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This Document is not a Solicitation of Votes on a Plan

BRYAN CAVE LLP
Lawrence P. Gottesman (LG-7061)
Michelle McMahon (MM-8130)
1290 Avenue of the Americas
New York, New York 10104
(212) 541-2000
and
DUANE MORRIS LLP
Phillip K. Wang, Esq. (admitted pro hac vice)
One Market Plaza, Spear Tower, Suite 2200
San Francisco, CA 94105-1127
(415) 957-3185

Objection Deadline: Sept. 23, 2010
Hearing Date: Sept. 30, 2010 at 10:00 a.m.
Attorneys for Wells Fargo Bank, N.A., as Trustee for the registered holders of Credit Suisse First
Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series
2007-C1 and U.S. Bank National Association, as successor to LaSalle Bank N.A., formerly
known as LaSalle National Bank, as Trustee for the registered holders of ML-CFC Commercial
Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series 2006-4
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
– – – – – – – – – – – – – – – – – – – – – – – – – – – – x
In re:

INNKEEPERS USA TRUST, et al.,

Debtors.
:

:

:
Chapter 11
Case No.: 10-13800 (SCC)

(Jointly Administered)
– – – – – – – – – – – – – – – – – – – – – – – –– – – – –x

MOTION OF WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE REGISTERED
HOLDERS OF CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-C1
AND U.S. BANK NATIONAL ASSOCIATION, AS SUCCESSOR TO LASALLE BANK
N.A., FORMERLY KNOWN AS LASALLE NATIONAL BANK, AS TRUSTEE FOR
THE REGISTERED HOLDERS OF ML-CFC COMMERCIAL MORTGAGE TRUST
2006-4, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES
2006-4 TO TERMINATE EXCLUSIVITY AND JOINDER TO MIDLAND LOAN
SERVICES, INC.'S MOTION TO TERMINATE EXCLUSIVITY

Wells Fargo Bank, N.A., as Trustee for the registered holders of Credit Suisse
First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series
2007-C1 and U.S. Bank National Association, as successor to LaSalle Bank N.A., formerly

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C053239/0312771/1593278.7
known as LaSalle National Bank, as Trustee for the registered holders of ML-CFC Commercial
Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series 2006-4
(jointly, the “Property Level Lenders”), by their undersigned counsel, hereby move this Court for
entry of an order terminating the exclusive periods of certain of the above-captioned debtors and
debtors-in-possession (collectively, the “Debtors”) to permit the Property Level Lenders to file a
plan or plans of reorganization with respect to the Property Level Debtors (as defined below).
The Property Level Lenders also join in Midland Loan Services, Inc.’s Motion to Terminate
Exclusivity (the “Midland Motion”). In support of this Motion and of the Property Level
Lender’s joinder to the Midland Motion, the Property Level Lenders respectfully state as
follows:
PRELIMINARY STATEMENT
1

1. The Property Level Lenders move to terminate exclusivity with respect to the
Property Level Debtors. It is imperative that these chapter 11 cases be opened up to permit
competing transactions in order to ensure that recoveries are maximized for all creditors of each
of the separate bankruptcy estates, none of which have or can be substantively consolidated. The
Property Level Lenders also join in the Midland Motion and support the request by Midland
Loan Services, Inc. (“Midland”) to terminate exclusivity.
2. As set forth in detail in the Midland Motion and as found by the Court at the
evidentiary hearing held on September 1, 2010 (the “PSA Hearing”), the Debtors’ Plan Support
Agreement and the cramdown plan of reorganization contemplated thereby (the “Lehman/AIC
Plan”) were negotiated with only one minority secured creditor and with an out-of-the-money

1
Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings ascribed to such
terms in the Midland Motion.

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C053239/0312771/1593278.7
equity holder of the Debtors. The Debtors made information and documents available only to
Lehman. The Debtors did not engage in any meaningful shopping of the proposed transaction or
negotiations with the vast majority of their secured creditors or make any effort to ensure that
one or more bankruptcy estates and their creditors were not preferred over the bankruptcy estates
and creditors of other of the Debtors. The Plan Support Agreement would have, if approved,
prohibited any further negotiations regarding alternative transactions or improvements to the
proposed Lehman/AIC Plan. Moreover, the Debtors’ chief restructuring officer unequivocally
testified, both before and at the PSA Hearing, that he had not and did not intend to have any such
discussions.
3. The Debtors’ willingness to enter into the Plan Support Agreement and their
single-minded pursuit of court authorization of it despite overwhelming secured creditor
objection speaks loudly and clearly to their intentions with regard to this process. The Debtors’
efforts to forcefully impose this wholly unacceptable deal on its secured creditor body, despite
the staggering costs of doing so, is highly instructive. These costs are comprised not only of the
astronomical legal and other professional fees incurred by the Debtors’ professionals in
prosecuting the PSA Motion and the significant fees incurred by the secured lenders in opposing
it (all of which, if allowed, will be paid from the secured lenders’ cash collateral),
2
but in the
enormous distraction and disruption of the normal chapter 11 process caused by such pursuit.
Indeed, as the Court aptly found, “the PSA created contempt rather than fostering negotiations.
This is not what Chapter 11 is supposed to be about.” PSA Hearing Tr., pp. 422-23:24-1. Given

2
As the Court noted in its decision denying the Debtors’ motion to assume the Plan Support Agreement, “[d]ue at
least in part to the lack of transparency in the process, the proposed PSA has spurred extensive discovery requests
and a motion for an examiner.” Transcript from the PSA Hearing (the “PSA Hearing Tr.”), p. 422:21-23. Excerpts
of the cited portions of the PSA Hearing Tr. are attached hereto as Exhibit A.


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C053239/0312771/1593278.7
this history, it is simply not credible for the Debtors to now engage in discussions with the
secured lenders and expect any level of trust or confidence. The Debtors have irreparably
damaged their ability to negotiate as independent fiduciaries. The Debtors’ lack of due care and
good faith and their abdication of their fiduciary obligations owed to all of the Debtors and their
respective creditors demonstrates the need to terminate the Debtors’ exclusive periods in order to
meaningfully open up the process.
4. Rather than acting as independent fiduciaries and dealing fairly and openly with
all of their creditors, the Debtors and their management, in entering into the Plan Support
Agreement, abandoned any pretense of neutrality and instead chose to favor a minority creditor
and the Debtors’ 100% equity holder. The Debtors and their management have proceeded in a
fashion designed to frustrate rather than advance the normal process of resolving large chapter 11
cases, making continuance of their exclusive period to negotiate, file and solicit acceptances of a
plan of reorganization a farce. All but one of the relevant, applicable factors support termination
of the Debtors’ exclusive periods under section 1121(d) of the Bankruptcy Code.
5. Notwithstanding the Debtors’ refusal to seek other offers, they have been
presented with one nonetheless. As set forth in the Midland Motion, Midland has obtained a
proposal from Five Mile Capital Partners LLC (“Five Mile”) for an alternative plan of
reorganization (the “Five Mile Proposal”) that would, among other things, permit the Debtors’
secured creditors the option of taking their collateral if they prefer it over the treatment proposed
by the Five Mile Proposal – an essential secured creditor protection.
3
The Property Level

3
The Property Level Lenders are still in the process of evaluating the proposed terms of the Five Mile Proposal and
would need to see the actual plan and a disclosure statement approved by this Court before accepting such a plan

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C053239/0312771/1593278.7
Lenders therefore support Midland’s efforts to seek higher and better alternatives to the
Lehman/AIC Plan and the termination of exclusivity.
6. The Property Level Lenders also seek a termination of the exclusive periods to
permit the Property Level Lenders to file a competing plan or plans of reorganization for the
Property Level Debtors if the Property Level Lenders determine that filing such a plan or plans is
the appropriate course of action. In view of the Debtors’ unwillingness or inability to date to
adopt a posture of neutrality and not favor the estates and creditors of certain Debtors over those
of other Debtors, termination of exclusivity to permit the Property Level Lenders to file their
own plan or plans with respect to the Property Level Debtors is necessary to, among other things,
ensure that such partiality does not occur again and that we have a process and result that is in
the interests of “each of the [D]ebtors in these cases.” PSA Hearing Tr., p. 421:5-6. While the
Property Level Lenders have worked cooperatively with Midland and intend to do so going
forward, it is also important to recognize that each of the Property Level Debtors are separate
entities, none of which have or could be substantively consolidated, with their own creditors and
corresponding fiduciary duties, and which may therefore require their own separate plan or
plans.
7. Termination of exclusivity to permit the Property Level Lenders to file their own
plan or plans with respect to the Property Level Debtors is necessary to, among other things,
ensure that such uneven treatment does not occur again. The termination of exclusivity is
necessary, bluntly stated, to keep the Debtors honest.

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C053239/0312771/1593278.7
FACTUAL BACKGROUND
General Background
8. On July 19, 2010 (the “Petition Date”), the Debtors filed voluntary petitions for
relief under chapter 11 of the Bankruptcy Code commencing these bankruptcy cases.
9. The Debtors are debtors-in-possession and continue to operate their businesses
pursuant to 11 U.S.C. §§ 1107 and 1108.
10. An official committee of unsecured creditors (the “Committee”) was appointed on
July 28, 2010.
The Property Level Loans
11. The Property Level Lenders hold secured debt with an aggregate unpaid principal
balance of approximately $160 million (as described below, the “Property Level Loans”). The
loans set forth below are part of a commercial mortgage backed securities pool (“CMBS”)
known as Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-
Through Certificates, Series 2007-C1, for which Wells Fargo Bank, N.A. (“Wells Fargo”) is
trustee and LNR Partners, LLC (“LNR”) serves as special servicer:
i. KPA RIMV, LLC, as borrower, KPA RIMV LESSEE, LLC, as accommodation
grantor, and Capmark Bank, as lender, are parties to that certain first-priority, perfected Deed of
Trust, Leasehold Deed of Trust, Assignment of Leases and Profits, Security Agreement and
Fixture Filing dated as of October 4, 2006 (the “Capmark Mission Valley Deed of Trust”),
securing a deed of trust loan in the original principal amount of $47.4 million (the “Capmark
Mission Valley Loan”). Pursuant to that certain Loan Assumption, Affirmation, and
Modification Agreement, dated June 29, 2007, Grand Prix RIMV Lessee LLC (“Grand Prix
RIMV”) assumed, and became liable for, all of KPA RIMV LESSEE, LLC’s obligations under
the Capmark Mission Valley Loan. The Capmark Mission Valley Loan is evidenced by a Deed
of Trust Note dated October 4, 2006 in the original principal amount of $47.4 million (the
"Capmark Mission Valley Note") and secured by Capmark Mission Valley Deed of Trust and the
assignment of leases and rents in and to the Residence Inn in San Diego, California (the
“Capmark Mission Valley Assignment of Rents,” and together with the Capmark Mission Valley
Note, the Capmark Mission Valley Deed of Trust and all other documents executed or delivered

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C053239/0312771/1593278.7
in connection with this loan, the “Capmark Mission Valley Loan Documents”). The Capmark
Mission Valley Loan has a stated maturity date of November 11, 2016.
ii. KPA RIGG, LLC, as borrower, KPA RIGG LESSEE, LLC, as accommodation
grantor, and Capmark Bank, as lender, are parties to that certain first-priority, perfected Deed of
Trust, Leasehold Deed of Trust, Assignment of Leases and Profits, Security Agreement and
Fixture Filing dated as of October 4, 2006 (the “Capmark Garden Grove Deed of Trust”),
securing a deed of trust loan in the original principal amount of $37.6 million (the “Capmark
Garden Grove Loan”). Pursuant to that certain Loan Assumption, Affirmation, and Modification
Agreement, dated June 29, 2007, Grand Prix RIGG Lessee LLC (“Grand Prix RIGG”) assumed,
and became liable for, all of KPA RIGG LESSEE, LLC’s obligations under the Capmark Garden
Grove Loan. The Capmark Garden Grove Loan is evidenced by a Deed of Trust Note dated
October 4, 2006 in the original principal amount of $37.6 million (the "Capmark Garden Grove
Note") and secured by Capmark Garden Grove Deed of Trust and the assignment of leases and
rents in and to the Residence Inn in Garden Grove, California (the “Capmark Garden Grove
Assignment of Rents,” and together with the Capmark Garden Grove Note, the Capmark Garden
Grove Deed of Trust and all other documents executed or delivered in connection with this loan,
the “Capmark Garden Grove Loan Documents”). The Capmark Garden Grove Loan has a stated
maturity date of November 11, 2016.
Declaration of Edward C. Brown in Support of the Objections of Certain Prepetition
Lenders [Docket No. 258] (the “Brown Decl.) ¶ 1.
12. The loans set forth below are part of a commercial mortgage backed securities
pool (“CMBS”) known as ML-CFC Commercial Mortgage Trust 2006-4, Commercial Mortgage
Pass-Through Certificates, Series 2006-4, for which U.S. Bank National Association, as
successor to Lasalle Bank N.A., formerly known as LaSalle National Bank, is trustee and LNR
serves as special servicer:
(i) KPA Washington DC, LLC,
4
as borrower, and Merrill Lynch Mortgage Lending,
Inc. (“Merrill Lynch”) as lender, are parties to that certain Loan Agreement (the “Merrill Lynch
Washington D.C. Loan Agreement”), dated as of September 21, 2006. The Merrill Lynch
Washington D.C. Loan Agreement provides for a deed of trust loan in the original principal
amount of $25.6 million (the “Merrill Lynch Washington D.C. Loan”), which amount is secured
by a first-priority, perfected deed of trust and assignment of leases and rents in and to the
Doubletree Guest Suites in Washington, D.C. (the “Merrill Lynch Washington D.C. Deed of
Trust and Assignment of Rents,” and together with the Merrill Lynch Washington D.C. Loan
Agreement and all other documents executed or delivered in connection with this loan, the

4
KPA Washington DC, LLC was formerly known as KPA Washington DC DT, LLC.

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C053239/0312771/1593278.7
“Merrill Lynch Washington D.C. Loan Documents”). The Merrill Lynch Washington D.C. Loan
has a stated maturity date of October 1, 2016.
(ii) KPA Tysons Corner RI, LLC, as borrower, and Merrill Lynch as lender, are
parties to that certain Loan Agreement (the “Merrill Lynch Tysons Corner Loan Agreement”),
dated as of September 19, 2006. The Merrill Lynch Tysons Corner Loan Agreement provides for
a deed of trust loan in the original principal amount of $25.2 million (the “Merrill Lynch Tysons
Corner Loan”), which amount is secured by a first-priority, perfected deed of trust and
assignment of leases and rents in and to the Residence Inn in Vienna, Virginia (the “Merrill
Lynch Tysons Corner Deed of Trust and Assignment of Rents,” and together with the Merrill
Lynch Tysons Corner Loan Agreement and all other documents executed or delivered in
connection with this loan, the “Merrill Lynch Tysons Corner Loan Documents”). The Merrill
Lynch Tysons Corner Loan has a stated maturity date of October 1, 2016.
(iii) KPA San Antonio, LLC,
5
as borrower, and Merrill Lynch as lender, are parties to
that certain Loan Agreement (the “Merrill Lynch San Antonio Loan Agreement”), dated as of
September 19, 2006. The Merrill Lynch San Antonio Loan Agreement provides for a deed of
trust loan in the original principal amount of $24.2 million (the “Merrill Lynch San Antonio
Loan”), which amount is secured by a first-priority, perfected deed of trust and assignment of
leases and rents in and to the Homewood Suites in San Antonio, Texas (the “Merrill Lynch San
Antonio Deed of Trust and Assignment of Rents,” and together with the Merrill Lynch San
Antonio Loan Agreement and all other documents executed or delivered in connection with this
loan, the “Merrill Lynch San Antonio Loan Documents”). The Merrill Lynch San Antonio Loan
has a stated maturity date of October 1, 2016.
Brown Decl. ¶ 2.
13. The Obligations of the Grand Prix RIMV, KPA RIMV, LLC, Grand Prix RIGG,
KPA RIGG LLC, KPA Washington DC, LLC, KPA Tysons Corner RI, LLC, KPA San Antonio,
LLC (collectively, the “Property Level Debtors”) under the Capmark Mission Valley Loan
Documents, Capmark Garden Grove Loan Documents, Merrill Lynch Washington D.C. Loan
Documents, Merrill Lynch Tysons Corner Loan Documents, and Merrill Lynch San Antonio
Loan Documents (collectively, the “Loan Documents”) are secured by first-priority, perfected
mortgages, liens and security interests on and in each of the hotel properties commonly know as
“Residence Inn San Diego,” “Residence Inn Garden Grove,” “Double Tree Guest Suites
Washington D.C.,” “Residence Inn Tysons Corner,” and “Homewood Suites San Antonio”

5
KPA San Antonio, LLC was formerly known as KPA San Antonio HS, LLC.

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C053239/0312771/1593278.7
(collectively, the “Hotel Properties”) and related personal property (including all cash generated
thereby), owned or leased by the Property Level Debtors. None of the Property Level Loans are
cross-collateralized either with each other, or with any other loan. Brown Decl. ¶ 3.
14. Each of the Property Level Debtors is a separate, independent special purpose
entity (“SPE”) as contemplated by the Loan Documents. Brown Decl. ¶ 4. Although the exact
terms of each of the Capmark Mission Valley Loan Agreement, Capmark Garden Grove Loan
Agreement, Merrill Lynch Washington D.C. Loan Agreement, Merrill Lynch Tysons Corner
Loan Agreement, and Merrill Lynch San Antonio Loan Agreement (collectively, the “Loan
Agreements”) may differ, in general the Loan Documents require the applicable Property Level
Debtor to maintain its separateness by representing and agreeing to certain provisions, including
provisions that it does and will (i) limit its purposes to ownership and operation of the Property
Level Debtor’s hotel property; (ii) not own any other significant property or assets other than the
Property Level Debtor’s hotel property; (iii) not engage in any business other than the ownership
and operation of the Property Level Debtor’s hotel property; (iv) limit its incurrence of debt to
that reasonably necessary to operate the Hotel Properties; (v) observe organizational formalities
and preserve the separateness of its existence; (vi) maintain separate books and records; (vii)
require the approval of the independent director(s), for significant decisions; (viii) not merge or
reorganize; and (ix) conduct its business so that all of the assumptions contained in the non-
consolidation opinion that was given with respect to the Property Level Debtor and was relied
upon by the Property Level Lender shall be true and correct (collectively, the “Separateness
Provisions”).
6
See, e.g., Merrill Tysons Corner Loan Agreement, §5.1.23. The Loan

6
A representative sample of one of the Loan Agreements, the Merrill Tysons Corner Loan Agreement, is attached as
Exhibit 1 to the Brown Decl.

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C053239/0312771/1593278.7
Agreements prohibit the Property Level Debtors from guaranteeing or becoming obligated for
the debts of another entity and pledging their assets for the benefit of another entity. Id. at §§
5.2.2 and 5.2.7.
15. These Separateness Provisions were agreed to by the Property Level Debtors in
order to obtain lower interest rates and more favorable terms commensurate with the risk
reduction resulting from such terms and structure. The Property Level Loans described above
were made on the basis that they were loans to SPEs separate from the other Debtors and their
affiliates and limited in their operations and powers, and as such could be securitized and
deposited into the CMBS trusts. Securitization through the CMBS market enabled the Debtors
to obtain better interest rates and access to greater liquidity.
7

16. The Property Level Loans were made to the Property Level Debtors prior to the
transaction pursuant to which AIC acquired 100% of the equity of Grand Prix Holdings LLC, the
parent or indirect parent of all of the Other Debtors, unlike the Fixed Rate and Floating Rate
secured financings which were incurred in connection with the AIC Transaction. See Amended
Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of
First-Day Pleadings [Docket No. 33] (the “Craven Declaration”), ¶¶ 23, 24, 25, 27, 28. The
Property Level Debtors are not liable for the debt of the other Debtors. Although the payment of
the debt at the parent level may be indirectly secured by the equity of the Property Level Debtors

7
The Capital Consortium, The Role of Commc’l Mortgage Backed Sec. (CMBS) and Commc’l Real Estate
Collateralized Debt Obligations (CRE CDOs) in the U.S. Real Estate Fin. Market, p. 4 (2007),
http://www.cmbs.org/about/CMBSSummary.pdf (“The CMBS market, now the second largest source of capital for
commercial and multifamily real estate lending, provides a liquid viable and transparent funding method for real
estate borrowers and wide array of global fixed income investors. It has helped fuel the growth and stability of the
commercial real estate market by providing competitively priced loans for borrowers while providing investors a
low-risk investment at attractive yields”).

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(owned by the parent level Debtors), such debt is structurally subordinate to the claims of
creditors of the Property Level Debtors, including the Property Level Lenders.
17. In accordance with the Loan Documents, the Property Level Debtors are required
to fund from the revenue generated by the Property Level Hotel Properties certain reserves for
the payment of taxes, insurance, property improvements, repairs, replacements, and/or capital
improvements to the properties. See, e.g., Merrill Tysons Corner Loan Agreement, Art. VII.
The Plan Support Agreement
18. Pursuant to a motion filed at the inception of these cases (the “PSA Motion”), the
Debtors asked this Court to authorize them to assume that certain Plan Support Agreement.
8
The
Plan Support Agreement incorporated a term sheet (the “Plan Term Sheet”)
9
that dictated the
terms of the Lehman/AIC Plan. The Lehman/AIC Plan, none of which was negotiated or in its
essential terms was negotiable with the holders of approximately eighty-three percent of the
Debtors’ secured debt, boiled down to the following core provisions:
• The outstanding aggregate amount of the Property Level Secured Debt and certain
other secured debt (collectively referred to the in term sheet as the “Other Secured Debt”) would
be reduced from the aggregate amount of not less than approximately $208.7 million to $150
million (or if the holders thereof make an election under section 1111(b) of the Bankruptcy
Code, the present value of the payments to be received by such holders would be capped at $150
million);
10

• The outstanding aggregate amount of the Fixed Rate Debt would be reduced from
the aggregate amount of approximately $825.4 million to $550 million (or if the holders thereof
make an election under section 1111(b) of the Bankruptcy Code, the present value of the
payments to be received by such holders would be capped at $550 million);

8
A copy of the Plan Support Agreement is attached as Exhibit B to the PSA Motion.
9
A copy of the Plan Term Sheet is attached as Exhibit A to the PSA Motion.
10
The exact amount of the total Other Secured Debt is unclear, as it is uncertain the approximately $21.3 million of
debt owed by Grand Prix Mezz Borrower Term LLC is included within the scope of Other Secured Debt. If such
debt is included, the total amount of Other Secured Debt would increase to approximately $229 million.

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C053239/0312771/1593278.7
• No distribution would be made to deficiency claims of the holders of Other
Secured Debt and Fixed Rate Debt resulting from such reduction of the allowed amount of their
respective secured claims; and
• The entire equity value of the “reorganized” Debtors, including the Debtors
obligated on the Other Secured Debt and Fixed Rate Debt, would be split between Lehman, a
holder of approximately seventeen percent of the total outstanding secured debt, and AIC, the
holder of 100% of the equity in Debtor Grand Prix Holdings LLC, notwithstanding the fact that
neither Lehman nor AIC, has any claims against the Property Level Debtors or the Debtors
obligated with respect to the Fixed Rate Debt.

19. The overwhelming majority of the Debtors’ other secured lenders, including the
Property Level Lenders, filed objections to the PSA Motion indicating their vehement opposition
to the Plan Support Agreement and the Lehman/AIC Plan contemplated thereby.
20. The Court denied the PSA Motion on September 1, 2010. After a lengthy –
indeed, exhaustive – evidentiary hearing, the Court found that the Debtors had acted in a manner
inconsistent with their fiduciary duties and lacking in transparency, and which the Court stated
caused it to “question the Debtors’ honest interest in exercising due care.” PSA Hearing Tr., p.
425:19-21. Specifically, the Court found that (i) the negotiations surrounding Plan Support
Agreement precluded a finding that it was a disinterested transaction (PSA Hearing Tr., p. 417:1-
12 (“Apollo also appears to have been directly and inextricably involved in the negotiations and
concept of the plan related transactions”)); (ii) the Plan Support Agreement was not entered into
with due care (PSA Hearing Tr., pp. 417:13-25, 418-20, 421:1-21); (iii) the Debtors did not act
in good faith both in terms of making the decision to enter into the Plan Support Agreement and
in terms of providing transparency to their creditors (PSA Hearing Tr., pp. 421: 21-25, 422,
423:1-14); and (iv) there was little or no basis upon which the Court could conclude that the Plan
Support Agreement was beneficial to the Debtors, particularly the Property Level Debtors (PSA
Hearing Tr., pp. 423:23-25, 424, 425:1-12).

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C053239/0312771/1593278.7
ARGUMENT
A. All but one of the Relevant Factors Support Termination of Exclusivity
21. Section 1121(d) of the Bankruptcy Code provides that the Court may reduce the
Debtors’ exclusive periods to file and solicit acceptances of a plan of reorganization for “cause.”
Although the Bankruptcy Code does not state what constitutes cause, the courts have considered
the following factors:
(i) the size and complexity of the case;
(ii) the necessity of sufficient time to permit the debtor to negotiate a plan of
reorganization and prepare adequate information;
(iii) the existence of good faith progress toward reorganization;
(iv) the fact that the debtor is paying its bills as they become due;
(v) whether the debtor has demonstrated reasonable prospects for filing a viable plan;
(vi) whether the debtor has made progress in negotiations with its creditors;
(vii) the amount of time which has elapsed in the case;
(viii) whether the debtor is seeking an extension of exclusivity in order to pressure
creditors to submit to the debtor’s reorganization demands; and
(ix) whether an unresolved contingency exists.
See, e.g., In re Adelphia Communications Corp., 352 B.R. 578, 587 (Bankr. S.D.N.Y.
2006).
22. All but one of the relevant factors enumerated above supports termination of the
Debtors’ exclusive periods.
11
In addition, as stated in the Midland Motion, “Courts frequently
terminate exclusivity where a debtor’s proposed plan leaves a creditor constituency out of the
money even though a viable alternative plan could provide a greater recovery to more creditors.”

11
Upon information and belief, factor (ix) is not relevant as there are no unresolved contingencies that would be a
barrier to the Debtors’ successful reorganization.

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C053239/0312771/1593278.7
Midland Motion ¶¶ 35-37 (and authorities cited therein). The Debtors have not proceeded in
good faith in proposing the Lehman/AIC Plan with respect to the Property Level Debtors or in
their lack of disclosure to the Property Level Lenders of the Lehman/AIC Plan prior to the
Petition Date, and have demonstrated by their actions and testimony their clear intent not to
negotiate any improvements of or alternatives to the Lehman/AIC Plan, which is unacceptable to
the majority of the Debtors’ secured lenders, including all of the secured lenders to the Property
Level Debtors. Instead of using the pre-petition period and approximately first two months of
these cases to make progress toward a consensual plan, the Debtors pursued approval of the Plan
Support Agreement. “The intention for [AIC] 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.” PSA Hearing Tr., p. 422:7-10. The Court found that Debtors had favored or
appeared to favor certain of their estates and that there was little basis upon which to conclude
that the Plan Support Agreement, which incorporated confirmation of the Lehman/AIC Plan, was
beneficial to the Non-Lehman Debtors. PSA Hearing Tr., pp. 423:24-25, 424:1 and 426:1-4.
23. Marc Beilinson, the Debtors’ chief restructuring officer, testified that prior to the
bankruptcy filing the Debtors did not: (i) provide the Plan Term Sheet to any party other than
Lehman (PSA Hearing Tr., pp. 219:8-17, 222:12-21, 224:1-11; Transcript of Deposition of Marc
A. Beilinson held on August 12, 2010 (the “Beilinson Tr.”), pp. 53:6-25, 205:22-25);
12
(ii)
provide the terms of the Lehman/AIC Plan to any creditors or third parties other than Lehman
(PSA Hearing Tr., pp. 219:8-17, 222:12-21, 224:1-11; Beilinson Tr., pp. 137:21-25 and 138:1-7);
or (iii) shop the proposed transaction to any third parties (PSA Hearing Tr., pp. 208:7-17, 210:8-
10; Beilinson Tr., p. 75:7-14). Indeed, the Debtors’ chief restructuring officer candidly conceded

12
Excerpts of the cited portion of the Beilinson Tr. are attached hereto as Exhibit B.

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C053239/0312771/1593278.7
that he views his role as getting the Lehman/AIC Plan contemplated by the Plan Support
Agreement confirmed, rather than engaging in the vigorous give and take negotiating process
that is expected in large and complex chapter 11 cases. Beilinson Tr., pp. 159:16-25 and 160:1-5
(in response to a question about whether he would engage in a dialogue with parties regarding an
alternative transaction, “No. Right now I believe that this integrated PSA . . . to do an internal
restructuring of this enterprise is clearly in the best interest of the estate. I intend to move
forward with a plan in the next 30 days”). See also Beilinson Tr., pp. 138:8-25, 139:1-25 and
140:1-18 (stating that the Debtors have not provided due diligence to any third parties who have
expressed interest in an alternate transaction, and that he does not believe he has a fiduciary
obligation to pursue any such transactions).
24. The Court also found that the Debtors lacked good faith and failed to exercise due
care based, in part, on the fact that the Debtors had not and did not intend to market or shop the
transaction or discuss it with any of the creditors other than Lehman. PSA Hearing Tr., p.
417:18-23. The Debtors did not disclose the transaction to their secured lenders. PSA Hearing
Tr., p.417:23-25, 422:1-6 and 17-20. The Debtors did not market the transaction and instructed
their investment banker not to pursue other bidders or transactions. PSA Hearing Tr., p. 418:5-
12. Information and documents in a dataroom were made available only to Lehman and all other
parties were denied access. PSA Hearing Tr., p. 422:4-6. Thus, it is clear that the Debtors
intended to use their exclusive periods to shield the Lehman/AIC Plan from competition in
contravention of LaSalle and in violation of their fiduciary duties to maximize the value of the
Debtors’ estates for the benefit of all creditors. Bank of America Nat’l Trust and Savings Ass’n
v. 203 North LaSalle Street Partnership, 526 U.S. 434, 458 (1998) (holding that “plans providing
junior interest holders with exclusive opportunities free from competition and without benefit of

16
C053239/0312771/1593278.7
market valuation fall within the prohibition of § 1129(b)(2)(B)(ii)”). The Property Level
Lenders have no faith that the Debtors will completely reverse their position and now conduct a
transparent and open process, treating all of the Debtors and their respective estates fairly and
with the requisite neutrality. Accordingly, factors (ii), (iii), (v) and (vi) weigh in favor of
terminating the Debtors’ exclusive periods.
25. The Debtors’ exclusive periods are intended by Congress to, inter alia, provide an
opportunity for the Debtors to negotiate with their constituents and reach a successful
reorganization, but “the plan exclusivity provisions should not be employed as a tactical device
to put pressure on parties to yield to a plan they consider unsatisfactory.” See, e.g., In re Texaco,
Inc., 81 B.R. 806, 810 and 812 (1988). See also PSA Hearing Tr., p. 423:6-14; NEAL BATSON,
ET AL., THE FAILED LBO REVISITED RESTRUCTURING TROUBLED BUSINESSES IN A RECESSION,
C638 ALI-ABA 31, 35 (1991) (“The exclusivity period provided to the debtor under § 1121 is
intended to create a balance by protecting the right of a debtor to propose and obtain a
consensual plan of reorganization while protecting creditors from the burdens and abuses
associated with an uncooperative debtor who is unwilling to negotiate in good faith with its
creditors”). By entering into and aggressively pursuing authorization of the Plan Support
Agreement in the face of overwhelming objection by their secured lenders, including the
Property Level Lenders, the Debtors have indicated their lack of commitment to negotiating in
good faith with the Property Level Lenders. Given the Debtors’ actions from April 2010 through
the date of the PSA Hearing, the Property Level Lenders justifiably fear that the Debtors will
improperly use their exclusive periods to coerce the Property Level Lenders into yielding to a
variation of the Lehman/AIC Plan or another equally unacceptable plan of reorganization. Thus,
factor (viii) also weighs in favor of terminating exclusivity.

17
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26. The Debtors do not need any additional time to negotiate and prepare the
Lehman/AIC Plan. Motion, ¶23, supra. The Debtors began pursuing the Lehman/AIC Plan in
April 2010 and wasted the first two months of these cases in litigation seeking approval of the
PSA Motion that was opposed by the majority of their secured lenders. The Debtors, had they
honored their fiduciary duties and productively used the time before and after the Petition Date,
would have had more than sufficient time to formulate and negotiate a plan or plans of
reorganization, even though only two months have elapsed since the Petition Date. Under these
circumstances, the Property Level Lenders have no alternative but to seek to terminate
exclusivity to pursue alternate transactions at this early stage of the cases. Thus, factors (i), (ii)
and (vii) also support termination of the Debtors’ exclusive periods.
B. Exclusivity Should be Terminated with Respect to the Property Level
Debtors to Permit the Property Level Lenders to File a Plan or Plans as Appropriate
27. As set forth in detail above and in the Property Level Lenders’ objection to the
PSA Motion [Docket Nos. 380 (sealed) and 568 (unsealed)] (the “PSA Motion Objection”) and
objection to the Cash Collateral Motion [Docket No. 255] (the “Cash Collateral Objection”), the
Property Level Debtors are separate, independent entities that do not rely upon or obtain
significant benefit from the Debtors’ purported “comprehensive hotel enterprise.” PSA
Objection, ¶¶ 20-24; Cash Collateral Objection, ¶¶ 18-21. Mere common ownership is not a
sufficient basis to bind the fate of the Property Level Debtors to the restructuring of all of the
other Debtors, which is what the Debtors intended through the Plan Support Agreement and
Lehman/AIC Plan and which they have exclusively pursued to date. The Debtors have clearly
abdicated their fiduciary obligations to the creditors of the Property Level Debtors by failing to
previously seek any alternative transaction that would provide greater value to this constituency

18
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(as opposed to Lehman and AIC).
13
As stated by this Court, in a multi-debtor case, the Debtors
as fiduciaries owe duties to all of their estates and their respective creditors and cannot favor or
appear to favor one estate over another. PSA Hearing Tr., p. 426:1-4.
28. The Debtors are each separate SPEs, formed and operated in compliance with the
Separateness Provisions. The Property Level Loans were made to the Property Level Debtors
prior to the transaction in which the Debtors acquired the majority of their properties and
incurred the majority of their secured debt.
14
The Property Level Debtors are not liable for the
debt of the other Debtors, nor do the Hotel Properties serve as collateral for any of the other
Debtors’ secured claims. Based on these facts, the plan of reorganization that maximizes value
for the Property Level Debtors’ creditors may be a separate plan or plans. “In a bankruptcy case,
it is Bankruptcy 101 that the debtor and its board of directors owe fiduciary duties to the debtors’
creditors to maximize the value of the estate and each of the estates in a multi-debtor case.” PSA
Hearing Tr., p. 425:22-25. It is in the best interest of these creditors that such potential
transactions are considered, which will not happen absent termination of the Property Level
Debtors’ exclusive periods as requested herein. See Midland Motion ¶¶ 39-41.
29. The Property Level Lenders have worked and expect to continue to work
cooperatively with Midland and the other non-Lehman property level secured lenders. The
Property Level Lenders have no doubt that the parties will be able to craft an efficient and
orderly plan process following the termination of exclusivity.

13
Moreover, the joint Lehman/AIC Plan improperly grants all of the equity in the reorganized Property Level
Debtors to an entity that is not a creditor of the Property Level Debtors. This grant of equity to a secured creditor of
the Lehman Debtors is not permitted by the Bankruptcy Code absent substantive consolidation. The facts do not
justify substantive consolidation, and the Debtors have provided no evidence that substantive consolidation would
be appropriate. PSA Objection, ¶¶ 22-24. Indeed, at least with respect to the Property Level Debtors, the facts
support just the opposite conclusion. Id.
14
It was also through this transaction that AIC acquired the 100% ownership interest in the parent-level Debtors.

19
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C. Debtors’ Filing of a Cramdown Plan Fails to Satisfy Section 1121(c)(3) of the
Bankruptcy Code and Supports Termination of Their Exclusive Periods
30. Section 1121(c)(3) of the Bankruptcy Code provides in pertinent part:
Any party in interest, including . . . a creditor . . . may file a plan if and only if—
. . .
(3) the debtor has not filed a plan that has been accepted, before 180 days after the
date of the order for relief under this chapter, by each class of claims or interests that is
impaired under the plan.

11 U.S.C. § 1121(c)(3). A leading bankruptcy treatise has interpreted this Bankruptcy Code
section to provide that “a court should grant a party in interest’s request to file a completing plan
before the expiration of the 180-day acceptance period if the debtor files a cramdown plan within
the 120-day exclusivity period allowed by section 1121(b).” 7 COLLIER ON BANKRUPTCY ¶
1121.05[3] (Alan N. Resnick & Henry J. Sommer eds., 16
th
ed).
31. The Lehman/AIC Plan is a cramdown plan. The majority of the Debtors’ secured
lenders, including all of the secured lenders of the Property Level Debtors, have indicated that
they will vote to reject the Lehman/AIC Plan. In addition, any deficiency claims of the secured
lenders, which the Lehman/AIC Plan will separately classify, will not receive any distribution
and are therefore presumed under section 1126(g) of the Bankruptcy Code to have rejected such
plan. Thus, if the Debtors proceed with the Lehman/AIC Plan, the Debtors will not file a plan
that will be accepted by each impaired class of claims or interests. As noted by Colliers, “[i]n
such a cramdown situation[], exclusivity should be terminated even before the expiration of the
180-day acceptance period.” Id.
D. The Court Should Set a Schedule that Provides the Opportunity for the
Debtors, Midland and the Property Level Lenders to Propose a Plan of Reorganization
32. The Property Level Lenders also join in Midland’s request that this Court set a
schedule for confirmation of the Lehman/AIC Plan, a plan incorporating the Five Mile Proposal

20
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and any other competing plan, including any plan filed by the Property Level Lenders, that
provides a fair opportunity for the Property Level Lenders to file such plan or plans and
disclosure statement(s). See Midland Motion ¶ 42. If the Debtors are permitted to proceed with
confirmation of the Lehman/AIC Plan in advance of any alternative plan, then the result will be
extensive, value consuming litigation over the significant defects in the Lehman/AIC Plan,
including, but not limited to litigation over valuation of each of the Debtors’ fifty-two hotels that
secure debt other than the debt owed to Lehman. The Property Level Lenders therefore request
that the Court also schedule any plan filed by the Property Level Lenders for confirmation on a
time table that is no less favorable than that provided for any competing plan, including the
Lehman/AIC Plan and any plan incorporating the Five Mile Proposal.
33. The Property Level Lenders reserve their right to amend and supplement this
Motion, and incorporate to the extent applicable the arguments and factual and legal support set
forth in the Midland Motion.
CONCLUSION
34. WHEREFORE, for all the foregoing reasons, the relief requested in this Motion
should be granted.
Dated: September 14, 2010 BRYAN CAVE LLP
New York, New York /s/ Michelle McMahon
Lawrence P. Gottesman (LG-7061)
Michelle McMahon (MM-8130)
1290 Avenue of the Americas
New York, New York 10104
Tel: 212-541-2000; Fax: 212-541-4630
[email protected]
[email protected]

and



21
C053239/0312771/1593278.7
DUANE MORRIS LLP
Phillip K. Wang, Esq. (admitted pro hac vice)
San Francisco, CA 94105-1127
Tel: (415) 957.3185; Fax: (415) 358.4725
[email protected]

Attorneys for Wells Fargo Bank, N.A., as Trustee
for the registered holders of Credit Suisse First
Boston Mortgage Securities Corp. Commercial
Mortgage Pass-Through Certificates, Series 2007-
C1 and U.S. Bank National Association, as
successor to Lasalle Bank N.A., formerly known
as LaSalle National Bank, as Trustee for the
registered holders of ML-CFC Commercial
Mortgage Trust 2006-4, Commercial Mortgage
Pass-Through Certificates, Series 2006-4

1
C053239/0312771/1594426.1
BRYAN CAVE LLP
Lawrence P. Gottesman (LG-7061)
Michelle McMahon (MM-8130)
1290 Avenue of the Americas
New York, New York 10104
(212) 541-2000
and
DUANE MORRIS LLP
Phillip K. Wang, Esq. (admitted pro hac vice)
One Market Plaza, Spear Tower, Suite 2200
San Francisco, CA 94105-1127
(415) 957-3185

Objection Deadline: Sept. 23, 2010
Hearing Date: Sept. 30, 2010 at 10:00 a.m.
Attorneys for Wells Fargo Bank, N.A., as Trustee for the registered holders of Credit Suisse First
Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series
2007-C1 and U.S. Bank National Association, as Trustee for the registered holders of ML-CFC
Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series
2006-4
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
– – – – – – – – – – – – – – – – – – – – – – – – – – – – x
In re:

INNKEEPERS USA TRUST, et al.,

Debtors.
:

:

:
Chapter 11
Case No.: 10-13800 (SCC)

(Jointly Administered)
– – – – – – – – – – – – – – – – – – – – – – – –– – – – –x

NOTICE OF MOTION
TO: (I) THE OFFICE OF THE UNITED STATES TRUSTEE; AND (II) ALL PARTIES
THAT HAVE REQUESTED NOTICE PURSUANT TO FEDERAL RULE OF BANKRUPTCY
PROCEDURE 2002
PLEASE TAKE NOTICE that Wells Fargo Bank, N.A., as Trustee for the registered
holders of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-
Through Certificates, Series 2007-C1 and U.S. Bank National Association, as Trustee for the
registered holders of ML-CFC Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-
2
C053239/0312771/1594426.1
Through Certificates, Series 2006-4 (jointly, the “Property Level Lenders”), filed the Motion of
Wells Fargo Bank, N.A., as Trustee for the registered holders of Credit Suisse First Boston
Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2007-C1
and U.S. Bank National Association, as Trustee for the registered holders of ML-CFC
Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series
2006-4 to Terminate Exclusivity and Joinder to Midland Loan Services, Inc.’s Motion to
Terminate Exclusivity.
PLEASE TAKE FURTHER NOTICE THAT responses or objections, if any, to the
Motion and the relief requested therein shall be made in writing, shall state with particularity the
grounds therefor, shall conform to the Federal Rules of Bankruptcy Procedure and the Local
Bankruptcy Rules for the Southern District of New York, and shall be filed with the Bankruptcy
Court electronically in accordance with General Order M-242 (N.B. General Order M-242 and the
User’s Manual for the Electronic Case Filing System can be found at www.nysb.uscourts.gov, the
official website for the United States Bankruptcy Court for the Southern District of New York) by
registered users of the Bankruptcy Court’s electronic filing system, and, by all other parties in
interest, on a 3.5 inch disk, preferably in Printable Document Format (PDF), WordPerfect or any
other Windows-based word processing format (with a hard copy delivered directly to Chambers)
and served in accordance with General Order M-242 or otherwise so as to be actually received
no later than 5:00 p.m. (EDT) on September 23, 2010 by: (i) Bryan Cave LLP, Attorneys for
the Property Level Lenders, 1290 Avenue of the Americas, New York, New York, 10104 (Attn:
Lawrence Gottesman, Esq.) and Duane Morris LLP, One Market Plaza, Spear Tower, Suite 2200,
San Francisco, CA 94105-1127 (Attn. Phillip K. Wang, Esq.); (ii) Kirkland & Ellis, LLP,
Attorneys for the Debtors, 601 Lexington Avenue, New York, New York 10022 (Attn: Jennifer
3
C053239/0312771/1594426.1
Marines and Paul M. Basta, Esq.); (iii) the Office of the United States Trustee, 33 Whitehall
Street, New York, New York 10004 (Attn: Paul Schwartzberg, Esq.); and (iv) Morrison &
Foerster LLP, Attorneys for the Official Committee of Unsecured Creditors, 1290 Avenue of the
Americas, New York, New York 10104 (Attn: Lorenzo Marinuzzi, Esq.).
PLEASE TAKE FURTHER NOTICE that if no objections are filed and served as
prescribed herein, the relief requested in the Motion may be granted without further hearing or
notice.
Dated: September 14, 2010
New York, New York BRYAN CAVE LLP


/s/ Michelle McMahon
Lawrence P. Gottesman (LG-7061)
Michelle McMahon (MM-8130)
1290 Avenue of the Americas
New York, New York 10104
Tel: 212-541-2000; Fax: 212-541-4630
[email protected]
[email protected]

and

DUANE MORRIS LLP
Phillip K. Wang, Esq. (admitted pro hac vice)
San Francisco, CA 94105-1127
Tel: (415) 957.3185; Fax: (415) 358.4725
[email protected]

Attorneys for Wells Fargo Bank, N.A., as Trustee for
the registered holders of Credit Suisse First Boston
Mortgage Securities Corp., Commercial Mortgage
Pass-Through Certificates, Series 2007-C1 and U.S.
Bank National Association, as Trustee for the
registered holders of ML-CFC Commercial Mortgage
Trust 2006-4, Commercial Mortgage Pass-Through
Certificates, Series 2006-4

EXHIBIT A
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
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516-608-2400
INNKEEPERS USA TRUST, et al.
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1 Lehman on April 22nd, you allowed Lehman to do due diligence
2 through Lazard with respect to the cross-pool review of the
3 entire company, is that correct?
4 A. Yes, it was.
5 Q. Okay.
6 A. Is.
7 Q. And at the same time so Lehman could look at the deal, you
8 refused to let anybody else look across the pools of debt to
9 determine whether or not they wanted to go forward with the
10 deal even at a time when Lehman had not yet committed?
11 A. I only began talking to Five Mile about this for three
12 weeks prior to the petition. And during that period of time I
13 was always already well on my way in my negotia -- in
14 Innkeepers' negotiation with Lehman Brothers and I believe that
15 was a right course of action in connection with a incredibly
16 deteriorating situation that was going towards bankruptcy
17 extremely quickly.
18 Q. Now, Moelis was hired by Innkeepers when, sir?
19 A. March of 2010.
20 Q. And Moelis has not only a monthly fee but I think a six
21 million dollar success entitlement in the transaction, is that
22 correct?
23 A. That's correct.
24 Q. So with he six million dollar success entitlement, you
25 didn't Moelis, did you, to go out and shop whether
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1 there would be alternative transaction at the same time you
2 were looking at the Lehman del/ did you?
3 A. I asked them to analyze all restructuring possibilities
4 and discuss them with me but I did not instruct them to shop
5 Q. You did not
6 A. which I didn't think was appropriate given the state of
7 play at that point in time.
8 Q. You did not ask them to go out and see whether
9 alternatives were available to the proposal of a peppercorn/ as
10 you stated/ of an idea? To see whether there were alternative
11 proposals versus your peppercorn of an idea/ is that correct?
12 A. I discussed with them all sorts of alternatives and that
13 was why they were retained. To inform me as to alternatives so
14 that we can discuss them and determine whether they were
15 sufficiently viable to move forward with. And we made a
16 determin.ation
1
that was supported by the independent members of
17 the board of Innkeepers/ that the PSA was the best alternative
18 that was currently presented.
19 Q. But at the time of April 22nd
1
let's start there. Or the
20 week before when you had your first meeting with Lehman and
21 Apollo present. At that point in time/ before you had
22 fertilized or developed this peppercorn of an idea/ you have
23 not engaged Moelis to go find alternative transactions for the
24 restructure of this company. That is true, isn't it?
25 A. We talked about alternative transactions. We didn't talk
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1 about marketing.
2 Q. It is true that since the filing of the bankruptcy case,
3 Moelis has not taken one step to look at alternative
4 transactions for this company, is that correct?
5 A. There have been no alternative transactions that have
6 presented themselves that had any viability to either Moelis or
7 to myself.
8 Q. Did you instruct Moelis to go and find alternative
9 transactions to this deal?
10 A. No. Simply to discuss them.
11 THE COURT: Mr. Parkins, as you're pausing, I'm going
12 to try once again to get us back online on the phone.
13 MR. PARKINS: Okay.
14 THE COURT: All right.
15 MR. PARKINS: I didn't -- I'm not guilty. I didn't
16 step on this.
17 THE COURT: You're not guilty, no.
18 Do you need another bottle of w a t e r ~ Mr. Beilinson?
. 19
THE WITNESS: Thank you, Your Honor.
20 MR. PARKINS: I want to get a drink of water while
21 we're waiting.
22
23
24
25
THE COURT: Go ahead.
MR. PARKINS: All right. Thanks.
(Pause; connecting telephonically)
THE COURT: All right. And this is Judge Chapman.
2 I 2-267-6868 ,
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1 much more.
2 Q. Okay. So let me ask you. When you went to your board to
3 discuss the process that was going on, did you tell them you
4 were not going to tell any other creditor constituency what was
5 going on during the negotiation process?
6 A. Well, I would have discussed with -- everything involving
7 each of the constituents, but
8 Q. My question, sir, is did you tell them you had no
9 intention of disclosing what was going on with Lehman Apollo to
10 any other creditors of this estate that outnumber Lehman by
11 hundreds of millions of dollars as well as the equity
12 represented by Mr. Bienenstock as well as the mezz debt
13 represented by other counsel here? Did you tell your board you
14 were not going to tell anybody about what's going on while you
15 were acting as their fiduciaries? Yes or no? Did you tell
16 them?
17 A. No.
18 Q. So you even kept it a secret from your board that you
19 weren't telling anybody, is that correct?
20 A. That's not correct.
21 Q. Now let me go back to one of the series of questions
22 MR. PARKINS: -- and I will be done, Your Honor.
23 Q. At the time you got your two million dollar bonus in April
24 or may of this year, bonuses of April/May of this year, this is
25 after a period in March where you diverted cash to a separate
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1 account away from Wachovia. Is that correct?
2 A. Let me just clarify something.
3 Q. My question -- yeah, you can answer my question. If you
4 need a clarification, I'm sure your counsel will ask.
5 This is after you diverted the cash, is that correct?
6 A. That's crafted. None of my bonus was paid out of any
7 proceeds of assets of your pool.
8 Q. I'm sorry?
9 A. None of my bonus was paid out of any of the proceeds from
10 your client's assets.
11 A. My question is, it was -- but it was paid also after
12 Marriott gave notice to default, is that correct?
13 A. That's correct.
14 Q. It was also after you went in default in payment on my
15 client's debt. Is that correct?
16 A. That's also correct.
17 Q. It was also after you went into default on payment of the
18 Lehman debt. Is that correct?
19 A. I believe so.
20 MR. PARKINS: I pass the witness, Your Honor.
21 THE COURT: All right. It's eight minutes to 4. Who
22 is -- I take it that someone else wants to ask Mr. Beilinson
23 some questions?
24 MR. GOTTESMAN: Yes, Your Honor. I probably have ten,
25 fifteen minutes at the most, Your Honor.
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1 THE COURT: All right. Here's what we're going to do.
2 I'd like to give the witness a short break; I need a little bit
3 of a break. Why don't we take fifteen minutes and I'm going to
4 ask the three of you and anybody else who wants to question the
5 witness to get together and see if you can coordinate your
6 areas of questioning so that we can be efficient.
7 All right? We'll come back at about --no later than
8 ten minutes after 4.
9 Mr. Beilinson, you, obviously, can't talk to anybody.
10 All right, thank you.
11 (Recess from 3:53p.m. until 4:15p.m.)
12 THE COURT: All right. We're going to have to take
13 another break in a half an hour for the changing of the court
14 reporter. Please be seated.
15 But we can get started in the meantime. All right,
16 Mr. Gottesman.
17 MR. GOTTESMAN: Thank you, Your Honor.
18 THE COURT: You drew the short or the long straw,
19 depending upon your perspective.
20 MR. GOTTESMAN: Intermediate.
21 THE COURT: Okay.
22 MR. GOTTESMAN: Thank you, Your Honor.
23 CROSS-EXAMINATION
24 BY MR. GOTTESMAN:
25 Q. Good afternoon, Mr. Beilinson. Lawrence Gottesman, Bryan
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1 Cave, on behalf of two securitization trusts, specially
2 serviced by LNR Partners.
3 A. Good afternoon.
4 Q. You testified earlier that you're the fiduciary for the
5 securitization trust specially serviced by Midland. You were
6 also a fiduciary with respect to the securitization trust
7 specially serviced by LNR as well. Isn't that correct?
8 A. I think I'm a fiduciary to the entire enterprise and that
9 includes participants within it.
10 Q. And by participants you include creditors, I take it?
11 A. Yes.
12 Q. And isn't it true that prior to the petition date, you
13 never informed LNR or the master servicer with respect to these
14 trusts of the PSA or the plan term sheet?
15 A. I believe I did inform them of their existence to the PSA
16 prior to filing, but it would have been shortly before filing.
17 Q. And when you say inform, you informed them of the terms
18 and conditions including the substantial write down
19 contemplated by the plan term sheet?
20 A. No, because I'm not sure what the write down is with
21 regard to the clients that you represent at this point in time.
22 Q. let's be more specific. The plan term sheet contemplates
23 that there's a bucket called "Other Secured Debt", is that
24 correct?
25 A. That's correct.
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1 Q. And it contemplates that that bucket can't have notes with
2 a value, present value, exceeding 150 million in the aggregate.
3 Is that correct?
4 A. That's correct.
5 Q. And the principal value as to the petition date for the
6 loans in that bucket is how much, sir?
7 A. I believe it's 225 million dollars.
8 Q. Okay. So going from roughly 225 to 150?
9 A. It's in that range, off the top of my head.
10 Q. Okay, okay. But you never informed anyone at LNR or the
11 master servicer prior to the petition date of that fact, did
12 you?
13 A. I informed them that I believed that the value of their
14 collateral is substantially less with regard to some properties
15 than the amount that we owed on them. So I was
16 while -- within sixty days of the bankruptcy case, I had
17 provided LNR with regard -- all of the P&Ls, all of the due
18 diligence information that they requested. I talked to them
19 about the situation; I allowed them to visit the properties.
20 They started dong their appraisals and we cooperated in that
21 regard and I told them that my view was that they were under-
22 collateralized and that the value.of the property-- the value
23 of the properties were less than the value of their debt
24
25
Q. Okay, but --
A. -- so I had full communication --
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Q. despite -- despite the sharing of that information,
despite the fact that you had conversations with LNR as
recently as a few weeks prior to the petition date and despite
the fact that this peppercorn of an idea by that point had
b ~ c o m e fully baked, you were never sure -- shared the specifics
of the term sheet reduction of the 225 to 150. Isn't that
correct?
A. At that time, the peppercorn wasn't fully baked. We were
still in substantive discussions with Lehman Brothers and no, I
did not discuss it with them and no, I did not discuss it with
Midland until days before we filed the bankruptcy case.
Q. Now earlier in your testimony, you testified that as part
of this deal Lehman would be getting equity of the entire
enterprise. That's correct?
A. That's correct.
Q. Okay. And does Lehman have claims against any debtors
other than the debtors that comprise the borrowers of the
floating-rate pool?
A. No, they do not.
Q. Okay. But they --
MR. GOTTESMAN: Withdrawn.
Q. If I understand your earlier testimony the plan that's
contemplated by the plan support agreement and the plan term
sheet contemplates that the properties and the other secured
debt pool will be fully encumbered. In other words, the loans
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1 standards. First, the negotiations surrounding the PSA
2 preclude me from finding that it was a disinterested business
3 transaction. Indeed, it is clear from the evidence presented
4 that even as early as April 2010 Apollo, the holder of 100
5 percent of the equity in debtor Grand Prix Holdings LLC and the
6 debtors' ultimate parent, was always intended to receive equity
7 as part of the transaction, either directly as a backstop party
8 or through a side deal with Lehman negotiated just before the
9 petition date. Apollo also appears to have been directly and
10 inextricably involved in the negotiations and concept of the
11 plan related transactions from the time the deal, as described
12 by Mr. Beilinson, was a peppercorn.
13 I also cannot conclude that the PSA was entered into
14 with due care. And I note that the due care prong is also
15 directly related to the fair process inquiry of the entire
16 fairness test. As one objector has pointed out, the
17 transaction not only has to be fair but it has to look fair as
18 well. The testimony of Mr. Beilinson that the deal embodied in
19 the plan term sheet was not shopped in the market prior to
20 signing the PSA nor did Mr. Beilinson have any intention of
21 shopping it or disclosing to the other secured parties that the
22 potential Lehman deal was on the table during the pre-petition'
23 period. It is troubling that when Mr. Beilinson and his team
24 met with Midland on April 28th they neglected to disclose the
25 potential Lehman deal that had been outlined at a meeting with
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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 discussioris 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 ~ i g h t 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 supposed to be about. To the contrary/ a number of the
2 objectors point out that a debtor's exclusive period was
3 intended by Congress to provide for an opportunity for the
4 debtor to negotiate with its constituents and reach a
5 consensual plan/ a successful plan.
6 And others cite to cases in this district for the
7 proposition that exclusivity should not be employed as a
8 tactical device to put pressure on parties .to yield to a plan
9 they consider unsatisfactory. The PSA has had such an effect
10 on the debtors' estates by tying all parties to a plan which
11 lacks support from nearly the entire capital structure and
12 preventing the debtors from negotiating in good faith with
13 their numerous constituents who will eventually be required to
14 vote on a plan.
15 Finally/ I will look at the alleged benefit to the
16 debtors' estates in assumption of the PSA and whether the
17 debtors have complied with their fiduciary duties in pursuing
18 the proposed plan transaction thus far.
19 The general standard under Section 365
1
which certain
20 of the objectors argue is not applicable here
1
requires me to
21 determine whether the assumption of the agreement at issue
22 would be a good business decision based on a review of the
23 totality of the circumstances. Here the PSA affords minimal
24 benefit to the debtors and there is little basis for me to
25 conclude it is beneficial or appropriate for the estates of the
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debtors, in particular the nonfloating-rate debtors.
The debtors assert that by equitizing Lehman's over
200 million dollars in secured debt this confers a benefit on
the estate by: (1) creating substantial unencumbered assets,
and {2) freeing up substantial cash flow that would otherwise
go to pay debt service. In this matter, they assert,
equitization of Lehman's debt would thus allow for the
remaining CMBS pools of secured debt to take debt. I do not
believe, however, that the alleged advantages conferred by the
equitization outweigh giving Lehman the amount of power over
these cases that the PSA confers.
The broad termination events contained in the PSA
permit Lehman to walk away and terminate the consensual use of
its cash collateral upon the occurrence of a laundry list of
different events, even in a variety of situations over which
the debtors have no control.
In exchange for Lehman's support, the debtors have
agreed, (1) to refrain from seeking competitive proposals which
could maximize the value of these estates; (2) reimburse
Lehman's costs, and in certain instances, consent to a lifting
of the stay to allow Lehman to exercise its remedies without
further court approval.
The debtors argue that up until the 240th day after
the petition date, in the case of a breach, Lehman's only
remedies are to terminate consensual use of cash collateral or
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1 to seek enforcement of the PSA. If the termination events
2 merely triggered the loss of Lehman's support for the proposed
3 restructuring this would be typical of many plan support
4 agreements approved in this district. Because, however, such
5 events also trigger a termination of the consensual use of
6 Lehman's cash collateral, and in certain instances a lifting of
7 the stay, they cannot be sustained. Simply put, to allow
8 Lehman to wield that much power over the fate of these cases is
9 unacceptable. Lehman's eleventh hour assurance that it will
10 not exercise a right to terminate in certain instances is of
11 little comfort, nor do I believe it changes the result here
12 dictated.
13 Finally, and of paramount importance, I believe that
14 the so-called fiduciary out, as written, is flawed. It
15 prohibits the debtors from taking actions consistent with their
16 fiduciary obligations. Fiduciaries owe duties of care and
17 loyalty and courts have held that these duties apply with equal
18 or greater force in the context of a sale of assets. Even
19 without Section 25(c), the fact that the debtors agree to this
20 provision causes me to question the debtors' honest interest in
21 exercising due care.
22 In a bankruptcy case, it is Bankruptcy 101 that the
23 debtor and its board of directors owe fiduciary duties to the
24 debtors' creditors to maximize the value of the estate and each
25 of the estates in a multi-debtor case. As Judge Gerber held in
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Adelphia, in a case with multiple debtors the debtors as
fiduciaries have duties to refrain from favoring or appearing
to favor one or another of their estates and its creditors over
another. The debtors have not done so here.
While the debtors focus on the, quote, "fiduciary
out", unquote, contained in Section 25(a) of the PSA which
provides that the company or its directors or officers shall be
entitled to take any action or refrain from taking any action,
including a decision to terminate the PSA that such person
determines in good faith is consistent with its or their
fiduciary obligations under applicable law. The debtors
repeatedly seem to ignore the effect of Section 25(c) on this
provision.
Section 25(c) of the PSA is an exception to the
fiduciary out set forth in Section 25(a), and as asserted by
nearly all of the objectors, it curtails its effectiveness and
prohibits the debtors and their directors and officers from
fully complying with their fiduciary duties. It provides that
the fiduciary out shall not apply and cannot be used to, quote,
"annul, modify, amend, or otherwise alter", end quote, any of
the plan milestones set forth in the PSA unless the debtors are
doing so in pursuit of an alternative transaction that will
provide Lehman with a higher and better recovery than that
proposed under the plan contemplated by the PSA.
While the debtors argue that Section 25(c) provides
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EXHIBITB
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
---------------------------------*
In re:
INNKEEPERS USA TRUST, et al.,
Debtors.
---------------------------------*
Chapter 11
CASE NO.
10'::.. 13800 (sec)
Deposition of MARC A. BEILINSON, called as
a witness for examination, held at the offices of
Kirkland & Ellis LLP, 601 Lexington Avenue, New
York, New York, on Thursday the 12th day of August
2010, commencing at 9:0.5 a.m., before Josephine H.
Fassett, a Registered Professional Reporter,
Certified Livenote Reporter and Notary Public of the
State of New York.
JOB NO. 19763
1
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1 Marc A. Beilinson
2 entities prefiling for global restructuring?
3
A I was negotiating with all parties to
4 determine their interest in being a participant
5 including Midland.
6
Q Are there any term sheets you can
7 recall where Innkeepers delivered proposed terms for
8 a global restructuring to other constituencies other
9 than Lehman?
10
A No. Because Midland showed no
11 interest in anything having to do with a
12 restructuring of this enterprise.
13
Q My question is: Did you send a term
14 sheet or deliver a term sheet proposal to other,
15 let's start with, creditors of the various
16 Innkeepers entities for global restructuring?
17
A No, but pieces within an integrated
18 global restructuring, yes, I did sign a term sheet
19 with Marriott, signed a term sheet with Lehman,
20 negotiated with every other creditor constituent
21 that I could.
22
Q So your answer is no?
23
A I only signed one Plan Support
24 Agreement with Lehman.
25
MR. DONOVAN: Do you want to take a
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2 interest in in connection with a plan of
3 reorganization, and I was completely stonewalled.
4 So no, I didn't show them the Lehman transaction,
5 but Midland showed absolutely no interest in being
6 involved in the internal restructuring, so.
7
Q Did you shop the deal to any outside
8 investors to come in and do a third-party
9 restructuring of the company not within the confines
10 of the creditor constituency?
11
A No, I did not.
12
Q Did you shop it since the filing of
13 the bankruptcy case?
14
A No, I have not.
15
Q When the Board of Directors of, or the
16 Board of Trustees met prior to the filing of the
17 bankruptcy case to approve the PSA and the Plan Term
18 Sheet, what options to that PSA did you discuss with
19 the board had been explored by the company prior to
20 the filing of the bankruptcy case?
21
MR. DONOVAN: Objection. You just
22
asked him the day before?
23
MR. PARKINS: Before the filing --
24
MR. DONOVAN: Okay.
25
MR. PARKINS: -- of the PSA.
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2 to do a better deal?
3
A Well, the only other creditor in a
4 position that had a substantial amount of assets
5 that could be converted was Midland. And, as I said
6 earlier, I didn't believe that Midland had an
7 interest in converting their debt to equity, which
8 actually has proven to be accurate in the fact that
9 Kevin Simone told me even last week that they never
10 had an interest, nor could they take equity. So
11 there was only one party I could shop it within the
12 internal structure to and that party had no
13 interest.
14
Q Did you approach any creditor
15 constituency asking them to look at this Lehman
16 suggested proposal you made and come up with a
17 structure to address the issues you had and to
18 compete with the Lehman proposal?
19
A I talked to creditors about all sorts
20 of things.
21
Q Did you take these pages of the Lehman
22 presentation and show them to creditors and say:
23 This is the end result I want, can we do better than
24 that, can you come up with something better than
25 that?
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2
A No, not at that time.
3
Q
Have you shown this proposal to anyone
4 else other than the fact that it was filed with the
5 court prior to the filing of this stuff with the
6 court?
7
A No.
8
Q
Did you since the bankruptcy filing,
9 okay, talk to third parties, not creditors, about
10 doing a better transaction or an alternative
11 transaction of this Lehman proposal?
12
A Yes.
13
Q And have you offered them due
14 diligence access in order to make a proposal?
15
A No, because none of the proposals were \
16 in my business judgment better or viable or
17 accretive as a fiduciary to this bankruptcy estate.
18
Q You have experience as a bankruptcy
19 lawyer, how do I make proposal to acquire a company
20 unless I get due diligence first?
21
A You know, my obligation as a fiduciary
22 is to do an internal restructuring. The Bankruptcy
23 Code, as you know, was set up so that I have an
24 exclusive period of time to negotiate within the
25 capital structure to propose a plan that could be
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1 Marc A. Beilinson
2 accepted or rejected by creditors and they have to
3 meet the confirmation requirements set forth in
4 1129(a) or (b) of the Bankruptcy Code.
5 I believe that we have an internal
6 restructuring that meets all the requirements of
7 1129, is confirmable and in the best interest of
B this bankruptcy estate in the exercise of my
9 fiduciary duty. And I tend to move forward unless a
10 transaction presents itself that I believe as a
11 fiduciary is better. I haven't
12
Q Better for you or better for Lehman,
13
sir?
A
Q
A
Q
18 diligence room for third-party non-creditor entities
19 to go do due diligence in order to make a proposal?
20
A No. I'm in my exclusive period where
21 I intend to fulfill my obligations under the PSA to
22 file an internal plan of reorganization for the
23 enterprise and will allow Midland and others to
24 object to confirmation and to vote to accept or
25 reject the plan. I, unlike others, don't believe
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1 Marc A. Beilinson
2 that this is going to end up being a non-consensual
3 resolution with Midland. I think this is part of
4 the process, including my deposition being taken by
5 you, and that we'll enter into negotiated
6 resolutions at some point in time, whether it's
7 today or two months from now.
8
Q So at the present time you reject the
9 concept of shopping this company to get a different
10 alternative transaction?
11
A I don't think that's a requirement
12 under the Bankruptcy Code or even during my
13 exclusive period of time and I don't think that's in
14 the best interest of this bankruptcy estate.
15
Q So the answer is yes, you reject that
16 proposition?
17
MR. DONOVAN: Asked and answered. His
18 answer stands.
19 BY MR. PARKINS:
20
Q That's how you view your fiduciary
21 duty, to just go with this deal and no other
22 alternative deal at this time?
23
MR. DONOVAN: Object. Objection to
24
form.
25
THE WITNESS: How about a lunch break?
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2 that --
3
MR. DONOVAN: Objection --
4
Q -- termination of exclusivity?
5
MR. DONOVAN: Objection. Vague.
6
Form.
7
A I'm not going to prejudge what a
8 proposal looks like. If I happen to get one, I'll
9 look at it, and make a business judgment at the
10 time.
11
Q Does the proposal have to be the firm
12 alternative transaction you described earlier?
13
A No. I think I've made it clear that
14 Section 25 sub (a) is a fiduciary out that I can
15 exercise in my business judgment.
16
Q And, therefore, since you are not
17 saying you won't engage in the dialogue, will you
18 engage in a dialogue after people do due diligence?
19
A No. Right now I believe that this
20 integrated PSA that has Marriott on board, two DIP
21 lenders on board, to d6 an internal restructuring of
22 this enterprise is clearly in the best interest of
23 the bankruptcy estate. I intend to move forward and
24 file a plan in the next 30 days that all creditor
25 constituencies can then look at, consent to, object
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1 Marc A. Beilinson
2 to, negotiate with me and have their rights under
3 1129. So at this point in time I see no reason to
4 move forward with anything other than an internal
5 restructuring of this enterprise.
6
Q You say two DIP lenders ln support of
7 the transaction, you include Five Mile in that; is
8 that correct?
9
A Well, they support doing the DIP fot
10 purposes of protecting the value of the fixed pool
11 portfolios and two o t h e r s ~
12
Q In fact, in the context of the
13 negotiations with Five Mile for the DIP, you didn't
14 tell them until right before the filing that there
15 was a Lehman transaction in place, did you?
16
A No, I told them before the
17 transaction, before
18
Q Just before?
19
A Before they executed the transaction.
20
Q Just before?
21
A What's your point?
22
Q My question is you told them just
23 before, not during the four months or the month
24 before the DIP was being negotiated, you didn't tell
25 them there was a Lehman transaction in play.
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2 me, please?
3
A I don't think we talked about how to
4 deal with each of the entities and all the
5 properties in connection with an overall
6 restructuring. We reached out to the special
7 servicer with regard to each of these properties and
8 entered into a dialogue with them which included the
9 provision to them of pretty much all due diligence
10 materials that they requested with regard to these
11 five assets. And we began discussing with the
12 special servicer the DIP facility in connection with
13 Tysons in San Diego, and the cash collateral
14 agreement with regard to all five of them.
15
Q The special servicer that you're
16 referring to is who?
17
A I can't remember the person
18 responsible at LNR.
19
Q But it was LNR as opposed to Midland
20 , or someone else?
21
A No, it was LNR.
22
Q Okay. And did you make a
23 restructuring proposal with LNR with respect to any
24 of these loans?
25
A No. I started off by providing them
DAVID FELDMAN WORLDWIDE, INC.
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1
C053239/0312771/1594381.1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
)
In re: ) Chapter 11
)
INNKEEPERS USA TRUST, et al., ) Case No. 10-13800 (SCC)
)
Debtors. ) Jointly Administered
)


ORDER GRANTING THE MOTION OF WELLS FARGO BANK, N.A., AS TRUSTEE
FOR THE REGISTERED HOLDERS OF CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP., COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2007-C1 AND U.S. BANK NATIONAL ASSOCIATION, AS
TRUSTEE FOR THE REGISTERED HOLDERS OF ML-CFC COMMERCIAL
MORTGAGE TRUST 2006-4, COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2006 TO TERMINATE EXCLUSIVITY

Upon the Motion by Wells Fargo Bank, N.A., as Trustee for the registered holders
of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through
Certificates, Series 2007-C1 and U.S. Bank National Association, as Trustee for the registered
holders of ML-CFC Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-Through
Certificates, Series 2006-4 to Terminate Exclusivity(the “Motion”)
1
and it appearing that (i) the
relief requested in the Motion is appropriate; (ii) the Court has jurisdiction over this matter
pursuant to 28 U.S.C. §§ 157 and 1334; (iii) this proceeding is a core proceeding pursuant to 28
U.S.C. § 157(b)(2); (iv) venue of this proceeding and this Motion in this District is proper
pursuant to 28 U.S.C. §§ 1408 and 1409; and (v) notice of this Motion was appropriate under the
particular circumstances and that no other or further notice need be given; and after due
deliberation and sufficient cause appearing therefore, it is hereby:
ORDERED that the Motion is GRANTED; and its is further

1
Capitalized terms used, but not otherwise defined herein, shall have the meanings set forth in the Motion.

2
C053239/0312771/1594381.1
ORDERED that exclusivity is terminated and that the Property Level Lenders are now
permitted to propose and file a plan of reorganization; and it is further
ORDERED that exclusivity is terminated and the Property Level Lenders are now
permitted to solicit acceptance of a plan (after the approval of a disclosure statement); and it is
further
ORDERED that the filing and solicitation of acceptances of any plan for confirmation by
the Property Level Lenders shall be on a time table that is no less favorable than that provided
for any competing plan, including the Lehman/AIC Plan and any plan incorporating the Five
Mile Proposal; and it is further
ORDERED that this Court shall retain jurisdiction to hear and determine all matters
arising from the implementation of this Order.
Dated: _____________, 2010
New York, New York



__________________________________________
THE HONORABLE SHELLEY C. CHAPMAN
UNITED STATES BANKRUPTCY JUDGE



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