which withdrawal, amendment, modification or pleading is materially inconsistent with the terms
set forth in the Plan Term Sheet or the Plan or is materially adverse to Lehman, in each case in a
manner not reasonably acceptable to Lehman, or if the Company files any motion or pleading
with the Bankruptcy Court that is inconsistent in any material respect with the terms set forth in
the Plan Term Sheet or the Plan (in each case with such amendments and modifications as have
been effected in accordance with the terms set forth in the Plan Term Sheet) and such motion or
pleading has not been withdrawn within three (3) Business Days;
G) The filing of any motion to approve a Disclosure Statement or Plan by the
Company that incorporates a Pro Forma Capital Structure or any other terms inconsistent with
the terms and conditions set forth Plan Term Sheet;
(k) The granting by the Bankruptcy Court ofreliefthat is inconsistent with the
terms set forth in the Plan Term Sheet or the Plan in any material respect (in each case with such
amendments and modifications as have been effected in accordance with the terms set forth in
the Plan Term Sheet);
9
(I) The issuance by any governmental authority, including the Bankruptcy
Court or any other regulatory authority or court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise restricting, preventing or enjoining the
consummation of a material portion of the Transaction, including an order denying confirmation
of the Plan and such ruling, determination or order has not been vacated or reversed within five
(5) Business Days of issuance;
(m) The occurrence and continuation of a default under the Fixed Rate DIP
Facility, provided that a cure of such default before the expiration of the notice period shall be a
cure of such default hereunder;
(n) The occurrence and continuation of a default under the Floating Rate DIP
Facility, including those set forth on Exhibit B to the Plan Term Sheet, provided that a cure of
such default before the expiration ofthe notice period shall be a cure of such default hereunder;
( o) The occurrence and continuation of a default in connection with the
Company's use of Lehman's cash collateral, provided that a cure of such default before the
expiration ofthe notice period shall be a cure of such default hereunder; and
(p) The occurrence after execution of this Agreement of (i) a change that has a
material adverse effect on the use, value or condition of the Company, its assets or the legal or
financial status or business operations of the Company or (ii) a material disruption or material
adverse change in the financial, real estate, banking or capital markets;
(q) Lehman has determined, in its sole discretion, after completion of its tax
due diligence, that the Transaction cannot be structured in a manner acceptable to Lehman,
which determination shall be made no later than 45 days after the Petition Date;
(r) The material breach by any Party of any of their undertakings,
representations, warranties or covenants set forth in this Agreement; and
(s) All Parties agree in writing to terminate this Agreement.
The foregoing Termination Events are intended solely for the benefit of the
Parties to this Agreement; provided that no Party may seek to terminate this Agreement based
upon a material breach or a failure of a condition (if any) in this Agreement arising out of its own
actions or omissions.
Section 7. Default Notices. The Company shall furnish to Lehman prompt written
notice of any Termination Event as soon as it becomes aware that the Termination Event will
occur, specifying the nature and extent thereof and the corrective action, if any, taken or
proposed to be taken with respect thereto.
Section 8. Effect of Termination. Upon occurrence of a Termination Event, this
Agreement shall be of no further force and effect and each f>arty hereto shall be released from its
commitments, undertaking, and agreements under or related to this Agreement except (i) to the
extent provided in Section 13 of this Agreement and (ii) with respect to the remedies set forth in
Sections 8(a) and 8.(1;U below:
10
(a) Upon the occurrence of any of the Termination Events set forth in Section
6(a) through@ hereof, Lehman may terminate this Agreement and the use of its cash
collateral.
(b) As long as this Agreement has not otherwise been terminated, (x) upon the
occurrence of a Termination Event set forth in Section 6(a)(vii) or 6(a)(viii); (y) if a trustee is
appointed for the Chapter 11 Cases of all of those Debtors obligated under the Floating Rate
Debt, Fixed Rate Debt, Mezzanine Debt, and Other Secured Debt, or (z) if the Company files a
motion to dismiss all of the Chapter I 1 Cases for those Debtors obligated under the Floating Rate
Debt, Fixed Rate Debt, Mezzanine Debt, and Other Secured Debt, the Company shall,
immediately upon the occurrence of such Termination Event, elect one of the following
remedies, provided, however, that if the Company fails to make such election within one day
after the occurrence of the applicable Termination Event, Lehman shall have the right to elect
either option:
(i) The Company will be deemed to have consented to the
modification of the automatic stay to permit Lehman to exercise any and all remedies
with respect to the Floating Rate Collateral, the automatic stay shall be so modified and
no further Bankruptcy Court approval shall be required; or
(ii) The Company will sell the Floating Rate Collateral pursuant to
section 363 of the Bankruptcy Code, subject to the following conditions, which shall be
incorporated into any order approving this Agreement: (i) the sale procedures shall be
agreed upon no later than 120 days after the Petition Date; (i i) Lehman shall have the
right to credit bid the Floating Rate Debt; (iii) if sale proceeds are not paid to Lehman
within 60 days of the Termination Event, title to the Floating Rate Collateral shall be
conveyed to Lehman free and clear of all liens, claims and encumbrances; (iv) the 60-day
period shall not be extended and the Company waives its right to seek any extension such
period.
Section 9. Good Faith Cooperation; Further Assurances; Transaction Documents.
The Parties shall cooperate with each other in good faith and shall coordinate their activities (to
the extent practicable) in respect of all matters concerning the implementation and
consummation of the Transaction. Furthermore, each of the Parties shall take such action
(including executing and delivering any other agreements and making and filing any required
regulatory filings) as may be reasonably necessary to carry out the purposes and intent of this
Agreement. Each Party hereby covenants and agrees (a) to negotiate in good faith the Plan
Related Documents, each of which shall (i) contain the same economic terms as and other terms
consistent in all material respects with, the terms set forth in the Plan Term Sheet, (ii) be in form
and substance acceptable in all respects to each of the Company and Lehman and (iii) be
consistent with this Agreement in all material respects and (b) to execute the Plan Related
Documents subject to the terms of this Agreement (to the extent such Party is a party thereto).
Section 10. Representations and Warranties. Each Party hereby represents and
warrants to the other Parties that the following statements are true, correct and complete as of the
date hereof and as of the date of any amendment of this Agreement approved by such Party:
II
(t) No Conflicts. To the Parties' actual knowledge, the execution, delivery
and performance by such Party of this Agreement does not and shall not (i) violate (A) any
provision of law, rule or regulation applicable to it or any of its subsidiaries or (B) its charter or
bylaws (or other similar governing documents) or those of any of its subsidiaries or (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or both) a default under
any material contractual obligation to which it or any of its subsidiaries is a party.
(u) Governmental Consents. The execution, delivery and performance by
such Party of this Agreement does not and shall not require any registration or filing with,
consent or approval of or notice to or other action to, with or by, any Federal, state or
governmental authority or regulatory body other than the Bankruptcy Court.
(v) Binding Obligation. This Agreement is t h ~ legally valid and binding
obligation of such Party, enforceable against it, and its officers, directors and agents, in
accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability or a ruling of the Bankruptcy Court.
Section 11. Effectiveness. This Agreement shall become effective and binding on
each Party upon (i) the payment of all reasonable fees and expenses owing to Lehman as
invoiced by counsel for Lehman on the date hereof and (ii) the receipt by Lehman of signature
pages executed by the Company, including each obligor under the Floating Rate Debt (the
"Effective Date"); provided, however, that this Agreement shall not become binding on Lehman
unless and until (a) the Marriott Agreement, in the form attached hereto as Exhibit B, have been
executed by all relevant parties thereto, (b) the bankruptcy court presiding over the Lehman
Bankruptcy Cases enters an order approving this Agreement, which approval (x) Lehman shall
seek as soon as practicable after the Petition Date (by a motion and order in substance subject to
the Company's reasonable consent), (y) shall be an order in form and substance reasonably
acceptable to Innkeepers and materially consistent in all respects with this Agreement, and
(z) shall include provisions that provide, among other things, that: (i) the Agreement is approved
without condition or delay, including approval for Lehman to comply with each provision of the
Agreement and (ii) the automatic stay in the Lehman Bankruptcy Cases is modified to permit
any Party to take any or all of the actions permitted by the Agreement; provided, further,
however, that if such if such order approving this Agreement is not entered in the Lehman
Bankruptcy Cases by August 27, 20 I 0, the Company has the right to terminate this Agreement
upon one (1) Business Day's written notice by the Company. Delivery by telecopier or
electronic mail of an executed counterpart of a signature page to this Agreement shall be
effective as delivery of an original executed counterpart hereof.
Section 12. GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY
CONFLICT OF LAWS PROVISIONS WHICH WOULD REQUIRE THE APPLICATION OF
THE LAW OF ANY OTHER JURISDICTION. BY ITS EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH OF THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ANY LEGAL ACTION, SUIT OR PROCEEDING
AGAINST IT WITH RESPECT TO ANY MA TIER UNDER OR ARISING OUT OF OR IN
12
CONNECTION WITH THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT
OF A;NY JUDGMENT RENDERED IN ANY SUCH ACTION, SUIT OR PROCEEDING,
MAY BE BROUGHT IN ANY FEDERAL COURT IN THE STATE OF NEW YORK AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HEREBY IRREVOCABLY ACCEPTS AND SUBMITS ITSELF TO THE EXCLUSIVE
JURISDICTION OF EACH SUCH COURT, GENERALLY AND UNCONDITIONALLY,
WITH RESPECT TO ANY SUCH ACTION, SUIT OR PROCEEDING.
NOTWITHSTANDING THE FOREGOING CONSENT TO JURISDICTION, UPON THE
COMMENCEMENT OF THE CHAPTER 11 CASES, EACH OF THE PARTIES AGREES
THAT THE BANKRUPTCY COURT PRESIDING OVER THE CHAPTER 11 CASES AND
NOT THE BANKRUPTCY COURT PRESIDING OVER THE LEHMAN BANKRUPTCY
CASES SHALL HAVE EXCLUSIVE JURISDICTION WITH RESPECT TO ANY MATTER
UNDER OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTION CONTEMPLATED HEREIN; PROVIDED, HOWEVER, THE
BANKRUPTCY COURT PRESIDING OVER THE LEHMAN BANKRUPTCY CASES
SHALL HAVE EXCLUSIVE JURISDICTION TO DETERMINE WHETHER TO APPROVE
LEHMAN'S ENTRY INTO THIS AGREEMENT. THE PARTIES WAIVE ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO RESOLVE
ANY DISPUTE BETWEEN THE PARTIES, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE.
Section 13. Specific Performance; Exclusive Remedy. Each Party hereto recognizes
and acknowledges that a breach by it of any covenants or agreements contained in this
Agreement will cause the other Parties to sustain damages for which such Parties would not have
an adequate remedy at law for money damages, and therefore each Party hereto agrees that in the
event of any such breach the other Parties shall be entitled to the remedy of specific performance
of such covenants and agreements and injunctive relief, without the necessity of securing or
posting a bond or other security in connection with such remedy. Notwithstanding anything to
the contrary set forth above, the Parties also agree that the remedy of specific performance shall
be the exclusive remedy of the Parties under this Agreement in the event of a breach of this
Agreement by another Party hereto.
Section 14. Survival. Notwithstanding the termination of this Agreement in
accordance with its terms, the agreements and obligations of the Parties in Sections 7 (effect of
termination), 11 (governing law), 11. (specific performance), U (survival); U (successors and
assigns), lQ (no third party beneficiaries, 1. (reservation of rights), 22 (publicity), 24 (fiduciary .
duties), 25 (indemnification), and 26 (continued banking practices) hereof shall survive such
termination and shall continue in full force and effect for the benefit of the Parties hereto in
accordance with the terms hereof.
Section 15. Headings. The headings of the sections, paragraphs and subsections of
this Agreement are inserted for convenience only and shall not affect the interpretation hereof.
Section 16. Successors and Assigns; Severability; Several Obligations. This
Agreement is intended to bind and inure to the benefit of the Parties and their respective
permitted successors, assigns, heirs, executors, estates, administrators and representatives. The
invalidity or unenforceability at any time of any provision hereof in any jurisdiction shall not
13
affect or diminish in any way the continuing validity and enforceability of the remammg
provisions hereof or the continuing validity and enforceability of such provision in any other
jurisdiction. The agreements, representations and obligations of the Parties under this
Agreement are, in all respects, several and not joint.
Section 17. No Third Party Beneficiaries. Unless otherwise expressly stated herein,
this Agreement shall be solely for the benefit of the Parties and no other person or entity shall be
a third party beneficiary hereof.
Section 18. Entire Agreement. This Agreement constitutes the entire agreement of the
Parties with respect to the subject matter hereof and supersedes all prior agreements (oral and
written) and all other prior negotiations, but shall not supersede either of the Plans or the other
Plan Related Documents.
Section 19. Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall constitute but one
and the same instrument.
Section 20. Notices. All demands, notices, requests, consents and other
communications under this Agreement shall be in writing, sent contemporaneously to all of the
Parties (unless otherwise stated in the Agreement) and deemed given when delivered, if
delivered by hand or upon confirmation of transmission, if delivered by email and facsimile,
during standard business hours (from 8:00A.M. to 6:00 P.M. at the place of receipt) at the
addresses and facsimile numbers set forth below:
If to the Company:
Innkeepers USA Trust
340 Royal Poinciana Way, Suite 306
Palm Beach, Florida 33480
Attn: Marc Beilinson
Telephone: (561) 835-1800
Facsimile: (561) 835-0457
email: MBeilinson@BeilimonPartners.com
with a copy to
Kirkland & Ellis LLP
60 I Lexington A venue
New York, NY 10022-4611
Attn: James H.M. Sprayregen
Paul M. Basta
Jennifer L. Marines
Telephone: (212) 446-4800
Facsimile: (212) 446-4900
14
email: jsprayregen@kirkland.com
pbasta@kirkland.com
jmarines@kirkland.com
and
Kirkland & Ellis LLP
300 North LaSalle
Chicago, IL 60654-3406
Attn: Anup Sathy
Marc J. Carmel
Telephone: (312) 862-2000
Facsimile: (312) 862-2200
email: asathy@kirkland.com
mcarmel@kirkland.com
Ifto Lehman:
Lehman ALI Inc.
1271 Avenue of the Americas
New York, NY 10020
Attn: Michael Lascher
Susanne Frey
email: michael.lascher@lamcollc.com
susanne. frey@lehmanholdings.com
with a copy to
Dechert LLP
1095 Avenue ofthe Americas
New York, NY I 0036
Attn: Michael J. Sage
Bria:n E. Greer
Telephone: (212) 698-3500
Facsimile: (212) 698-3599
email: michael.sage@dechert.com
brian.greer@dechert.com
Section 21. Rule of Interpretation; Calculation of Time Period. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect the intent of the Parties hereto.
None of the Parties hereto shall have any term or provision construed against such Party solely
by reason of such Party having drafted the same. When calculating the period of time before
which, within which or following which any act is to be done or step taken pursuant to this
Agreement, the date that is the reference date in calculating such period shall be excluded. If the
last day of such period is not a Business Day, t h ~ period in question shall end on the next
succeeding Business Day.
15
Section 22. Reservation of Rights. Nothing herein shall be deemed an admission of
any kind. If the transactions contemplated herein are not consummated or this Agreement is
terminated for any reason, the Parties fully reserve any and all of their rights. Pursuant to
Rule 408 of the Federal Rule of Evidence, any applicable state rules of evidence and any other
applicable law, foreign or domestic, this Agreement and all negotiations relating thereto shall not
be admissible into evidence in any proceeding other than a proceeding to enforce its terms.
Section 23. Publicity; Confidentiality. The Parties understand and acknowledge that,
until publicly disclosed as herein contemplated, the terms of this Agreement and the exhibits
hereto are confidential information, and the Parties agree to keep such information confidential
and not use it for any purpose except as contemplated hereby or as reasonably necessary in the
Chapter II Cases.
Section 24. Representation by Counsel. Each Party acknowledges that it has had the
opportunity to be represented by counsel in connection with this Agreement and the transactions
contemplated by this Agreement. Accordingly, any rule of law or any legal decision that would
provide any Party with a defense to the enforcement of the terms of this Agreement against such
Party based upon lack of legal counsel shall have no application and is expressly waived.
Section 25. Fiduciary Duties.
(a) Notwithstanding anything to the contrary herein, at any time prior to the
Confirmation Date, the Company or any directors or officers of the Company, in such person's
capacity as a director or officer of the Company, shall be entitled to take any action, or to refrain
from taking any action, including a decision to terminate this Agreement, that such person
determines in good faith, after consultation with counsel, is consistent with its or their fiduciary
obligations under applicable law (the "Fiduciary Out").
(b) At the time this Agreement is entered into, the Company acknowledges
and agrees that the Plan Milestones and any remedies in respect thereof set forth in this
Agreement constitute the sound business judgment of the Company that comports with the
fiduciary duties ofthe Company's officers and directors.
(c) The Company agrees that the Fiduciary Out shall not apply, and may not
be used, to annul, modify, amend, or otherwise alter any of the Plan Milestones or any of the
remedies in respect thereof; provided, however, that if the Company secures a binding and firm
written commitment with respect to an alternative transaction that will provide Lehman with a
higher and better recovery than the recovery proposed under the Plan (a "Firm Alternative
Transaction"), the Company shall provide Lehman with at least ten (I 0) Business Days to
determine whether Lehman will consent to such Firm Alternative Transaction. If Lehman does
not consent to such Firm Alternative Transaction, the Company may only exercise the Fiduciary
Out after it has obtained an order from the Bankruptcy Court authorizing the Company to
exercise the Fiduciary Out in accordance with the terms hereof. The Company agrees that in
determining whether a Firm Alternative Transaction is "higher and better," all factors must be
considered including contingencies, conditionality, legal and financial execution risk, economics
and Lehman's opinion as to whether such Firm Alternative Transaction is "higher and better."
!6
Section 26. Indemnification. The Company hereby agrees to indemnify and hold
Lehman and its officers, directors, partners, agents, employees, advisors, and successors and
assigns, harmless from and against any and all claims, actions, suits, liabilities and judgments,
and costs and expenses directly related thereto (including reasonable costs of defense on an as-
incurred basis), arising by reason of or resulting from Lehman's execution of this Agreement and
performance of its obligations hereunder, but expressly excluding any liability, cost or expense
arising from or related to the fraudulent or willful misconduct of Lehman.
Section 27. Continued Banking Practices. Notwithstanding anything herein to the
contrary, Lehman and its affiliates, may accept deposits from, lend money to and generally
engage in any kind of banking, investment banking, trust or other business with or provide debt
financing, equity capital or other services (including financial advisory services) to the Company
or any affiliate of the Company or any other person, including, but not limited to, any person
proposing or entering into a transaction related to or involving the Company or any affiliate
thereof.
Section 28. Acknowledgement. This Agreement and the Transactions are the product
of negotiations among the Parties, together with their respective representatives. This
Agreement is not, and shall not be deemed to be, a solicitation of votes for the acceptance of the
Plan or any plan of reorganization for the purposes of sections 1125 and 1126 of the Bankruptcy
Code or otherwise. Lehman's vote(s) will not be solicited until it has received the Disclosure
Statement and any other required materials related to the Solicitation. In addition, this
Agreement does not constitute an offer to issue or sell securities to any person, or the solicitation
of an offer to acquire or buy securities, in any jurisdiction where such offer or solicitation would
be unlawful.
Section 29. No Waiver. The failure of any Party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at law or in
equity or to insist upon compliance by any other Party hereto with its obligations hereunder and
any custom or practice or the Parties at variance with the terms hereof, shall not constitute a
waiver by such Party of its right to exercise any such right, power or remedy or to demand such
compliance.
Section 30. Modification. This Agreement may only be modified, altered, amended,
or supplemented by an agreement in writing signed by the Company and Lehman.
Section 31. Transfers. Lehman agrees that until the earlier to occur of (x) termination
of this Agreement in accordance with Section 6 and (y) the occurrence of the Plan Effective
Date, it shall not sell, transfer, pledge, assign or otherwise hypothecate any of the Floating Rate
Debt or any option thereon or any right or interest (voting or otherwise) therein (any such
transfer, pledge, assignment, hypothecation or option being referred to as a "Transfer"), unless
such Transfer is subject to, and the transferee thereof agrees in writing for the benefit of the
Parties to be bound by all of the terms of this Agreement by executing and delivering to the
Parties a joinder in the form attached hereto as Exhibit E upon no less than five (5) days written
notice to the Company. Any Transfer that is made in violation of the immediately preceding
sentence shall be null and void ab initio, and the Company shall have the right to enforce the
voiding of such transfer. In the event that any Transfer is not fully consummated for any reason,
17
Lehman shall remain bound by the terms of this Agreement. After a Transfer, the Company has
the right to terminate this Agreement upon one (1) day's written notice by the Company.
Notwithstanding the foregoing, if Lehman notifies the Company of a potential Transfer, the
Company shall advise Lehman within five business days if it will exercise its termination right
with respect to such Transfer.
[Signature Page Follows]
*****
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
18
IN WITNESS WHEREOF, the Parties hereto have duly executed and delivered
this Agreement as of the date first above written.
By signing below. each party acknowledges it.c:; agreement to the foregoing.
LEHMAN ALI, INC.

Title:
Date: July .!1, 2010
\
[SIGNATURE PAGE TO PLAN SUPPORT AGREEMENT]
INNKEEPERS USA TRUST
B y : ; l ; d ; ~
Name: Marc Beilinson
Title: ChiefRestructuring Officer
Date: July 17,2010
[SIGNATURE PAGE TO PLAN SUPPORT AGREEMENT]
15818454.2
EXECUTION COPY
GRAND PRIX HOLDINGS LLC

Name: Marc Murphy
Title: General Counsel, Secretar
Date: July ll, 2010
ON BEHALF OF ALL THE DEBTOR
ENTITIES LISTED ON ANNEX A

Title: General Counsel, Secretary
Date: July l1, 2010
I
I
Exhibit B
(The Plan Term Sheet)
US _ACTJYE:\434460 16120158399.0008
Term Sheet
Illustrative Terms of Proposed Restructuring
July 17,2010
The following are the proposed principal terms of a restructuring transaction between
Lehman ALI Inc. ("Lehman"), as mortgage lender, and Innkeepers USA Trust
("Innkeepers" and, collectively with its subsidiaries, the "Company").
1
The transaction
(the "Transaction") contemplates a conversion of the Company's obligations under that
certain mortgage loan agreement, dated as of June 29, 2007, among Lehman and the
affiliates of the Company parties thereto (the "Floating Rate Debt"), collateralized by 20
of the Company's properties (the "Floating Rate Collateral") into all the equity ofthe
reorganized Company (as set forth herein). The Transaction would be effectuated
through a prearranged plan of reorganization (the "Plan") in chapter 11 bankruptcy cases
filed by Innkeepers and certain of its subsidiaries (the "Chapter 11 Cases") in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). This term sheet has been prepared for discussion purposes only and is non-
binding, but shall serve as the basis for further negotiations regarding a definitive
agreement.
The terms discussed herein constitute an integrated offer, are not divisible except as
described herein, and are subject to the terms and conditions hereof. This term sheet is
provided in confidence and may be distributed only with the express written consent of
Lehman and the Company, as applicable. This term sheet does not include a description
of all of the terms, conditions and other provisions that are to be contained in the
definitive documentation governing such matters, which remain subject to discussion and
negotiation to the extent not inconsistent with the specific matters set forth herein. This
term sheet is proffered in the nature of a settlement proposal in furtherance of settlement
discussions, and is intended to be entitled to the protections of Rule 408 of the Federal
Rules of Evidence and any other applicable statutes or doctrines protecting the use or
disclosure of confidential information and information exchanged in the context of
settlement discussions, and shall not be treated as an admission regarding the truth,
accuracy or completeness of any fact or the applicability or strength of any legal theory.
Lehman's entry into any definitive transaction on the terms set forth in this term sheet, or
otherwise, are subject to approval of the United States Bankruptcy Court administering
the chapter II case of Lehman Brothers Holdings Inc.
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH
RESPECT TO ANY SECURITIES OF THE COMPANY OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR
This term sheet is not being provided on behalf of SASCO 2008-C2, LLC (the "Mezzanine
Lender") in connection with the mezzanine loan with respect to the collateral securing the
Floating Rate Debt or the mezzanine loan with respect to the Anaheim property (the "Mezzanine
Debt"). Lehman does not make any representations with respect to the Mezzanine Lender.
15798647.8
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:
Treatment of Claims and Eguitv Interests Under the Plan:
Floating Rate Debt Lehman will receive, in full and final satisfaction of its secured
mortgage claims in respect ofthe Floating Rate Debt, 100% of the
issued and outstanding new shares of common stock issued by
Innkeepers (the "New Equity"), subject to dilution by the
Management Equity Incentive Program (as defined below) and New
Equity distributions, if any, for other Plan uses, as agreed by the
parties hereto.
Mezzanine Debt The Mezzanine Debt will be deemed cancelled, and the Mezzanine
Lender will not retain any property or interest on account of such debt
under the Plan. The Mezzanine Lender will be deemed to vote against
the Plan. No action by the Mezzanine Lender will be required under
this Term Sheet or any definitive documentation with respect to the
terms set herein.
Fixed Rate Debt Holders of the claims against the Company for its obligations under
that certain mortgage loan agreement, dated as of June 29, 2007,
among Lehman and the affiliates ofthe Company parties thereto (the
"Fixed Rate Debt") collateralized by 45 ofthe Company's properties
(the "Fixed Rate Collateral") will receive, in full and final
satisfaction of their claims in respect of such debt, new mortgage
notes secured by mortgages on the Fixed Rate Collateral either (a) in
an aggregate face amount not to exceed $550 million; or (b) if such
holders make an election for application of section 1111(b)(2) ofthe
Bankruptcy Code, jn the amount of the aggregate amount of such
holders' Fixed Rate Debt, with a present value of the new mortgage
notes not to exceed $550 million. The terms of the new Fixed Rate
Debt notes and any security interests to be granted in connection
therewith are subject to approval, in form and substance, by Lehman
and the Company.
Other Secured Holders of claims against the Company for its obligations under those
Debt certain secured mortgage loan agreements, not including the Floating
Rate Debt or the Fixed Rate Debt (the "Other Secured Debt"),
collateralized by seven ofthe Company's properties, not including the
Floating Rate Collateral or the Fixed Rate Collateral (the "Other
Secured Debt Collateral"), will receive, in full and final satisfaction
of their claims in respect of such debt, new mortgage notes secured by
liens on the respective holder's Other Secured Debt Collateral
2
I 5798647.8
("Other Secured Debt New Mortgage Notes") either (a) in an
aggregate face amount not to exceed $150 million; or (b) if a holder of
Other Secured Debt claims makes an election for application of
section 1111(b)(2) ofthe Bankruptcy Code, in the amount ofthe
aggregate amount of such holder's claims, with present value of such
Other Secured Debt New Mortgage Note equaling the value of the
collateral securing such holder's claims, provided, however, that the
aggregate present value of all Other Secured Debt New Mortgage
Notes issued pursuant to (a) and (b) herein shall not exceed $150
million. The terms of the Other Secured Debt New Mortgage Notes
are subject to approval, in form and substance, by Lehman and the
Company.
Debt allocation among the Other Secured Debt Collateral and
identification of any Other Secured Debt Collateral that should be
removed from the Company's portfolio shall be agreed among the
parties hereto.
General Unsecured "General Unsecured Claim" shall mean any unsecured claim against
Claims any ofthe Debtors that is not: (a) an Administrative Claim; (b) a
Priority Claim (tax or otherwise); (c) an intercompany claim; or (d) a
~ e c t i o n 51 O(b) claim, if any.
If a class of General Unsecured Claims votes to accept the Plan and
affirmatively release Lehman and its affiliates from all claims and
causes of action relating to the Company and/or the Floating Rate
Debt, then holders of such General Unsecured Claims shall receive a
pro rata distribution of cash in the amount of$500,000.
Intercompany Intercompany claims shall not be entitled to receive any distribution
Claims under the Plan on account of such claims and shall be deemed to have
voted against the Plan. Such claims will be reinstated, extinguished or
cancelled as appropriate in the judgment of Lehman and the Company
to effectuate the Transaction contemplated by the Plan.
Section 51 O(b) Claims subject to subordination pursuant to section 51 O(b) of the
Claims Bankruptcy Code shall not receive any recovery under the Plan and
shall be deemed to have voted against the Plan.
Deficiency Claims Unsecured deficiency claims ofholders of Floating Rate Debt, Fixed
Rate Debt and Other Secured Debt shall not receive any recovery
under the Plan or otherwise without the consent of Lehman and the
Company, and, if not receiving any recovery, shall be deemed to have
voted against the Plan.
Administrative Allowed administrative claims shall be paid in cash in the ordinary
3
15798647.8
Claims course of business or upon the effective date ofthe Plan (the
"Effective Date"), unless the holders of such Administrative Claims
agree to different treatment.
Priority Claims Allowed priority claims shall be paid in cash on the Effective Date;
provided, that on the Effective Date Lehman and the Company may
determine to defer priority tax claims in accordance with the
Bankruptcy Code.
Existing Equity On the Effective Date, all prepetition common and preferred shares of
Innkeepers will be cancelled, and holders of such interests will not
retain any property on account of such interests under the Plan. To the
extent Lehman and the Company determine that the Company's
existing corporate structure would be the most tax efficient for
Lehman and the Company on the Effective Date, the prepetition
equity interests of each of Innkeepers' subsidiaries will be deemed
reissued in accordance with the Company's prepetition corporate
structure on terms mutually acceptable to the parties hereto. If
Lehman and the Company determine that a different structure would
be more beneficial to Lehman and the Company on the Effective Date,
the Plan shall provide for such structure, on terms mutually acceptable
to the parties hereto.
4
15798647.8
Means oflm(!lementation:
Bankruptcy All material pleadings filed by the Company in connection with the
Pleadings Chapter 11 Cases, including all first-day motions, shall be in form and
substance reasonably acceptable to Lehman.
DIP Financing DIP financing to be provided in two separate facilities:
(a) a DIP facility provided in an amount equal to $50.75 million,
which is necessary to complete certain Marriott property improvement
plan ("PIP") requirements for (i) certain of those hotels collateralizing
the Fixed Rate Debt; (ii) the hotel collateralizing that certain mortgage
loan, dated as of October 4, 2006, by and between KPA RIMY, LLC
and Capmark Bank (the "Residence Inn in San Diego"); and (iii) the
hotel collateralizing that certain mortgage loan, dated as of September
19, 2006, by and between KPA Tysons Corner RI, LLC and Merrill
Lynch Mortgage Lending, Inc. (the "Residence Inn in Tyson's
Corner"), secured by senior, priming liens on the Fixed Rate
Collateral, the Residence Inn in San Diego, and the Residence Inn in
Tyson's Corner on terms acceptable to Lehman, as substantially set
forth on Exhibit A (the "Fixed Rate DIP Facility"). On the Effective
Date of the Plan, all amounts outstanding under the fixed Rate DIP
Facility shall be repaid from the Exit Funding (as defined below).
(b) a DIP facility provided by Lehman or any of its affiliates in an
amount up to approximately $17.5 million, secured by senior, priming
liens on the Floating Rate Collateral on terms to be agreed between
the Company and Lehman as substantially set forth on Exhibit B (the
"Floating Rate DIP Facility"). On the Effective Date ofthe Plan
which is consistent with the terms hereof, all claims outstanding under
the Floating Rate DIP Facility shall be extinguished; provided,
however, if, and to the extent, any claim or cause of action is brought
by, or on behalf of, the Company or its estates related to the Floating
Rate Debt against Lehman or any of its affiliates is allowed by final
order or part of a judgment of a court of competent jurisdiction (the
"Claims or Causes of Actions"), then the claims arising under the
Floating Rate DIP Facility shall be, at Lehman's election either (i)
repaid on the Effective Date of the Plan in an amount equal to any
allowed Claim or Cause of Action, up to the amount outstanding
under the Floating Rate DIP Facility, or (ii) set off against the Claims
or Causes of Action, up to the amount outstanding under the Floating
Rate DIP Facility.
Use ofCash In addition to providing the Floating Rate DIP Facility, Lehman will
consent to the use of its cash collateral pursuant to the terms of the
5
15798647.8
Collateral
Exit Funding
New Equity
Conditions
Precedent to
Lehman's
Obligations Under
PSA
15798647.8
cash collateral order attached hereto as Exhibit C.
The Company shall not take any action, and shall not solicit,
encourage or support any action by a third party, seeking to amend,
modify or extend the Plan Milestones (as defined below) (the
foregoing provision is hereinafter referred to as the "Milestones
Covenant").
The Company's use of Lehman's cash collateral will terminate
immediately upon the receipt of notice of a Termination Event (as
defined below).
Innkeepers will secure additional funding of no less than $75 million,
plus such additional amounts in form and substance as may be
determined by the parties hereto ("Exit Funding"). Prior to any Exit
Funding, the reorganized Company shall deliver a comprehensive PIP
and cycle renovation budget, which budget shall be (a) prepared with
the assistance of, and validated by, a third party expert and
(b) acceptable in all respects to the parties hereto (the "Budget").
Such Budget shall be updated annually or more frequently as may be
requested by any party hereto.
The Plan shall provide that the issuance of the New Equity and any
subsequent transfer of New Equity by Lehman prior to the Effective
Date will be exempt from (a) securities laws in accordance with
section 1145 of the Bankruptcy Code and (b) transfer taxes in
accordance with section 1146 ofthe Bankruptcy Code.
The Transaction will become binding on Lehman when Lehman and
the Company execute a plan support agreement (the "PSA") that
incorporates the Transaction as set forth herein, including:
Receipt by Lehman of a Plan term sheet incorporating
the terms set forth herein and otherwise in form and
substance acceptable to Lehman;
Agreement reached with Marriott in the form attached
hereto as Exhibit D;
Innkeepers and each of its wholly owned subsidiaries,
including each obligor under the Floating Rate Debt,
shall be a signatory to the PSA; and
Bankruptcy Court approval in the chapter 11
bankruptcy proceedings of Lehman Brothers Holdings
Inc.
6
Termination Upon the occurrence of any of the following events (each, a
Events Under PSA "Termination Event"), the PSA and the use of Lehman's cash
and Use of Cash collateral shall automatically terminate on the first calendar day
Collateral immediately following one (1) business day after the date of such
Termination Event, unless (a) Lehman, in its sole discretion, provides
the Company with a written waiver of any such Termination Event
within one (1) business day from the date of such Termination Event
or (b) Lehman and the Company, in their respective sole discretion,
provide the other party with a written waiver ofTermination Events R
and S within one (1) business day from the date of such Termination
Event:
A. Failure to meet any of the following milestones (the "Plan
Milestones"):
(i) Motion to assume the PSA filed on the petition date;
(ii) Order entered authorizing the assumption of the PSA no
later than 45 days after the petition date;
(iii) Orders entered on a final (and not interim) basis
authorizing the Fixed Rate DIP Facility, Floating Rate
DIP Facility, the use ofLehman's cash collateral and the
use of the cash collateral securing the Fixed Rate Debt
consistent with the terms hereof no later than 45 days
after the petition date;
(iv) Disclosure statement and Plan consistent with the terms
hereof filed no later than 45 days after the petition date;
(v) Disclosure statement consistent with the terms hereof
approved by the Bankruptcy Court no later than 120
days after the petition date;
(vi) Lehman and the Company shall have reached mutual
agreement no later than 120 days after the petition date
on the terms of a sale process upon the occurrence of
Termination Event A(vii) or A(viii) below;
(vii) Order confirming a Plan consistent with the terms hereof
entered no later than 240 days after the petition date; and
(viii) Effective Date of the Plan no later than 270 days after
the petition date.
B. Lehman has not executed definitive agreements with
respect to the sale of 50% of the New Equity for a
7
15798647.8
15798647.8
purchase price of at least $107.5 million (the "New
Equity Sale Transaction") by 45 days after the petition
date;
C. Lehman has not consummated the New Equity Sale
Transaction by 270 days after the petition date;
D. The entry by the Bankruptcy Court of an interim order
authorizing the use of Lehman's cash collateral in form
and substance not acceptable to Lehman;
E. The entry of any order of the Bankruptcy Court granting
relief from the automatic stay (i) to permit any exercise of
remedies by the lenders or special servicer under the Fixed
Rate Debt, Other Secured Debt or Mezzanine Debt other
than limited relief solely to permit the delivery of default
notices under the terms of the Fixed Rate Debt, Other
Secured Debt or Mezzanine Debt and (ii) to permit
termination of any franchise agreement with Marriott or
any other hotel brand;
F. The filing by the Company of any motion or other request
for relief seeking to (i) dismiss any of the Chapter 11
Cases, (ii) convert any of the Chapter 11 Cases to a case
under chapter 7 of the Bankruptcy Code or (iii) appoint a
trustee or an examiner with expanded powers pursuant to
section II 04 of the Bankruptcy Code in any of the
Chapter I I Cases;
G. (i) The filing by the Company of any motion or other
request for relief seeking an extension ofthe Plan
Milestones or any alteration of the remedies upon
termination set forth herein without the express written
consent of Lehman in its sole discretion; (ii) the filing by
the Company of any pleading supporting any motion from
any other party to obtain such extension or alteration;
(iii) the failure ofthe Company to oppose any motion
from any other party to obtain such extension before the
objection deadline of such motion; or (iv) the violation by
the Company of the Milestones Covenant;
H. The entry of an order by the Bankruptcy Court
(i) dismissing any of the Chapter II Cases, (ii) converting
any ofthe Chapter 11 Cases to a case under chapter 7 of
the Bankruptcy Code, (iii) appointing a trustee or an
examiner with expanded powers pursuant to section 11 04
of the Bankruptcy Code in any of the Chapter 11 Cases or
8
15798647.8
(iv) making a finding of fraud, dishonesty or misconduct
by any officer or director of the Company, regarding or
relating to the Company;
I. The withdrawal, amendment or modification by the
Company of, or the filing by the Company of a pleading
seeking to amend or modify, the Plan or PSA, which
withdrawal, amendment, modification or pleading is
materially inconsistent with the terms hereof or the Plan or
is materially adverse to Lehman, in each case in a manner
not reasonably acceptable to Lehman, or if the Company
files any motion or pleading with the Bankruptcy Court
that is inconsistent in any material respect with the terms
hereof or the Plan (in each case with such amendments
and modifications as have been effected in accordance
with the terms hereof) and such motion or pleading has
not been withdrawn within three (3) business days after
Lehman provides written notice to the Company;
J. The filing of any motion to approve a disclosure statement
or Plan by the Company that incorporates a Pro Forma
Capital Structure or any other terms inconsistent with the
terms and conditions set forth herein;
K. The granting by the Bankruptcy Court ofreliefthat is
inconsistent with the terms hereof or the Plan in any
material respect (in each case with such amendments and
modifications as have been effected in accordance with
the terms hereof);
L. The issuance by any governmental authority, including the
Bankruptcy Court or any other regulatory authority or
court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise
restricting, preventing or enjoining the consummation of a
material portion of the Transaction, including an order
denying confirmation ofthe Plan and such ruling,
determination or order has not been vacated or reversed
within ten (1 0) business days of issuance;
M. The occurrence and continuation of a default under the
Fixed Rate DIP Facility, provided that a cure of such
default before the expiration of the notice period shall be a
cure of such default hereunder;
N. The occurrence and continuation of a default under the
Floating Rate DIP Facility, including those set forth on
9
15798647.8
Exhibit B, provided that a cure of such default before the
expiration of the notice period shall be a cure of such
default hereunder;
0. The occurrence and continuation of a default in
connection with the Company's use of Lehman's cash
collateral, provided that a cure of such default before the
expiration of the notice period shall be a cure of such
default hereunder; and
P. The occurrence after execution of the PSA of (i) a change
that has a material adverse effect on the use, value or
condition of the Company, its assets or the legal or
financial status or business operations of the Company or
(ii) a material disruption or material adverse change in the
financial, real estate, banking or capital markets;
Q. Lehman has determined, in its sole discretion, after
completion of its tax due diligence; that the
Transaction cannot be structured in a manner acceptable to
Lehman, which determination shall be made no later than
45 days after the petition date;
R. The material breach by any Party of any of their ..
undertakings, representations, warranties or covenants set
forth in the PSA; and
S. All parties agree in writing to terminate the PSA.
10
Remedies Upon Upon the occurrence of any of Termination Events A through S,
Termination Lehman may terminate the PSA and use of cash collateral.
As long as the PSA has not otherwise been terminated, (a) upon the
occurrence of Termination Event A( vii) or A(viii); (b) if a trustee is
appointed for the Chapter II Cases of all of those debtors obligated
under the Floating Rate Debt, Fixed Rate Debt, Mezzanine Debt, and
Other Secured Debt; or (c) ifthe Company files a motion to dismiss
all of the Chapter 11 Cases for those debtors obligated under the
Floating Rate Debt, Fixed Rate Debt, Mezzanine Debt, and Other
Secured Debt, the Company shall, immediately upon the occurrence
of such Termination Event, elect one of the following remedies,
provided, however, that ifthe Company fails to make such election
within one day after the occurrence of the applicable Termination
Event, Lehman shall have the right to elect either option:
(a) The Company will be deemed to have consented to the
modification of the automatic stay to permit Lehman
to exercise any and all remedies with respect to the
Floating Rate Collateral, the automatic stay shall be so
modified and no further court approval shall be
required; or
(b) The Company will sell the Floating Rate Collateral
pursuant to section 363 of the Bankruptcy Code,
subject to the following conditions, which shall be
incorporated into any order approving the PSA: (i) the
sale procedures shall be agreed upon no later than 120
days after the petition date; (ii) Lehman shall have the
right to credit bid the Floating Rate Debt; (iii) if sale
proceeds are not paid to Lehman within 60 days of the
Termination Event, title to the Floating Rate Collateral
shall be conveyed to Lehman free and clear of all
liens, claims and encumbrances; (iv) the 60-day period
shall not be extended and the Company waives its
right to seek any extension of such period.
Bankruptcy Court The Company shall, on or immediately after the commencement of
Approval of PSA the Chapter 11 Cases, file a motion seeking authorization to assume
the PSA. The order approving the PSA shall include provisions that
the Company (i) shall not seek an extension ofthe Plan Milestones or
any alteration of the remedies upon termination set forth herein
without the express written consent of Lehman in its sole discretion,
(ii) shall not support any motion from any other party to obtain such
extension or alteration; and (iii) will oppose any motion from any
Il
15798647.8
Pro Forma Capital
Structure
Governance
Management
Equity Incentive
Program
REIT Status
Property Manager
Releases
15798647.8
other party to obtain such extension or alteration by the objection
deadline of such motion.
Following the consummation of the Transaction, the reorganized
Company will have, after repayment of the Fixed Rate DIP Facility,
(a) funds sufficient to perform Marriott capital expenditures and brand
standard work and (b) cash on hand sufficient to operate the business
of the Company, and such amounts in (a) and (b) above shall be
acceptable to Lehman and the Company and be capitalized as follows:
Fixed Rate Debt: present value less than or equal to $550 million
Other Secured Debt: present value less than or equal to $150 million
Exit Funding: At least $75 million, plus such additional amounts in
form and substance as may be determined by the
parties hereto.
Except as set forth above, on the Effective Date, the Company shall
not have any debts or liens encumbering the Company's assets, except
for permitted liens agreed to by Lehman and the Company.
Prior to the Effective Date, Lehman will determine the requisite
number of directors, all of whom will be nominated by Lehman, and
voting requirements shall be in form and substance acceptable to
Lehman.
The Plan shall provide for a management equity incentive program
(the "Management Equity Incentive Program") in form and
substance acceptable to Lehman and the Company providing for a
reserve of up to 3% ofthe New Equity to be allocated to management
under the Management Equity Incentive Program as approved by the
board of directors of the reorganized Company.
Lehman and the Company shall, after the Effective Date, determine
whether to maintain Innkeepers' status as a real estate investment
trust.
Prior to the Effective Date of the Plan, Lehman and the Company
shall designate a manager for the reorganized Company's properties.
If Island Hospitality Management, Inc. ("Island") is not selected as
the manager, the Company will use its reasonable best efforts to
effectuate an orderly transition to the replacement manager.
The Plan shall include a full discharge and release of liability by the
Company, other than a release of the obligations set forth herein, in
12
favor of (a) the Company and each of its subsidiaries, (b) Lehman, and
(c) each oftheir respective principals, employees, affiliates,
subsidiaries, members, shareholders, agents, officers, directors, and
professionals from: (i) any and all claims and causes of action arising
prior to the Effective Date and (ii) any and all claims arising from the
actions taken or not taken in good faith in connection with the
Transaction.
Professional Fees The Company shall pay the professional fees and expenses incurred
by Lehman in connection with the Transaction.
13
15798647.8
US_ ACTIVE :\434460 I 6\20\58399.0008
Exhibit C
(DIP Term Sheet)
Summary of Indicative Terms and Conditions
Proposed $17,498,095.52 Senior Secured Super-Priority
Debtor-in-Possession Credit Facility (this "Term Sheet")
This Term Sheet is not a commitment to provide the financing described below. This Term Sheet
is not meant to be, and should not be construed as, a commitment by DIP Lender (defined below)
or any of its affiliates to extend credit or enter into efforts in order to extend credit. Moreover, it
does not attempt to describe all terms and conditions that would pertain to the DIP Facility
(defined below), and its terms do not suggest the specific phrasing of documentation clauses.
The proposed terms and conditions summarized herein represent the conditions pursuant to
which the DIP Lender proposes to enter into a $17,498,095.52 Senior Secured Super-Priority
Debtor-in-Possession Credit Facility (the "DIP Facility") with the Borrower (defined below).
Reference is made to those certain mortgage loans in the original principal amount of
$250,000,000 (the "Existing Loan") made by Lehman ALI Inc. to the Borrower (as defined
below) and the Released Borrowers (as defined below) pursuant to a certain Loan Agreement
dated as of June 29, 2007, among the Borrower, the Released Borrowers and Lehman ALI Inc.
(as amended, the "Existing Loan Agreement'). The terms, covenants, conditions and provisions
which are applicable as of the date of this Term Sheet to the Existing Loan are set forth in the
Existing Loan Agreement and the other loan documents entered into in connection therewith.
The collateral for the Existing Loan is referred to herein as the "Pre-Petition Collateral." As of
the date of this Term Sheet, Borrower (as defined below) is a party to the Existing Loan
Agreement.
Borrower:
Released Borrowers:
DIP Facility:
15742757.15.BUSINESS
Collectively, the borrowers set forth on the List of
Borrowers attached hereto, which borrowers (individually
and collectively, as the context may require, the
"Borrower'') shall be jointly and severally liable for the
obligations under the DIP Facility (as defined below).
Collectively, the borrowers set forth on the List of Released
Borrowers attached hereto, which borrowers (collectively,
the "Released Borrowers") were previously released from
their obligations under the Existing Loan Agreement in
accordance with the terms and conditions of the Existing
Loan Agreement.
After entry of the Final Order, a term facility of up to
$17,498,095.52 allocated to 20 properties (the "Lehman
Properties") securing the Existing Loan (the "DIP
Facility") shall be extended to the Borrower pursuant to the
terms and provisions of a DIP loan agreement (the "DIP
Closing Date:
DIP Lender:
Carve-Out:
Fees:
Maturity Date:
Termination Date:
I 5742757. 15.BUSINESS
Loan Agreement"). The loan funded by the DIP Lender
under the DIP Facility is referred to herein as the "DIP
Loan."
The date of the effectiveness of the DIP Facility and the
funding by the DIP Lender of the first advance under the
DIP Facility to the Borrower.
Solar Finance Inc.
There shall be no carve-out of any nature whatsoever for
professional fees or expenses of the Borrower or any estate
professionals. Since the DIP Facility is intended to solely
provide funds for the Marriott PIP Work, the Other
Franchise PIP Work and the Cycle Renovations, the
professional fees and expenses incurred by the Borrower
and other estate professionals shall be dealt with in
connection with the cash collateral order(s) entered by the
Bankruptcy Court.
A Closing Fee of 0.5% of the amount committed in
connection with the DIP Facility shall be paid by the
Borrower to the DIP Lender on the closing date of the DIP
Facility and shall be fully earned and non-refundable on
such date.
The Borrower shall not incur or pay any success fee,
transaction fee or financing fee of any kind or character in
connection with or in respect of obtaining the issuance
and/or funding of the DIP Facility (except for the Closing
Fee and Commitment Fee).
A Commitment Fee equal to 1.0% of the amount
committed in connection with the DIP Facility shall be paid
by the Borrower to the DIP Lender on the closing date of
the DIP Facility and shall be fully earned and non-
refundable on such date.
The cash collateral order(s) approved by the Bankruptcy
Court shall provide that the Closing Fee and the
Commitment Fee shall be paid immediately upon the
approval of the DIP Facility by the Bankruptcy Court and
the closing of the DIP Facility.
360 days from the Closing Date.
The earliest to occur of: (a) acceleration by the DIP Lender
of the obligations under the DIP Loan due to the occurrence
2
Non-Default Interest Rate
and PaymentTerms:
Default Interest Rate:
Loan Payments:
and continuation of an Event of Default with respect to the
DIP Loan (i.e., which Event of Default has not otherwise
been cured or waived in writing by the DIP Lender); (b) the
acceleration of the obligations under any other debtor-in-
possession financing provided to the Debtors due to the
occurrence and continuation of an event of default under
such financings; (c) the effective date of any plan in the
bankruptcy proceeding that provides for payment in full in
cash of all obligations owing under the DIP Facility or is
otherwise acceptable to the DIP Lender; (d) the date that is
the closing date of any sale of all or substantially all of any
Borrower's assets that constitute collateral for the DIP
Facility; (e) the entry of an order by the Bankruptcy Court
granting relief from the automatic stay permitting
foreclosure of any assets of any Borrower constituting
collateral with respect to the DIP Facility in excess of
$1,000,000 in the aggregate (each, a "Release from Stay");
or (f) the entry of an order of dismissal or conversion of the
Chapter 11 Cases with respect to all of the Borrowers with
respect to the DIP Facility.
Interest on the DIP Loan shall be paid monthly in arrears,
accruing at a per annum floating rate equal to the sum of
the 30-day LIBOR (subject to a floor of 2.0%) (LIBOR
being defined and determined by DIP Lender in a manner
as is customary for facilities similar to the DIP Facility)
plus the applicable Spread (as defined below) (the "Non-
Default Interest Rate"). All interest shall be computed on
the basis of a 360-day year for the actual number of days
elapsed. "Spread'' means 5.00%.
Effective immediately upon the occurrence and applying
during the continuance of any Event of Default (after
giving effect to any applicable grace and cure periods with
respect thereto), unless and until such Event of Default is
waived in writing by the DIP Lender, interest shall accrue
on the DIP Loan at a rate that is 3% per annum in excess of
the applicable Non-Default Interest Rate.
All unpaid obligations, including, without limitation,
principal and interest on the DIP Facility and any fees and
expenses incurred thereon, shall be due and payable in full
in cash on the earlier to occur of (i) the Maturity Date and
(ii}the Termination Date.
3
Mandatory Prepayments:
Use of Proceeds:
Cash Management:
15742757.15.BUS!NESS
Upon the receipt by (or on behalf of) any Borrower of
insurance proceeds or a condemnation award in excess of
$25,000 following a. casualty or condemnation event with
respect to any assets of such Borrower constituting
collateral for the DIP Facility (subject to the use thereof for
restoration as is permitted in the DIP Loan Agreement),
100% of any net cash proceeds from such insurance shall
be paid to the DIP Lender on the date that such net cash
proceeds are received by or on behalf of such Borrower or
such subsidiary in the following order of priority: first, to
accrued and unpaid interest under the DIP Facility, second,
to all other amounts then due to DIP Lender under the DIP
Facility, and third, to outstanding principal under the DIP
Facility until the DIP Facility is paid in full.
Proceeds of the DIP Facility shall be used solely for (1) the
Marriott PIP Work in accordance with the PIP Budget, (2)
the Other Franchise PIP Work in accordance with the PIP
Budget and (3) the Cycle Renovations in accordance with
the Cycle Renovations Budget and shall include the
following payments: (a) amounts to pay the financing fees
owed to the DIP Lender in accordance with the DIP
Facility, (b) amounts up to a maximum principal amount of
$5,448,771.01 to fund post-petition Marriott PIP Work in
accordance with the PIP Budget, (c) amounts up to a
maximum principal amount of $7,949,324.51 to fund post-
petition Other Franchise PIP Work in accordance with the
PIP Budget, and (d) amounts up to a maximum principal
amount of $4,100,000.00 to fund post-petition Cycle
Renovations in accordance with the Cycle Renovations
Budget.
The Borrower shall use a segregated cash management
system that segregates proceeds of the DIP Facility from
cash generated by the Borrower without commingling cash
collateral from any other affiliates and such cash
management system must be acceptable to the DIP Lender.
Additionally, (i) all funds advanced under the DIP Facility
shall be held in a segregated disbursement account
controlled by the DIP Lender (the "Controlled
Disbursement Account') and (ii) disbursements from the
Controlled Disbursement Account for the Marriott PIP
Work, the Other Franchise PIP Work and the Cycle
Renovations shall be made in accordance with the
disbursement provisions of the Existing Loan Agreement
with regard to the disbursements from the Required Capital
Improvements Account (as defmed in the Existing Loan
4
Priority Claim:
Collateral Security:
Agreement). On the Closing Date, the DIP Lender shall
advance $5,448,771.01 to fund the post-petition Marriott
PIP Work in accordance with the PIP Budget, which funds
shall be held in the Controlled Disbursement Account. The
DIP Lender shall make advances to fund (i) the post-
petition Other Franchise PIP .Work in accordance with the
PIP Budget and (ii) the post-petition Cycle Renovations in
accordance with the Cycle Renovations Budget provided
that the following conditions with respect to each advance
for the Other Franchise PIP Work and Cycle Renovations,
respectively, under the DIP Facility have been satisfied: (a)
no Event of Default shall have occurred, (b) all previous
advances made by the DIP Lender with respect to the Other
Franchise PIP Work or the Cycle Renovations, as
applicable, shall have been fully disbursed to Borrower and
Borrower shall have fully expended such amounts in
accordance with the PIP Budget or the Cycle Renovations
Budget, respectively, (c) Borrower shall have submitted a
written request to the DIP Lender for such advance at least
-thirty (30) days prior to the date on which Borrower
requests that such advance be funded to the Controlled
Disbursement Account, which request shall set forth in
reasonable detail the Other Franchise PIP Work or Cycle
Renovations, as applicable, to be paid in accordance with
the PIP Budget or the Cycle Renovations Budget,
respectively, (d) the amount of the advance requested by
Borrower pursuant to the Other Franchise PIP Budget or
the Cycle Renovations Budget, as applicable, shall not
exceed the remaining unfunded commitment by the DIP
Lender under the DIP Facility with respect to the Other
Franchise Work or the Cycle Renovations, respectively and
(e) Borrower shall have otherwise satisfied all conditions
necessary for funds to be disbursed from the Controlled
Disbursement Account pursuant to the DIP Facility.
Amounts owed by the Borrower to the DIP Lender
pursuant to the DIP Facility, including all accrued interest,
fees, costs and expenses, shall constitute, in accordance
with Section 364(c)(l) of the Bankruptcy Code, a super-
priority administrative claim having priority over any or all
administrative expenses of the kind specified in, among
other sections, Sections 105, 326, 330, 331, 503(b ), 506( c),
507(a), 507(b) and 726 of the Bankruptcy Code.
Without any limitation whatsoever, the DIP Facility,
including accrued interest, principal, costs and expenses,
shall be secured on a super-priority basis in accordance
5
Lien Validation
and Perfection:
DIP Facility Documentation:
with sections 364( c )(2) and (d) of the Bankruptcy Code by
first priority, senior secured and priming liens on and
security interests in (i) all of the Borrower's real property
(including the improvements thereon and all furniture,
fixtures and equipment used in connection therewith) and
the proceeds thereof that secure the Existing Loan, subject
only to prepetition liens and other permitted liens to be
agreed in the DIP Loan Agreement (the "Permitted Liens"),
(ii) the Controlled Disbursement Account, the amounts on
deposit from time to time therein and the proceeds thereof,
and (iii) all chapter 5 causes of action that relate to the
Lehman Properties.
All liens authorized and granted pursuant to the DIP
Facility shall be deemed effective and perfected as of the
Petition Date, and no further notice or act will be required
to effect such perfection.
The DIP Facility shall be subject to the negotiation,
execution and delivery of a definitive DIP Loan Agreement,
an account control agreement relating to the Controlled
Disbursement Account and related loan documents and
other supporting instruments and agreements (collectively,
the "DIP Facility Documentation") embodying the terms
set forth herein mutually acceptable to the Borrower and
DIP Lender. Entering into mortgages and other security
documents and filings (and obtaining policies of mortgagee
title insurance reasonably acceptable to the DIP Lender)
shall not be a condition precedent to the Closing Date;
provided that, following the occurrence of the Closing Date,
the DIP Lender (at the sole cost and expense of Borrower)
may require that some or all of the Borrowers enter into
mortgages and other security documents and filings (and
execute and deliver customary affidavits to the applicable
title companies in order to permit the issuance of policies of
mortgagee title insurance and customary endorsements
thereto reasonably acceptable to the DIP Lender) which the
DIP Lender deems reasonably necessary for the continued
perfection of the DIP Lender's security interests under the
DIP Facility. Notwithstanding the foregoing, the DIP
Lender may record and/or file the Final Order in the land
records and/or in such other places as may be determined
by DIP Lender (although the same shall not be a condition
precedent to the Closing Date, all costs and expenses
incurred by the DIP Lender in connection with such
6
Fees and Expenses:
Audits and Appraisals:
Conditions Precedent:
recordation and/or filing of the Final Order shall be borne
exclusively by the Borrower).
Borrower will pay (i) all documented fees and out-of-
pocket expenses of one counsel and financial advisor for
the DIP Lender relating to the DIP Facility and the
administration and interpretation of the DIP Facility, (ii) all
documented out-of-pocket due-diligence expenses of the
DIP Lender in connection with the DIP Facility, including
but not limited to environmental and tax due diligence,
duplication expenses, consultation, travel and attendance at
court hearings, and inspections of the Lehman Properties in
connection with disbursements from the Controlled
Disbursement Account and (iii) other documented out-of-
pocket fees and expenses of the DIP Lender in connection
with the. DIP Facility, in each case, whether or not the DIP
Facility is consummated (other than as a result of the DIP
Lender failure or refusal to consummate the DIP Facility on
the terms set forth herein).
The Borrower shall allow the DIP Lender (through its
officers, senior employees, or agents and advisors) from
time to time at the Borrower's expense to periodically
inspect and audit the books, records and account statements
of the Borrower in order to confirm the Borrower's
compliance with the PIP Budget and the Cycle Renovations
Budget and the terms and provisions of the DIP Facility
Documentation (including, without limitation, in order to
verify that funds are being used in accordance with the PIP
Budget and the Cycle Renovations Budget); provided that,
to the extent that the Termination Date shall not have
occurred and there shall exist no Event of Default (or event
which would constitute an Event of Default or cause the
Termination Date to occur with the giving of notice or
lapse of time), any such inspections and audits shall (x) be
conducted only if the DIP Lender deems it reasonably
necessary, and (y) occur during normal business hours and
upon reasonable notice to the Borrower.
The closing of the DIP Facility shall be subject to the DIP
Facility Documentation and the Final Order each being
acceptable to the DIP Lender.
The closing of the DIP Facility shall also be subject to the
condition that no Termination Event or Event of Default
shall have occurred and shall be continuing and such other
conditions precedent customary and appropriate for
7
J5742757.15.BUSINESS
financings of this type, including, but not limited to, (a)
satisfaction of all to be set forth in the DIP
Facility Documentation, (b) delivery of (i) the PIP Budget
and the Cycle Renovations Budget in form and substance
satisfactory to the DIP Lender (after consultation with its
advisors), each of which shall include the items set forth in
the "Use of Proceeds" section of the Term Sheet and shall
be acceptable to the applicable franchisors, (ii) the
Adequate Assurance Agreement (including with respect to
the timeline and performance milestones for completion of
the Marriott PIP Work) in form and substance satisfactory
to the DIP Lender after consultant with its advisors (it
being understood and agreed that the draft Adequate
Assurances Agreement provided to the DIP Lender on July
14, 2010 is satisfactory to the DIP Lender), (iii) a thirteen
(13)-week cash flow projection and (iv) such other
financial information with respect to the Borrower
delivered (or required to be delivered) to Lehman ALI Inc.
in its capacity as lender under the Existing Loan
(collectively, the "Required Financial Information"), (c)
delivery of updated title searches, lien searches and updated
so-called "phase 1" environmental reports (and if
recommended by the DIP Lender's environmental
consultant or otherwise obtained at the closing of the
Existing Loan, delivery of new or updated so-called "phase
2" environmental reports), which updated title searches,
lien searches and updated "phase 1" (and, if applicable,
updated or new "phase 2") environmental reports are, in
each case, acceptable to DIP Lender, (d) entry of a Final
Order approving the DIP Facility, its senior, first priority,
priming liens, super-priority status and all liens securing
the DIP Facility and containing such other orders and
findings as DIP Lender may reasonably request which Final
Order shall not have been modified or amended without
approval of the same, and shall not have been reversed or
stayed pending appeal, in form and substance satisfactory
to the same, (e) the payment of all fees and expenses in
accordance with the caption "Fees and Expenses" above, (f)
there shall have occurred no material adverse change in the
applicable Borrower(s) financial condition, results of
operations or properties (which for the avoidance of doubt
shall mean all of the Borrowers and properties applicable to
the DIP Facility) constituting collateral under the DIP
Facility (other than the commencement of the Chapter 11
Case or otherwise in connection therewith) since the date of
this Term Sheet that in the reasonable judgment of the DIP
8
Affirmative and
Negative Covenants:
!5742757.!5.BUSINESS
Lender have or would reasonably be expected to have a
material adverse effect on the rights and remedies of the
DIP Lender or on the ability of the Borrower to perform its
respective obligations to them, (g) the representations and
warranties contained in the DIP Facility Documentation
shall be true and correct in all material respects (except to
the extent that any such representations and warranties
relate to an earlier date, in which case they shall be true and
correct as of such earlier date), (h) the DIP Lender shall
have received bankruptcy court approval in the bankruptcy
case of Lehman Commercial Paper Inc. to enter into the
DIP Facility and (i) the DIP Lender shall have received the
approval of the Official Committee of Unsecured Creditors
in the bankruptcy case of Lehman Commercial Paper Inc.
to enter into the DIP Facility (which approval the DIP
Lender will seek to obtain as soon as practicable).
Affirmative and negative covenants similar to the type
contained in the Existing Loan Agreement (and the other
loan documents entered into in connection therewith) to the
extent such covenants are customarily included in debtor-
in-possession financing agreements, including, but not
limited to, (a) delivery to the DIP Lender, on a weekly
basis, of a rolling 13 week cash flow projections (together
with a comparison of actual payments to budgeted line
items for the prior weekly period) of the debtors under the
Chapter 11 Case, (b) restrictions on sales of goods and
services out of the ordinary course of business (including
that all sales, including sales of any hotel properties, shall
be on an arm's-length basis to bona fide third-party
purchasers and shall be acceptable to the DIP Lender), (c)
delivery of the Required Financial Information, (d) use of
proceeds solely in accordance with the PIP Budget and the
Cycle Renovations Budget, (e) performance and
completion by the Borrower of the Marriott PIP Work and
the Other Franchise PIP Work in accordance with the PIP
Budget and the Adequate Assurance Agreement (including
the timeline for the Marriott PIP Work set forth therein)
and the performance and completion by the Borrower of
the Cycle Renovations in accordance with the Cycle
Renovations Budget, (f) unless such action has otherwise
been approved by the DIP Lender, no Borrower shall (or
shall attempt or seek Bankruptcy Court approval to) modify
or terminate a franchise agreement or enter into a new
franchise agreement upon any hotel that constitutes
collateral for the DIP Facility, (g) unless such action has
9
Representations and
Warranties:
Remedies:
otherwise been approved by the DIP Lender, no Borrower
shall (or shall attempt or seek Bankruptcy Court approval
to) modify or enter into a new PIP with respect to any hotel
that constitutes collateral for the DIP Facility, (h) unless
such action has otherwise been approved by the DIP
Lender, no Borrower shall (or shall attempt or seek
Bankruptcy Court approval to) modify or enter into a new
Cycle Renovation with respect to any hotel that constitutes
collateral for the DIP Facility, (i) unless such action has
otherwise been approved by the DIP Lender, no Borrower
shall (or shall attempt or seek Bankruptcy Court approval
to) modify, terminate or replace the Adequate Assurance
Agreement (provided that the Adequate Assurance
Agreement may be extended for a period not to exceed 60
days without such approval by the DIP Lender provided
that the Adequate Assurance Agreement is not otherwise
modified in connection with such extension) and G)
Borrower shall use commercially reasonable efforts to
deliver to the DIP Lender so-called "comfort letters" in
form and substance reasonably acceptable to the DIP
Lender from franchisors (which "comfort letters" shall
provide, among other things, that such franchisors will
recognize the performance by DIP Lender of the
obligations of the Borrower thereunder, including
completion of the Marriott PIP Work, the Other Franchise
PIP Work and the Cycle Renovations, and that such
franchisors will otherwise accept the cure by DIP Lender
of defaults by the Borrower thereunde:t:).
The documentation for the DIP Facility shall contain
representations and warranties similar to the type contained
in the Existing Loan Agreements, but modified to include
those customary in the context of the proposed DIP Facility.
Upon the Termination Date or the occurrence of an Event
of Default, the DIP Lender shall have customary remedies,
including, without limitation, (i) the right to realize on all
Collateral securing the DIP Facility and the right to
exercise any remedy available under the DIP Facility and
applicable law (including, without limitation, the right (but
not the obligation) to complete the Marriott PIP Work, the
Other Franchise PIP Work and the Cycle Renovations and
to apply any of the proceeds of the DIP Facility on account
thereof) and (ii) any remedies (but not the termination or
related events themselves) set forth in any cash collateral
order entered by the Bankruptcy Court in the event that
10
Right to Credit Bid:
Events of Default:
there is an event of default under such cash collateral order,
without the necessity of obtaining any further relief or
order from the Bankruptcy Court. Automatic Section 362
relief from the stay in favor of the DIP Lender shall be
embodied in any order approving the DIP Facility;
provided, that DIP Lender shall provide the Borrower with
5 days prior notice of its intent to lift the stay, with a copy
of such notice to counsel for the Committee.
Upon entry of a Final Order approving the DIP Facility, the
DIP Lender shall have the right to credit-bid the amount of
claims of the DIP Facility during a sale of all or
substantially all assets of the Borrowers and their debtor
affiliates in the chapter 11 cases (collectively, the
"Debtors") which assets constitute collateral for the DIP
Facility, including without limitation, a sale occurring
pursuant to Section 363 of the Bankruptcy Code or
included as part of any restructuring plan subject to
confinnation under Section 1129(b )(2)(A)(iii) of the
Bankruptcy Code.
Events of Default limited to the following:
The Chapter 11 Case shall be converted to cases under
Chapter 7 of the Bankruptcy Code or be dismissed.
Filing or support of a proposed plan of reorganization
by any Borrower or any affiliate of the Borrower that
does not provide for the payment in full and in cash of
such Borrower's obligations outstanding under the DIP
Facility on the effective date of such plan of
reorganization, unless otherwise consented to by the
DIP Lender.
Entry of a final order confinning a plan of
reorganization that does not require repayment in full in
cash of the DIP Facility as of the effective date of the
plan, unless otherwise consented to by the DIP Lender.
Appointment of a trustee under Section 1104 of the
Bankruptcy Code.
Other than at the request of the DIP Lender, the
appointment of an examiner with enlarged powers
(powers beyond those set forth in Section 1106(a)(3)
and (4) of the Bankruptcy Code) under Section 1106(b)
of the Bankruptcy Code.
11
Entry of a final order by the Bankruptcy Court
amending, supplementing, staying, vacating or
otherwise modifying the DIP Facility.
Any attempt by any Borrower to obtain, or if any other
party in interest obtains, an order of the Bankruptcy
Court or other judgment, and the effect of such order or
judgment is to, invalidate, reduce or otherwise impair
the DIP Lender's claims or collateral security under the
DIP Facility (including the filing of any motion by any
Borrower to (i) obtain financing from any person or
entity other than the DIP Lender (x) under Section
364(d) of the Bankruptcy Code, (y) under Section 364(c)
of the Bankruptcy Code or (z) with respect to the
existence of any charge, in each case which is or which
is claimed to be senior to or pari passu with the super-
priority of the claims or charges of the DIP Lender (in
each of cases (x), (y) and (z), other than with respect to
financing used, in whole or part, to repay in full the DIP
Loan) or (ii) except for the Permitted Liens, grant or
suffer to exist any other lien or charge upon or affecting
the collateral for the DIP Loan), or to subject the DIP
Lender's collateral under the DIP Facility to any
surcharge pursuant to Section 506( c) of the Bankruptcy
Code.
Marriott or the other applicable franchisor terminates
the franchise agreement (or otherwise has the right to so
terminate such franchise agreement and has taken
affirmative steps in such regard (including but not
limited to proper delivery of notice of intent to
terminate)) upon any hotel owned by any Borrower
constituting collateral with respect to the DIP Facility.
Any Borrower supports a request of any party in
interest to surcharge collateral of the Pre-Petition
Collateral or Post-Petition Collateral that constitutes
collateral with respect to the DIP Facility, for any
expense.
Expenditure of any DIP Loan proceeds in a manner or
upon a property or project for which it had not been
approved; provided that, with respect to any
expenditure in violation of the foregoing which was
inadvertent and does not exceed $25,000, the Borrower
shall have the right to cure the same (but on not more
12
than one occasion per calendar month) within five (5)
business days following any such expenditure.
Any Borrower shall apply for an order substituting any
assets for all or any portion of the Post-Petition
Collateral that constitutes collateral with respect to the
DIP Facility, except as provided in the instruments
evidencing and governing the Existing Loan
Agreements and DIP Facility.
Failure to make all payments under the DIP Facility
when due.
Failure to pay any undisputed, material post-petition
taxes or indebtedness.
Any Cycle Renovations Variance beyond the Cycle
Renovations Budget with respect to any property.
"Cycle Renovations Variance" means costs and
expenses for completing specific Cycle Renovations at
the Lehman Properties owned by Grand Prix Bulfmch
LLC and KP A/GP Louisville (HI) LLC as of any date
of determination, which costs and expenses exceed the
line item for such Cycle Renovations set forth in the
Cycle Renovations Budget for such hotel property as of
such date (either on an actual spend or on a projected
basis).
Any Variance with respect to any hotel property
constituting collateral for the DIP Facility; provided
that, any such Variance that does not exceed 1 0% on a
line-item basis shall not constitute an Event of Default
hereunder so long as (a) with respect to the PIP
Property Group that includes such hotel property, the
Borrower has not, in the aggregate, spent more (and is
not, in the aggregate, projected to spend more) in
respect of completing the Marriott PIP Work and/or the
Other Franchise PIP Work with respect to all hotel
properties in such PIP Property Group than the amount,
in the aggregate, budgeted therefor in the PIP Budgets
for such hotel properties and (b) such Variance is fully
compensated for by a combination of (i) applying the
remaining unallocated portion of the contingency line
item set forth in the PIP Budget for such hotel property
(but in no event to exceed an amount thereof equal to
the Maximum Contingency Amount), (ii) reallocating
13
any unused portion of the PIP Budget for any of the
other hotel properties in such hotel property's PIP
Property Group for which the Marriott PIP Work and/or
the Other Franchise PIP Work has been fully completed
and accepted by the applicable franchisor (i.e., not
subject to "punch-list" items) in accordance with the
applicable franchise agreement and the Adequate
Assurance Agreement and approved by the DIP Lender
pursuant to the terms and conditions of the DIP Facility
and for which complete and final invoices have been
submitted by the applicable contractors and fully paid,
and (iii) identified and documented savings from
budgeted amounts to complete the Marriott PIP Work
and/or the Other Franchise PIP Work for any hotel
property in such hotel property's PIP Property Group.
"Maximum Contingency Amount" means, with
respect to any hotel property as of any date of
determination, the percentage of the Marriott PIP Work
or Other Franchise PIP Work, as applicable, with
respect to such hotel property which has been
completed as of such date multiplied by the remaining
unallocated portion of the contingency line item set
forth in the PIP Budget for such hotel property.
"PIP Property Group" means, with respect to any
hotel property, such hotel property together with one or
more other hotel properties (but in no event to exceed 3
such hotel properties in the aggregate) with respect to
which the Borrower is then-engaged in Marriott PIP
Work and/or Other Franchise PIP Work or have
completed Marriott PIP Work and/or Other Franchise
PIP Work and which have been designated by the
Borrower and reasonably approved by the DIP Lender
as a "PIP Property Group".
"Variance" means costs and expenses for completing
specific Marriott PIP Work or Other Franchise PIP
Work, as applicable at any hotel property as of any date
of determination, which costs and expenses exceed the
line item for such Marriott PIP Work or Other
Franchise PIP Work, as applicable set forth in the PIP
Budget for such hotel property as of such date (either
on an actual spend or on a projected basis).
Any breach of any covenant of the DIP Facility beyond
any applicable grace periods.
14
Governing Law:
Chapter 11 Cases:
Miscellaneous:
Indemnification:
In the event any of the DIP Facility Documentation
giving rise to any effective lien or security interest in
any collateral for the DIP Loan (including, without
limitation, the account control agreement relating to the
Controlled Disbursement Account) shall cease to create
a valid and perfected lien on and security interest in the
collateral purported to be covered thereby.
Any representation or warranty in the DIP Facility was
incorrect or misleading in any material respect when
made.
Any sale of the Lehman Properties without the DIP
Lender's consent.
Any default under any other debtor-in-possession
financings.
Any other events of default as are usual and customary
for financings of this kind, and consistent with the
events of default contained in the Existing Loan
Agreement (as modified to take account of the current
financial condition of the Borrower).
New York
Venue for the chapter 11 Cases shall be in the Southern
District ofNew York.
Release and Waiver by any Borrower of any claims against
the DIP Lender under the DIP Facility under Section 510 of
the Bankruptcy Code.
Waiver by any Borrower of any rights to assert claims
arising under applicable law against the DIP Lender (or
related to the DIP Facility).
DIP Lender shall at all times act pursuant to the DIP Loan
Agreement.
The Borrower shall indemnify and hold the DIP Lender and
its respective officers, directors, employees and agents
(including all of their professionals) (each an "Indemnified
Party") harmless from and against any and all claims,
damages, losses, liabilities and expenses (including,
without limitation, all reasonable fees and disbursements of
attorneys and other professionals) to which any
15
Other Definitions:
Indemnified Party may become liable or which may be
incurred by or asserted against any Indemnified Party, in
each case in connection with the DIP Facility, the DIP
Facility Documentation, any "Obligation" under the DIP
Loan Agreement or any act, event or transaction related or
attendant thereto or any use or intended use of the proceeds
of the DIP Facility, except to the extent the same is found
in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct.
"Adequate Assurance Agreement" means that certain
agreement (or, if more than one, those certain agreements,
collectively) between the Borrower and Marriott providing
for the forbearance of the exercise of remedies by the
applicable franchisor under its franchise agreement in
respect of the Marriott PIP Work, including a timeline and
performance milestones for completion of the Marriott PIP
Work and certain other matters as more fully set forth
therein.
"Bankruptcy Code" means Title 11 of the United States
Code (11 U.S.C. 101 et seq.), as amended.
"Bankruptcy Court' means the United States Bankruptcy
Court for the Southern District ofNew York.
"Chapter 11 Case" means, collectively, the cases filed by
the Borrower under Chapter 11 of the Bankruptcy Code
with the Bankruptcy Court.
"Committee" means any official committee of the
unsecured creditors appointed pursuant Section 1102 of the
Bankruptcy Code in Borrower's bankruptcy case.
"Cycle Renovations" means the construction, labor and
materials necessary to renovate the Lehman Properties
owned by Grand Prix Bulfinch LLC and KP A/GP
Louisville (HI) LLC, which renovation plans are in scope,
form and substance reasonably acceptable to the DIP
Lender.
"Cycle Renovations Budgef' means the budget setting
forth the projected expenditures for funding the Cycle
Renovations, in form and substance reasonably acceptable
to the DIP Lender (after consultant with its advisors).
16
"Final Order" means a final order of the Bankruptcy Court,
that, without limitation, approves the DIP Facility and
grants the liens and security interests contained therein,
provides (in addition to the rights and benefits afforded to
the lenders under the so-called "comfort letters" obtained in
connection with the origination of the Existing Loan) that
the applicable franchisors shall recognize the performance
by the DIP Lender of the obligations of the Borrower under
the applicable PIPs (including the completion of the
Marriott PIP Work, the Other Franchise PIP Work and
Cycle Renovations and that such franchisors will otherwise
accept the cure by the DIP Lender of defaults of the
Borrower thereunder), is in recordable form, provides that
it cannot be vacated, dismissed or converted unless the DIP
Facility and all amounts due and owing thereunder have
been fully paid, which order is not stayed.
"Marriott PIP Work" means the construction, labor and
materials necessary to satisfy Marriott that each of the
requirements of each of the PIPs has been satisfied, as
identified and reasonably approved by the DIP Lender.
"Other Franchise PIP Work" means the construction,
labor and materials necessary to satisfy each applicable
franchisor (other than Marriott) that each of the
requirements of each of the PIPs has been satisfied, as
identified and reasonably approved by the DIP Lender.
"Petition Date" means the date of filing of the Chapter 11
Case.
"PIP' means the Property Improvement Plans included
within and a made a part of the Franchise Agreements
covering certain of the hotel properties owned . by the
Borrower, which Property Improvement Plans shall have
been approved by Marriott or any other applicable
franchisor, and shall have been received and reasonably
approved by the DIP Lender, unless such Property
Improvement Plans have been previously approved by the
DIP Lender in accordance with the terms and conditions of
the Existing Loan Agreement.
"PIP Budget' means, collectively, (i) the existing PIP
budget prepared by Borrower and. approved by the DIP
Lender, which PIP budget is attached and made a part of
the Existing Loan Agreement, as adjusted to account for
funds previously disbursed to Borrower for the Marriott
17
PIP Work and the Other Franchise PIP Work in accordance
with the terms and conditions of the Existing Loan
Agreement and (ii) the budget setting forth the projected
expenditures for funding the Mod 14 work at the Lehman
Properties owned by Grand Prix Ontario LLC, Grand Prix
Troy (SE) LLC, Grand Prix Troy (Central) LLC and Grand
Prix Harrisburg LLC, in form and substance reasonably
acceptable to the DIP Lender (after consultation with its
advisors).
18
US_ ACTJYE:\434460 16\20\58399.0008
Exhibit D
(AIC Term Sheet)
TERM SHEET
(Lehman/ AI C)
July 19, 2010
Confidential
This term sheet ("Term Sheet'') is proffered in the nature of a settlement proposal in furtherance
of settlement discussions, and is intended to be entitled to the protection of Rule 408 for the
Federal Rules of Evidence and any other applicable statutes or doctrines protecting the use or
disclosure of confidential information and information exchanged in the context of settlement
discussions, and shall not be treated as an admission regarding the truth, accuracy or
completeness of any fact or the applicability or strength of any legal theory.
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO
ANY SECURITIES OF INNKEEPERS USA TRUST OR A SOLICITATION OF
ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR SOLICITATION
SHALL COMPLY WITH ALL APPLICABLE SECURITIES LAWS, IF ANY, AND/OR
PROVISIONS OF THE BANKRUPTCY CODE.
Seller:
Acquirer:
Description ofTransaction:
15816974.6
Lehman ALI Inc. ("Lehman").
Apollo Investment Corporation ("AIC").
AIC may not assign any or all of its rights or delegate any or all
of its obligations under this Term Sheet without the express
written consent of Lehman (which consent may be withheld in
Lehman's sole discretion).
Following the confirmation by the Bankruptcy Court for the
Southern District of New York (the "Bankruptcy Court") o(the
prearranged plan (the "Plan") of reorganization of Innkeepers
USA Trust ("Innkeepers" or the "Company") as described in
the term sheet, dated as of July 17, 2010, by and between
Lehman and the Company, and attached hereto as Annex A
(the "Lehman-Innkeepers Term Sheet") and prior to the
effective date of the Plan (the "Effective Date"), Lehman and
AIC will enter into an agreement (the "Stock Purchase
Agreement") whereby Lehman will agree to sell to AIC and
AIC will agree to purchase from Lehman the right to receive
50% of the equity in the Company, subject to dilution as set
forth in the Lehman-Innkeepers Term Sheet, that Lehman
receives in connection with consummation of the Plan (such
50%, the "Transferred Equity") in exchange for cash in an
amount equal to $107.5 million (the "Sale Proceeds") payable
upon the closing of the transactions contemplated by the Stock
Purchase Agreement. In the event the transfer tax exception
under 1146(a) of the Bankruptcy Code is determined by the
Bankruptcy Court to be inapplicable, AIC and Lehman will
Distribution oflnnkeepers
Equity:
Conditions to Execution of
Stock Purchase Agreement:
cooperate to structure the sale of the Transferred Equity in a
manner that will not incur transfer taxes; provided, however,
that in the event such taxes are incurred as a result of the sale,
AIC shall be responsible for payment of such taxes in addition
to the Sale Proceeds.
After giving effect to the sale of Transferred Equity described
above, the equity in the reorganized Company (the "New
Equity") will be held as follows:
50% by Lehman; and
50% by AIC;
Subject to pro rata dilution of3%, which shall
be available for distribution to the Company's
management under the Plan pursuant to a
Management Equity Incentive Program on the
terms provided in the Lehman-Innkeepers Term
Sheet.
The execution of the Stock Purchase Agreement and the
consummation of a transaction on the terms described herein
will be subject to the satisfaction or waiver by Lehman or AIC,
as applicable, (in each case in such party's sole discretion) of
the following conditions:
approval of the Bankruptcy Court of a plan
support agreement executed by Lehman and the
Company as contemplated by the Lehman-
Innkeepers Term Sheet;
receipt by AIC and Lehman of all necessary
final internal approvals to consummate the
transaction (which may be withheld (for any
reason or no reason) in their sole discretion) by
September 2, 2010, including, without
limitation, final approval by AIC's Investment
Committee and final approval ofthe UCC and
the United States Bankruptcy Court
administering the Chapter 11 case ofLBHI by
such date; and
the negotiation, execution and delivery of
definitive documents reflecting the terms set
forth in this Term Sheet and containing other
terms and conditions mutually acceptable to
2
Conditions to Closing:
AIC and Lehman, including, but not limited to,
terms customary for transactions of this type.
The consummation of a transaction on the terms described
herein will be subject to the satisfaction or waiver by Lehman
or AIC, as applicable, (in each case in such party's sole
discretion) of customary closing conditions including, without
limitation, the following:
the consummation ofthe proposed restructuring
transaction between Lehman and Innkeepers on
the terms and as contemplated by the Lehman-
Innkeepers Term Sheet;
the reorganized Company will have the pro
forma capitalization structure contemplated by
the Lehman-Innkeepers Term Sheet; and
completion ofthird party and regulatory notices
and receipt of all necessary and material
consents and waivers.
So long as the Letter Agreement has not been terminated,
during the pendency of Innkeepers' chapter II cases, Lehman
shall not object, directly or indirectly, to (a) Innkeepers'
performance of the primary obligations underlying the
Required Capital improvements Guaranty, dated as of June 29,
2007 (the "Guaranty") so long as such obligations are
exclusively limited to the non-immediate property
improvement plan ("PIP") obligations in the properties which
constitute the Fixed Rate Collateral (as such term is defined in
the Lehman-Innkeepers Term Sheet) (the "Fixed Rate Pool")
and such obligations are paid solely with funds available under
the Fixed Rate DIP Facility (as such term is defined in the
Lehman-Innkeepers Term Sheet) or cash collateral generated
from the Fixed Rate Pool, and (b) the settlement or termination
of the Guaranty so long as such settlement or termination
occurs at least 45 days after the date Innkeepers commences its
chapter 11 cases (the "Petition Date").
So long as the Letter Agreement has not been terminated and
AIC is at least a 25% owner of reorganized Innkeepers, subject
to dilution as provided in the Lehman-Innkeepers Term Sheet,
Lehman and AIC shall authorize reorganized Innkeepers to
agree that any (a) non-immediate PIP obligations in the Fixed
Rate Pool described in Schedule XI to the related loan
agreement that were not satisfied before or during the chapter
3
Termination Events:
11 cases and (b) discretionary capital expenditures as set forth
in Annex B attached hereto will be funded from the proceeds of
the Exit Funding (as such term is defined in the Lehman-
Innkeepers Term Sheet) or excess cash flow after payment of
all property level expenses, FF&E reserves, debt obligations,
corporate G&A, and working capital holdbacks as reasonably
determined by reorganized Innkeepers.
Upon the occurrence of any of the following events (each, a
"Termination Event"), the Letter Agreement, dated as of July
17, 2010, by and between Lehman and AIC (the "Letter
Agreement") and any Stock Purchase Agreement shall be
terminable by either Lehman or AIC, and shall terminate upon
five (5) business days' written notice of such Termination
Event by the terminating party to the other party:
upon the occurrence of any Termination Event
described in the Lehman-Innkeepers Term
Sheet;
upon the waiver, modification or amendment of
any material term, condition or provision of the
Lehman-Innkeepers Term Sheet, or the
definitive documents (including the Plan)
implementing the same, in a manner not
acceptable to Lehman or AIC;
any material extension of the period oftime to
achieve the Plan Milestones set forth in the
Lehman-Innkeepers Terms Sheet;
if AIC seeks but does not obtain the approval of
its Investment Committee within 45 days after
the Petition Date;
if Lehman seeks but does not obtain the
approval of the UCC or the United States
Bankruptcy Court administering the Chapter 11
case of LBHI within 45 days after the Petition
Date; or
upon the occurrence of any event that would
make the fulfillment of any conditions set forth
under "Conditions to Closing" or "Conditions to
Execution of the Stock Purchase Agreement" of
this Term Sheet impossible by April 15, 2011.
4
Governance:
Shareholders Agreement:
REIT Status:
Property Manager:
Professional Fees:
Governing Law:
Notwithstanding the foregoing, the Letter Agreement and any
Stock Purchase Agreement shall be terminable by either
Lehman or AIC (for any reason or no reason in such party's
sole discretion) at any time prior to September 2, 2010.
The board of directors of the Company will initially consist of
7 members: 2 members nominated by Lehman, 2 members
nominated by AIC and 3 members to be mutually agreed.
A super-majority vote of 66 2/3% will be required for material
transactions, including, among others, a merger or
consolidation, equity issuances, debt issuances in excess of $10
million in the aggregate, sale or disposal of a property and such
other events as determined by Lehman, AIC and the Company.
Lehman and AIC shall agree on a future date by which the
Company shall engage an investment banker to market and sell
the Company; provided, that such date shall not be later than
three years after the Effective Date unless otherwise agreed by
Lehman and AIC.
Other usual and customary terms, subject to mutual agreement
between Lehman and AIC.
The Plan shall provide that, on the Effective Date, Lehman,
AIC and all other holders of New Equity to be issued pursuant
to. the Plan shall enter into a shareholders agreement that
provides, among other things, for restrictions on the transfer of
the New Equity and customary protections, including, but not
limited to, tag-along/drag-along rights, all on terms to be
mutually agreed between Lehman and AIC.
Lehman and AIC shall, prior to the Effective Date, determine
whether to maintain Innkeepers' status as a real estate
investment trust.
Prior to the Effective Date, Lehman and AIC shall designate a
manager for the Company's properties.
The Company shall reimburse AIC for fees and expenses of
one counsel; provided that the transactions contemplated by the
Stock Purchase Agreement are consummated.
This Term Sheet and all agreements entered into pursuant
thereto shall be governed by New York law with jurisdiction in
the courts in New York.
5
US_ ACT!YE:\434460 I 6\20\58399.0008
Annex A
(Proposed Order)
- - - - - - - - - - - - - - - - - - - - - - ~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X
In re
Debtors.
--------------------------------------------------------------------X
Chapter 11 Case No.
08-13555 (JMP)
ORDER PURSUANT TO SECTION 363 OF THE BANKRUPTCY CODE
GRANTING AUTHORITY TO LCPI TO (I) CONSENT TO ITS
NON-DEBTOR AFFILIATE LEHMAN ALI, INC.'S (A) ENTRY INTO
PLAN SUPPORT AGREEMENT RELATED TO RESTUCTURING OF
INNKEEPERS USA TRUST AND (B) CONSUMMATION OF THE
TRANSACTIONS SET FORTH IN THE PLAN TERM SHEET AND
(II) PROVIDE FUNDS TO SOLAR FINANCE INC., A NON-DEBTOR_
Upon the motion, dated July 27,2010 (the "Motion"), of Lehman
Commercial Paper Inc. ("LCPI"), as debtor in possession (together with its affiliated
debtors in the above-referenced chapter 11 cases, the "Debtors"), for an order pursuant to
section 363 of title 11 of the United States Code (the "Bankruptcy Code") authorizing
LCPI to (I) consent to Lehman ALI, Inc.'s ("ALI"), a non-Debtor affiliate of LCPI, (A)
entry into a plan support agreement related to the proposed restructuring of Innkeepers
USA Trust (together with its affiliates, "Innkeepers") and (B) consummation of the
transactions set forth in the plan term sheet attached thereto and (II) provide funds to
Solar Finance Inc., its non-Debtor affiliate for the purposes of extending debtor in
possession financing to Innkeepers (the "DIP Facility"), all as more fully described in the
Motion (the "Transaction"); and the Court having jurisdiction to consider the Motion and
the reliefrequested therein in accordance with 28 U.S.C. 157 and 1334 and the
US_ ACTIVE:\434460 I 6\20\58399.0008
Standing Order M-61 Referring to Bankruptcy Judges for the Southern District of New
York Any and All Proceedings Under Title 11, dated July 10, 1984 (Ward, Acting C.J.);
and consideration of the Motion and the relief requested therein being a core proceeding
pursuant to 28 U.S.C. 157(b); and venue being proper before this Court pursuant to 28
U.S.C. 1408 and 1409; and due and proper notice of the Motion having been provided
in accordance with the procedures set forth in the second amended order entered June 17,
2010 governing case management and administrative procedures [Docket No. 9635]; and
the Court having found and determined that the relief sought in the Motion is in the best
interests of LCPI, its estate and creditors, and all parties in interest and that the legal and
factual bases set forth in the Motion establish just cause for the relief granted herein; and
after due deliberation and sufficient cause appearing therefor, it is
ORDERED that the Motion is granted; and it is further
ORDERED that LCPI is authorized and empowered to consent to ALI's
entry into the Plan Support Agreement and consummation of the transactions
contemplated thereby; and it is further
ORDERED that ALI is authorized and empowered to execute, deliver,
implement, and perform any and all obligations, instruments, documents and papers, and
to take any and all corporate and other actions that may be necessary or appropriate to
enter into the Plan Support Agreement, the Plan Tenn Sheet, and all other related
documents; and it is further
ORDERED that ALI is authorized and empowered to execute, deliver,
implement, and perform any and all obligations, instruments, documents and papers, and
to take any and all corporate and other actions that may be necessary or appropriate to
US _ACTIVE:\434460 16120\58399.0008 31
consummate the transactions set forth in the Plan Support Agreement, Plan Term Sheet
and all other related agreements, which include the conversion of debt to equity (the
"New Equity") and the sale of 50% of the New Equity for a price not less than $107.5
million; and it is further
ORDERED that LCPI is authorized and empowered to loan up to
approximately $17.5 million to LCPI's non-Debtor affiliate Solar Finance Inc. for the
purposes of Solar extending the DIP Facility; and it is further
ORDERED that no further Court approval shall be required in connection
with any modification of the terms and conditions ofthe Transaction so long as (a) the
Transaction includes a conversion of debt to New Equity and the sale of 50% of the New
Equity for a price not less than $107.5 million, (b) the amount advanced by LCPI for the
purposes of Solar extending the DIP Facility not exceeding $17.5 million, and (c) the
Debtors have obtained the approval of the Official Committee of Unsecured Creditors to
such modifications; and it is further
ORDERED that the automatic stay in LCPI's chapter 11 case is modified
to the extent necessary to permit Innkeepers, ALI, and LCPI to take any or all of the
actions permitted by the terms and conditions of the Plan Support Agreement, Plan Term
Sheet, DIP Facility and all related agreements; and it is further
ORDERED that this Order shall not be deemed to modify or amend any
tenns and conditions of the Plan Support Agreement, Plan Term Sheet, DIP Facility and
all related documents; and it is further
ORDERED that notice of the Motion as provided therein shall be deemed
good and sufficient notice of such Motion; and it is further
US_ ACTJYE:\434460 16\20158399.0008 32
ORDERED that nothing contained in the Motion or this Order shall be
deemed to be a waiver or the relinquishment of any rights, claims, interests, obligations,
benefits, or remedies of LCPI, or any of the Debtors or their non-debtor affiliates, that
any of the Debtors or non-debtor affiliates may have or choose to assert on behalf of their
respective estates under any provision of the Bankruptcy Code or any applicable non-
bankruptcy law, including against each other or third parties. It is further ordered that the
parties are authorized to execute such further documentation necessary to reflect this
reservation of rights; and it is further
ORDERED that Debtors are authorized to comply with each provision of
the Plan Support Agreement; and it further
ORDERED that this Court shall retain jurisdiction over this order, but that
the Bankruptcy Court presiding over the chapter 11 cases of Innkeepers and not this
Court shall have exclusive jurisdiction with respect to any matter under or arising out of
or in connection with the Plan Support Agreement or the Transaction (as defined in the
Plan Support Agreement) contemplated therein.
Dated: August _, 2010
New York, New York
HONORABLE JAMES M. PECK
UNITED STATES BANKRUPTCY JUDGE
US _ACT!VE:\434460 16120158399.0008 33

Counsel For Trimont Real Estate Advisors, Inc. As Special Servicer

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Counsel For Trimont Real Estate Advisors, Inc. As Special Servicer

Uploaded by

Copyright:

Available Formats

US2008 1517450.

You might also like