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DEWEY & LEBOEUF LLP 1301 Avenue ofthe 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.

REDACTED VERSION

Attorneys for Ad Hoc Committee of Preferred Shareholders

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al., Debtors.

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Chapter 11 Case No. Case No. 10- 13800 (SCC) (Jointly Administered)

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AD HOC COMMITTEE OF PREFERRED SHAREHOLDERS, Movant, -againstINNKEEPERS USA TRUST, et al., Respondent.

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REPLY OF AD HOC COMMITTEE OF PREFERRED SHAREHOLDERS TO OBJECTIONS TO MOTION FOR ORDER DIRECTING APPOINTMENT OF EXAMINER PURSUANT TO SECTION 1104{c){l)-(2) OF THE BANKRUPTCY CODE
TO THE HONORABLE SHELLEY C. CHAPMAN UNITED STATES BANKRUPTCY JUDGE: The Ad Hoc Committee of Preferred Shareholders (the "Ad Hoc Committee") in the above-captioned chapter 11 cases of Innkeepers USA Trust ("Innkeepers"), 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"), files this reply in further support of its Motion, dated August 11, 2010, for an Order Directing Appointment of an Examiner Pursuant to Section 11 04( c)(I )-(2) of the Bankruptcy Code [Docket No. 179] (the "Motion"), and in reply to the limited and other objections and responses thereto filed by Midland Loan Services, Inc. ("Midland") [Docket No. 253] (the "Midland Response"), Wells Fargo Bank, N.A. ("Wells Fargo") [Docket No. 282] (the "Wells Fargo Joinder"), the Official Committee of Unsecured Creditors (the UCi' .. ) [Docket No. 263] (the "UCC Objection"), the United States Trustee (the

us Trustee .. )

[Docket No. 268] (the "US Trustee's Response"), Lehman ALI, Inc. ("Lehman") [Docket No. 270] (the "Lehman Objection"), Apollo Investment Corporation ("Apollo," and together with the UCC, Lehman, and the Debtors, the "Objectors") [Docket No. 2771 (the "Apollo Objection"), and the Debtors [Docket No. 285] (the "Debtors' Objection", together with the UCC Objection, the Lehman Objection and the Apollo Objection, the "Objections"), and respectfully represents a follows:

Summary of Argument
1. By themselves, (a) the Debtors' own

and (b) the numerous misrepresentations made by the Debtors and Apollo in their Objections as proven by uncovered in discovery, make the Ad Hoc Committee's case that (i) an examiner is mandatory due to the existence of more than $5 million of fixed, liquidated unsecured

debt, and (ii) an examiner is needed to bring sunshine, fairness, and the appearance of fairness to these cases. 2. The evidence obtained by Midland and Five Mile Capital Partners ("Five

Mile") in connection with their objections to the Debtors' motion to assume the plan support agreement between the Debtors and Lehman, dated July 17, 2010 (the .. PSi\") clearly proves that the Debtors and Apollo

of the PSA which would guarantee the wiping out of the preferred shareholders and most unsecured claims, and lead to the distribution of 100% of the stock of the reorganized Debtors to Lehman, all without ever exposing the Debtors to competitive bidding. Indeed, in lieu of a marketing process, Apollo entered into a side deal with Lehman under which Lehman agrees to sell half of the stock it receives under the Plan to Apollo. In defense, Apollo declares Lehman can terminate the sale agreement. But. since Lehman s right to terminate expires the day before the hearing on the PSA if Lehman dared to terminate, Apollo could simply instruct the Debtors not to go forward with its motion for approval of the PSA. 3. As further explained below, the evidence demonstrates that: (a) the

1 2

See Deposition Transcrivt, See Email from M

ofAmerica National Trust & Savings Ass 'n v.203 North LaSalle Street Partnership, 526
U.S. 434,440 (1999). 4. The Debtors' and Apollo's acts and conduct corroborate the need for an

examiner and make a prima facie case for the appointment of a trustee. Given the difficulty of denying admissions in ' negotiated by the Debtors and Apollo, the Objectors assert as their main grounds for opposing the appointment of an examiner that (a) the Debtors and their relationship with Apollo and Lehman are already being investigated; (b) the Ad Hoc Committee's concerns should be addressed in connection with plan confirmation; and (c) the appointment of an examiner is not mandatory because there are not $5 million of uncontingent, liquidated, unsecured claims against the Debtors' estates. 5. The objection that creditors and/or the statutory creditors' committee arc

already investigating certain topics is wholly lacking in merit because none of their discovery provides sunshine to those whose rights the Debtors would extinguish. Examiners file public reports. Creditors and committees negotiate for what they want settle, and file no report. 6. Second, the objection that the Ad Hoc Committee's issues are

confirmation issues is a universal truth not constituting a meritorious objection. The purpose of every chapter 11 case is distributable value which is the focus of all parties in interest. Bankruptcy Code sections 1129(a)(1)-(3) require that title 11 and other

applicable law be complied with for a plan to be confirmed. Thus, nearly every issue is a confirmation issue. Therefore, the notion that an examiner is inappropriate to investigate issues that arise at confirmation, is self rebutting because nearly all issues are incorporated into confirmation and no issue would be appropriate for an examination. 7. Third, appointment of an examiner is "appropriate" given the fact that it is

the Debtors' and Apollo's very actions, initially not disclosed, which require the investigation. Simply put, Apollo, which owns directly and indirectly 100% of the common stock of the Debtors, has cut an exclusive deal with Lehman under which Apollo will purchase 50% of the reorganized Debtors, while preferred shareholders have no right to purchase anything. 3 Worse yet, the Debtors' proposed chapter 11 plan eliminates the preferred shareholders' equity in up to 7 properties or joint ventures not encumbered by blanket mortgages

The Debtors and Apollo make much of the fact that the Apollo/Lehman deal is contained in a document (the "Apollo/Lehman Side Agreement"), which is separate from the PSA in support of their contention that it is an arms-length transaction. See Debtors Objection at ,!25 (Apollo ownership of the reorganized Debtors "would happen by virtue of a separate transaction between Lehman and [Apollo]"); Apollo Objection at~~ 10-11 (Apollo is "not a party to the PSA" but "entered into [an agreement] with Lehman" under which it has agreed to purchase half of the reorganized Debtors). The fact that it is in a separate agreement is irrelevant when viewed along side the clear and convincing evidence that

8.

Fourth, the Objectors argue an examiner is not mandatory under

Bankruptcy Code section 1104(c)(2) because the Ad Hoc Committee has not demonstrated there are more than $5 million of fixed, liquidated, unsecured claims, and even if that threshold is met, there is no appropriate area of examination. These arguments are equally without merit. First, it is too cute by half for the Objectors, on the one hand, to argue that the Ad Hoc Committee has not met its burden of demonstrating that there are at least $5 million of fixed, liquidated, unsecured claims while, on the other hand, they have been negotiating for months a chapter 11 plan that, for instance, replaces Midland's $825 million mortgage claim with a $500 million note, while giving Lehman ownership of72 properties when its collateral comprises only 20 properties. See Plan

Term Sheet, attached as Exhibit A 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 2. 9. Because they cannot deny that there are more than $5 million of

deficiency claims, the parties argue that deficiency claims cannot be counted towards the $5 million threshold because such claims are contingent and unliquidated today and because the lenders may make a Bankruptcy Code section 1111(b)(2) election tomorrow.

See Debtors' Objection

at~

4. But, today and when issued, the mortgage debt was fixed

and liquidated. And, the Debtors concede it is undersecured, which is equivalent to conceding the existence of unsecured debt. Moreover, no one has made a section 1111 (b)(2) election. 10. The Objectors further argue that there is no appropriate area of

examination because private parties are investigating the Debtors. The fact that the

Debtors' and Apollo's suspicious behavior has caused numerous parties to take discovery does not obviate the need for a public examination. 4 Private parties investigate for their own purposes. Examiners investigate to provide all parties with transparency and to maintain the integrity of the bankruptcy system and the appearance of fairness. 11. Finally, the Debtors, Apollo, and Lehman ask this Court, the Ad Hoc

Committee, and all parties in interest to trust their word they have not done anything wrong and that there is no "appropriate examination" to be conducted. Sorry, that is simply not possible, particularly in light of the fact that the documents and information

An examiner must be appointed to investigate how the Debtors have harmed their estates and favored Apollo.

The only materiality and relevance of creditors' investigations is they corroborate the lack of full disclosure and the existence of areas of appropriate examination.

ARGUMENT A. An Examiner Should be Appointed under Bankruptcy Code Section 1104(c)(l)


The Debtors, Apollo, and Lehman are supporting a chapter 11 plan, as

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outlined in the PSA, which benefits only the Debtors' management, Apollo, and Lehman. and harms all other constituencies. Pursuant to the PSA, Lehman will receive 100% of the stock of the reorganized Debtors in exchange for its liens against properties belonging to 20, but not 72, of the Debtors. The PSA further provides that, if the confirmation schedule deviates, and a plan is not confirmed by March 16, 2011, the automatic stay is waived and Lehman, to the detriment of the Debtors' creditors and shareholders, can take possession of its collateral. By agreeing to such onerous terms, the Debtors have all but guaranteed (if the PSA is approved) that their plan will be confirmed because the results of not confirming a plan on time are disastrous for the Debtors, their creditors, and shareholders. Simply put, the Debtors and Apollo constructed a chapter 11 strategy that says: confirm our plan that favors Apollo or the estate is dismembered. 13. The one-sided nature of the PSA alone should raise eyebrows; but when

viewed in light of the facts that the Apollo/Lehman Side Agreement, under which Apollo will regain a 50% interest in the Debtors, v

Debtors and Apollo have been acting in an effort to avoid the requirements of LaSalle, 526 U.S. 434, 440 (1999), to market the Debtors. That is the definition of bad faith and worse. Allowing such actions to remain unexamined undermines all the protections otherwise afforded to creditors and shareholders under the Bankruptcy Code. 14. Notwithstanding, the Objectors argue that appointment of an examiner is

not in the best interests ofthe Debtors' estates because (a) Midland, the UCC, and other parties in the case are already investigating the Debtors and (b) the Ad Hoc Committee has had, and will have, the opportunity to take discovery in connection with assumption of the PSA and plan confirmation. See Apollo Objection at 8-10, Debtors' Objection at 8-13, UCC Objection at 15, Lehman Objection at 3-5. This argument must fail because the investigations and discovery taking place in these cases by Midland and the UCC are being done confidentially, piecemeal, and by parties whose interests are not necessarily aligned, and are under no obligation to report their findings to this Court. The only party pursuing a broad investigation of the Debtors' actions is Midland. Midland, however, has no obligation to share its findings with the Court, creditors, or shareholders. 5 Indeed, Midland is free to settle its dispute with the Debtors and never fully pursue the matter. 15. To be clear, the U CC, which is supposed to serve the interests of all

unsecured claimholders, has no obligation to share its findings with creditors or this Court. Moreover, the UCC's investigation is focused solely on the 2007 transaction

Significantly, Midland, which has been responsible for a substantial amount of the investigation and discovery cited in the Objections, does not object to the appointment of an examiner. See Midland Response at 1. Wells Fargo has joined Midland in this position. See Wells Fargo Joinder at 2. Thus, the creditors holding the largest claims in these cases have not opposed having an examiner.

under which Apollo gained control of the Debtors. The UCC's examination will not overlap with the scope of the examination proposed by the Ad Hoc Committee. 6 16. Moreover, the fact that the Ad Hoc Committee has had and will have the

opportunity to take discovery in connection with the Debtors' motion to assume the PSA and plan confirmation does nothing to alleviate the need for an examiner. Indeed, denying the appointment of examiner less than seven weeks into a case because the issues to be investigated are "more appropriately addressed in the context of plan confirmation"

(Debtors Objection at p. 12) would completely frustrate the uncovering and disclosure of
facts when there is still time to do something about them. The Debtors and Apollo want investigations to wait until confirmation, precisely because they know that's too late for an investigation to have an impact in this case. Confirmation is too late to market the debtors. Confirmation is too late to raise financing on better terms. The Debtors and Apollo know all this and know that delaying sunshine until confirmation is tantamount to denying disclosure in time to do anything about it. Indeed, the Debtors and Apollo corroborate our argument by intentionally having made every effort to render confirmation of their plan afait accompli by ensuring fatal consequences in the event confirmation is derailed. 17. Tellingly, the Debtors also argue this Court's decision on their motion to

assume the PSA will render "any examiner's investigations beyond such date as moot."

Debtors' Objection

at~

23. This is not an objection. This is proof the Court should not

be locking in the Debtors' plan by granting the plan support motion. Under the Debtors'

Given the Debtors' efforts to confirm their plan prior to March 16, 2011, it is disconcerting to say the least that the UCC did not seek authority under Bankruptcy Rule 2004 to investigate all of the issues raised by the Ad Hoc Committee in its Motion and merely filed a reservation of rights to the motion to assume the PSA, as opposed to an objection. Who exactly is the UCC representing?

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theory, there could never be an examination of any debtor's prior acts because what's done is done. Not only is this argument ridiculous, it reflects the Debtors' next plan of action, to render any arguments against confirmation of their plan all but moot because the Debtors will have no choice but to proceed with the plan due to the penalties imposed by the PSA (i.e., Lehman gets its collateral) if the plan is not confirmed. 18. The UCC argues that the Motion is "nothing more than the [Ad Hoc

Committee's] attempt to have its issues and interests formally addressed by the Bankruptcy Court at the expense of the Debtors' estates." See UCC Objection at 7. Let's get this straight. Congress enacted the examiner statute to cause examiners to bring sunshine to chapter 11 cases, and Congress provided that parties in interest (which it defined in section 1109 to include shareholders) are entitled to request examiners, and the estate must pay for the examiner. So, what the UCC is arguing is that the Ad Hoc Committee is invoking the statute that Congress passed! All parties in interest, including
the UCC, should be interested in an investigation of the Debtors' conduct leading up to

the formation of a plan that gives a creditor, Lehman, secured by only 20 properties, 100% of the stock of the reorganized Debtors owning 72 properties. In fact, it is both surprising and distressing that the UCC does not recognize that the investigation could expose a significant claim of the Debtors' estates against Apollo. 19. The Objectors' additional arguments pertaining to the delay to these cases

caused by an examiner's investigation simply underscore the breakneck speed at which Debtors seek to have a plan locked in for all practical purposes. It is telling that the Motion, the grant of which would necessarily impact confirmation of the proposed plan, could not be heard any earlier than September 1, the same date on which Debtors' motion

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for approval of the PSA and DIP financing will be heard. The schedule for approval of a plan in these cases was established by the Debtors in their PSA and DIP financing motion-approval of the PSA and DIP financing and filing of a disclosure statement by September 2, approval of the disclosures and agreement on the sale terms between Lehman and the Debtors by November 16, and confirmation of the plan by March 16. See Debtors Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support Agreement and (B) Granting Related Relief[Docket No. 15]
at~

11. Failure to

meet any ofthese deadlines constitutes a termination event under the terms of the PSA and allows Lehman to terminate the agreement. While in any bankruptcy case, speed has the potential to save the debtors' estates money that might inure to the debtors' creditors, in this case such a schedule, with the added pressure of the potential failure in the event Lehman chooses to terminate when a milestone is missed, allows little time for investigation of the motivations of the Debtors, Lehman, and Apollo, in particular before the September 1 and November 16 deadlines. Such a timeline, coupled with the pressure tactic incorporated into the PSA, evidences that the Debtors and Apollo designed the process to make the enforcement ofthe rights of non-Lehman creditors and shareholders under the Bankruptcy Code impracticable.

B.

Appointment of an Examiner is Required Under Bankruptcy Code Section 1104(c)(2)

20.

The Objectors contend that the appointment of an examiner is not

mandatory under Bankruptcy Code section 11 04(c)(2) because the Ad Hoc Committee has not proved there are in excess of $5 million of unsecured, uncontingent liquidated claims against the Debtors. See Debtors Objection
at~~

2-4; Apollo Objection

at~

17;

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UCC Objection

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31-34. Interestingly, none of the parties deny that the threshold is

met, but instead argue that any deficiency claims are "unliquidated and not fixed and will remain so until the Court has made a valuation finding with respect to the assets collateralizing the Debtors' various secured debt obligations." Debtors' Objection at 4.
See also UCC Objection
at~

33.

21.

The fact that the Court has not made a "valuation finding" on the value of

the Debtors does not mean that the Debtors have a good faith basis to dispute that that there are at least $5 million of deficiency claims. 7 Indeed, as set forth above, the

Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of First-Day Pleadings [Docket No. 2] at ~8.

Similarly, Midland's blanket mortgage of $825 million is proposed to be addressed with a $500 million mortgage. 22. The Debtors cannot hang their hat on the fact t that any valuations are not final. It more than strains credulity to believe that the Debtors have no idea whether or not, across 92 Debtors, there

Neither of the cases cited in the Objections to support the contention that a deficiency claim can not be used to meet the $5 million threshold in section 1104(c)(2) was decided in the context of a motion for appointment of an examiner. See In re Planes, Inc., 48 B.R. 698 (Bankr. N.D. Ga. 1985) (mentioning the potential existence of a deficiency claim in connection with a ruling on plan confirmation); In re Sneijder, 407 B.R. 46 (Bankr. S.D.N.Y. 2009) (deciding not to expunge, on debtor's motion, a secured claim where it was likely a deficiency claim existed).

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are $5 million of deficiency claims. They cannot claim both (a) ignorance of the value of their properties and the amount of their secured debt and (b) that approval of the PSA, which gives Lehman 100% ofthe stock ofthe reorganized Debtors in exchange for its secured claims against 21 of the 92 Debtors, is in the best interests of the estate. Ignorance may be bliss, but it is also actionable. If the Debtors really have no idea what their assets are worth, given that they have refused to market themselves to anyone other than Lehman and Apollo, their entry into the PSA is tantamount to bad faith and "Exhibit A" to any allegation that the officers and directors have breached their fiduciary obligations. 23. In addition, it is disingenuous, to say the least, to both fail to deny that

there are $5 million of unsecured claims and rail against the Ad Hoc Committee for not submitting proof that the threshold has been met. This information is within the Debtors' knowledge and control and is not freely available to the Ad Hoc Committee. Indeed, the Debtors have requested that the Court grant them until October 1, 2010 to file their schedules of liabilities. See Debtors' Motion for an Order Further Extending the

Deadline to File Schedules ofAssets and Liabilities, Schedules of Executory Contracts and Unexpired Leases, and Statements of Financial Affairs [Docket No. 248]. The
Debtors should fess up, $5 million of deficiency claims and stop the charade. 24. The Objectors contend that, even if this Court were to determine that the md admit that there are at least

$5 million threshold has been met, appointment of an examiner is not mandatory because Bankruptcy Code section 11 04(c) requires an examiner only if "appropriate" and

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appointment in this case is "neither necessary nor appropriate." 8 Debtors Objection at 4. See also Lehman Objection
at~

6; UCC Objection

at~~

41-44; Apollo Objection

at~~

16-22. The Objectors' request that this Court ignore the District Court decision in In re Lora! Space and Commc 'ns, Ltd. 2004 WL 2979785 (S.D.N. Y. Dec. 23, 2004) in which the District Court held that appointment was mandatory if the $5 million threshold is satisfied and cite to decisions outside of this circuit in support of their construction of section 1104(c). See Debtors' Objection at~ 7; Apollo Objection at~ 17; UCC
9

Objection

at~

36; Lehman Objection

at~

7.

The US Trustee takes a contrary view and asserts in the US Trustee Response that, if the $5 million threshold has been satisfied, this Court has no alternative but to appoint an examiner. 9 Apparently in possession of a clairvoyant and presumptuous gene, the Debtors state that there are no published decisions in this circuit affirming the reasoning of Lora! Space because the "reasoning produces the undesirable result of requiring the appointment of an examiner in any chapter II case with $5 million of qualifying debt as soon as any party requests one." Debtors' Objection, I 0-II. The Debtors then cite a number of unpublished decisions from other jurisdictions refusing to appoint examiners despite the threshold being met. Should we presume that there are no published decisions in those circuits denying appointment of examiners because courts in such circuits disagree with the unpublished decisions?

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25.

Even ifthe Objectors' interpretation of section 1104(c)(2) is correct, 10

which it is not, appointment of an examiner in this case is both necessary and appropriate. The Objectors' main reasons for contending that appointment of an examiner is not appropriate are that (a) there are a number of ongoing investigations covering the same subject areas as those outlined in the Motion, (b) the issues the Ad Hoc Committee seeks to have investigated relate to plan confirmation and should be properly considered in that context, and (c) the proposed topics of examination are inappropriate because they are the product of "unsubstantiated allegations."

The Objectors principally rely upon the decisions of the United States Bankruptcy Court for the District of Delaware in In re Spansion and In re Visteon. In Spansion, the request for the examiner was made 9 months into the case, when a plan was already on file and the disclosure statement approved, and it concerned whether or not the plan on file was proposed in good faith. In this case, we are only seven weeks into the case, there is no plan on file, only a PSA which is harmful to everyone but the Debtors' management, Apollo and Lehman. In Visteon the Court denied the appointment of an examiner where there were allegations that the Company had undervalued its equity and where public filings contrasted with the Debtors' disclosures. In stark contrast, here there are substantial allegations of bad faith in the form of secret side-deals with creditors, which were hidden from the Court. Here there arc no public disclosures to use as a measuring stick. Everything has been hidden from view. In denying the appointment of an examiner, the bankruptcy court in Visteon stated, But at some point there has to be a level of smoke, if you will-- not a lot but more than none, more than just a whiff of smoke -- but some sort of indication, some sort of allegation or facts that make the Court think in a whole that, hmm, somebody needs to look into this independently and tell the Court what's going on. It's easy in Lehman or Revco to figure out that somebody's got to figure this out. Here, there's more than just a whiff of smoke. There is evidence of outright deception and ongoing manipulation of the process. Additional cases cited by the Objectors to support propositions that an examination in these cases would be inappropriate are distinguishable. See In re WorldCom, Inc., Case No. 02-13533,2003 Bankr. LEXIS 2192 (Bankr. S.D.N.Y May 16, 2003) (and finding that appointment of a second examiner was inappropriate where the powers of the first could be expanded); In re Sletteland, 260 B.R. 657 (Bankr. S.D.N.Y. 2001) (finding appointment of an examiner unnecessary where creditors with investigation power had moved for the appointment); In re Bradlees Stores, Inc., 209 B.R. 36 (S.D.N.Y. 1997) (denying a motion filed 8 months after receipt of information prompting the motion, and 19 days before the expiration of the statute of limitation for claims movants wanted examiner to prosecute); In re Schepps Food Stores, Inc., 148 B.R. 27 (S.D. Tex, 1992) (denying an emergency appeal on the eve of confirmation where the movant had waited two months after first expressing concerns to file a motion).

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26.

First, as outlined above, the ongoing investigations and the fact that

certain of the issues relate to plan confirmation do not in any way obviate the need for an examiner. The investigations currently underway are to serve each of the various creditors' private interests. The results of the investigations are unlikely to be publically available and, what is clearly needed in these cases is transparency. 27. Second, as explained above, it is entirely inappropriate to contend, on the

one hand, that the inquiry into the reasonableness of the Debtors' actions in entering into the PSA should be conducted in connection with plan confirmation and simultaneously contend, on the other hand, that after this Court approves the Debtors' entry into the PSA, an investigation of the events leading up to the PSA are moot. See Debtors' Objection at
p. 12, ~ 23.

28.

Third, and most importantly, it is the Objectors who make baseless and

false statements to this Court. For example, Apollo states that "The Debtors' chief restructuring officer has offered sworn testimony that (a) the Debtors did not engage in negotiations with AIC regarding AIC's contemplated post-reorganization purchase of equity from Lehman; (b) the Sale Agreement between AIC and Lehman was relevant to the Debtors only insofar as it would satisfy a condition precedent to Lehman's obligations under the PSA; and (c) the PSA represents an exercise of the Debtors' best business judgment." 11 These statements are false.
29.

The deposition testimony of is in itself illustrative. was the Rule 30(b)(6) witness proferred by Apollo. During his deposition, answered "I don't know," "I don't recall" or a similar phrase in response to questions no fewer than 4U times.

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17

day declaration between Apollo and Lehman was inadvertent. See Transcript ofJuly 20

hearing in In re Lehman Brothers Holdings Inc., et. al., Case No. 08-13555-JMP (Bankr.
S.D.N.Y.), attached hereto as Exhibit H, at 23-24. Indeed, the fact that the existence of the side deal was referenced in prior drafts of the first day declaration is consistent with the fact that

Moreover, if the Debtors and Apollo had truly intended to disclose the side deal, it would have been in the motion to approve the PSA. 33. Creditors and shareholders are entitled to a public report of whether the

Debtors' management and directors breached their duties of care and loyalty to the Debtors' estates in a scheme designed to benefit Apollo.

CONCLUSION
WHEREFORE the Ad Hoc Committee respectfully reiterates its request for the appointment of an Examiner to investigate the issues set forth in its Motion and Reply, and granting it such other and further relief as the Court deems just and proper.

Dated: New York, NY August 27, 2010

DEWEY & LEBOEUF LLP

/s/ Martin J. Bienenstock Martin J. Bienenstock, Esq. Irena M. Goldstein, Esq. Timothy Q. Karcher, Esq. 1301 Avenue of the Americas New York, New York 10019 Telephone: 212.259.8000 Facsimile: 212.259.6333

Attorneys for Ad Hoc Committee of Preferred Shareholders


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