10000003791

DEWEY & LEBOEUF LLP
1301 Avenue of the Americas

New York, New York 10019
Telephone: 212.259.8000
Facsimile: 212.259.6333
Martin J. Bienenstock, Esq.
Irena M. Goldstein, Esq.
Timothy Q. Karcher, Esq.

Attorneys for Ad Hoc Committee of Preferred Shareholders
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
INNKEEPERS USA TRUST, et al.,
Debtors.
AD HOC COMMITTEE OF PREFERRED
SHAREHOLDERS,
Movant,
-against-

Respondents.

Chapter 11 Case No.

Case No. 10 13800
(SCC)
(Jointly Administered)

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MOTION OF AD HOC COMMITTEE OF PREFERRED
SHAREHOLDERS FOR ORDER DIRECTING APPOINTMENT
OF STATUTORY COMMITTEE OF PREFERRED SHAREHOLDERS
PURSUANT TO BANKRUPTCY CODE SECTION 1102(a)(2)

TO THE HONORABLE SHELLEY C. CHAPMAN
UNITED STATES BANKRUPTCY JUDGE:

2
The Ad Hoc Committee of Preferred Shareholders (the Ad Hoc Committee)
1
in
the above-captioned chapter 11 cases of Innkeepers USA Trust (Innkeepers or the
Company), its parent corporation Grand Prix Holdings, LLC (Grand Prix) and their direct
and indirect title 11 debtor subsidiaries (collectively with Innkeepers and Grand Prix, the
Debtors),
2
hereby requests issuance of the proposed order attached hereto as Exhibit A,
directing the appointment of a statutory committee of preferred shareholders pursuant to section

1
The following holders of approximately 24.0% of Innkeepers 8.0% Series C Cumulative Preferred Shares
comprise the Ad Hoc Committee: Brencourt Advisors, LLC; Esopus Creek Advisors, LLC; and Plainfield
Special Situations Master Fund II Limited.
2
The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtors federal tax identification
number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS)
LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange
Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Corners) LLC (3650);
Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand
Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix
Bulfinch LLC (3639); Grand Prix Campbell / San Jose LLC (3638); Grand Prix Cherry Hill LLC (3634); Grand
Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East
Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood / Denver South LLC (3701);
Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC (4290); Grand Prix Fremont LLC
(3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704); Grand Prix Gaithersburg
LLC (3709); Grand Prix General Lessee LLC (9182); Grand Prix Germantown LLC (3711); Grand Prix Grand
Rapids LLC (3713); Grand Prix Harrisburg LLC (3716); Grand Prix Holdings LLC (9317); Grand Prix
Horsham LLC (3728); Grand Prix IHM, Inc. (7254); Grand Prix Indianapolis LLC (3719); Grand Prix Islandia
LLC (3720); Grand Prix Las Colinas LLC (3722); Grand Prix Lexington LLC (3725); Grand Prix Livonia LLC
(3730); Grand Prix Lombard LLC (3696); Grand Prix Louisville (RI) LLC (3700); Grand Prix Lynnwood LLC
(3702); Grand Prix Mezz Borrower Fixed, LLC (0252); Grand Prix Mezz Borrower Floating, LLC (5924);
Grand Prix Mezz Borrower Floating 2, LLC (9972); Grand Prix Mezz Borrower Term LLC (4285); Grand Prix
Montvale LLC (3706); Grand Prix Morristown LLC (3738); Grand Prix Mountain View LLC (3737); Grand
Prix Mt. Laurel LLC (3735); Grand Prix Naples LLC (3734); Grand Prix Ontario Lessee LLC (9976); Grand
Prix Ontario LLC (3733); Grand Prix Portland LLC (3732); Grand Prix Richmond (Northwest) LLC (3731);
Grand Prix Richmond LLC (3729); Grand Prix RIGG Lessee LLC (4960); Grand Prix RIMV Lessee LLC
(4287); Grand Prix Rockville LLC (2496); Grand Prix Saddle River LLC (3726); Grand Prix San Jose LLC
(3724); Grand Prix San Mateo LLC (3723); Grand Prix Schaumburg LLC (3721); Grand Prix Shelton LLC
(3718); Grand Prix Sili I LLC (3714); Grand Prix Sili II LLC (3712); Grand Prix Term Lessee LLC (9180);
Grand Prix Troy (Central) LLC (9061); Grand Prix Troy (SE) LLC (9062); Grand Prix Tukwila LLC (9063);
Grand Prix West Palm Beach LLC (9065); Grand Prix Westchester LLC (3694); Grand Prix Willow Grove
LLC (3697); Grand Prix Windsor LLC (3698); Grand Prix Woburn LLC (3699); Innkeepers Financial
Corporation (0715); Innkeepers USA Limited Partnership (3956); Innkeepers USA Trust (3554); KPA HI
Ontario LLC (6939); KPA HS Anaheim, LLC (0302); KPA Leaseco Holding Inc. (2887); KPA Leaseco, Inc.
(7426); KPA RIGG, LLC (6706); KPA RIMV, LLC (6804); KPA San Antonio, LLC (1251); KPA Tysons
Corner RI, LLC (1327); KPA Washington DC, LLC (1164); KPA/GP Ft. Walton LLC (3743); KPA/GP
Louisville (HI) LLC (3744); KPA/GP Valencia LLC (9816). The location of the Debtors corporate
headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite
306, Palm Beach, Florida 33480.

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1102(a)(2) of title 11 of the United States Code (the Bankruptcy Code), and respectfully
represents as follows:
STATEMENT OF THE CASE
1. Preferred Shareholders Are Not Behind Creditors of All 92 Debtors. In
these chapter 11 cases, the preferred shareholders are not contractually or structurally
subordinate to all creditors of each of the ninety-two (92) title 11 Debtors (seventy-two (72) of
the Debtors own individual hotels). Rather, the preferred shareholders are entitled to the value of
each Debtor having value, notwithstanding that other Debtors may be unable to pay in full all
their respective creditors. Appointment of a statutory equity committee is necessary to provide
adequate representation of preferred shareholders in each of the Debtors chapter 11 cases.
2. Preferred Shareholders Have No Adequate Representation. The record of
these chapter 11 cases is a testament to the need for a statutory committee to represent preferred
shareholders. Notably, as shown below, the Debtors have used estate funds to pay for the efforts
of its executives, attorneys, and financial advisors to wipe out preferred shareholders while
illegally favoring the common shareholder. Moreover, the Debtors simultaneously opposed use
of any estate assets to represent preferred shareholders by urging the United States Trustee not to
appoint a preferred shareholders committee. The Debtors actions prove the absence of
representation of preferred shareholders. Specifically:
A. The Debtors commenced these cases with a proposed Plan Support Agreement
and chapter 11 plan term sheet (attached hereto as Exhibit B) extinguishing all
preferred shares in exchange for nothing, while the common shareholder, Apollo
Investment Corporation (AIC or Apollo) obtained the exclusive right to
purchase half the reorganized debtors from the Debtors hand picked entity
(Lehman ALI, Inc. Lehman), which was to acquire 100% of the stock of all the
reorganized debtors under the plan term sheet.
B. The statutory creditors committee (the Creditors Committee) is by law charged
with representing unsecured claimholders and not preferred shareholders, and
manifested as much by not objecting to the proposed Plan Support Agreement and

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plan term sheet even though the plan term sheet provided only $500,000 for
distribution to unsecured creditors.
3

C. Seventy-two (72) Debtors not subject to Lehmans blanket mortgage proposed to
give Lehman full ownership of their reorganized estates, in addition to Lehmans
acquisition of the twenty estates owning properties encumbered by the Lehman
blanket mortgage, thereby depriving the preferred shareholders of (i) the value of
controlling forty-five (45) properties whose mortgage debt would be reduced,
where necessary, to their aggregate value, and (ii) the individual values of seven
(7) other hotel properties encumbered by individual mortgages, but not blanket
mortgages (the Unencumbered Debtors). Gifting to Lehman more than all its
legal rights takes value away from preferred shareholders. (Perhaps not
coincidentally, Lehman reciprocated for its gift by providing Apollo the exclusive
contractual right to purchase half the reorganized debtors for $107.5 million while
being off the hook on its guaranty of property improvements.)
D. The Debtors requested permission from the Bankruptcy Court to lock themselves
into their proposed Plan Support Agreement whereby the Debtors could not
consider any alternate transaction unless it provided Lehman with a higher and
better recovery than that provided under the Debtors plan term sheet. See Plan
Support Agreement, dated June 19, 2010, attached as Exhibit B to Debtors'
Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support
Agreement and (B) Granting Related Relief [Docket No. 15] at 25(c). Thus, the
Debtors would have been required by court order not to consider any transaction
that failed to give Lehman more than it could achieve under state law and more
than 100% of everything which the Debtors were already proposing to give
Lehman. When the Debtors argued they could consider other transactions, the
Court found Mr. Beilinsons testimony regarding the alleged fiduciary out in
the Plan Support Agreement simply was not credible.
4

E. The Debtors admitted not having asked counsel to check the validity and
perfection of the mortgage debt the Debtors were purportedly satisfying under
their proposed plan term sheet.
5

F. The Debtors chief executive officer was unable to specify any actual liabilities at
intermediate holding companies that would prevent the preferred shareholders
from obtaining value from subsidiaries.
6

3
See Creditors Committees response, dated August 23, 2010 (attached hereto as Exhibit C) to the Debtors
motion dated July 19, 2010 for approval of the plan support agreement [Docket No. 264], and Transcript of
September 1, 2010 Proceedings (hereinafter, September 1 Transcript) pp. 95 lines 12-25, 96 lines 1-2.
Relevant excerpts from the September 1 Transcript are annexed hereto as Exhibit D.
4
See September 1 Transcript at pp. 418 line 24, 419 lines 1-10 (As the Court noted in its decision, when
questioned by the Court Mr. Beilinson acknowledged that even participating in discussions with Five Mile, on
which he now asserts he is ready to embark, may well constitute a termination event under the PSA.).
5
See September 1 Transcript at pp. 184 line 16-25, 185 line 1.
6
See September 1 Transcript at pp. 155 line 1-25, 156 lines 1-25, 157 lines 1-6.

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G. The representative of the Debtors financial advisor, Moelis & Co., testified and
admitted that the Debtors were looking for an internal reorganization whereby
higher and better prices would not be sought from unrelated third parties.
7

3. The Preferred Shares Are Plausibly in the Money and Clearly Not
Hopelessly Out of the Money. There are two sources of value for the preferred shares: the value
of controlling fully encumbered properties, and the value of hotels in which there is equity above
their mortgage debt. As the United States Supreme Court demonstrated in LaSalle, even when
estate property is encumbered by mortgage debt equal to its value, there is value in controlling
and owning the estate property.
8
Additionally, up to five to seven hotels and a joint venture

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The Debtors made no effort to market test the value of their assets or obtain an alternative plan sponsor as made
clear by Bill Derrough of Moelis & Co., financial advisor to the Debtors, during his testimony on August 12
before this Court: I think that [the] substantial amount of our discussions and negotiations have been with
people inside the capital structure. Ultimately, to the extent that were going to do an internal plan, which is, I
think, what we generally all have a bias towards is not trying to have to sell things to other people, if you can
avoid it, to working internally.... Transcript of August 12, 2010 Proceedings at pp. 35 lines 5-6; 47 lines 10-13
[Docket No. 227], attached hereto as Exhibit E.
8
In Bank of America v. 203 North LaSalle Street Partnership, 119 S. Ct. 1411 (1999), the debtors chapter 11
plan provided its mortgagee, which the bankruptcy court had determined held a $54.5 million secured claim and
a $38.5 million deficiency claim, a 7 to 10 year secured note for its secured claim and installments equal to 16%
(present value) of its unsecured claim which was classified separately from other unsecured claims. Trade
claims held by third parties approximated $90,000 and were to be paid in full without interest on the plans
effective date. The debtors interest holders would retain ownership of the reorganized debtor having a present
value of $4.1 million and would thereby avoid approximately $20 million of taxes chargeable if the mortgagee
foreclosed.
The Supreme Court expounded the policies to be served by chapter 11 as: preserving going concerns and
maximizing property available to satisfy creditors. 119 S. Ct. at 1421. Then, it explained [c]ausation
between the old equitys holdings and subsequent property substantial enough to disqualify a plan would
presumably occur on this view of things whenever old equitys later property would come at a price that failed
to provide the greatest possible addition to the bankruptcy estate, and it would always come at a price too low
when the equity holders obtained or preserved an ownership interest for less than someone else would have
paid. A truly full value transaction, on the other hand, would pose no threat to the bankruptcy estate not posed
by any reorganization, provided of course that the contribution be in cash or be realizable moneys worth, just
as Ahlers required for application of Cases new value rule. 119 S. Ct. at 1421-22 (footnotes and citations
deleted).

The Supreme Court ruled the exclusive right to buy equity is, in and of itself, property and cited authority for
the proposition that options to buy interests at market values trade for a positive price. 119 S. Ct. at 1422. The
court also explained the old interest holders rights to buy interests in the reorganized debtor were exclusive and
therefore were property even though the debtors exclusive opportunity to propose a plan is not itself property
within the meaning of subsection 1129(b)(2)(B)(ii). The logic was that upon confirmation of the plan the old
interest holders were in the same position they would have been in had they exercised an exclusive option under
the plan to buy the equity in the reorganized entity, or contracted to purchase it from a seller who had first
agreed to deal with no one else. 119 S. Ct. at 1422. Accordingly, the Supreme Court ruled that to avoid
violating 1129(b)(2)(B)(ii), there must be a market test

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interest owned by the Debtors estates have value for the preferred shareholders. The Debtors
conducted no valuation to support their plan and performed no lien analysis.
9

4. To agree to a Plan Support Agreement, without testing the value of the
properties or the validity of the underlying security interests, is as reckless as it is unfair from the
point of view of creditors and preferred shareholders. But, it was not reckless from the point of
view of Apollo (the Debtors controlling shareholder) because Apollo was benefitting from lack
of disclosure through its right to purchase half the reorganized debtor from Lehman. While the
Supreme Court expressly ruled the policy to be served under chapter 11 is to maximize property
for distribution (see footnote 8, supra), the Debtors, as controlled by Apollo, were striving for
the opposite, namely for Apollo to be able to purchase the reorganized debtors for the lowest
possible price.
5. In other words, without allowing competing offers, without market testing,
without performing a valuation, and without reviewing the validity of any of the underlying
security interests, the Debtors tried to move forward with a plan designed to destroy equity value

Whether a market test would require an opportunity to offer competing plans or would be satisfied
by a right to bid for the same interest sought by old equity, is a question we do not decide here. It
is enough to say, assuming a new value corollary, that plans providing for junior interest holders
with exclusive opportunities free from competition and without benefit of market valuation fall
within the prohibition of 1129(b)(2)(B)(ii).

119 S. Ct. at 1424 (citations and footnotes omitted).

9. The seven properties are (i) KPA HS Anaheim, LLC, (ii) KPA HI Ontario LLC, (iii) KPA RIMV LLC, (iv)
KPA RIGG, LLC, (v) KPA Tysons Corner RI, LLC, (vi) KPA Washington DC, LLC, and (vii) KPA San
Antonio, LLC. In addition, KPA Raleigh, LLC (KPA Raleigh) owns 49% of a Joint venture in Genwood
Raleigh LLC (Genwood). The Debtors recently filed a Bankruptcy Rule 2015.3 report setting forth nominal
net book value for KPA Raleigh and negative equity at Genwood. Given the Debtors testimony at the
September 1 hearing that they performed no valuations or market testing of their properties, the Ad Hoc
Committee is not prepared to accept the Debtors numbers at face value.

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for all Debtors (including Unencumbered Debtors), and give the sole controlling insider, Apollo,
the right to buy back its equity on the cheap.
10

6. At the conclusion of the September 1, 2010 hearing, this Court could not
conclude that the debtors exercised due care in electing to move forward with the current plan
term sheet and the proposed valuation implied therein. The Court further found that the Debtors
were not even handed in their approach and, instead, favored the Lehman/Apollo arrangement
over other alternatives.
11

7. As a result of the Courts denial of the Debtors motion for approval of its
Plan Support Agreement, the Debtors will now have to meet with its various constituents. The
preferred shareholders are entitled to an even playing field, unlike the last round where the
Debtors used estate assets to pay its executives and advisors to pursue a strategy favoring Apollo
and harming the preferred shareholders.

JURISDICTION AND VENUE
8. This Court has subject matter jurisdiction over this Motion pursuant to 28
U.S.C. 1334. Venue is proper pursuant to 28 U.S.C. 1408 and 1409.
BACKGROUND
9. On the Petition Date, each of the Debtors filed voluntary petitions for
relief under Chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court for the
Southern District of New York (the Bankruptcy Court). The Debtors chapter 11 cases are

10
See Debtors Motion for an Order (A) Authorizing The Debtors to Assume The Plan Support Agreement
Motion, dated June 19, 2010 [Docket No. 15] (Paragraph 8(e) provides: (e) holders of interests in the Debtors,
including common and preferred stock, receiving no distributions on account of such interests, with such
interests being cancelled.).
11
See September 1 Transcript at pp. 420, lines 5-7; 428, line 19.

8
jointly administered under the above-captioned number, but not substantively consolidated. No
trustee or examiner has been appointed in the Debtors chapter 11 cases.
10. On July 28, 2010, the United States Trustee for the Southern District of
New York (the United States Trustee) appointed the Creditors Committee in these cases.
11. By letter dated July 28, 2010, the Ad Hoc Committee requested that the
United States Trustee appoint a statutory equity committee in these cases. Both the Debtors and
the Creditors Committee opposed the Ad Hoc Committees request for a statutory equity
committee.
12. On August 30, 2010, the United States Trustee informed the Ad Hoc
Committee of its decision not to appoint a statutory equity committee.
12

13. Following oral argument and an all day evidentiary hearing on September
1, 2010, this Court denied the Debtors motion to assume the Plan Support Agreement entered
into with Lehman. The Court found that the Debtors Chief Restructuring Officer was not
credible with respect to his testimony regarding the alleged fiduciary out contained in the
Plan Support Agreement. The Court further found that the Debtors did not perform a valuation
of the estate or the shares Lehman would receive, and that ultimately the Debtors have not
shown that they acted in good faith in (i) making the decision to enter into the Plan Support
Agreement, and (ii) providing transparency to their creditors. See September 1 Transcript at
421, lines 22-24.

12
The decision of the United States Trustee not to appoint a statutory equity committee states a conclusion with
no explanation in accordance with its normal practice. The Court reviews the United States Trustees decision
de novo. See In re Williams Commcns Group, 281 B.R. 216, 219-20 (Bankr. S.D.N.Y. 2002); In re McLean
Indus., 70 B.R. 852, 858 (Bankr. S.D.N.Y. 1987); In re Texaco, 79 B.R. 560, 566 (Bankr. S.D.N.Y. 1987).

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RELIEF REQUESTED
14. The Ad Hoc Committee requests the Court appoint a statutory preferred
shareholders committee pursuant to section 1102(a)(2) of the Bankruptcy Code.
ARGUMENT
15. Section 1102(a)(2) of the Bankruptcy Code provides that the Court may
order the appointment of a statutory equity committee if necessary to assure adequate
representation of . . . equity security holders. 11 U.S.C. 1102(a)(2).
16. Courts in this District and elsewhere have developed a number of criteria
to consider in determining whether to appoint a statutory equity committee: (i) whether the
interest of shareholders are adequately represented absent the appointment of a statutory equity
committee; (ii) whether the Debtors appear hopelessly insolvent and the likelihood of
shareholders receiving a distribution; (iii) the timing of the motion relative to the case; and (iv)
whether the administrative costs of the statutory committee outweigh the benefits of adequate
representation. See e.g., In re Kalvar Microfilm, Inc., 195 B.R. 599, 600 (Bankr. D. Del. 1996);
In re Williams Commcns Group, 281 B.R. 216, 220 (Bankr. S.D.N.Y. 2002); In re Johns-
Manville Corp., 68 B.R. 155, 160; In re Wang Labs., Inc., 149 B.R. 1, 2 (Bankr. D. Mass. 1992).
In addition to other factors, courts also weigh the size and complexity of the cases. See e.g., In
re Beker Indus., 55 B.R. 945, 949 (Bankr. S.D.N.Y. 1985).
17. As set forth below, each of these factors argues strongly for the
appointment of a statutory equity committee.
A. Preferred Shareholders Cannot Rely on Any Other Constituency For
Adequate Representation
18. Absent a statutory preferred shareholders committee, preferred
shareholders of Innkeepers clearly lack adequate representation in these cases. Certainly, the

10
preferred shareholders cannot look to the Debtors for representation. Indeed, while the Debtors
management and board of directors (the Board) did their best for Apollo (the sole common
shareholder), they performed their worst for all preferred shareholders. The Board approved a
Plan Support Agreement that extinguished the interests of preferred shareholders in favor of the
common shareholder receiving an exclusive right to purchase half the reorganized debtors.
Moreover, the Court found the Debtors were intentionally down-playing (or simply hiding) the
exclusive side arrangement with Apollo to purchase half of the equity in the reorganized
company at a price not subject to market testing.
13
Apollo controls the Debtors Board.
14
Apollo
hand picked the Chief Restructuring Officer, first by placing him on the Debtors Board on
which Apollos CEO also serves, then by placing him on the board of Apollos real estate
investment trust, and finally by having its designees on the Debtors Board approve Mr.
Beilinson as Chief Restructuring Officer of the Debtors. There is simply no way that current
management or the Board is looking out for the interests of anyone but themselves and Apollo.
15

19. Nor can the preferred shareholders look towards the Creditors Committee
for help. Indeed, it is a hornbook principle in bankruptcy law that preferred shareholders cannot

13
As noted by the Court at the September 1, 2010 hearing: The intention for Apollo to end up with half of the
debtors equity which has been on the table since April has been, at best, downplayed and, at worst, obfuscated
from parties-in-interest. See September 1 Transcript at p. 422, lines 7-10.
14
Martin Bienenstock (Counsel to Ad Hoc Committee): Apollo has the power to replace all of the directors,
does it not?
Marc Beilinson (Chief Restructuring Officer): Theoretically, they do. See September 1 Transcript at p. 261,
lines 23-25.
15
Notably, after the Debtors missed six preferred dividend payments, the preferred shareholders were entitled to
designate a director to the board of Grand Prix. See Articles Supplementary of 8.0% Series C Cumulative
Preferred Shares, dated June 29, 2009, at 6, attached hereto as Exhibit G. Neither Apollo nor the Debtors
enabled that to happen. Indeed, with the exception of Apollo, none of the shareholders has a representative on
the Debtors Board. Even worse, Apollo delisted and deregistered Innkeepers, thereby depriving the preferred
shareholders of the most basic protections of Sarbanes Oxley, inclusive of public disclosures. With a corporate
governance scorecard as poor as this one, the Debtors cannot show that management and the Board adequately
represent shareholders in these cases. In fact, the opposite rings true here: shareholders not only lack adequate
representation, they also suffer the Debtors negative representation dictated by Apollo as the controlling party.

11
rely upon unsecured creditors to adequately represent their interests throughout the valuation and
plan process. See Pilgrims Pride Corp., 407 B.R. 211, 217, n. 17 (Bankr. N.D. Tex. 2009)
([W]hen it comes to valuation and determination of future capital structure for plan purposes,
their agendas are likely to be very much at odds.); In re Saxon Indus., 29 B.R. 320, 321 (Bankr.
S.D.N.Y. 1983) (stating that the two committees are separate and distinct entities with the
members of the unsecured creditors and equity creditors classes possessing variant priorities and
interests with respect to their relationship with the debtor).
20. In these cases, it is not only case law but the Creditors Committees
actions thus far in the cases that make crystal clear that the Creditors Committee cannot and will
not protect the interests of preferred shareholders. The Creditors Committee, which was the
only creditor at the September 1, 2010 hearing that did not oppose the Plan Support Agreement
and the Lehman/Apollo deal, has demonstrated that it is solely interested in protecting the
interests of the unsecured claimholders, and if they can obtain acceptable treatment in a sale or
under a plan, they are not concerned with the fate of the preferred shareholders.
16

21. Indeed, at the September 1, 2010 hearing, the Creditors Committee was,
by its own admission,
standing up with what parties believe to be the bad guys
[the Debtors, Lehman, and Apollo] who put together this
PSA and have every intention of wiping out equity and
significantly writing down debt as part of this de-leveraging
process thats really geared to give the company back to
Apollo.
. . .
the committee just wasnt prepared to take that risk [of
objecting to the Plan Support Agreement]. Other parties
can take that risk. Parties who have nothing to lose can
certainly take that risk.

16
This may explain why, even after hearing the damning testimony of Mr. Beilenson, where he all but admitted to
violating his fiduciary duties, the Creditors Committee continued to not oppose the Debtors request to
assume the plan support agreement.

12

See September 1 Transcript at pp. 94, lines 13-18; 95, lines 8-11.

22. The third major constituency in these cases, the mortgagees, also does not
represent the interests of preferred shareholders either, and in fact, may be incentivized to
advocate for a lower valuation if it means they will not have to share potential upside with
unsecured claims or preferred shares.
23. Thus, there are no parties in the cases currently working to protect the
rights of preferred shareholders. Congress clearly noted the importance of safeguarding against
this divergence of interests when it emphasized: [a]s public investors are likely to be junior or
subordinated creditors or stockholders, it is essential for them to have legislative assurance that
their interests will be protected. Such assurance should not be left to a plan negotiated by a
debtor in distress and senior or institutional creditors who will have their own best interest to
look after. S. Rep. No. 989, 95th Cong., 2d Sess. 10 (1978). A statutory committee offers
preferred shareholders such assurance by facilitating a unified voice against the myriad of
competing interests outlined above. See In re Finley Kumble, 85 B.R. 13, 16 (Bankr. S.D.N.Y.
1988) (The committee structure provided for in Chapter 11 cases offers substantial benefits to
the court and the Debtor in the form of a centralized body to be heard and met with.). Absent a
statutory committee, preferred shareholders of Innkeepers cannot receive adequate representation
in these cases.
24. As stated in the legislative history to section 1102, appointment of a
statutory preferred shareholders committee offers shareholders necessary protection against the
natural tendency of a debtor in distress to pacify large creditors, with whom the debtor would
expect to do business, at the expense of small and scattered investors. S. Rep. No. 989, 95th

Cong., 2d Sess. 10 (1978). Congress further recognized that appointment of a statutory equity

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committee preserves one of the main policy objectives of the reorganization process: [t]he
purpose of a business reorganization case, unlike a liquidation, is to restructure a businesss
finances so that it may continue to operate, provide its employees with jobs, pay its creditors, and
produce a return for its stockholders. . . . 115 H.R. Rep. No. 595, 95th Cong. 2d Sess. 220
(1977) (emphasis supplied).
25. Not surprisingly, the Ad Hoc Committee has found no reported decisions
with facts as egregious as the facts before the Court. But it is clear that, in circumstances like
this, where the Debtors have failed to adequately represent preferred shareholders due to
questionable behavior on the part of the Board and management, courts will protect preferred
shareholders with the appointment of a statutory equity committee. Indeed, the egregious
conduct of the Debtors, the Board, and Apollo, and the serious risks their conduct presents to the
interests of preferred shareholders, coupled with the lack of representation from other parties,
compels the appointment a statutory preferred shareholders committee in these cases. It is
simply impracticable for a handful of preferred shareholders to invest additional sums to defend
against the Debtors executives and advisors who are paid from the estate.
B. The Debtors Are Far From Hopelessly Insolvent and Retain Equity Value
For Preferred Shareholders
26. The second element courts look to in determining whether to appoint an
equity committee is whether each of the Debtors is hopelessly insolvent.
17
[Insolvency] is not a
simple matter of statutory construction where the Court can rest with citation to the balance sheet
test of 11 U.S.C. 101(32). In re Wang Laboratories, 149 B.R. 1, 7 (Bankr. D. Mass. 1992).

17
Courts typically weigh insolvency as merely one of a variety of factors in their determination of whether to
appoint a statutory equity committee it is by no means dispositive. See In re Mansfield Ferrous Castings Inc.
96 B.R. 779, 781 (Bankr. N.D. Ohio 1988) (The court must be guided by all the facts and not look exclusively
to the issue of solvency.); In re Natl R.V. Holdings, Inc., 2008 Bankr. LEXIS 3465, at *11 (Bankr. C.D. Cal.
Apr. 25, 2008).

14
Instead, courts rely upon a confluence of factors [to determine] that the Debtors appear to be
hopelessly insolvent. In re Williams, 281 B.R. at 221.
27. Above, we provided two solid reasons why equity exists here: the value
of controlling up to seventy-two (72) fully encumbered hotels, and the equity in up to seven (7)
hotel properties and a joint venture interest. In addition, as discussed below, there is evidence
that the Unencumbered Debtors are not hopelessly insolvent, but are generating profits.
18
In In
re Exide Technologies, et al., 2002 U.S. Dist. LEXIS 27210 at *5, 6 (D. Del. December 23,
2002), the United States District Court for the District of Delaware found that the Bankruptcy
Court did not err in appointing a statutory equity committee where the motion for appointment
of the equity committee came early in [the] complex Chapter 11 proceeding where the movant
presented credible evidence of equity value of the Debtors on a cash flow basis.
28. Moreover, the Supreme Court has found that there is value in controlling
encumbered property. Finally, the Debtors have not done any lien analysis for any of their
seventy-two (72) hotels. Each of these weigh against a finding that all the Debtors are insolvent
and that there is no equity value.
a. There are Unencumbered Debtors, Whose Value Goes Directly to Equity
29. As demonstrated at the September 1, 2010 hearing, and disclosed in the
Organizational Chart filed with the Debtors first day declaration, at least six (6) of the Debtors
(the Unencumbered Debtors) own hotels that are not encumbered by any of the blanket
mortgages (other than the mortgages on the individual hotels).
19
If any of those hotels have

18
It is significant for this element to note that the Debtors ninety-two (92) cases have not been substantively
consolidated.
19
The Unencumbered Debtors are (i) KPA RIMV, LLC, (ii) KPA RIGG, LLC, (iii) KPA HI Ontario, LLC, (iv)
KPA Washington DC, LLC, (v) KPA Tysons Corner RI, LLC, and (vi) KPA San Antonio, LLC. See Amended
Declaration of Dennis Craven, Chief Financial Office of Innkeepers, In Support of First-Day Pleadings [Docket
No. 33] (the First-Day Declaration) at 16. A copy of the Debtors Organization Chart is attached hereto as
Exhibit H.

15
value in excess of their individual mortgages, and the Ad Hoc Committee has reason to believe
they do, then the corresponding Unencumbered Debtor has equity value. Notably, the Debtors
first-day pleadings failed to make clear that Innkeepers, the holding company whose preferred
shares are held by the members of the Ad Hoc Committee, is not liable on the blanket Lehman
mortgage (or any other debt) and owns the equity in the Unencumbered Debtors, plus the KPA
HS Anaheim LLC property (which is encumbered by a $13.7 million mortgage loan and a $21.3
million mezzanine loan), and a non-debtor joint venture (Genwood Raleigh LLC), all of which
all have no obligation to Lehman under the blanket Lehman mortgage.
20
Thats a total of seven
(7) hotels owned in fee, and one hotel owned in a joint venture. None of these have been valued
by the Debtors.
21
The Debtors own and operate a total of seventy-two (72) hotels, nearly 10% of
which are not subject to any secured financing, other than mortgages, and any one of which may
have equity value.
30. The Debtors have not been responsive to discovery requests, which have
remained outstanding since August 20, 2010.
22
However, with the limited materials provided to

20
Martin Bienenstock (Counsel to Ad Hoc Committee): . . .[Y]oure not aware of any specific institutional debt,
mortgage debt or bond debt, that those seven entities are on the hook for, other than the mortgages on their
individual properties, correct?
Marc A. Beilinson (Chief Restructuring Officer): No, I dont think that is correct. I believe that, at least with
regard to Anaheim, theres a twenty-one million dollar mezz piece to one of the Lehman-affiliated entities.
That comes to mind.
Martin Bienenstock: Okay, but for the other six entities, youre not aware of any other institutional bond debt
or mortgage debt that theyre liable for, are you?
Marc A. Beilinson: I dont believe so.
September 1 Transcript, at p. 155, lines 14-25.
21
The Debtors Chief Restructuring Officer conceded that the Debtors have not performed any appraisals of
equity value on the entities holding the six individual hotels and the joint venture interest. See September 1
Transcript, at p. 158, lines 6-7. (We have not done any appraisals [of the equity value] with regard to any of
those assets.).
22
The Debtors did provide the Ad Hoc Committee with additional materials the weekend before the Monday that
this motion was filed. Because of the limited time available, the Ad Hoc Committees advisors have not
finished their review of the information and the Ad Hoc Committee reserves its right to both request additional

16
date, there is strong evidence that at least four of the hotels owned by the Unencumbered Debtors
(Residence Inn in San Diego, California; Doubletree Guest Suites in Washington, D.C.;
Residence Inn in Vienna, Virginia; and Homewood Suites in San Antonio, Texas) have equity
value exceeding several million dollars per hotel. These hotels are each separately capitalized
with long-term financing at favorable interest rates and maturities in 2016.
31. Moreover, each of the hotels held by the Unencumbered Debtors appear to
generate net operating income leaving funds available to pay principal and interest on their
individual mortgage debt. Publicly available financial data on Bloomberg demonstrate that
properties owned by the Unencumbered Debtors have, during the last several months, generated
cash flow in excess of their interest expenses.
23
This is supported by a recent article in the Wall
Street Journal, indicating that now [is] considered a good time to sell because the public
markets are relatively optimistic about hotel real estate, boosting prices. The article continues,
hotel buyers are banking on a fairly attractive future for the industry. That's leading to prices
that are deemed by many [sellers] to be attractive.
24
See also, Hotels Lure Investors as
Lodging Surpasses U.S. Offices, Retail Share Business reported in Bloomberg, September 9,
2010, (hotel sales increased 139% in the first half of 2010 from a year ago and income from
hotels continues to rise as occupancy rates climb), attached hereto as Exhibit F.
b. There is Value in Controlling Encumbered Assets
32. Even if the value of all of the Debtors properties is less than the amount
of the outstanding mortgage, there is still value in the ability to control the property. This is the

information and submit a supplement to this motion with additional evidentiary support. At the Debtors
request, that supplement will be filed under seal.
23
The Debt Service Coverage Ratios (DSCRs) for the individual loans exceed a rating of 1 for most periods.
Financial analysts will typically interpret any rating above 1 as undisputed evidence of solvency.
24
See Hotels Poised to Shed Properties reported in Wall Street Journal, September 8, 2010, attached hereto as
Exhibit I.

17
teaching of LaSalle, which has been completely ignored by the Debtors in their efforts to strip
preferred shares of any interest in the Debtors estates.
33. At the September 1, 2010 hearing, Mr. Beilinson, on cross examination,
conceded that there could be value in controlling encumbered assets, as demonstrated in the
following exchange:
Martin Bienenstock (Counsel to Ad Hoc Committee):
Okay. Now, isnt it true that if forty-five properties are
encumbered by a mortgage in the amount of their value, it
is still valuable; someone will still pay to take control and
own those forty-five properties?
Marc Beilinson (Chief Restructuring Officer): Only
equity has inherent upside and downside, correct.
Martin Bienenstock: If those forty-five properties, subject
to the mortgage and the amount of their value, were held up
for sale, is there any question in your mind that there would
be bidding and people would pay money to take those
forty-five encumbered properties?
Marc Beilinson: Of course somebody would buy them at
some price. Whether that price is well below 500 or above
600 is an issue.
Martin Bienenstock: No, Im not talking about buying
them free and clear. Im talking about buying them subject
to the mortgage in the amount of their value. Wouldnt
someone pay money to control forty-five hotels even if
they're fully encumbered?
Marc Beilinson: Perhaps.
Martin Bienenstock: Wouldnt someone pay money to
control the other seven properties even if theyre fully
encumbered?
Marc Beilinson: Some of them might be willing to pay a
negligible amount, but I wouldn't see anyone being able to
pay anything of meaning.
Martin Bienenstock: If the value of lets say
hypothetically the value of the forty-five properties is
pegged at 500 million dollars. If the value goes up one
percent, whats the increment? Whats one percent of 500
million?
Marc Beilinson: I dont know. What is it?

18
Martin Bienenstock: Well, its five million.
Marc Beilinson: Okay.
Martin Bienenstock: You -- will you except that?
Marc Beilinson: Ill accept it.
See September 1 Transcript at pp. 174, lines 13-25; 175, lines 1-18.
34. LaSalle stands for the proposition that there is value in being able to
control a fully encumbered asset. The Debtors (and Apollo) tried to deprive the estates of that
value. Apollo knew what it was doing when it kept these assets off the market, and the Debtors,
their directors, and their management let them do it. The fact that the Debtors, their board, and
management did not seek to capitalize on the potential value of controlling a portfolio of
seventy-two (72) marquee hotels (even if they were encumbered) supports the Ad Hoc
Committees request for recognition as a statutory committee.
35. Three years ago, in 2007, Apollo invested millions in Innkeepers. Now,
rather than lose their investment and be stuck with $13 million in guaranty obligations, they
deliberately undersold the value of the enterprise, and agreed to give Innkeepers to Lehman with
the arrangement that Apollo will take half of it back for $107 million.
25
At the very least, the
release from the guarantees had value for Apollo, which would have been a component of any
bid.
36. Yet none of that potential value inured to the benefit of the estates.
Despite Mr. Beilinsons acknowledgement that there was potential value in controlling
encumbered property, and the requirements of La Salle, the Debtors did not explore any

25
In his August 19, 2010 Deposition, Michael Lascher, a representative of Lehman in these cases, confirmed his
knowledge of guaranty analysis attached to an email from Apollos Schuyler Hewes to Marc Beilinson, dated
July 17, 2010, which valued Apollos guaranty liability in excess of $13 million. See Deposition of Michael
Lascher, dated August 19, 2010, at 135-138, attached hereto as Exhibit J.

19
alternatives to realize that value. Indeed, as the following exchange makes clear, the Debtors
undertook no efforts to see if the encumbered property had any value:
Martin Bienenstock (Counsel to Ad Hoc Committee): Mr.
Beilinson, what Im trying to -- well, lets -- let me just ask
you directly. You clearly did not take any steps to find out
what someone will pay to control that block of forty-five
mortgages encumbered by a mortgage and whatever their
value is?

Daniel Donovan (Counsel to the Debtors): Your Honor,
objection. I think were getting pretty far away from the
PSA.
Martin Bienenstock: I think this is exactly what its about,
Your Honor.
The Court: Well, I think its a fair question. Hes trying
to find out the process, and the process is, I think, what this
hearing is about. So
Marc Beilinson (Chief Restructuring Officer): The
answer is no.
See September 1 Transcript at p. 176, lines 5-7.
37. Rather than foster bidding, the Debtors Chief Restructuring Officer
testified that he denied Five Mile Capital Partners (Five Mile) access to due diligence in
connection with a potential acquisition of the company, and neglected to give a thorough review
to Five Miles proposal:
David Friedman (Counsel to Five Mile): Youve looked
at the Five Mile transaction, those transactions, have you
not?
Marc A. Beilinson (Chief Restructuring Officer): Ive
taken a little look at it, yes. Ive read it.
David Friedman: You havent spent much time on it,
have you?
Marc A. Beilinson: No. I havent had time during the last
few days.
David Friedman: So from the 23rd of August until today,
thats nine days, you didnt consider it important to review
a written proposal from a wealth capitalized third party that

20
places a higher enterprise value on the estate than your
plan. You didnt think that was worth your time?
See September 1 Transcript at p. 236, lines 12-21.
David Friedman: And I think it was your testimony
earlier that [Five Mile] asked for access to the data room
and you declined to give them that access?
Marc A. Beilinson: Yes, I did decline.
See September 1 Transcript pp. at 241, lines 23-25; 242, line 1.
38. Earlier in his testimony, Mr. Beilinson explained that the reason he would
not market test the properties as requested by Midland Loan Services, Inc. was because he
thought that the agreement with Lehman was absolutely in the best interest of this bankruptcy
estate and its a bird in[the] hand. September 1 Transcript p. 119, lines 10-12. Of course, we
have since learned that the Debtors made no effort to even hunt for other birds (let alone value
their properties). Because the Debtors deliberately refused to market test their properties or
perform any valuations, there is no way for the Court to find that any of the Debtors are
insolvent, and in fact, Apollos reluctance to put the assets up for market testing supports the
assertion that there is real value not only in the assets, but in controlling the assets. This is
especially true for the Unencumbered Debtors, where the only obligations are the obligations of
the underlying individual mortgages.
26
This lack of adequate market testing, coupled with the
fact that certain of these properties have sufficient cash flow to pay their debt service, indicates
that, rather than being hopelessly insolvent the Debtors are likely to have equity value.
27

26
When asked about other obligations for the Unencumbered Debtors at the September 1, 2010 hearing, the
Debtors Chief Restructuring Officer could not identify any material obligations. See September 1 Transcript,
at 155-157, see footnote 17, supra.
27
Indeed, one area for future inquiry is whether the Debtors improperly forced profitable hotels to cease making
interest payments on their loans precisely to make them delinquent so as to enable the company to transfer the
loans to a special servicer and create the false impression that there is no equity value for preferred
shareholders. Apollos efforts to disenfranchise and extinguish preferred shareholders stands in contrast to the
pertinent pages of Apollos Form 10K filed on May 26, 2010, which the Ad Hoc Committee has previously
submitted to the Court. Apollos Form 10K provides that Apollos preferred equity interests in Grand Prix had a
value of $5,268,000 as of March 31, 2010. See Apollo Investment Corp Form 10-K For The Fiscal Year Ended

21
39. Tellingly, on May 26, 2010, when restructuring preparations had been
ongoing for months and all the cash flows and other negative facts were known, Apollo still had
its preferred shares listed at $5,268,000 in its SEC filings. These are the same shares the
Debtors sought to wipe out in the Plan Support Agreement. Apollos admission in its SEC filing
on May 26, 2010 clearly demonstrates the existence of equity value for preferred shareholders
and further supports the Ad Hoc Committees contention that the Debtors are far from
hopelessly insolvent. (In August 2010, after the Debtors filed their motion for approval of the
Plan Support Agreement that extinguishes preferred and common shares, Apollo listed its shares
as worthless. That is consistent with its plan that would render them worthless.).
40. Moreover, operating metrics (occupancy, average daily rate, RevPar)
throughout the mid-price hotel industry have continued to improve since March 31, 2010.
28

c. The Debtors Have Not Performed a Lien Analysis
41. In addition to the fact that there are hotel properties unencumbered by
blanket mortgages, and the fact that the Debtors have failed to market test their assets, one other
point goes to the fact that the Debtors are not hopelessly insolvent -- there is no indication that
Lehman or any other purportedly secured claimholder holds a properly perfected lien on any of
the hotel properties. Indeed, on cross examination at the September 1, 2010 hearing, Mr.
Beilinson acknowledged that the issue of perfection has not been fully explored by the Debtors.
When questioned by counsel to the Ad Hoc Committee regarding the issues surrounding review

March 31, 2010 at 55-56, attached hereto as Exhibit K. Notably, Apollo valued its preferred shares at $5.28
million even though the Debtors Chief Restructuring Officer testified that he informed Apollo in March 2010
that the shares were worthless. See September 1 Transcript, at pp. 128, lines 22-25; 129, line 1 (March 2010 I
had an unbelievably uncomfortable conversation with Apollo telling them that in my view they were out of the
money and they would be receiving absolutely no consideration on account of the 250 million dollars they were
losing in their equity investment in this enterprise.).
28
See e.g., InterContinental Hotels Says Room Rates Are Rising reported in the Wall Street Journal, August 11,
2010, annexed hereto as Exhibit L.

22
of the security interests, Mr. Beilinson noted simply that it was an issue raised by the Creditors
Committee and further conceded that obviously to the extent that theyre successful thats going
to -- to the extent that they find any deficiencies that may very well impact how the debtor views
this plan. See September 1 Transcript at p. 185, lines 10-12. Beilinson went on to state:
Marc Beilinson (Chief Restructuring Officer): Im fairly
comfortable, based upon discussion with legal counsel, that
all the perfection issues -- there are no perfection issues.
Martin Bienenstock (Counsel to Ad Hoc Committee):
Well then what discussion was that?
Marc Beilinson: I had discussions with Skadden who was
my prepetition counsel in connection with a restructure
agreement between Innkeepers and Lehman that was
conducted between December of 08 and July of 09. And
in connection with those discussions there was lien
evaluations.
Martin Bienenstock: By who?
Marc Beilinson: By Skadden.
Martin Bienenstock: Of all of the liens in the estate or just
certain ones, or just certain liens?
Marc Beilinson: I believe at that time we were focused
only on Lehman since we were restructuring the Lehman
pool of party assets.
Martin Bienenstock: So you dont have any knowledge of
checking any of the other liens for the fifty-two other
properties?
Marc Beilinson: I dont have personal knowledge, no.
Martin Bienenstock: But you don't even know if it was
done, do you?
Marc Beilinson: I have looked at the closing binders in
2007; there were legal opinions and all sorts of documents.
Do I believe that it was done and all of the liens are
perfected? Absolutely. Do I have personal knowledge as
to everything? No, I don't.
Martin Bienenstock: In all the cases that you filed as a
debtor's attorney or even as a creditor's attorney where you
participated, Mr. Beilinson, did you ever accept the fact
that there were closing binders as a substitute for checking
the valid perfection of all the liens?

23
Marc Beilinson: Not all the time.
See September 1 Transcript at pp. 185 lines 18-25, 186 lines 1-23.

42. Without having reviewed all of the liens for each of the properties, the
Debtors cannot, with any certainty, establish that there is no equity value here.
C. A Statutory Preferred Shareholders Committee Appointment Will Not
Delay These Cases
43. The Ad Hoc Committees timely application for the appointment of a
statutory preferred shareholders committee will not delay these cases. Extensive plan
negotiations and discussions among competing stakeholders regarding plan formulation will
likely unfold over the next critical months. The appointment of a statutory committee will
ensure preferred shareholders a seat at the negotiating table. Put simply, this is not a case where
preferred shareholders have moved for the appointment of a statutory equity committee merely
to extract hold-out value from the Debtors and impede the progress of these chapter 11 cases.
Indeed, a statutory equity committee will advance a consensual plan that meets all fiduciary
obligations.
D. The Incremental Administrative Costs of a Statutory Equity Committee Will
Not Outweigh The Clear Benefits Statutory Representation Will Yield
44. Courts have made it abundantly clear that the administrative costs of a
statutory equity committee alone must not bar statutory equity committee recognition. See In re
McClean Indus., 70 B.R. 852, 860 (Bankr. S.D.N.Y. 1987) (Cost alone cannot, and should not,
deprive . . . security holders of representation.); In re Enron Corp., 279 B.R. 671, 684 (Bankr.
S.D.N.Y. 2002) (Added cost alone does not justify the denial of appointment of an additional
committee where it is warranted.). Appointment of a statutory equity committee will level the
playing field for preferred shareholders as they seek to vindicate their rights against
constituencies with adverse economic interests and unlimited budgets. When viewed in light of

24
the overall fees the Debtors estates will incur throughout these chapter 11 cases, the benefits of
recognition of a statutory committee vastly exceed the incremental costs occasioned by such
recognition.
E. These Cases Are Undeniably Large and Complex
45. No one can deny the size and complexity of these chapter 11 cases. By
the Debtors own admission, the Debtors comprise ninety-two (92) entities that own and operate
seventy-two (72) hotels consisting of approximately 10,000 rooms, located in twenty (20) states
across the United States. See First-Day Declaration at 6. The Debtors consolidated assets for
2009 totaled approximately $1.5 billion and consolidated liabilities equaled $1.5 billion. Id. at
21. The Debtors hotels operate under a series of interrelated franchise agreements with premier
global franchise companies and brands, such as Marriott, Hilton, and Hyatt.
46. It is clear that the Debtors desire the myriad of benefits available from a
chapter 11 case and plan confirmation such as: debtor in possession financing, free and clear
transfers, no stamp taxes, reduction of blanket mortgage debt, elimination of contingent claims,
exculpations, and more. It is the opposite of fairness that the Debtors can cherry pick benefits
they want, while depriving preferred shareholders of adequate representation, as the Debtors
have attempted to date.

[Remainder of Page Left Intentionally Blank]

25
CONCLUSION
WHEREFORE the Ad Hoc Committee requests the Court issue an order,
substantially in the form attached hereto, directing the appointment of a statutory preferred
shareholders committee pursuant to section 1102(a)(2) of the Bankruptcy Code and granting the
Ad Hoc Committee of Preferred Shareholders such other and further relief as is just.
Dated: New York, NY DEWEY & LEBOEUF LLP
September 13, 2010

/s/ Martin J. Bienenstock
Telephone: 212.259.8000
Facsimile: 212.259.6333

Attorneys for Ad Hoc Committee of Preferred
Shareholders

NY3 3064120.5
Hearing Date: September 30, 2010 at 10:00 AM (Eastern)
Objection Deadline: September 27, 2010 at 4:00 PM (Eastern)

DEWEY & LEBOEUF LLP
Telephone: 212.259.8000
Facsimile: 212.259.6333

Attorneys for Ad Hoc Committee of Preferred Shareholders
In re:
Debtors.
SHAREHOLDERS,
Movant,
-against-

Respondent.

Chapter 11 Case No.

Case No. 10 13800
(SCC)

x
)
)
)
)
)
)
X
)
)
)
)
)
)
)
)
)
)
)
x

NOTICE OF HEARING ON THE MOTION OF THE AD HOC COMMITTEE OF
PREFERRED SHAREHOLDERS FOR ORDER DIRECTING APPOINTMENT
OF STATUTORY COMMITTEE OF PREFERRED SHAREHOLDERS
PURSUANT TO BANKRUPTCY CODE SECTION 1102(a)(2)

PLEASE TAKE NOTICE that a hearing to consider the motion (the Statutory
Committee Motion) of the Ad Hoc Committee of Preferred Shareholders for an order directing
the appointment of a statutory committee of preferred shareholders pursuant to section

1102(a)(2) of the Bankruptcy Code, filed September 13, 2010 in the above-captioned chapter 11
cases of Innkeepers USA Trust and certain of its affiliates (collectively, the Debtors), will be
held before the Honorable Shelley C. Chapman, United States Bankruptcy Judge, in Courtroom
No. 610, One Bowling Green, New York, New York on Thursday, September 30, 2010 at
10:00 a.m. (Eastern Time).
PLEASE TAKE FURTHER NOTICE that objections, if any, to the relief sought in the
Statutory Committee Motion must be made in writing, conform to the Federal Rules of
Bankruptcy Procedure, the Local Rules for the United States Bankruptcy Court for the Southern
District of New York, and the Order Establishing Certain Notice, Case Management, and
Administrative Procedures [Docket No. 56], entered in the Debtors chapter 11 cases on July 20,
2010 (the Case Management Procedures Order), and be filed with the United States
Bankruptcy Court for the Southern District of New York and served in accordance with the Case
Management Procedures Order so as to be actually received no later than 4:00 p.m. (Eastern
Time) on Monday, September 27, 2010.
PLEASE TAKE FURTHER NOTICE that replies to any such objections will be filed and
served by the Ad Hoc Committee of Preferred Shareholders no later than 12:00 noon (Eastern
Time) on Friday, September 29, 2010.
Dated: New York, NY DEWEY & LEBOEUF LLP
September 13, 2010

/s/ Martin J. Bienenstock
Irena Goldstein, Esq.
Telephone: 212.259.8000
Facsimile: 212.259.6333

Attorneys for Ad Hoc Committee of Preferred
Shareholders
NY4 4026927.2

EXHIBIT A

In re:
Debtors.
SHAREHOLDERS,
Movant,
-against-

Respondent.

Chapter 11 Case No.

Case No. 10 13800
(SCC)

x
)
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)
)
)
)
X
)
)
)
)
)
)
)
)
)
)
)
x

ORDER GRANTING MOTION OF AD HOC
COMMITTEE OF PREFERRED SHAREHOLDERS
FOR ORDER DIRECTING APPOINTMENT OF STATUTORY
COMMITTEE OF EQUITY SECURITY HOLDERS PURSUANT
TO SECTION 1102(A)(2) OF THE BANKRUPTCY CODE

Upon consideration of the motion dated September 13, 2010 (the Motion) of the
Ad Hoc Committee of Preferred Shareholders (the Ad Hoc Committee) for the
appointment of a statutory committee of equity security holders pursuant to section
1102(a)(2) of title 11 of the United States Bankruptcy Code (the Bankruptcy Code);
and this Court having jurisdiction to consider and determine the Motion and all relief
requested therein; and due and sufficient notice of the Motion having been given under
the circumstances; and this Court having convened a hearing at which all interested

parties had an opportunity to appear and be heard; and after considering all responses to
the Motion, after due deliberation and sufficient cause appearing therefor; it is:
1. Ordered that the Motion is GRANTED; and it is further
2. Ordered that, pursuant to 11 U.S.C. 1102(a)(2), the Office of the United
States Trustee shall convene a meeting for the purpose of appointing a statutory
committee of equity security holders in these chapter 11 cases.
______________________________________
New York, NY
September __, 2010 THE HONORABLE SHELLEY C. CHAPMAN
UNITED STATES BANKRUPTCY JUDGE

NY3 3063845.2

EXHIBIT B

15798647.8
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 Companys 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 Companys properties (the Floating Rate Collateral) into all the equity of the
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.
Lehmans 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 11 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

1
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.

2
15798647.8
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:

Treatment of Claims and Equity Interests Under the Plan:

Floating Rate Debt Lehman will receive, in full and final satisfaction of its secured
mortgage claims in respect of the 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 of the Company parties thereto (the
Fixed Rate Debt) collateralized by 45 of the Companys 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) of the
Bankruptcy Code, in 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
Debt
Holders of claims against the Company for its obligations under those
certain secured mortgage loan agreements, not including the Floating
Rate Debt or the Fixed Rate Debt (the Other Secured Debt),
collateralized by seven of the Companys 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 holders Other Secured Debt Collateral

3
15798647.8
(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) of the Bankruptcy Code, in the amount of the
aggregate amount of such holders claims, with present value of such
Other Secured Debt New Mortgage Note equaling the value of the
collateral securing such holders 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 Companys portfolio shall be agreed among the
parties hereto.

General Unsecured
Claims
General Unsecured Claim shall mean any unsecured claim against
any of the Debtors that is not: (a) an Administrative Claim; (b) a
Priority Claim (tax or otherwise); (c) an intercompany claim; or (d) a
section 510(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
Claims
Intercompany claims shall not be entitled to receive any distribution
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 510(b)
Claims
Claims subject to subordination pursuant to section 510(b) of the
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 of holders 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

4
15798647.8
Claims course of business or upon the effective date of the 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 Companys
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 Companys 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.

5
15798647.8

Means of Implementation:

Bankruptcy
Pleadings
All material pleadings filed by the Company in connection with the
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 RIMV, 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 Tysons
Corner), secured by senior, priming liens on the Fixed Rate
Collateral, the Residence Inn in San Diego, and the Residence Inn in
Tysons 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 of the 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 Lehmans 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 of Cash 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

6
15798647.8
Collateral 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 Companys use of Lehmans cash collateral will terminate
immediately upon the receipt of notice of a Termination Event (as
defined below).

Exit Funding 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.

New Equity 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 of the Bankruptcy Code.

Conditions
Precedent to
Lehmans
Obligations Under
PSA
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.

7
15798647.8

Termination
Events Under PSA
and Use of Cash
Collateral
Upon the occurrence of any of the following events (each, a
Termination Event), the PSA and the use of Lehmans cash
collateral 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
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 of Termination 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 of Lehmans 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

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 Lehmans 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 1104 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 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 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
of the Bankruptcy Code in any of the Chapter 11 Cases or

9
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 of relief that 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 of the Plan and such ruling,
determination or order has not been vacated or reversed
within ten (10) 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

10
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;
O. The occurrence and continuation of a default in
connection with the Companys use of Lehmans 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.

11
15798647.8

Remedies Upon
Termination
Upon the occurrence of any of Termination Events A through S,
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 11 Cases of all of those debtors obligated
under the Floating Rate Debt, Fixed Rate Debt, Mezzanine Debt, and
Other Secured Debt; or (c) 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:

(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
Approval of PSA
The Company shall, on or immediately after the commencement of
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 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) shall not support any motion from any other party to obtain such
extension or alteration; and (iii) will oppose any motion from any

12
15798647.8
other party to obtain such extension or alteration by the objection
deadline of such motion.

Pro Forma Capital
Structure
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 Companys assets, except
for permitted liens agreed to by Lehman and the Company.

Governance 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.

Management
Equity Incentive
Program
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% of the New Equity to be allocated to management
under the Management Equity Incentive Program as approved by the
board of directors of the reorganized Company.

REIT Status Lehman and the Company shall, after the Effective Date, determine
whether to maintain Innkeepers status as a real estate investment
trust.

Property Manager Prior to the Effective Date of the Plan, Lehman and the Company
shall designate a manager for the reorganized Companys 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.

Releases 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

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15798647.8
favor of (a) the Company and each of its subsidiaries, (b) Lehman, and
(c) each of their 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.

EXHIBIT C

ny-937338

MORRISON & FOERSTER LLP
Telephone: (212) 468-8000
Facsimile: (212) 468-7900
Brett H. Miller
Lorenzo Marinuzzi
Jordan A. Wishnew

Proposed Counsel for the Official Committee of
Unsecured Creditors of Innkeepers USA Trust, et al.

)
In re ) Chapter 11
)
Innkeepers USA Trust, et al. ) 10-13800 (SCC)
)
Debtors. ) Jointly Administered
)

RESERVATION OF RIGHTS OF THE OFFICIAL COMMITTEE OF
UNSECURED CREDITORS IN RESPONSE TO DEBTORS MOTION
FOR AN ORDER (A) AUTHORIZING THE DEBTORS TO ASSUME THE
PLAN SUPPORT AGREEMENT AND (B) GRANTING RELATED RELIEF

The Official Committee of Unsecured Creditors (the Committee) of Innkeepers USA
Trust and certain of its direct and indirect subsidiaries in the above-captioned chapter 11 cases,
as debtors and debtors in possession (collectively, the Debtors), by its proposed counsel,
Morrison & Foerster LLP, hereby submits this reservation of rights in response to the Debtors
Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support Agreement and
(B) Granting Related Relief (the Motion) [Docket No. 15]. In support thereof, the Committee
respectfully represents and alleges as follows:

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BACKGROUND
A. The Chapter 11 Cases
1. On July 19, 2010 (the Petition Date), each of the Debtors filed with the Court a
voluntary petition for relief under Chapter 11 of the Bankruptcy Code, commencing the above
captioned Chapter 11 cases.
2. Pursuant to an order of this Court dated July 20, 2010, the Debtors Chapter 11
cases are being jointly administered.
3. The Debtors continue to operate their businesses and manage their properties as
debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
4. On July 28, 2010, the United States Trustee for the Southern District of New York
appointed the five (5) member Committee pursuant to section 1102(a)(1) of the Bankruptcy
Code. On that same date, the Committee selected Morrison & Foerster to serve as its counsel.
5. On July 30, 2010, the Committee met and selected Jefferies & Company, Inc. as
financial advisor and investment banker to the Committee.
6. A request has been made for the appointment of an examiner in these Chapter 11
cases (the Examiner Motion). A hearing on the Examiner Motion is scheduled for September
1, 2010.
7. Since the appointment of the Committee, its professionals have been working
continuously with the Debtors and their professionals to better understand the Debtors day-to-
day operations and the events that precipitated this bankruptcy filing. These ongoing diligence
efforts include reviewing the Debtors financial records, examining prepetition secured credit
facilities, examining the Debtors prepetition financial transactions, including publicly filed
documents concerning the 2007 acquisition by Apollo Investment Corp. (Apollo), and
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understanding the details of the plan support agreement between the Debtors and Lehman
(defined below). Moreover, the Committees professionals have been in contact with advisors
for other parties-in-interest to discuss these same issues.
B. The Motion and Plan Support Agreement
The PSA
8. On the Petition Date, the Debtors filed the Motion, together with a proposed order
(the Proposed Order), seeking authority to enter into the plan support agreement (the PSA
with Lehman ALI Inc. (Lehman, together with the Debtors, the Parties). Obtaining authority
from this Court to assume to the PSA is necessary in order to secure Lehmans commitment to
support the Debtors restructuring efforts, including Lehmans agreement to vote to accept a plan
of reorganization based on the PSA.
9. Pursuant to the PSA, Lehman will agree to support the Plan and not support any
competing restructuring efforts so long as the Parties comply with the terms of the PSA, which
includes implementing and consummating a reorganization that provides for converting the $238
million of Floating Rate Debt
1
owned by Lehman into all of the equity in the reorganized
Debtors (subject to dilution by a Management Equity Incentive Plan).
10. The PSA can be described as an amalgam of interrelated conditional agreements.
For example, Lehmans willingness to enter into the PSA is conditioned, in part, on its ability to
sell a portion of the Reorganized Equity to a third party anticipated to be Apollo on or after
the effective date of the Plan. Moreover, Lehmans support of the Plan is conditioned on the
Debtors retention of certain franchise agreements, which will be facilitated by Marriott
International Inc.s (Marriott) forbearance with respect to critical hotel properties, as set forth

1
Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Motion.
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in the Agreement for Adequate Assurance of Completion of Certain PIPs and Assumption of
Agreements, dated June 25, 2010 between certain of the Debtors and Marriott (the Marriott
Agreement). This requires the Debtors to obtain debtor-in-possession financing,
2
in exchange
for Marriott agreeing to forbear from exercising remedies pursuant to the Marriott Agreement,
which will then allow the Debtors to retain franchise agreements, thus inducing Lehman to enter
into the PSA. The PSA is clearly not a straight forward bilateral agreement.
The Lock-Up
11. Sections 4(a)(ii) and (iii) of the PSA provide that no Party may directly or
indirectly engage in discussions regarding, or otherwise support, the formulation of any plan of
reorganization or any restructuring other than pursuant to the Plan.
12. However, Section 25(a) of the PSA permits the Debtors to take, or refrain from
taking, any action (including terminating the PSA) if it is consistent with their fiduciary
obligations under applicable law, with certain exceptions. This concept is defined in the PSA as
the Debtors Fiduciary Out.
13. The PSA also delineates the Debtors rights with respect to Firm Alternative
Transactions. According to Section 25(c) of the PSA, the Debtors agree that:
if the Company secures a binding and 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, the Company shall provide Lehman
with at least ten (10) Business Days to determine whether Lehman will consent to
such Firm Alternative Transaction.; and

2
The Debtors are separately seeking authority from the Bankruptcy Court to enter into two debtor-in-possession
financing facilities consisting of: (i) $50.75 million DIP Facility provided by Five Mile Capital Partners LLC, which
will be used primarily to perform PIPs on certain hotels securing the Debtors obligations under the Fixed Rate
Debt; and (ii) $17.5 million DIP facility provided by an affiliate of Lehman, which will be used to perform PIPs and
certain other investments on hotels securing the Debtors obligations under the Floating Rate Mortgage Loan
Agreement.

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[t]he Company agrees that in determining whether a Firm Alternative
Transaction is higher and better, all factors must be considered
includingLehmans opinion as to whether such Firm Alternative Transaction is
higher and better.
14. One of the exceptions to the Debtors Fiduciary Out described above will occur if
Lehman does not consent to a proposed Firm Alternative Transaction. In that case, the Debtors
right to exercise their Fiduciary Out is conditioned on obtaining an order from the Bankruptcy
Court.
Termination Events
15. Section 6 of the PSA sets forth the Termination Events of the PSA, and Section 8
describes the effects of the occurrence of the Termination Events. Section 6 does not contain
any clear reference regarding whether the Fiduciary Out would trigger a Termination Event.
Section 8(a) provides that in the event of a Termination Event, Lehman would be entitled to
terminate the PSA and terminate the use of its cash collateral.
Lehmans Fees
16. Sections 4(c) and 5(d) of the PSA provide that the Company shall pay all the
reasonable fees and expenses of Lehman in connection with the Transaction. It does not appear
that there is a cap on such fees to be paid in the event they are incurred.
RESERVATION OF RIGHTS
17. The Committee understands the importance of a successful reorganization and
appreciates that the PSA, as conditional as it may be, is intended to achieve that result. The
Committee is rightfully concerned that the termination of the PSA could pose substantial risk to
the survivability of the Debtors business. For this reason, the Committee does not oppose the
Debtors Motion.
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18. However, the Committee also seeks to ensure that the Debtors are obtaining
maximum value for their estates and their creditors. The Committees failure to object to the
PSA does not limit its consideration of any plan of reorganization proposed by the Debtors,
whether it be the Plan contemplated under the PSA or an alternative plan. Accordingly, the
Committee hereby reserves all of its rights to oppose the Plan and Disclosure Statement at the
appropriate time.
19. With respect to the terms of the PSA, in the event that the Debtors should exercise
the Fiduciary Out, it is unclear to the Committee whether the Fiduciary Out gives rise to a
material breach or any other Termination Event under Section 6 of the PSA. It is not clear from
the filed version of the PSA whether the remedies described in Section 8(a) of the PSA would be
triggered by the Fiduciary Out. The Committee believes it is important to understand the
significant consequences associated with the Fiduciary Out and therefore believes the PSA
should be modified to clarify what remedies would be available to the Parties should the Debtors
utilize the Fiduciary Out. Similarly, if the Fiduciary Out is a Termination Event that
automatically terminates the PSA and the Debtors right to use Lehmans cash collateral, the
Committee believes that the procedures set forth in the PSA should be modified to allow the
Debtors the opportunity to seek appropriate relief from the Bankruptcy Court before the right to
use cash collateral is cut off.
20. In addition, the Committee is concerned that should litigation ensue over the PSA
for any reason, sufficient protocols are not in place to protect the Debtors from being required to
pay potentially substantial sums to reimburse Lehmans legal fees and expenses. Section 4(c) of
the PSA mandates that Lehman is not required to file any documents or otherwise take action in
support of the Plan unless the Company agrees to pay Lehmans legal fees, and section 5(d)
7
ny-937338
notes that the Company shall pay all reasonable professional fees and expenses incurred by
Lehman in connection with the Transaction. The PSA does not limit the Companys payment
of Lehmans fees and does not indicate how any determination of what is reasonable is made.
Without a cap on fees and expenses and/or the ability for the Committee or this Court to review
the fee requests in advance of payment, the Committee believes that these costs have the
potential to become a significant drain on estate assets to the detriment of the Debtors other
creditors.
21. The Committee believes that the Parties should consider: (A) modifying the PSA
to clarify whether the Fiduciary Out gives rise to a Termination Event and whether there are
specific remedies for the Parties in the event of a Fiduciary Out; (B) modifying Section 8 of the
PSA to provide for a period of three (3) business days before the Debtors right to use cash
collateral is terminated following a Fiduciary Out in order to allow the Debtors to seek relief
from the Bankruptcy Court; and (C)(i) implementing a cap on or (ii) incorporating procedures for
the Committee and/or this Court to review the fees and expenses that could be incurred by
Lehman should the terms of the PSA become the subject of a dispute between Lehman, the
Debtors and/or a third party.
[concluded on the following page]

8
ny-937338
CONCLUSION
22. The Committee appreciates that the PSA is an important and carefully negotiated
step towards the reorganization of the Debtors businesses. With the clarifications sought above,
the Committee does not oppose the Motion. The Committee respectfully reserves all rights
relating to the Plan approval process, including the right to object to the Plan or Disclosure
Statement if it believes it necessary to do so.
Dated: August 23, 2010
New York, New York
Respectfully submitted,
/s/ Lorenzo Marinuzzi
MORRISON & FOERSTER LLP
Brett H. Miller
Lorenzo Marinuzzi
Jordan A. Wishnew
Telephone: (212) 468-8000
Facsimile: (212) 468-7900

Proposed Counsel for the Official Committee of
Unsecured Creditors of Innkeepers USA Trust, et al.

EXHIBITD
1
2 UNITED STATES BANKRUPTCY COURT
3 SOUTHERN DISTRICT OF NEW YORK
4 Case No. 10-13800-scc
5 - - - - - - - - - -x
6 In the Matter of:
7
8 INNKEEPERS USA TRUST, et al.,
9
10 Debtors.
11
12 - - - - - - - - - - - - - - - -x
13
14 U.S. Bankruptcy Court
15 One Bowling Green
16 New York, New York
17
18 September 1, 2010
19 8:30AM
20
21
22 B E F 0 R E:
23 HON. SHELLEY C. CHAPMAN
24 U.S. BANKRUPTCY JUDGE
25
212-267-6868
VERITEXT REPORTING COMPANY
www. veritext.com
- 1 -
516-608-2400
- 2 -
1
2 HEARING re "Cash Collateral": Debtors' Motion for the Entry of
3 Interim and Final Orders (A) Authorizing the Debtors to (I) Use
4 the Adequate Protection Parties' Cash Collateral and (II)
5 Provide Adequate Protection to the Adequate Protection Parties
6 Pursuant to 11 U.S.C. Sections 361, 362, and 363, (B) to the
7 Extent Approved in the Final Order, Granting Senior Secured,
8 Priming Liens on Certain Postpetition Intercompany Claims, (C)
9 to the Extent Approved in the Final Order, Granting
10 Administrative Priority Status to Certain Postpetition
11 Intercompany Claims, and (D) Scheduling a Final Hearing
12 Pursuant to Bankruptcy Rule 4001 (b) [Docket No. 13]
13
14 HEARING re "Cash Management": Debtors' Motion for the Entry of
15 an Order Authorizing the Continued Use of (I) Existing Cash
16 Management System, as Modified Herein, (II) Existing Bank
17 Accounts, (III) Existing Business Forms, and (IV) Certain
18 Existing Investment Guidelines [Docket No. 14]
19
20 HEARING re "Lehman DIP": Debtors' Motion for Entry of an Order
21 Authorizing the Debtors to Obtain Postpetition Financing from
22 an Affiliate of Lehman ALI Inc. on a Priming Basis Pursuant to
23 Sections 364 (c) (1), 364 (c) (2), 364 (c) (3), 364 (d) (1), and 364 (e)
24 of the Bankruptcy Code [Docket No. 23]
25
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1
2 HEARING re "Plan Support Agreement": Debtors' Motion for Entry
3 of an Order (A) Authorizing the Debtors to Assume the Plan
4 Support Agreement and (B) Granting Related Relief [Docket No.
5 15]
6
7 HEARING re "Appointment of Examiner": Motion of Ad Hoc
8 Committee of Preferred Shareholders for Order Directing
9 Appointment of Examiner Pursuant to Section 1104(c) (1) -(2) of
10 the Bankruptcy Code [Docket No. 179]
11
12 HEARING re "Morrison & Foerster Retention": Application
13 Pursuant to Sections 327(a) and 1103 of the Bankruptcy Code and
14 Bankruptcy Rules 2014 and 2016 for Entry of an Order
15 Authorizing the Retention and Employment of Morrison & Foerster
16 LLP as Attorneys to the Official Committee of Unsecured
17 Creditors Nunc Pro Tunc to July 28, 2010 [Docket No. 206]
18
19
20
21
22
23
24 Transcribed By: Clara Rubin
25
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VERJTEXT REPORTING COMPANY
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1
2 A P P EAR AN C E S:
3 KIRKLAND & ELLIS LLP
4 Attorneys for the Debtors and Debtors-in-Possession
5 655 Fifteenth Street, N.W.
6 Washington, DC 20005
7
8 BY: DANIEL T. DONOVAN, ESQ.
9
10
13 300 North LaSalle
14 Chicago, IL 60654
15
16 BY: ANUP SATHY, P.C., ESQ.
17
18
21 601 Lexington Avenue
22 New York, NY 10022
23
24
25
BY: PAUL M. BASTA, ESQ.
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1
2 ALTER, GOLDMAN & BRESCIA, LLP
3 Attorneys for Hilton International
4 550 Mamaroneck Avenue
5 Harrison, NY 10528
6
7 BY: BRUCE R. ALTER, ESQ.
8
9
10 BRYAN CAVE LLP
11 Attorneys for LNR Partners, LLC
12 1290 Avenue of the Americas
14
15 BY: LAWRENCE P. GOTTESMAN, ESQ.
16
17
18 DECHERT LLP
19 Attorneys for Lehman ALI Inc., and Michael Lascher
22
23
24
25
BY: MICHAEL J. SAGE, ESQ.
KEVIN J. O'BRIEN, ESQ.
BRIAN E. GREER, ESQ.
212-267-6868
1
2 DEWEY & LEBOEUF LLP
3 Attorneys for the Ad Hoc Committee of Preferred
4 Shareholders
7
8 BY: MARTIN BIENENSTOCK, ESQ.
9 IRENA M. GOLDSTEIN, ESQ.
10 TIMOTHY Q. KARCHER, ESQ.
11
12 HAYNES AND BOONE, LLP
13 Attorneys for Midland Loan Services, Inc.
14 201 Main Street, Suite 2200
15 Forth Worth, TX 76102
16
17 BY: JOHN D. PENN, ESQ.
18
20
21
22
23
24
25
Attorneys for Midland Loan Services, Inc.
26th Floor
New York, NY 10020
BY: LENARD M. PARKINS, ESQ.
212-267-6868
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516-608-2400
1
3 Attorneys for Midland Loan Services, Inc.
4 2323 Victory Avenue, Suite 700
5 Dallas, TX 75219
6
7 BY: PHILIP M. BRIDWELL, ESQ.
8 MARK ELMORE, ESQ.
9
10 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
11 Attorneys for Five Mile Capital Partners LLC
12 1633 Broadway
14
15 BY: DAVID M. FRIEDMAN, ESQ.
16 ADAM L. SHIFF, ESQ.
17 DANIEL A. FLIMAN, ESQ.
18
19 KILPATRICK STOCKTON LLP
20 Attorneys for TriMont Real Estate Advisors, Inc.
21 as Special Servicer
22 1100 Peachtree Street, Suite 2800
23 Atlanta, GA 30309
24
25 BY: TODD C. MEYERS, ESQ.
212-267-6868
VERJTEXT REPORTING COMPANY
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516-608-2400
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1
2 MORRISON & FOERSTER LLP
3 Attorneys for the Official Committee of Unsecured
4 Creditors
7
8 BY: LORENZO MARINUZZI, ESQ.
9
10 PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
11 Attorneys for Apollo Investment Corporation
14
15 BY: ANDREW J. EHRLICH, ESQ.
16 ALAN W. KORNBERG, ESQ.
17
18 PERKINS COIE LLP
19 Attorneys for C-III Asset Management and CWCapital Asset
20 Management
21 131 S. Dearborn Street
22 Suite 1700
24
25 BY: DAVID M. NEFF, ESQ.
212-267-6868
1
2 SIDLEY AUSTIN LLP
3 Attorneys for Appaloosa
4 787 Seventh Avenue
6
7 BY: LEE S. ATTANASIO, ESQ.
8 JOHN G. HUTCHINSON, ESQ.
9 EVAN R. ZISHOLTZ, ESQ.
10
11 SIDLEY AUSTIN LLP
12 Attorneys for Appaloosa
13 One South Dearborn
15
16 BY: BOJAN GUZINA, ESQ. (TELEPHONICALLY)
17
18 U.S. DEPARTMENT OF JUSTICE
19 Office of the United States Trustee
20 33 Whitehall Street
21 21st Floor
23
24
25
BY: PAUL K. SCHWARTZBERG, ESQ.
212-267-6868
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516-608-2400
1
2 ALIXPARTNERS, LLC
3 Restructuring Advisor
4 BY: LAURA J. EISELE (TELEPHONICALLY)
5
6 APPALOOSA MANAGEMENT
7 BY: JAMES BOLIN (TELEPHONICALLY)
8
9 DE SHAW
10 Interested Party
11 BY: SARAH S. JOHNSON (TELEPHONICALLY)
12
13 ESOPUS CREEK ADVISORS, LLC
14 For the Ad Hoc Committee of Equity Holders
15 BY: LAUREN KRUEGER (TELEPHONICALLY)
16
17 FIVE MILE CAPITAL PARTNERS LLC
18 BY: MICHAEL FRANCO (TELEPHONICALLY)
19
20 ANDREW HAYNE (TELEPHONICALLY)
21 Interested Party; Preferred Shareholder
22
23
24
25
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INNKEEPERS USA TRUST, et al.
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1 and it is what it is.
2 THE COURT: All right. Thank you.
3 MR. SAGE: Thank you.
4 THE COURT: All right. Anyone else?
5 MR. MARINUZZI: Good afternoon, Your Honor. For the
6 record
7 THE COURT: Good afternoon. Good morning still.
8 MR. MARINUZZI: I'm sorry. You're right. Good
9 morning.
10 THE COURT: Yeah.
11 MR. MARINUZZI: Lorenzo Marinuzzi again on behalf of
12 the official committee of unsecured creditors.
13 Your Honor, we're here this morning standing up with
14 what parties believe to be the bad guys on this side of the
15 room who put together this PSA and have every intention of
16 wiping out equity and significantly writing down debt as part
17 of this de-leveraging process that's really geared to give the
18 company back to Apollo.
19 Now, the committee has a little bit of a different
20 view here. And all parties are intended to take whatever
21 positions they want with respect to the restructuring of their
22 debt. And parties are entitled to call bluffs as they see
23 them. If they're indeed bluffs, people will figure that out
24 shortly. This committee, though, looking at the choice of
25 supporting the debtors' assumption of the PSA and reserving its
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1 rights fully in connection with the disclosure statement and
2 plan. And this isn't a plan confirmation hearing. All rights
3 are reserved -- was of the view that they weren't prepared to
4 call a bluff. They're not prepared to say that Marriott will
5 not react adversely if the PSA is not approved, that the
6 Marriott transaction or the negotiated deal that's been put
7 into place as part of the PSA won't disappear, that it won't
8 cause a deterioration in the debtors' businesses. The
9 committee just wasn't prepared to take that risk. Other
10 parties can take that risk. Parties who have nothing to lose
11 can certainly take that risk.
12 But at this point, again, it's not a confirmation
13 hearing. To the extent that the committee has a particular
14 view for the disclosure statement or the plan based on facts
15 known already, based on facts that are developed or discovered
16 during its investigation. All those rights are reserved. But
17 for today, for purposes of this hearing, the committee does not
18 oppose the debtors' assumption of the PSA. There are certain
19 clarifications we've asked for. We're told by the debtors that
20 we'll see them in a revised order or they'll be put on the
21 record. In particular, dealing with what happens if a
22 fiduciary out is exercised. What are the respective rights and
23 remedies with parties in particular. Can Lehman run into court
24 or can Lehman simply pretend the automatic stay is not in
25 effect? Does Lehman have to run in to court? We just want
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1 some clarification on that so we know exactly what happens if
2 the debtors do, in fact, exercise a fiduciary right.
3 THE COURT: All right.
4 MR. MARINUZZI: Thank you, Your Honor.
5 THE COURT: Thank you. Okay. Anyone else?
6 (No response)
7 THE COURT: All right. So should we go with the
8 evidence?
9 MR. DONOVAN: Dan Donovan for the debtors, Your Honor.
10 Just to inform you of the schedule and you can tell me how you
11 want to proceed.
12 THE COURT: Okay.
13 MR. DONOVAN: We're ready to proceed with evidence.
14 Based on prior objections and some of the opening statements, I
15 think the direct will be an hour and fifteen to an hour and
16 thirty minutes. Don't know when you would want to take lunch
17 or a break but I just want to let you know that's my estimate
18 at this point.
19 THE COURT: All right. I think if your estimate is
20 reasonably accurate, that would put us at 1 o'clock which would
21 be a good time, I think, to take a break. I have a feeling
22 this is going to go a lot longer than people are estimating,
23 though. So why don't we just get started and if anyone needs a
24 break earlier, just let me know.
25
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MR. DONOVAN: Okay.
VERlTEXT REPORTING COMPANY
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1 aren't so dramatically apart that it shouldn't result in a
2 consensual restructuring if we simply move forward with
3 exclusivity.
4 Q. Let's cover the third. You said Midland told you as a
5 precondition to future meetings or discussions that you market
6 the company.
7 What did that mean to you as the CRO of Innkeepers?
8 A. I think it's unfortunate anybody including myself comes to
9 a meeting with preconceived notions and preconditions.
10 Obviously, I believe that the Lehman PSA is absolutely in the
11 best interest of this bankruptcy estate and it's a bird in
12 hand. And to, in essence, terminate that for purposes of
13 having negotiations with Midland would just be unacceptable.
14 But at the same time that I said that, I had a
15 conversation yesterday with Ron Greenspan in which we discussed
16 having a meeting in the next couple of weeks with his client,
17 Midland, and to talk about everything. It's similar to the
18 conversation I had withAl Nickerson who's a principal of Five
19 Mile, where yesterday we agreed to sit down and chat about
20 everything in the next couple of weeks. So I --
21
22
23
24
25
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THE COURT: Can I ask a question?
MR. DONOVAN: Yes, Your Honor.
THE COURT: I want to get a level set here.
MR. DONOVAN: Sure.
THE COURT: Exhibit 16 bears the date April 27th,
- 128 -
1 various term sheets from Lehman that included Apollo as being a
2 party to the PSA. What was your response to those term sheets
3 in which Lehman proposed Apollo to be a party to the plan
4 support agreement?
5 A. I didn't respond except -- I didn't respond in writing and
6 I told them that that was unacceptable, I was looking to do an
7 internal restructuring with Lehman Brothers and that Lehman
8 would have to convert their debt to equity. I think I received
9 other term sheets that were sent to me by Apollo's counsel,
10 didn't respond to those term sheets either and told them I just
11 wasn't interested, I'm going to convert the debt to equity.
12 And of course I recognize that that secured creditor or party
13 who obtains equity can in the future sell to whomever they
14 want. And as you know, Lehman made it a condition to the PSA
15 that they sell fifty percent, take some of the risk off the
16 table, to a third party, 407 million dollars.
17 Q. What was your position with respect to Apollo and its
18 equity within this restructuring?
19 A. I made it clear, I believe, in early March if not before,
20 I had an --
21 Q. March 2010.
22 A. March of 2010 I had an unbelievably uncomfortable
23 conversation with Apollo telling them that in my view they were
24 out of the money and they would be receiving absolutely no
25 consideration on account of the 250 million dollars that they
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1 were losing in their equity investment in this enterprise. I
2 made it clear in my first meeting with Midland that Apollo was
3 out of the money and would be receiving nothing in this
4 restructuring. I made it clear to Lehman that they were out of
5 the money and they would not receive anything in the
6 restructuring.
7 Q. Okay. So how did Apollo, then, get involved with Lehman
8 to purchase, as we understand it, fifty percent of Lehman's
9 post-confirmation equity?
10 A. Well, part of my sales pitch when I went to a secured
11 creditor and said give up your collateral, not an easy pitch to
12 make, was 'Listen, when you take the equity you can always
13 consider taking some of the risk off the table by selling it to
14 a third party.' Of course there was a conversation as to
15 whether, you know, Apollo might be interested in doing that.
16 And at that point in time I had had no conversations with them
17 and told everyone the truth, which is I have no clue but it was
18 possible.
19 Q. And what was your reaction as the process went along and
20 you learned that Apollo at least was negotiating to purchase
21 fifty percent of Lehman's equity?
22 A. Once I understood that Lehman wanted to take 50 percent of
23 the equity they would receive out of this bankruptcy and
24 transfer it to a third party, listen, I would have been happy
25 if Lehman took 100 percent of the equity or if they sold it to
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1 A. No, I believe it's seven hotels and, in addition, a joint-
2 venture interest.
3 Q. Okay. And each of those hotels in the joint-venture
4 interest are owned by separate legal entities, is that right?
5 A. I believe that's probably accurate, although I don't have
6 a corporate chart in front of me.
7 Q. Okay. And those legal entitles are, to your knowledge,
8 not liable for any of the other debt of the other Innkeepers
9 entities, such as the blanket mortgages or the mezzanine debt,
10 is that right?
11 A. I'm not sure. I mean, there are other obligations that
12 all of these entities have to franchisors and creditors, and of
13 all sorts of natures.
14 Q. But you're not aware of any specific institutional debt,
15 mortgage debt or bond debt, that those seven entities are on
16 the hook for, other than the mortgages on their individual
17 properties, correct?
18 A. No, I don't think that is correct. I believe that, at
19 least with regard to Anaheim, there's a twenty-one million
20 dollar mezz piece to one of the Lehman-affiliated entities.
21 That comes to mind.
22 Q. Okay, but for the other six entities, you're not aware of
23 any other institutional bond debt or mortgage debt that they're
24 liable for, are you?
25 A. I don't believe so.
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1 Q. Now, these seven entities, and I'll name them for you
2 KPA HI Ontario LLCi KPA RIMV, LCCi KPA RIGG, LLCi KPA San
3 Antonio, LLCi KPA Washington DC, LLCi KPA Tysons Corner Rhode
4 Island, LLCi and KPA HS Anaheim, LLC -- these entities, other
5 than the Anaheim entity, the first six entities I mentioned are
6 owned by Innkeepers USA Limited Partnership, correct?
7 A. I don't have a corporate structure in front of me, but
8 that probably is accurate.
9 Q. Okay. And that Innkeepers USA Limited Partnership is in
10 turn owned by Innkeepers Financial Corporation, right?
11 A. I don't have a corporate structure, but if you make that
12 representation it's probably accurate.
13 MR. BIENENSTOCK: Your Honor, I only have one,
14 unfortunately. Could I --
15 THE COURT: Well, we've got -- there's a full-color
16 one that supersedes that one, so
17 UNIDENTIFIED SPEAKER: Mr. Bienenstock, it's Exhibit
18 17 in that pile. The last exhibit.
19 A. Thank you. Didn't see it.
20 I believe that your comments are accurate.
21 Q. And the same would be -- the same answer would hold for
22 Innkeepers USA Trust in terms of it not having any
23 institutional debt or mortgage debt liability?
24 A. I have not looked at that specifically.
25 it before I
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1 Q. But you're not aware of any, are you?
2 A. I don't believe there is any bond debt. I believe that
3 there's other debt and debt based upon guaranties to a lot of
4 my franchisors, and also franchisor obligations which are
5 embedded in many of those entities in the corporate structure.
6 As I sit here today, I can't tell you exactly who and how much.
7 Q. Okay, and the same answer would go for Grand Prix Holdings
8 LLC?
9 A. Yes. There is guaranty and other obligations by
10 franchisors and other parties to different entities in
11 different ways within the parent corporate structure.
12 Q. And some of those guaranties are being satisfied by virtue
13 of the debtor-in-possession loans that the Court has recently
14 approved, correct?
15 A. No.
16 Q. None of them, or just some of them?
17 A. I don't think any of the guaranties within the parents of
18 the structure that you were referring is being satisfied by the
19 debtor-in-possession financing.
20 Q. Okay. Can you tell us what those guaranties are that
21 you're referring to?
22 A. I believe -- meaning the parent structure?
23 Q. Yes.
24 A. I believe there's a guarantee to Marriott, and there's
25 other guarantees that I'm just not familiar with, but none that
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1 I think are being satisfied based upon the debtor-in-finan
2 debtor-in-possession financing.
3 Q. You haven't today brought with you appraisals of the
4 equity value
1
if any/ of the seven entities I've referred to/
5 have you?
6 A. We have not done any appraisals with regard to any of
7 those assets in the recent past.
8 Q. Is there also joint-venture interest that is owned in this
9 corporate enterprise that's -- by the parent companies?
10 A. There's only one joint venture that I'm aware of involving
11 a company called Gencor
1
with regard to one piece of property/
12 which I believe the interest is valueless/ based upon all
13 information that I have at my disposal.
14 Q. Now
1
let's get back to the compensation we were talking
15 about before. You're hopeful/ are you not/ that if you do a
16 good job/ Apollo might refer you to other situations in the
17 future where you could be of help
1
are you not?
18 A. That is not of significance to me. I have retired
19 previously/ and I don't have any knowledge or view with regard
20 to what I might do in the future. I always just simply try to
21 do my best job.
22 Q. Are you retired now?
23 A. No/ I'm not retired now.
24 Q. Okay. Now/ if Lehman Brothers -- I'm sorry/ if Lehman
25 ALI
1
I thinki the Court set it out clearly this morning at the
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1 Q. What is the amount?
2 A. It says that Lehman has the ability to terminate the PSA
3 if the value is determined to be in excess of 550 million
4 dollars. So what was important to me was utilizing my business
5 judgment, getting comfortable that the value was below 550, and
6 in fact I am very comfortable that the value is less than 550
7 with regard to the fixed-rate pool.
8 Q. Okay, but whatever it is, your -- one -- if the plan is
9 confirmed, the forty-five properties will be encumbered by a
10 mortgage in the amount of the value this Court determines,
11 right?
12 A. That's correct.
13 Q. Okay. Now, isn't it true that if forty-five properties
14 are encumbered by a mortgage in the amount of their value, it
15 is still valuable; someone will still pay to take control and
16 own those forty-five properties?
17 A. Only equity has inherent upside and downside, correct.
18 Q. If those forty-five properties, subject to the mortgage
19 and the amount of their value, were held up for sale, is there
20 any question in your mind that there would be bidding and
21 people would pay money to take those forty-five encumbered
22 properties?
23 A. Of course somebody would buy them at some price. Whether
24 that price is well below 500 or above 600 is an issue.
25 Q. No, I'm not talking about buying them free and clear. I'm
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1 talking about buying them subject to the mortgage in the amount
2 of their value. Wouldn't someone pay money to control forty-
3 five hotels even if they're fully encumbered?
4 A. Perhaps.
5 Q. Wouldn't someone pay money to control the other seven
6 properties even if they're fully encumbered?
7 A. Some of them might be willing to pay a negligible amount,
8 but I wouldn't see anyone being able to pay anything of
9 meaning.
10 Q. If the value of -- let's say hypothetically the value of
11 the forty-five properties is pegged at 500 million dollars. If
12 the value goes up one percent, what's the increment? What's
13 one percent of 500 million?
14 A. I don't know. What is it?
15 Q. Well, it's five million.
16 A. Okay.
17 Q. You -- will you except that?
18 A. I'll accept it.
19 Q. Okay. So someone might pay money for the possibility that
20 500 million dollars will go up one percent, right?
21 A. It's theoretically possible.
22 Q. It happens all the time, doesn't it? Isn't that real
23 estate? Isn't that the world of real estate?
24
25
A. Not my world of real estate, no.
Q. Okay.
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1 A. My world is that people who have mortgages aren't going to
2 give someone an upside for negligible value. What they'll do
3 is have them put real economic skin in the game by putting ten
4 to twenty percent down and then have an economic upside.
5 Q. Mr. Beilinson, what I'm trying to -- well, let's -- let me
6 just ask you directly. You clearly did not take any steps to
7 find out what someone will pay to control that block of forty-
8 five mortgages encumbered by a mortgage and whatever their
9 value is?
10 MR. DONOVAN: Your Honor, objection. I think we're
11 getting pretty far away from the PSA.
12 MR. BIENENSTOCK: I think this is exactly what it's
13 about, Your Honor.
14 THE COURT: Well, I think it's a fair question. He's
15 trying to find out the process, and the process is, I think,
16 what this hearing is about. So
17 A. The answer is no. Back in April, I was focused in on
18 having to do seventy million doll financing for seventy
19 million dollars' worth of PIPs; eliminate the potential
20 catastrophic effect of losing flags on or more
21 properties; walk into a bankruptcy case with a rational plan to
22 move forward; and come up with a deal with Marriott. That did
23 not leave me time to try to market for a negligible amount a
24 control opportunity in substantially undercollateralized
25 properties. Just didn't have time to do that.
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1 to speculate as to what would be accepted or not is very, very
2 difficult for me to do. I'll know it when I see it, in
3 consultation with my advisors.
4 Q. Mr. Beilinson, what states are the twenty properties in
5 that collateralize the Lehman blanket mortgage?
6 A. Off the top of my head I couldn't tell you which states.
7 Q. Name one or two.
8 A. Michigan, New Jersey, Atlantic City.
9 Q. Okay. I think Atlantic City is still part of New Jersey
10 but we won't get into that.
11 THE COURT: I need to make a disclosure; I was born
12 and raised in Atlantic City so move on to a different subject.
13 MR. BIENENSTOCK: In view of that I'm going to
14 concentrate of Michigan and not New Jersey.
15 THE COURT: You can keep going on Atlantic City but --
16 Q. Who is your law firm in Michigan to review whether
17 Lehman's liens and security interests in the real property and
18 revenues are validly perfected?
19 A. I don't know.
20 Q. Is there one?
21 A. I'd have to consult with my general counsel, Mark Murphy.
22 Q. Did you ask your general counsel to have local counsel in
23 each state check out whether the mortgagees in this case have
24 valid, perfected liens that you're dealing with under the plan?
25 Yes or no?
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1 A. I don't recall.
2 Q. Are you aware of any due diligence and report that you
3 received saying whether you have -- whether they have valid,
4 perfected liens against the properties in the estate?
5 A. My understanding is that unsecured creditors committee has
6 asked for a 2004 examination so that they could do an
7 evaluation of all perfection and lien issues. And I know as a
8 debtor we're going to be fully cooperating with the unsecured
9 creditors' committee examination.
10 Obviously to the extent that they're successful that's
11 going to -- to the extent that they find any deficiencies that
12 may very well impact how the debtor views this plan.
13 Q. Do you think this hearing should be adjourned, then, until
14 you know whether the mortgagees have valid, perfected liens
15 against properties and revenues?
16 A. Absolutely not.
17 Q. Okay.
18 A. I'm fairly comfortable, based upon discussion with legal
19 counsel, that all the perfection issues -- there are no
20 perfection issues.
21 Q. Well then what discussion was that?
22 A. I had discussions with Skadden who was my prepetition
23 counsel in connection with a restructure agreement between
24 Innkeepers and Lehman that was conducted between December of
25 '08 and July of '09. And in connection with those discussions
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1 there was lien evaluations.
2 Q. By who?
3 A. By Skadden.
4 Q. Of all of the liens in the estate or just certain ones, or
5 just certain liens?
6 A. I believe at that time we were focused only on Lehman
7 since we were restructuring the Lehman pool of party assets.
8 Q. So you don't have any knowledge of checking any of the
9 other liens for the fifty-two other properties?
10 A. I don't have personal knowledge, no.
11 Q. But you don't even know if it was done, do you?
12 A. I have looked at the closing binders in 2007; there were
13 legal opinions and all sorts of documents. Do I believe that
14 it was done and all of the liens are perfected? Absolutely.
15 Do I have personal knowledge as to everything? No, I don't.
16 Q. In all the cases that you filed as a debtor's attorney or
17 even as a creditor's attorney where you participated, Mr.
18 Beilinson, did you ever accept the fact that there were closing
19 binders as a substitute for checking the valid perfection of
20 all the liens?
21 A. Not all the time.
22 Q. One of the items of relief that you give Lehman, what you
23 call the super relief, 240 days, is the ability to sell its
24 hotels in the bankruptcy court, correct, under Section 363?
25 A. At the debtor's option we can either give them relief from
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1 a fiduciary, is better."
2 Q. Is that your testimony?
3 A. It is very accurate.
4 Q. Did you not just testify that you did not -- when I said
5 to you don't you believe you have a fiduciary duty to pursue an
6 internal reorganization, wasn't your answer, "No"?
7 A. Unless a better alternative presents itself -- maybe I
8 misunderstood the question, but --
9 THE COURT: Well, you did say no.
10 A. my deposition testimony is accurate and how I feel
11 today.
12 Q. Did Five Mile speak with you in the middle of last month
13 to talk about a proposal they were willing to make?
14 A. Yes, we had breakfast.
15 Q. And they indicated to you that they were desirous of
16 making a proposal that would be competitive with the Lehman
17 proposal. Isn't that correct?
18 A. They believed it might be competitive, but in our
19 conversation there were certain aspects of it which I told them
20 I didn't think were beneficial to the bankruptcy estate or
21 would it result in a confirmable plan so we -- we had a full
22 conversation, but it wasn't a fully baked proposal.
23 Q. And I think it was your testimony earlier that they asked
24 for access to the data room and you declined to give them that
25 access?
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1 A. Yes, I did decline.
2 Q. By the way, you have -- you set up a data room for a
3 Lehman, isn't that right?
4 A. Yes, I gave Lehman access to the data room in -- some time
5 in April.
6 Q. Some time in April. So, some time in April when you had a
7 peppercorn of an idea of a Lehman proposal, you were willing to
8 make the data room available to Lehman? But no other party is
9 entitled to access to the data room unless they can come up
10 with a fully drafted proposal that you, in your own wisdom,
11 decide is better. Is that correct?
12 A. No, that's not correct.
13 Q. Why did --
14 A. I
15 Q. -- Lehman get access to the data room and no other party?
16 A. I was negotiating a transaction where they would be giving
17 up their rights as a secured party, eliminating a security
18 interest and twenty assets, not taking advantage of the cash
19 flow that was being provided to them from those assets for the
20 opportunity to be an equity holder of the entire enterprise.
21 Since it was an enterprise-based analysis, I gave them access
22 to the entire enterprise.
23 I do not -- if someone came to me tomorrow and had a
24 viable alternative that made sense and that, in reviewing it
25 with my advisors, we believed it might be a better alternative,
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1 Lehman's PSA done prior to the time that Midland might take
2 aggressive action that would cause a premature bankruptcy.
3 Q. And now that you have the benefit of the automatic stay,
4 are you prepared to meet with Midland?
5 A. I've always kept an open dialogue.
6 MR. DONOVAN: That's all I have, Your Honor.
7 THE COURT: All right. Anything further?
8 MR. BIENENSTOCK: May I ask a couple questions?
9 THE COURT: All right, Mr. Bienenstock. You're giving
10 me a look, Mr. Donovan.
11 MR. DONOVAN: No. I'm sorry. I'm looking at Mr.
12 Bienenstock not you, Your Honor.
13 RECROSS-EXAMINATION
14 BY MR. BIENENSTOCK:
15 Q. Mr. Beilinson, if Lehman decided that it was no longer
16 going to sell fifty percent of the equity to Apollo and instead
17 decided to sell it to someone else, as things stand now, Apollo
18 could cause this plan to be withdrawn and simply direct the
19 debtor to go forward with a different plan, couldn't it?
20 A. I would be asking for approval of the independent
21 directors before I did anything. And, although it's an
22 interesting hypothetical, that would never happen.
23 Q. Apollo has the power to replace all of the directors, does
24 it not?
25 A. Theoretically, they do.
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1 Lehman and Apollo the prior week for which Lehman would receive
2 the equity in all of the debtors, including those securing
3 Midland's debt, and would sell a portion of this equity to a
4 so-called investor.
5 The debtors did not run any marketing process, and in
6 fact Moelis, the debtors' investment banker, was told not to
7 pursue other bidders or transactions. While the debtors state
8 that they communicated with both Midland and Five Mile during
9 the pre-petition period. It does not appear that Innkeepers
10 has contacted any potential investors outside the capital
11 structure or meaningfully interacted with their secured
12 creditors regarding plan proposals.
13 Section 5(c) of the PSA specifically prohibits such
14 negotiations by providing that neither party to the PSA shall
15 directly or indirectly seek, solicit, negotiate, support or
16 engage in any discussions relating to or enter into any
17 agreements related to any restructuring or plan of
18 reorganization other than as set forth in the plan term sheet.
19 Section 4 (a) (2) contains a similar restriction,
20 stating that prior to the termination date no party will
21 directly or indirectly seek, solicit, negotiate, vote for,
22 consent to, support or participate in the formulation of any
23 plan of reorganization or other restructuring other than the
24 plan.
25 When asked whether he believed the debtors could
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1 provide due diligence materials to Five Mile without violating
2 Section 4 (a) ( 2) of the PSA, Mr. Beilin (sic) stated, quote,
3 "probably not", although he suggested that the fiduciary out in
4 Section 25(a) of the PSA would protect his conduct because of
5 the, quote, "notwithstanding anything to the contrary" opening
6 language. Mr. Beilinson's testimony was not credible on this
7 point. Indeed, when questioned by the Court Mr. Beilinson
8 acknowledged that even participating in discussions with Five
9 Mile, on which he now asserts he is ready to embark, may well
10 constitute a termination event under the PSA.
11 Moreover, it is not clear to me whether the debtors
12 have fully analyzed the value of the floating-rate mortgage
13 vis-a-vis the value of the new shares Lehman and Apollo will
14 receive. The question goes directly to the fair price prong of
15 the entire fairness test. Mr. Beilinson has stated that he has
16 not valued the value of the shares Lehman will receive, only
17 that he believes that Lehman is not getting more than it is
18 entitled to. He didn't perform an evaluation, nor did he
19 direct his advisors to do so.
20 No value has been ascribed to the new equity other
21 than the 150 million to 190 million estimate contained in the
22 April 22, 2010 presentation prepared by Moelis. Indeed,
23 notwithstanding that valuation, arguably the imputed value of
24 the new equity would appear to be at least 215 million dollars
25 based on the price Apollo has agreed to pay to purchase fifty
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1 percent of the equity.
2 In light of the substantial limitations in the PSA and
3 the debtors' ability to engage in discussions regarding a
4 restructuring with any of their other major creditors, I cannot
5 conclude that the debtors exercised due care in electing to
6 move forward with the current plan term sheet and the proposed
7 valuation implied therein. The testimony of Mr. Beilinson on
8 these points reveals that Lehman wielded great power in the
9 negotiations and Mr. Beilinson seems to have succumbed to
10 virtually all of their demands.
11 With respect to the PSA and the proposed plan it is
12 difficult to understand what the rush is. The DIPs are now
13 approved. The hotels are generally performing well. The
14 relationship with Marriott is on track. In fact, Mr. Beilinson
15 testified that the need to secure the DIPs and the Marriott
16 agreement, two inter-related transactions, was one key reason
17 why the debtors entered into the PSA. As each of those
18 agreements has been executed and the Marriott adequate
19 assurance agreement was in fact only tied to the DIP agreements
20 and not dependent on the PSA, this justification vanishes.
21 The only dark cloud in an otherwise pretty sunny
22 picture and it is a large dark cloud is that 1.2 billion
23 dollars in secured debt is extremely unhappy with the proposed
24 plan. They deserve more of a process than what has been
25 provided thus far. The debtors have not set forth
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1 justification as to why and at this very early stage in the
2 cases the debtors need to lock themselves into the proposed
3 plan prior to either: (a) seeking higher and better offers
4 which may benefit the entire creditor constituency in these
5 cases, or as Mr. Meyers correctly observed, each of the debtors
6 in these cases, or (b) at a minimum negotiating with their
7 existing creditors regarding a restructuring transaction.
8 While the debtors state in their reply that they are
9 aware of no potential alternative that would provide creditors
10 with richer recoveries, it does not appear from the evidence
11 presented that they have canvassed the possible alternatives at
12 this point.
13 Despite the debtors' failure to shop for alternatives,
14 attached to the Midland objection filed on August 23rd is a
15 restructuring proposal submitted by Five Mile which Mr.
16 Beilinson states he has not yet received or had a chance to
17 really review. It strains credulity to believe that Mr.
18 Beilinson has not really reviewed this proposal or would stand
19 on ceremony and take the position that he has not received it.
20 This is not an appropriate position for a fiduciary of these
21 estates.
22 Next I find that the debtors have not shown that they
23 acted in good faith in (1) making the decision to enter into
24 the PSA, and (2) providing transparency to their creditors.
25 The good faith inquiry is relevant to both the heightened
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1 scrutiny and business judgment standards. Virtually all of the
2 other parties-in-interest in the debtors' capital structure
3 aside from Lehman complain of having been shut out of the
4 process. And even those parties who wanted to make a
5 restructuring proposal were denied access to a data room that
6 was set up by the debtors for Lehman's use only.
7 The intention for Apollo to end up with half of the
8 debtors' equity which has been on the table since April has
9 been, at best, downplayed and, at worst, obfuscated from
10 parties-in-interest. For example, the debtors' largest
11 creditor, Midland, was not informed about the agreement to
12 transfer fifty percent of the new equity to Apollo until just a
13 few days before the petition date. Yet e-mail correspondence
14 introduced into evidence clearly reflect Mr. Beilinson's
15 knowledge that Apollo's role in the related transactions was
16 essential; Lehman wanted Apollo in the deal and Mr. Beilinson
17 knew it. Nor did the debtors share the specifics of the plan
18 term sheet, including the proposed write-downs of the secured
19 loans in the non-Lehman tranche with the other secured
20 creditors.
21 Due at least in part to the lack of transparency in
22 the process, the proposed PSA has spurred extensive discovery
23 requests and a motion for an examiner. One objector has, in my
24 view, correctly argued that the PSA created contempt rather
25 than fostering negotiations. This is not what a Chapter 11 is
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1 opposing the debtors' motion in an effort to extract holdup
2 value from those constituents that are in the money.
3 Instead -- and I am repeating myself but this point is
4 important. Unlike most plan support agreements the PSA only
5 locks up approximately 200 million of the total 1.4 billion in
6 secured debt in these cases, the support of only one creditor
7 among the critical mass of creditors needed to support a
8 successful restructuring in these cases.
9 After today, without the burden of the restrictions
10 imposed by the PSA, the debtors will have wide birth to fulfill
11 their fiduciary duties to conduct a plan process which
12 maximizes value for all of the estates and treats the various
13 tranches of debt with greater neutrality.
14 And here again I will invoke Adelphia and its
15 substantial teachings regarding the fine art of being a debtor
16 with multiple separate tranches of debt secured by separate
17 collateral pools. There's a level of neutrality required. I
18 do not believe the process leading to the PSA reflects the more
19 even-handed approach required in this case.
20 To be sure, the debtors do not have to be paralyzed in
21 an attempt to make everyone happy. If they believe the plan
22 underlying the PSA is a good confirmable plan, they can and
23 should file it and prosecute it. It will either survive
24 attacks vis-a-vis valuation, new value, substantive
25 consolidation, and whatever else the creditor body asserts, or
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1 I N D E X
2
3 T E s T I M 0 N Y
4 WITNESS EXAM BY PAGE LINE
5 Ronald Greenspan Mr. Penn 15 23
6 Ronald Greenspan Mr. Donovan 19 19
7 William Derrough Mr. Meyers 25 5
8 Marc Beilinson Mr. Donovan 97 15
9 Marc Beilinson Mr. Bienenstock 150 17
10 Marc Beilinson Mr. Parkins 190 19
11 Marc Beilinson Mr. Gottesman 221 25
12 Marc Beilinson Mr. Friedman 226 24
13 Marc Beilinson Mr. Meyers 253 18
14 Marc Beilinson Mr. Donovan 256 24
15 Marc Beilinson Mr. Bienenstock 261 15
16 Michael Lascher Mr. Parkins 267 24
17 Kevin Semon Mr. Penn 309 13
18 Kevin Semon Mr. Donovan 324 5
19 Kevin Semon Mr. Penn 331 18
20 Ronald Greenspan Mr. Penn 334 25
21 Ronald Greenspan Mr. Donovan 345 18
22
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E X H I B I T S
PARTY NO DESCRIPTION
Debtors Declaration of William Q.
Derrough
Debtors 1 Plan support agreement
Debtors 14 Declaration of Marc Beilinson
Debtors 15 Moelis presentation re:
Project Tavern
Debtors 16 Multicolor presentation
Debtors 17 Chart
Debtors Demonstratives 1 through 7
Debtors 25 Deposition of Kevin Semon
TriMont Declaration of Travis
Shelhorse
Midland 1-21 (No description provided)
Midland 55
Midland 57
Midland 94
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Deposition of Schuyler
Hewes
Acquisition agreement of
Innkeepers by Five Mile
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ID. EVID.
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2 R U L I N G S
3 DESCRIPTION
4 Debtors' Motion for Entry of an Order
5 Authorizing the Debtors to Obtain
6 Postpetition Financing from an Affiliate
7 of Lehman ALI Inc. on a Priming Basis,
8 granted.
9
10 Motion of the debtors for an order
11 authorizing the debtors to assume
12 the plan support agreement entered
13 into with Lehman ALI, Inc., denied
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1
2 C E R T I F I C A T I 0 N
3
4 I
1
Clara Rubin
1
certify that the foregoing transcript is a true
5 and accurate record of the proceedings.
6
7
8 Clara Rubin
9 AAERT Certified Electronic Transcriber (CET**D-491)
10
11 Veritext
12 200 Old Country Road
13 Suite 580
14 Mineola/ NY 11501
15
16 Date: September 3
1
2010
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EXHIBIT E
- 1 -
1
2 UNITED STATES BANKRUPTCY COURT
3 SOUTHERN DISTRICT OF NEW YORK
4 Case No. 10-13800 (SCC)
5 - - - - - - - - - - - - - - - - - - - - -x
6 In the Matter of:
7
8 INNKEEPERS USA TRUST, et al.,
9
10 Debtors.
11
12 - - - - - - - - - - - - - - - - - - - - -x
13
14 U.S. Bankruptcy Court
15 One Bowling Green
16 New York, New York
17
18 August 12, 2010
19 1:59 PM
20
21
22 B E F O R E:
23 HON. SHELLEY C. CHAPMAN
24 U.S. BANKRUPTCY JUDGE
25
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1
2 HEARING re Debtors' Motion for the Entry of Interim and Final
3 Orders Authorizing, but Not Directing, the Debtors to (A) Pay
4 Certain Prepetition Wages, Salaries, and Reimbursable Employee
5 Expenses, (B) Pay and Honor Certain Employee Medical and Other
6 Benefits, and (C) Continue Employee Benefits Programs [Docket
7 No. 8]
8
10 Orders Authorizing, but Not Directing, the Payment of
11 Prepetition Taxes and Fees [Docket No. 11]
12
14 Orders (A) Authorizing the Debtors to Grant Administrative
15 Expense Priority to All Undisputed Obligations for Goods
16 Ordered Prepetition and Delivered Postpetition and Satisfy Such
17 Obligations in the Ordinary Course of Business, (B)
18 Authorizing, but Not Directing, the Debtors to Pay Prepetition
19 Claims of Shippers, Warehousemen, and Materialmen, and (C)
20 Authorizing the Debtors to Pay Prepetition PACA Claims [Docket
21 No. 10]
22
23
24
25
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1
2 HEARING re Motion for Entry of an Order Authorizing, but Not
3 Directing, the Debtors' to (A) Maintain Prepetition Insurance
4 Policies and Premium Financing Agreements and (B) Pay All
5 Prepetition Obligations in Respect Thereof [Docket No. 17]
6
7 HEARING re Debtors Motion for Entry of an Order Authorizing the
8 Retention and Compensation of Certain Professionals Utilized in
9 the Ordinary Course of Business [Docket No. 19]
10
11 HEARING re Debtors' Motion for Entry of an Order Determining
12 Adequate Assurance of Payment for Future Utilities Services
13 [Docket No. 16]
14
15 HEARING re Debtors' Motion for Entry of an Order Establishing
16 Procedures for Interim Compensation and Reimbursement of
17 Expenses for Professionals and Official Committee Members
18 [Docket No. 18]
19
20 HEARING re Debtors' Application for Entry of an Order
21 Authorizing the Retention and Employment of Kirkland & Ellis
22 LLP as Attorneys for the Debtors and Debtors in Possession Nunc
23 Pro Tunc to the Petition Date [Docket No. 20]
24
25
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1
3 Authorizing the Retention and Employment of AP Services, LLC
4 and Designating Nathan J. Cook as Interim Chief Financial
5 Officer to the Debtors Nunc Pro Tunc to the Petition Date
6 [Docket No. 22]
7
9 Authorizing the Retention and Employment of Moelis & Company
10 LLC as Financial Advisor and Investment Banker to the Debtors
11 Nunc Pro Tunc to the Petition Date [Docket No. 21]
12
14 Orders Authorizing, but Not Directing, the Debtors to Continue
15 to Honor Obligations Set Forth in the Hotel Management and
16 Shared Services Agreements [Docket No. 12]
17
18 HEARING re Motion of Ad Hoc Committee of Preferred Shareholders
19 for an order shortening time, under Rule 9006(c)(1), as to a
20 hearing on the appointment of an examiner.
21
22
23
24 Transcribed By: Clara Rubin
25
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- 5 -
1
2 A P P E A R A N C E S:
5 300 North LaSalle
6 Chicago, IL 60654
7
8 BY: MARC J. CARMEL, ESQ.
9 ANUP SATHY, P.C.
10
11
14 655 Fifteenth Street, N.W.
15 Washington, DC 20005
16
17 BY: PATRICK M. BRYAN, ESQ.
18
19
20 ALTER, GOLDMAN & BRESCIA, LLP
21 550 Mamaroneck Avenue
22 Harrison, NY 10528
23
24 BY: BRUCE R. ALTER, ESQ.
25
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1
2 BRYAN CAVE LLP
3 Attorneys for LNR Partners, LLC
6
7 BY: MICHELLE MCMAHON, ESQ.
8
9
10 DECHERT LLP
11 Attorneys for Lehman ALI Inc.
14
15 BY: ANDREW BUCK, ESQ.
16
17
18 DEWEY & LEBOEUF LLP
19 Attorneys for the Ad Hoc Committee of Preferred
20 Shareholders
23
24 BY: TIMOTHY Q. KARCHER, ESQ.
25
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1
3 Attorneys for Midland Loan Services
4 201 Main Street
5 Suite 2200
6 Forth Worth, TX 76102
7
8 BY: JOHN D. PENN, ESQ.
9
10 KASOWITZ, BENSON, TORRES & FRIEDMAN LLP
11 Attorneys for Five Mile Capital
12 1633 Broadway
13 New York, NM 10019
14
15 BY: NII-AMAR AMAMOO, ESQ.
16
17 MORRISON & FOERSTER, LLP
18 Attorneys for the Official Committee of Unsecured
19 Creditors
22
23 BY: JORDAN WISHNEW, ESQ.
24 LORENZO MARINUZZI, ESQ.
25
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1
2 U.S. DEPARTMENT OF JUSTICE
3 Office of the United States Trustee
4 33 Whitehall Street
5 21st Floor
7
8 BY: PAUL K. SCHWARTZBERG, ESQ.
9
10
11 DUANE MORRIS LLP
12 Attorneys for LNR Properties
13 1540 Broadway
15
16 BY: PHILLIP K. WANG, ESQ. (TELEPHONICALLY)
17
18
19 KILPATRICK STOCKTON LLP
20 Attorneys for Creditor, TriMont Real Estate Advisors
21 1100 Peachtree Street, Suite 2800
22 Atlanta, GA 30309
23
24 BY: MARK A. FINK. ESQ. (TELEPHONICALLY)
25
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1
2 PERKINS COIE LLP
3 Attorneys for Creditors, C-III Asset Management, LLC and
4 CWCapital Asset Management
5 131 South Dearborn Street
6 Suite 1700
7 Chicago, IL 60603
8
9 BY: DAVID M. NEFF, ESQ. (TELEPHONICALLY)
10
11 PERKINS COIE LLP
12 Attorneys for Creditors, C-III Asset Management, LLC and
13 CWCapital Asset Management
14 1201 Third Avenue
15 Suite 4800
16 Seattle, WA 98101
17
18 BY: BRYAN A. JENNINGS, ESQ. (TELEPHONICALLY)
19
20 ALIXPARTNERS, LLC
21 Restructuring Advisor to the Debtors
22 BY: LAURA J. EISELE (TELEPHONICALLY)
23
24 F.T.I. CONSULTING
25 BY: RON F. GREENSPAN (TELEPHONICALLY)
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1 transaction?
2 A. We've been in contact with every member of the capital
3 structure, so I would say we've been talking to lots of
4 investors.
5 Q. Okay. But all within the existing capital structure,
6 correct?
7 A. I think that substantial amount of our discussions and
8 negotiations have been with people inside the capital
9 structure.
10 Q. Has Moelis created any kind of a data room for
11 distributing information to potential investors?
12 A. There is a data room available to people who have access
13 to the data room.
14 Q. And --
15 A. And we've been interacting with, as I said, so, three or
16 four other financial advisors, lots of lawyers and lenders. So
17 we've been having lots of information go back and forth.
18 Q. Aside from existing lenders and existing shareholders, has
19 Moelis obtained a confidentiality agreement with any other
20 parties to provide them with financial information as described
21 in the engagement letter?
22 A. Well, certainly in connection with the DIP exploration
23 process. To the extent that anyone was interested, it would
24 have gone to the next level. I can't sit here and tell you how
25 many have signed copies or not. I know we've contacted a
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1 constituency group. So all of their financial advisors talked
2 to us and worked through us from an informational perspective
3 in learning about the business perspective, and ultimately
4 asked us how we think about the business.
5 So, you know, that's not the end game. That's sort of the
6 managing the process. There's of course all the things related
7 to financing, looking at whether there are alternatives or
8 better financing, DIP financing, available to the debtors as
9 compared to what we have in hand today.
10 Ultimately, to the extent that we're going to do an
11 internal plan, which is, I think, what we generally all have a
12 bias towards is not trying to have to sell things to other
13 people, if you can avoid it, to working internally, but
14 ultimately to the extent that you think that some financing you
15 have is part of your plan process doesn't -- based upon the
16 market conditions, isn't as cheap as what you could get
17 somewhere else; and looking for things like that as well.
18 Q. And let me ask, do you anticipate being actively involved
19 in the restructuring process going forward?
20 A. Absolutely. I know we were at a meeting yesterday with
21 parts of the capital structure. We're going to be talking to
22 the board in a couple weeks. We're going to be providing the
23 feasibility, you know, analysis work and valuation analysis
24 work, and capital structure analysis work ultimately, to
25 debtors' counsel, the board, management and ultimately to the
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1 I N D E X
2
3 T E S T I M O N Y
4 WITNESS EXAM BY PAGE LINE
5 William Q. Derrough Mr. Penn 33 18
6 William Q. Derrough Mr. Bryan 45 2
7
8 E X H I B I T S
9 PARTY NO DESCRIPTION ID. EVID.
10 Debtors Declaration and supplemental 33
11 declarations of William Q.
12 Derrough
13
14 R U L I N G S
15 DESCRIPTION PAGE LINE
16 Debtors' motion for pro hac vice admission 10 13
17 of Patrick Bryan, Esq., granted.
18
19 Debtors' Wages and Employee Benefits 15 19
20 Motion, granted.
21
22 Debtors' Taxes and Fees Motion, granted. 16 3
23
24 Debtors' Vendors, Lien Creditors, and 16 14
25 PACA Claimants Motion, granted.
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1
2 R U L I N G S (cont'd.)
4 Debtors' Insurance Motion, Granted. 16 24
5
6 Debtors' Ordinary-Course Professionals 18 3
7 Motion, granted.
8
9 Debtors' Utilities Motion, granted. 18 24
10
11 Debtors' Interim Compensation Motion, 19 22
12 granted.
13
14 Debtors' AP Services, LLC Retention 24 7
15 Application, granted.
16
17 Debtors' Property Management Application, 25 17
18 granted.
19
20 Debtors' Kirkland & Ellis LLP 25 23
21 Retention Application Motion, granted.
22
23 Debtors' Moelis & Company LLC Retention 49 11
24 Application, approved.
25
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1
2 R U L I N G S (cont'd.)
4 Motion of Ad Hoc Committee of Preferred 59 16
5 Shareholders for an order shortening time
6 as to a hearing on the appointment of
7 an examiner, denied.
8
9 Hearing date on the application of the 59 17
10 Ad Hoc Committee of Preferred Shareholders
11 for appointment of an examiner will be
12 September 1, 2010.
13
14
15
16
17
18
19
20
21
22
23
24
25
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1
2 C E R T I F I C A T I O N
3
4 I, Clara Rubin, certify that the foregoing transcript is a true
5 and accurate record of the proceedings.
6
7 ___________________________________
8 Clara Rubin
9 AAERT Certified Electronic Transcriber (CET**D-491)
10
11 Veritext
12 200 Old Country Road
13 Suite 580
14 Mineola, NY 11501
15
16 Date: August 13, 2010
17
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EXHIBIT F

Hotels Lure Investors as Lodging Surpasses U.S.
Offices, Retail
Hotel purchases are increasing faster than deals for office buildings, shopping centers or any other
type of U.S. commercial property as rising occupancies and room rates boost the lodging industry.
Sales of hotels jumped 136 percent in the first half of 2010 from a year earlier, the biggest gain among
five commercial real estate categories tracked by New York-based Real Capital Analytics Inc. Those
deals were based on transactions of at least $5 million and exclude hotels attached to casinos.
A rebound in business and leisure travel is helping the U.S. lodging industry recover after last years
recession sent occupancies to a 30-year low. Hotels can boost rates quickly to take advantage of
economic growth, while tenants at offices and retail properties tend to sign multiyear leases.
Hotels have already absorbed the downturn, said Richard J ones, executive vice president of
acquisitions and operations at Atlanta-based developer Portman Holdings LLC. Its not as evident
what exactly the impact of this downturn is going to be for other commercial real estate.
Owners of offices, shopping centers and other buildings with pre-recession leases are now signing
agreements that will result in significant cuts in rental income said J ones, whose company develops
lodging, office and retail properties.
Income for hotels, meanwhile, is rising. Revenue per available room, or revpar, in the top 25 U.S.
markets rose to $73.87 during the first half from $71.08 a year earlier, according to Smith Travel
Research Inc. of Hendersonville, Tennessee. Occupancies climbed to 63 percent from 59 percent
during the period, while remaining below 2008s 66 percent.
Host Hotels, Pebblebrook
Host Hotels & Resorts Inc., the owner of Ritz-Carltons in San Francisco and Phoenix, in J uly agreed
to buy the W New York Union Square with partners including Istithmar World PJ SC, and said it will
purchase the Westin Chicago River North for about $165 million. The same month, Pebblebrook
Hotel Trust bought the InterContinental Buckhead Atlanta hotel for $105 million in cash from
By Nadja Brandt - Sep 9, 2010
1 of 4
InterContinental Hotels Group Plc.
Pebblebrook today said it purchased the 183-room Hotel Monaco Washington D.C. for $74 million.
The property will continue to be managed by Kimpton Hotel & Restaurant Group LLC.
Hotels are inherently different from apartment buildings or other types of commercial real estate,
said Lewis Wolff, co- chairman of Sunstone Hotel Investors Inc., an Aliso Viejo, California-based real
estate investment trust. Because their space is rented by the night, not the month or year, hotels are a
better investment than other properties during a boom and worse during a bust, he said.
Operating Business
Its not really real estate, Wolff said. Its an operating business thats immediately affected by any
economic change. Apartments are not daily operations. They are much closer to being actual real
estate than hotels are.
The vacancy rate at U.S. shopping centers rose to 10.9 percent in the second quarter from 10 percent
a year earlier and near a record 11.1 percent set in 1990, Reis Inc. said in J uly. Office vacancies
increased to 17.4 percent during the period, the highest level since 1993, according to the New York-
based real estate research firm.
Hotel occupancies and rates still have a long way go before recovering to their peak levels, said J ames
Tisch, president and chief executive officer of New York-based Loews Corp., which operated 19 high-
end hotels as of J une.
Now were obviously in a recovery, but in terms of revpar, were still at 75 or 85 percent of the revpar
of 07, Tisch said during an interview at Bloombergs New York offices last month. While the
business has improved, it still has a long way to go before it gets back to where it was.
Rising Profits
Lodging companies have reported higher earnings, buoyed by rising demand in cities. Starwood
Hotels & Resorts Worldwide Inc., the White Plains, New York-based owner of luxury brands
including the St. Regis and W hotels, in J uly reported earnings that beat analysts estimates and
raised its revpar forecast. Marriott International Inc. of Bethesda, Maryland, the largest U.S. hotel
chain, said second-quarter profit more than tripled and increased its full-year earnings forecast.
In the meantime, profits are still falling for some retail and office landlords. General Growth
Properties Inc., the Chicago-based U.S. mall owner planning to exit bankruptcy in October, said last
2 of 4
month that second-quarter core funds from operations declined 17 percent after store rents dropped.
Boston Properties
Boston Properties Inc., the biggest U.S. office landlord by market value, said in J uly that second-
quarter FFO slid 5.9 percent as rental revenue fell. The same month, SL Green Realty Corp.,
Manhattans largest office owner, reported a slump in second-quarter FFO after New York tenants
signed leases for an average of 4.4 percent less than previous rents.
FFO is a measure of cash flow used by REITs and excludes interest, depreciation and other gains and
losses.
Sales of hotels totaled $3.19 billion in the first six months of 2010, up from $1.36 billion a year
earlier, according to Real Capital Analytics. The 136 percent increase compares with an 82 percent
gain in office transactions, a 51 percent advance in apartment deals, a 37 percent climb for retail
properties and a 22 percent rise in industrial property sales.
By dollar volume, hotel sales trailed other property types because they are a smaller portion of the
market. Office transactions, totaling $11.9 billion, led deals by value, Real Capital data show.
The volume of lodging transactions remains below the record reached in 2007. A total of $78.6 billion
of hotels sold that year, Real Capital said.
REIT Demand
REITs may be the primary buyers of hotels as they come on the market because they are fairly well
capitalized and have access to attractively priced capital, said J ohn Arabia, managing director at
Green Street Advisors, a Newport Beach, California-based real estate research company.
Sunstone last month acquired Miami Beachs Royal Palm hotel in a foreclosure auction for about $117
million. LaSalle Hotel Properties, a REIT that focuses on upscale lodging, last week said it bought its
first hotel in San Francisco as well as two in Philadelphia for a total of $292.5 million. DiamondRock
Hospitality Co. in May agreed to buy the 821-room Hilton Minneapolis for about $155.5 million, and
Host Hotels said in J uly its seeking deals in the U.S., Europe and Asia.
Publicly traded REITs will be a significant buyer of hotels over the next few years, Arabia said. Its
now REITs that will have their day in sun.
To contact the reporter on this story: Nadja Brandt in Los Angeles at nbrandt@bloomberg.net.
3 of 4

EXHIBIT G
ARTICLES SUPPLEMENTARY
8.0% SERIES C CUMULATIVE PREFERRED SHARES
(liquidation preference $25.00 per share)
Grand Prix Acquisition Trust, a Maryland real estate investment trust (the "Company"),
hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article VI of the Amended and Restated Declaration
of Trust ofthe Company (the "Declaration of Trust"), the Board of Trustees ofthe Company (the
"Board of Trustees"), by resolution duly adopted by unanimous written consent classified and
designated 5,800,000 Preferred Shares (as defined in the Declaration of Trust) as 8.0% Series C
Cumulative Preferred Shares, $.01 par value per share, with the following preferences and other
rights, voting powers, restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption, which, upon any restatement of the
Declaration of Trust, shall be deemed to be part of Article VI of the Declaration of Trust with
any necessary or appropriate renumbering or relettering of the sections or substitutions hereof:
8.0/o SERIES C CUMULATIVE PREFERRED SHARES
A. TERMS OF THE 8.0% SERIES C CUMULATIVE PREFERRED SHARES.
1. Designation and Number. A series of Preferred Shares, designated the "8.0%
Series C Cumulative Preferred Shares ofBeneficiallnterest" (the "Series C Preferred
Shares"), is hereby established. The maximum number of authorized Series C Preferred
Shares shall be 5,800,000.
2. Rank. The Series C Preferred Shares will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company, rank (a) prior or
senior to any class or series of Common Shares (as defined in the Declaration of Trust) of
the Company and any other class or series of equity securities of the Company, if the
holders of Series C Preferred Shares shall be entitled to the receipt of dividends or of
amounts distributable upon liquidation, dissolution or winding up in preference or
priority to the holders of shares of such class or series ("Junior Shares"); (b) on a parity
with any class or series of equity securities ofthe Company if, pursuant to the specific
terms of such class or series of equity securities, the holders of such class or series of
equity securities and the Series C Preferred Shares shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority one over the other ("Parity
Shares"); (c) junior to any class or series of equity securities of the Company if, pursuant
to the specific terms of such class or series, the holders of such class or series shall be
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The term "equity securities" does not include convertible debt securities, which will rank
senior to the Series C Preferred Shares prior to conversion.
3. Dividends.
(a) Holders of Series C Preferred Shares shall be entitled to receive, when and
as authorized by the Board of Trustees and declared by the Company, out of funds of the
Company legally available for payment, cash dividends at the rate of 8.0% per annum of
the $25 liquidation preference (equivalent to $2.00 per annum per share). Such dividends
shall be cumulative from the date of original issue, whether or not in any dividend period
or periods (i) such dividends shall be declared, (ii) there shall be funds of the Company
legally available for the payment of such dividends or (iii) any agreement of the
Company prohibits payment of such dividends, and shall be payable quarterly on or
before the last Tuesday of January, April, July and October of each year (or, if not a
business day, the next succeeding business day, each a "Dividend Payment Date") for the
period ending on such Dividend Payment Date. "Business day" shall mean any day other
than a Saturday, Sunday or other day on which commercial banks in the City of New
York are authorized or required to close. Any dividend payable on the Series C Preferred
Shares for any partial dividend period will be computed on the basis of twelve 30-day
months and a 360-day year. Dividends will be payable in arrears to holders of record as
they appear on the share records of the Company at the close of business on the last
Friday of March, June, September and December immediately preceding such Dividend
Payment Date. Holders of Series C Preferred Shares shall not be entitled to receive any
dividends in excess of cumulative dividends on the Series C Preferred Shares. No
interest shall be paid in respect of any dividend payment or payments on the Series C
Preferred Shares that may be in arrears.
(b) When dividends are not paid in full upon the Series C Preferred Shares or
any other class or series of Parity Shares, or a sum sufficient for such payment is not set
apart, all dividends declared upon the Series C Preferred Shares and any other class or
series of Parity Shares shall be declared ratably in proportion to the respective amounts
of dividends accumulated, accrued and unpaid on the Series C Preferred Shares and
accumulated, accrued and unpaid on such Parity Shares. Except as set forth in the
preceding sentence, unless dividends on the Series C Preferred Shares equal to the full
amount of accumulated, accrued and unpaid dividends have been or contemporaneously
are declared and paid, or declared and a sum sufficient for the payment thereof set apart
for such payment for all past dividend periods, no dividends shall be declared or paid or
set aside for payment by the Company with respect to any class or series of Parity Shares.
Unless full cumulative dividends on the Series C Preferred Shares have been paid or
declared and set apart for payment for all past dividend periods, no dividends (other than
dividends paid in Junior Shares or options, warrants or rights to subscribe for or purchase
Junior Shares) shall be declared or paid or set apart for payment by the Company with
respect to any Junior Shares, nor shall any Junior Shares or Parity Shares be redeemed,
2
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Junior Shares, or options, warrants or rights to subscribe for or purchase Junior Shares),
nor shall any other cash or property be paid or distributed to or for the benefit of holders
of Junior Shares. Notwithstanding the above, the Company shall not be prohibited from
(i) declaring or paying or setting apart for payment any dividend or distribution on any
Parity Shares or (ii) redeeming, purchasing or otherwise acquiring any Parity Shares, in
each case, if such declaration, payment, redemption, purchase or other acquisition is
necessary to maintain the Company's qualification as a real estate investment trust under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code").
(c) No dividends on Series C Preferred Shares shall be authorized by the
Board of Trustees or declared or paid or set apart for payment by the Company at such
time as the terms and provisions of any agreement ofthe Company, including any
agreement relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart for payment
would constitute a breach thereof or a default thereunder, or if such declaration or
payment shall be restricted or prohibited by law.
(d) If, for any taxable year, the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital Gains
Amount") of the dividends (as determined for federal income tax purposes) paid or made
available for the year to holders of all classes of shares (the "Total Dividends"), then the
portion of the Capital Gains Amount that shall be allocable to the holders of Series C
Preferred Shares shall be the amount that the total dividends (as determined for federal
income tax purposes) paid or made available to the holders of the Series C Preferred
Shares for the year bears to the Total Dividends. The Company may elect to retain and
pay income tax on its net long-term capital gains. In such a case, the holders of Series C
Preferred Shares would include in income their appropriate share of the Company's
undistributed long-term capital gains, as designated by the Company.
(e) In determining whether a distribution (other than upon voluntary or
involuntary liquidation, dissolution or winding up of the Company), by dividend,
redemption or otherwise, is permitted, amounts that would be needed, if the Company
were to be dissolved at the time of the distribution, to satisfy the Liquidation Preference
(as defined below) will not be added to the Company's total liabilities.
4. Liquidation Preference.
(a) Upon any voluntary or involuntary liquidation, dissolution or winding up
of the Company, before any payment or distribution by the Company shall be made to or
set apart for the holders of any Junior Shares, the holders of Series C Preferred Shares
shall be entitled to receive a liquidation preference of $25 per share (the "Liquidation
Preference"), plus an amount equal to all accumulated, accrued and unpaid dividends
3
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amount equal to all accumulated, accrued and unpaid dividends (whether or not earned or
declared) to the date of final distribution to such holders, no payment shall be made to
any holder of Junior Shares upon the liquidation, dissolution or winding up of the
Company.
(b) If upon any liquidation, dissolution or winding up of the Company, the
assets ofthe Company, or proceeds thereof, distributable among the holders of Series C
Preferred Shares shall be insufficient to pay in full the above described preferential
amount and liquidating payments on any other class or series of Parity Shares, then such
assets, or the proceeds thereof, shall be distributed among the holders of Series C
Preferred Shares and any such other Parity Shares ratably in the same proportion as the
respective amounts that would be payable on such Series C Preferred Shares and any
such other Parity Shares if all amounts payable thereon were paid in full.
(c) A voluntary or involuntary liquidation, dissolution or winding up of the
Company shall not include a consolidation or merger of the Company with or into one or
more entities, a sale or transfer of all or substantially all ofthe Company's assets, or a
statutory share exchange.
(d) Upon any liquidation, dissolution or winding up of the Company, after
payment shall have been made in full to the holders of Series C Preferred Shares and any
Parity Shares, any other series or class or classes of Junior Shares shall be entitled to
receive any and all assets remaining to be paid or distributed, and the holders of the
Series C Preferred Shares and any Parity Shares shall not be entitled to share therein.
5. Redemption.
(a) Series C Preferred Shares shall not be redeemable prior to January 20,
2009. However, in order to ensure that the Company will continue to meet the
requirement for qualification as a REIT, the Series C Preferred Shares will be subject to
the provisions of Article VII of the Company's Declaration of Trust pursuant to which
any series of Preferred Shares owned by a shareholder in excess of9.8% of the number
of outstanding shares of such series of Preferred Shares (the "Ownership Limit") will
automatically be deemed "Shares-in-Trust" (as defined in such Article VII). On and after
January 20,2009, the Company may redeem Series C Preferred Shares, in whole or from
time to time in part, at a cash redemption price equal to 100% of the Liquidation
Preference plus all accrued and unpaid dividends to the date fixed for redemption (the
"Redemption Date"). The Redemption Date shall be selected by the Company and shall
not be less than 30 days nor more than 60 days after the date notice of redemption is sent
by the Company. If full cumulative dividends on all outstanding Series C Preferred
Shares have not been paid or declared and set apart for payment, no Series C Preferred
Shares may be redeemed unless all outstanding Series C Preferred Shares are
simultaneously redeemed; provided, however, that the foregoing shall not prevent the
4
ai3 a .1. J.VI .1'-''-'""'aJ. IIJ...,U.lll\,;1 la.J\. .}JUJ. u1 a\.n ..uuuu, .... .,., .a.u..u Y"" """"'Y """'"'.a..a.ut.:J
on all outstanding Series C Preferred Shares have been paid or declared or set apart for
payment, the Company shall not purchase or otherwise acquire directly or indirectly for
any consideration, nor shall any monies be paid to or made available for a sinking fund
for the redemption of, any Series C Preferred Shares (except by conversion into or
exchange for Junior Shares); provided. however, that the foregoing shall not prevent the
purchase by the Company of Series C Preferred Shares pursuant to Article VII of the
Declaration of Trust or otherwise in order to ensure that the Company remains qualified
as a REIT for federal income tax purposes.
(b) Notice of redemption ofthe Series C Preferred Shares shall be mailed by
the Company to each holder of record of the shares to be redeemed by first class mail,
postage prepaid at such holder's address as the same appears on the share records of the
Company. Any notice which was mailed as described above shall be conclusively
presumed to have been duly given on the date mailed whether or not the holder receives
the notice. In addition to any information required by law or by the applicable rules of
exchange upon which the Series C Preferred Shares may be listed or admitted to trading,
each notice shall state: (i) the Redemption Date; (ii) the redemption price; (iii) the
number of Series C Preferred Shares to be redeemed; and (iv) the place or places where
certificates for such Series C Preferred Shares are to be surrendered for cash. Any such
redemption may be made conditional on such factors as may be determined by the Board
of Trustees and set forth in the notice of redemption. From and after the Redemption
Date, dividends on the shares of Series C Preferred Shares to be redeemed will cease to
accrue, such shares shall no longer be deemed to be outstanding and all rights of the
holders thereof shall cease (except the right to receive the cash payable upon such
redemption).
(c) The Series C Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption provisions except as provided
under Article VII of the Declaration of Trust.
(d) Subject to applicable law and the limitation on purchases when dividends
on the Series C Preferred Shares are in arrears, the Company may, at any time and from
time to time, purchase any Series C Preferred Shares in the open market, by tender or by
private agreement.
(e) Any Series C Preferred Shares redeemed, purchased or otherwise acquired
by the Company in any manner whatsoever shall become authorized but unissued
Preferred Shares of the Company and may be reissued or reclassified by the Company in
accordance with the applicable provisions of the Declaration of Trust.
6. Voting Rights.
5
(b) If and whenever distributions on any Series C Preferred Shares or any
series or class of Parity Shares shall be in arrears for six or more quarterly periods
(whether or not consecutive), the number of trustees then constituting the Board of
Trustees shall be increased by two and the holders of such Series C Preferred Shares
(voting together as a single class with all other Parity Shares of any other class or series
which is entitled to similar voting rights (the "Voting Preferred Shares")) will be entitled
to vote for the election of the two additional trustees of the Company at any annual
meeting of shareholders or at a special meeting ofthe holders of the Series C Preferred
Shares and of the Voting Preferred Shares called for that purpose. The Company must
call such special meeting upon the request of any holder of record of Series C Preferred
Shares. Whenever dividends in arrears on outstanding Series C Preferred Shares and the
Voting Preferred Shares shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart for payment, then
the right of the holders ofthe Series C Preferred Shares to elect such additional two
trustees shall cease and the terms of office of such trustees shall terminate and the
number of trustees constituting the Board of Trustees shall be reduced accordingly.
(c) The affirmative vote or consent of at least 66 %% of the votes entitled to
be cast by the holders of the outstanding Series C Preferred Shares and the holders of all
other classes or series of Preferred Shares entitled to vote on such matters, voting as a
single class, will be required to (i) authorize the creation of, the increase in the authorized
amount of, or issuance of any shares of any class of Senior Shares or any security
convertible into shares of any class of Senior Shares or (ii) amend, alter or repeal any
provision of, or add any provision to, the Declaration of Trust, including the Articles
Supplementary for the Series C Preferred Shares, if such action would materially
adversely affect the voting powers, rights or preferences of the holders of the Series C
Preferred Shares. The amendment of the Declaration of Trust to authorize, c:r:eate, or
increase the authorized amount of Junior Shares or any class of Parity Shares, shall not
be deemed to materially adversely affect the voting powers, rights or preferences of the
holders of Series C Preferred Shares. No such vote ofthe holders of Series C Preferred
Shares as described above shall be required if provision is made to redeem all Series C
Preferred Shares at or prior to the time such amendment, alteration or repeal is to take
effect, or when the issuance of any such shares or convertible security is to be made, as
the case may be.
(d) With respect to the exercise of the above described voting rights, each
Series C Preferred Share shall have one vote per share, except that when any other class
or series of Preferred Shares shall have the right to vote with the Series C Preferred
Shares as a single class, then the Series C Preferred Shares and such other class or series
shall have one vote per $25 of stated Liquidation Preference.
(e) The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall be
6
7. Conversion. The Series C Preferred Shares are not convertible into or
exchangeable for any other property or securities of the Company.
B. EXCLUSION OF OTHER RIGHTS.
Except as may otherwise be required by law, the Series C Preferred Shares shall not have
any voting powers, preferences or relative, participating, optional or other special rights, other
than those specifically set forth in these Articles Supplementary (as such Articles Supplementary
may be amended from time to time) and in the Declaration ofTrust. The Series C Preferred
Shares shall have no preemptive or subscription rights, or rights of an objecting shareholder
under Title 3, Subtitle 2 of the Maryland General Corporation Law.
C. HEADINGS OF SUBDIVISIONS.
The headings ofthe various subdivisions hereof are for convenience of reference only
and shall not affect the interpretation of any of the provisions hereof.
D. SEVERABILITY OF PROVISIONS.
If any voting powers, preferences or relative, participating, optional and other special
rights of the Series C Preferred Shares or qualifications, limitations or restrictions thereof set
forth in these Articles Supplementary (as such Articles Supplementary may be amended from
time to time) is invalid, unlawful or incapable of being enforced by reason of any rule of law or
public policy, all other voting powers, preferences and relative, participating, optional and other
special rights of Series C Preferred Shares and qualifications, limitations and restrictions thereof
set forth in these Articles Supplementary (as so amended) which can be given effect without the
invalid, unlawful or unenforceable voting powers, preferences or relative, participating, optional
or other special rights of Series C Preferred Shares or qualifications, limitations and restrictions
thereof shall be given such effect. None of the voting powers, preferences or relative
participating, optional or other special rights of the Series C Preferred Shares or qualifications,
limitations or restrictions thereof herein set forth shall be deemed dependent upon any other such
voting powers, preferences or relative, participating, optional or other special right of Series C
Preferred Shares or qualifications, limitations or restrictions thereof unless so expressed herein.
SECOND: These Articles Supplementary were duly adopted by the Board of Trustees of the
Company in the manner and by the vote required by law.
TIIIRD: The Series C Preferred Shares have been classified and designated by the Board
of Trustees under the authority contained in the Declaration of Trust.
FOUR Til: These Articles Supplementary shall be effective at the time the State Department
of Assessments and Taxation ofMarylav'"cusr 'io': 000t9s6460 n_,_._ ... __ C ~ - - - ~ - . . l
WORK ORDER:0001429498
DATE:06-29-2007 09:13AM
AMT. PAID:$199.00

IN WITNESS WHEREOF, I hereby certify that I, Rick Press, am the President und
Treasmer of Grand Prix Acquisition Trust (the "Company") and that as such, I am authorized to
execute and file with the State Department of Assessments and Taxation of Maryland these
Articles Supplementary on behalf of the Company, and I further certify on behalf of the
Company that these Articles Supplementary were authorized by the Board of Trustees by
unanimous written consent, and are still in full force and effect as of the date hereof. The
undersigned officer acknowledges these Articles Supplementary to be the true act of the
Company and, as to all matters or facts required to be verified under oath, the Wldersigned
acknowledges that, to the best of his knowledge, information and belief: the matters and facts set
forth herein are true in all material respects and that this statement is made under penalty for
perjury.
GRAND PRIX ACQUISmON TRUST
By:7d
Rick Press ........
President and Treasurer
The undersigned, Aaron Sack, the Vice President and Secretary of the Company, hereby
certifies that Rick Press is the President and Treasmer of the Company and that the signature set
forth above is his genuine signature.
IN WfiNESS WHEREOF, the undersigned has he \Dlto set his hand this 2.""'P\ day of
'1 'Af\t. 2007.
nSack
V1ce.President and Secretary
8

EXHIBIT H

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EXHIBIT I

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Hotels Poised to Shed Properties
REAL ESTATE SEPTEMBER 8, 2010
Flush Buyers Await on Sidelines as Revenue Per Room, Occupancy Rates Are Set to Rise

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By KRI S HUDSON
With the U.S. hotel market recovering, some of the country's largest hotel companies are poised to resume their efforts
to divest themselves of real estate.
Brands such as Marriott International Inc. and Hilton Hotels Worldwide began divesting their properties in the 1980s
to focus on the more lucrative and less capital-hungry business of managing the properties for fees. By now, most have
only a few dozen properties remaining on their balance sheets, and they are looking to further whittle their holdings
after holding off during the recession.
Their moves mean that several large, high-quality hotels are likely to change hands this year and next.
The timing is ripe to restart such divestitures because hotel results are rebounding, with revenue per room in the U.S.
expected to post strong gains this year and occupancies on the rise. In addition, big buyers are flush with cash and
credit, and the number of new hotels opening in the U.S. is starting to taper off. A reduction in new hotels means
stronger cash flows for existing hotels and, in turn, rising property values.
"It's maybe the beginning of some opportunities, because there is a
fair amount of capital on the sidelines interested in investing in this
space," said J im Anhut, chief development officer in the Americas
division of InterContinental Hotels Group PLC, owner of brands
including Holiday Inn and InterContinental. "We're a cyclical
business, and people are seeing the bottom of the cycle."
Closely held brand Fairmont Hotels and Resorts last month sold its
383-room Fairmont Boston Copley Plaza Hotel to FelCor Lodging
Trust, a real-estate investment trust, for $98.5 million.
In J uly, InterContinental, also known as IHG, sold its 422-room
InterContinental Buckhead in Atlanta to Pebblebrook Hotel Trust for
$105 million.
Hyatt Hotels Corp. is listing for sale 11 of the 96 hotels it owns, with the intent of using proceeds to acquire hotels in

FelCor Lodging Trust
The Fairmont Boston Copley Plaza Hotel was sold last
month by Fairmont Hotels and Resorts to FelCor
Lodging Trust for $98.5 million.
1 of 2
markets where it has little or no presence.
Starwood Hotels & Resorts Worldwide Inc., owner of brands such as W and Sheraton, is close to selling its St. Regis
Aspen Resort this month to Bangkok-based OptAsia Capital Co., Starwood said. Starwood also has put on the block the
Westin Atlanta, according to people familiar with the matter.
Hotels sold by brands in the coming months won't represent a big portion of overall sales of commercial property,
because the brands own so little real estate at this point. Starwood owns 62 hotels; Hilton, 46; IHG, 15; Marriott, eight.
However, the hotels the brands do own tend to be large properties in major cities. In many cases, the brands held onto
those hotels with the intent of eventually selling them to stable buyers while retaining contracts to manage them for
fees.
Why is now considered a good time to sell? Partly because the public markets are relatively optimistic about hotel real
estate, boosting prices.
Earnings multiples for hotel owners are trading at a slight premium to those of hotel brands, according to Robert W.
Baird & Co.
For the five largest publicly traded hotel brands, the average 2011 multipleenterprise value divided by projected
earnings before interest, taxes, depreciation and amortizationis 12.5. For the seven largest REITs, the 2011 multiple
is 13.1, according to Baird. The reverse is the norm. Hotel REIT multiples are higher now because the market
anticipates REITs will rebound to a greater extent than the brands from the downturn.
"We've bottomed in the fundamentals, so investors can underwrite [cash-flow projections] with growth" rather than
the declines of 2008 and 2009, said Greg Rumpel, executive vice president of brokerage J ones Lang LaSalle.
Indeed, from 2007 to 2009, U.S. hotel occupancy declined 8.2 percentage points, and revenue per room fell 18.3%,
according to Smith Travel Research. But those trajectories are expected to reverse this year and next. PKF Consulting
Inc., a hotel-industry research and advisory company, estimates that, from 2009 to 2011, U.S. occupancy will gain 4.1
percentage points and revenue per room will rise 10.8%.
Predictions of that rebound have lured hotel buyers, most of them REITs flush with cash from recent share sales.
Pebblebrook Hotel Trust, a REIT formed last year by former LaSalle Hotel Properties Chief Executive J on Bortz, has
raised $730 million in two offerings of stock. It has purchased three hotels and has two more under contract.
Mr. Bortz, Pebblebrook's chairman, president and CEO, said hotel buyers are banking on "a fairly attractive future" for
the industry. "That's leading to prices that are deemed by many [sellers] to be attractive," he said.
Wr it e t o Kris Hudson at kris.hudson@wsj.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright
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2 of 2

EXHIBIT J
1
-----------------------------*
In re: Chapter 11
INNKEEPERS USA TRUST, et al., CASE NO.
Debtors. 10-13800 (SCC)
-----------------------------*
Deposition of MICHAEL LASCHER,
called as a witness for examination,
held at the offices of Dechert LLP, 1095
Avenue of the Americas, New York, New
York, on Thursday, the 19th day of
August 2010, commencing at 12:18 p.m.,
before Jennifer Ocampo-Guzman, a
Certified Livenote Reporter and Notary
Public of the State of New York.
JOB NO. 19803
450 Seventh Avenue - Ste 2803, New York, NY 10123 (212)705-8585
DAVID FELDMAN WORLDWIDE, INC.
35 (Pages 134 to 137)
134
1 Lascher
2 of the PSA?
3 A. Yes.
4 Q. So you don't remember specifically
5 talking about these term sheets; is that your
6 answer?
7 A. Yes. These versions of the term
8 sheets.
9 Q. I'm sorry?
10 A. These versions of the term sheets.
11 Q. Okay.
12 MR. PARKINS: Give me a second.
13 (Discussion off the record.)
14 (Exhibit Lascher-17, E-mail dated
15 7/17/10 with attachment, Bates Nos.
16 INN_MID00003311 and INN_MID00003312,
17 marked for identification, this date.)
18 Q. I've handed you what's been marked
19 as Exhibit 17.
20 A. Yes.
21 Q. It's a document that is an
22 Innkeepers production. It's Bates stamp
23 number 3311 to 3312.
24 A. Right.
25 Q. Contains on the first page of it
135
1 Lascher
2 two e-mails.
3 The first is an e-mail from -- on
4 the lower part of the document -- the first
5 an e-mail from Mr. Marc Beilinson to Joseph
6 Glatt and Schuyler Hewes, subject Guaranty
7 Analysis Based Upon Reading of Schedule 11
8 Only.
9 And the second top part of this
10 document is an e-mail from Mr. Hewes to
11 Mr. Beilinson and Mark Murphy and other
12 individuals at Apollo. Do you see that?
13 A. Yes.
14 Q. The second page of this document
15 has a bunch of numbers on it. It's entitled
16 "Innkeepers USA Trust Summary of Schedule
17 XI."
18 A. Right.
19 Q. Have you seen this document before?
20 A. I've seen something like this.
21 Q. And when you say this, are you
22 referring to the second page or both the
23 entire document I've handed you?
24 A. I never saw the e-mail. But I've
25 seen something like this schedule.
136
1 Lascher
2 Q. Okay. If you look at the schedule
3 here, when you look at the right-hand column,
4 the very right column, it says $13,665,381
5 (sic), right?
6 A. 13,665,581.
7 Q. Right. Is that the number you
8 understand to be the company's position on
9 what Apollo's exposure is on a guaranty?
10 MR. EHRLICH: Objection to form.
11 Please note my objection. This is a
12 totally improper question, beyond the
13 scope of this notice and improper
14 discovery in a state court litigation
15 that Midland has brought.
16 MR. PARKINS: Okay. You can
17 answer.
18 THE WITNESS: Can I answer it?
19 MR. O'BRIEN: I join in the
20 objection. It is outside the scope, but
21 I'm not going to instruct the witness
22 not to answer the question.
23 A. I don't really know what they think
24 is there -- actually, can you just ask me the
25 question again.
137
1 Lascher
2 Q. This $13 million odd number is that
3 a number you had discussed with Innkeepers as
4 their view of the exposure of Apollo on the
5 guaranty we've been talking about?
6 MR. O'BRIEN: Well, you make it
7 sound like his numbers.
8 MR. PARKINS: No, I'm asking if
9 this is what Innkeepers --
10 MR. O'BRIEN: All my client said
11 was that he had seen a schedule like
12 this before.
13 Q. And my question is, did Innkeepers
14 discuss this number in the context of
15 developing the PSA as dealing with the Apollo
16 guaranty problem with this magnitude of
17 dollars?
18 MR. EHRLICH: Objection.
19 A. I don't remember the number. We
20 looked at this schedule, we looked at a
21 schedule similar to this in agreeing to what
22 scope of work we would commit to having the
23 company do as long as there were funds
24 available post emergence from bankruptcy,
25 assuming that we own the company together.
450 Seventh Avenue - Ste 2803, New York, NY 10123 (212)705-8585
DAVID FELDMAN WORLDWIDE, INC.
36 (Pages 138 to 141)
138
1 Lascher
2 Q. That was in the context of these
3 negotiations for the PSA, correct?
4 A. It was in the context of our
5 negotiations over the sale of the equity to
6 Apollo.
7 Q. Bu you didn't just mention what the
8 company would do, you are going to end up
9 owning the company pursuant to the PSA if
10 it's implemented, right?
11 A. Yes, yes.
12 MR. EHRLICH: Objection to form.
13 A. But in terms of what their
14 perspective, on whether, you know, this was
15 the number that they were liable for under
16 the guaranty, no.
17 Q. I understand. I just want to know
18 if this was discussed between Innkeepers and
19 you.
20 MR. PARKINS: I pass the witness.
21 I think there is other counsel who have
22 questions here.
23 MR. O'BRIEN: Next.
24 EXAMINATION BY
25 MR. GOTTESMAN:
139
1 Lascher
2 Q. Good afternoon. My name is
3 Lawrence Gottesman of Bryan Cave. We
4 represent LNR Partners, LLC, which is the
5 special servicer group to securitization
6 trust. Just for the record one of those is
7 CSFB 2007-C1 which services two loans, one of
8 which relates to the Residence Inn Mission
9 Valley in San Diego and the other of which
10 relates to the Residence Inn Garden Grove.
11 The other trust is called ML-CFC 2006-4 and
12 that trust has three Innkeepers' loans, one
13 of which is the Doubletree Guest Suites in
14 Washington, D.C., another of which is a
15 Residence Inn Tyson's Corner, Vienna,
16 Virginia, and the third is the Homewood
17 Suites in San Antonio.
18 Are you familiar with any of those
19 loans as part of the planned negotiation and
20 plan support process that you described in
21 your prior testimony?
22 A. Yes.
23 Q. Can you tell me what your
24 familiarity is?
25 A. As part of our PSA, we -- you know,
140
1 Lascher
2 there's about $150 million of debt that would
3 remain on those assets and one other in the
4 restructured company.
5 Q. And were there discussions between
6 Lehman on the one hand and Innkeepers on the
7 other with respect to those hotels?
8 A. About the debt on those hotels.
9 Q. And let me -- probably it's just
10 easier if we go back to what was marked
11 earlier today as Exhibit 5, which is the Plan
12 Support Agreement.
13 A. Okay.
14 Q. And I would direct your attention
15 to, it's the one that's bound, to the term
16 sheet that's annexed to the Plan Support
17 Agreement. I guess page 2 of that, if you
18 could get there, please.
19 A. Okay.
20 Q. And your answer a moment or two
21 ago, you were referring to what's called
22 other secured debt in the term sheet; is that
23 correct?
24 A. Yes.
25 Q. And were there discussions between
141
1 Lascher
2 Lehman on the one hand and Innkeepers on the
3 other with respect to that other secured
4 debt?
5 A. Yes.
6 Q. Can you tell me when the
7 discussions with respect to the other secured
8 debt started in the process that you
9 described earlier today?
10 A. I mean they would have started at
11 our first meeting back in April, I think it
12 was the April 22nd meeting. They were part
13 of the, you know, the organizational chart
14 that's attached to the Moelis presentation
15 and there was always an amount of debt that
16 was allocated to assets other than the fixed
17 rate and floating rate pools.
18 Q. What I would like to know is in
19 this process who allocated that debt? I mean
20 there was a certain amount outstanding; is
21 that correct?
22 A. Yes.
23 Q. And what's that amount
24 approximately, if you know?
25 A. I don't remember offhand.

EXHIBIT K
APOLLO INVESTMENT CORP (AINV)
10K
FORM 10K FOR THE FISCAL YEAR ENDED MARCH 31, 2010
Filed on 05/26/2010 Period: 03/31/2010
File Number 81400646
LIVEDGAR
Information Provided by Global Securities Information, Inc.

800.669.1154
www.gsionline.com
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 2010
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 81400646
APOLLO INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 522439556
(State of Incorporation) (I.R.S. Employer Identification Number)
9 West 57th Street
New York, N.Y. 10019
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (212) 5153450
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, par value
$0.001 per share
The NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation ST during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein, and will not be contained, to the
best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to
this Form 10K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b2 of the Exchange Act.
Large accelerated filer Accelerated filer Nonaccelerated filer Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Act) Yes No
The aggregate market value of common stock held by nonaffiliates of the Registrant on September 30, 2009 based on the closing price on that date of
$9.55 on the NASDAQ Global Select Market was approximately $1.6 billion. For the purposes of calculating this amount only, all directors and executive
officers of the Registrant have been treated as affiliates. There were 193,844,627 shares of the Registrants common stock outstanding as of May 26, 2010.
Portions of the registrants Proxy Statement for its 2010 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year
covered by this Annual Report on Form 10K are incorporated by reference into Part III of this Form 10K.
Table of Contents
SCHEDULE OF INVESTMENTS (continued)
March 31, 2010
(in thousands, except shares)
INVESTMENTS IN CONTROLLED PORTFOLIO
COMPANIES 5.2%(9) Industry Shares Cost
Fair
Value(1)
Preferred Equity 0.3%
Grand Prix Holdings, LLC Series A, 12.00% (Innkeepers USA) *** Hotels, Motels, Inns &
Gaming 2,989,431 $ 101,346 $ 5,268
EQUITY
Common Equity/Interests 4.9%
AIC Credit Opportunity Fund LLC (10) Asset Management $ 70,041 $ 73,514
Generation Brands Holdings, Inc. (Quality Home Brands) Consumer Products 750 230
Generation Brands Holdings, Inc. Series H (Quality Home Brands) Consumer Products 7,500 2,297 2,297
Generation Brands Holdings, Inc. Series 2L (Quality Home Brands) Consumer Products 36,700 11,242 11,242
Grand Prix Holdings, LLC
(Innkeepers USA) **
Hotels, Motels, Inns &
Gaming 17,335,834 172,664
Total Common Equity/Interests $ 256,244 $ 87,283
TOTAL EQUITY $ 256,244 $ 87,283
Total Investments in Controlled Portfolio Companies $ 357,590 $ 92,551
Total Investments 161.0%(11) $3,242,605 $ 2,853,580
Par
Amount*
CASH EQUIVALENTS 25.3%
U.S. Treasury Bill, 0.13%, 7/1/10 Government $ 450,000 $ 449,852 $ 449,828
Total Investments and Cash Equivalents 186.3% $3,692,457 $ 3,303,408
Liabilities in Excess of Other Assets (86.3%) (1,530,602)
Net Assets 100.0% $ 1,772,806
See notes to financial statements.
54
Table of Contents
SCHEDULE OF INVESTMENTS (continued)
March 31, 2010
(in thousands)
(1)
Fair value is determined in good faith by or under the direction of the Board of Directors of the Company (see Note 2).
(2) Includes floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the LIBOR (London Interbank Offered Rate), EURIBOR (Euro
Interbank Offered Rate), GBP LIBOR (London Interbank Offered Rate for British Pounds), or the prime rate. At March 31, 2010, the range of interest rates on floating rate bank
debt was 4.59% to 10.50%.
(3) Position is held across five US Dollardenominated tranches with varying yields.
(4) Position is held across three Eurodenominated tranches with varying yields.
(5) Denominated in Euro ().
(6) The Company is the sole Limited Partner in GS Prysmian CoInvest L.P.
(7) Denominated in Canadian dollars.
(8) Denotes investments in which we are an Affiliated Person, as defined in the 1940 Act, due to owning, controlling, or holding the power to vote, 5% or more of the outstanding
voting securities of the investment. Transactions during the fiscal year ended March 31, 2010 in these Affiliated investments are as follows:
Name of Issuer
Fair Value at
March 31, 2009
Gross
Additions
Gross
Reductions
Interest/Dividend
Income
Fair Value at
March 31, 2010
Gray Wireline Service, Inc. 1
st
Out $ $ 1,000 $ $ 5 $ 1,000
Gray Wireline Service, Inc. 2
nd
Out 77,554 633 59,251
DSI Renal, Inc., 17.00% 9,860 364 10,057
CDSI I Holding Company, Inc. Common Equity 9,300 10,206
Gray Energy Services, LLC Class H Common Equity 3,590
CDSI I Holding Company, Inc. Series A Warrant 773 854
CDSI I Holding Company, Inc. Series B Warrant 645 693
CDSI I Holding Company, Inc. Contingent Payment Agreement 1,003 1,075
Gray Holdco, Inc. Warrant
$ 3,590 $ 100,135 $ $ 1,002 $ 83,136
(9) Denotes investments in which we are deemed to exercise a controlling influence over the management or policies of a company, as defined in the 1940 Act, due to beneficially
owning, either directly or through one or more controlled companies, more than 25% of the outstanding voting securities of the investment. Transactions during the fiscal year ended
March 31, 2010 in these Controlled investments are as follows:
Name of Issuer
Fair Value at
March 31, 2009
Gross
Additions
Gross
Reductions
Interest/Dividend
Income
Fair Value at March 31,
2010
Grand Prix Holdings, LLC Series A Preferred $ 76,557 $ 11,272 $ $ 9,351 $ 5,268
AIC Credit Opportunity Fund LLC Common Equity
(10) 57,294 11,854 21,190 11,309 73,514
Generation Brands Holdings, Inc. Common Equity 230
Generation Brands Holdings, Inc. Series H Common
Equity 2,297 2,297
Generation Brands Holdings, Inc. Series 2L
Common Equity 11,242 11,242
Grand Prix Holdings, LLC Common Equity 7,570
$ 141,421 $ 36,665 $ 21,190 $ 20,660 $ 92,551
See notes to financial statements.
55

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InterContinental Hotels Says Room Rates Are Rising
EARNINGS AUGUST 11, 2010

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LONDONInterContinental Hotels Group PLC said room rates, which fell during the recession, have started to rise in
most markets as the return of business travelers boosts its revenue and profit.
The world's largest hotel operator by number of rooms said revenue per available room, or revpara key industry
measurerose 7.4% in the second quarter, compared with a 0.2% rise in the first quarter. By J uly, revpar was up 8.1%.
A 1% increase in revpar improves full-year operating profit by $13 million.
InterContinental, often called IHG, franchises or owns more than 4,000 hotels globally under the brands Holiday Inn,
Holiday Inn Express, Crowne Plaza and others. It also operates 168 luxury hotels under the InterContinental Hotels and
Resorts brand, seven of which it actually owns.
IHG's results followed similarly upbeat second-quarter reports from other major hotel operators, which also signaled a
return of corporate travel and conference. Starwood Hotels & Resorts Worldwide Inc. posted a 13% increase in second-
quarter revpar from a year ago and outlined a 2010 forecast for a revpar gain of 7% to 9%. Marriott International Inc.
posted a 9.9% rise in revpar and a 1.6% rise in nightly rates.
"Business and leisure stays at our hotels are trending up," Marriott Chairman and Chief Executive Officer Bill Marriott
said.
IHG said the improving revenue was driven by higher occupancy levels.
While room rates still were lower in the second quarter than a year ago,
the company said rates are stabilizing and beginning to rise is many
markets.
Overall, IHG reported operating income of $136 million in the second
quarter ended J une 30, up 27% from the same period a year ago.
Earnings per share was 30 cents from a loss of 20 cents per share a
year ago. Revenue in the latest quarter rose 9.3%, to $410 million.
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Despite the positive news, shares of IHG dropped 4.1%, to 1,078 pence
($17.15), in London after a profit warning from tour operator TUI
Travel PLC sent shares across the sector lower. Still, IHG shares have doubled since March of last year.
A recovery in business travel is critical for hotels because business travelers tend to pay higher rates than leisure
travelers. In addition, corporate meetings and conferences are a more stable and lucrative flow of business for hotels
than tourism traffic.
"Last year was an awful year for corporate travel," said J ohn Arabia, an analyst with Green Street Advisors Inc. "What
we're seeing now is more corporations getting back on the road. As a result of that, hotels are increasing their number of
room nights from high-paying corporate travel. Some hotels in some markets are able to pull back on some of the
discounts they had been offering."
IHG has 197,431 rooms waiting to be built or converted into one of its brands.
This is less than the May pipeline of 200,895 rooms, suggesting the company
is struggling to increase its estate. Rather than owning all of its hotels directly,
IHG operates a franchise model in partnership with hotel owners and must
rely on developers finding financing for new hotel construction.
Richard Solomons, IHG's chief financial officer, said developers still were
finding it tough to secure financing for new hotels in the U.S. and Europe. He
added that 30,000 rooms will be removed from IHG's system in the second
half of the year, following 10,000 removals in the first six months. These are
mainly Holiday Inns that are leaving the brand rather than investing in
refurbishing.
The company started a relaunch of its Holiday Inn brand two years ago and is
set to complete it at the end of this year. Mr. Solomons said the relaunched
hotels were performing at the top end of his expectations.
Wr it e t o Michael Carolan at michael.carolan@dowjones.com
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
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