Hearing Date and Time: December 14, 2010 at 10:00 a.m.

prevailing Eastern Time Objection Deadline: December 7, 2010 at 4:00 p.m. prevailing Eastern Time

James H.M. Sprayregen, P.C. Paul M. Basta KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

NOTICE OF DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH AFCO CREDIT CORPORATION1

The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480.

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PLEASE TAKE NOTICE that a hearing (the Hearing)2 for the relief requested in the above-referenced motion (the Motion) will be held before the Honorable Shelley C. Chapman, United States Bankruptcy Judge, in Courtroom No. 610 of the United States Bankruptcy Court for the Southern District of New York (the Court), Alexander Hamilton Custom House, One Bowling Green, New York, New York 10004-1408, on December 14, 2010 at 10:00 a.m. prevailing Eastern Time or such other time as counsel may be heard. PLEASE TAKE FURTHER NOTICE that any objections to the Motion: (a) must be in writing; (b) shall conform to the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules), all General Orders of the Court, the Local Rules for the United States Bankruptcy Court for the Southern District of New York, and the Notice, Case Management, and Administrative Procedures [Docket No. 68] (the Case Management Procedures) approved by the Court; (c) shall be filed with the Bankruptcy Court electronically by registered users of the Bankruptcy Courts case filing system (the Users Manual for the Electronic Case Filing System can be found at www.nysb.uscourts.gov, the official website for the Bankruptcy Court); and (d) shall be served to as to be actually received no later than December 7, 2010 at 4:00 p.m. prevailing Eastern Time by: (i) the entities on the Master Service List (as such term is defined in the Case Management Procedures), which is available at www.omnimgt.com/innkeepers, the website maintained by Omni Management Group, LLC, the Debtors notice and claims agent; and (ii) AFCO Credit Corporation. Only those objections that are timely filed, served, and received will be considered. PLEASE TAKE FURTHER NOTICE that, if no objections to the Motion are timely filed and served in accordance with this notice, the Court may enter an order granting some or all

All capitalized terms used by otherwise not defined herein shall have the meanings set forth in the Motion.

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of the relief requested in the Motion as requested by the Debtors without further notice or hearing. New York, New York Dated: November 23, 2010 /s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Counsel to the Debtors and Debtors in Possession

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Hearing Date and Time: December 14, 2010 at 10:00 a.m. prevailing Eastern Time Objection Deadline: December 7, 2010 at 4:00 p.m. prevailing Eastern Time

James H.M. Sprayregen, P.C. Paul M. Basta KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH AFCO CREDIT CORPORATION1 Innkeepers USA Trust (Innkeepers) and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors), file this motion (this Motion) for the entry
1

The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480.

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of an order, substantially in the form attached hereto as Exhibit A (the Order), (a) authorizing Innkeepers to (i) enter into a premium financing and security agreement (the PFA), a copy of the form of which is attached as Exhibit B hereto,2 with AFCO Credit Corporation (AFCO) related to certain property insurance policies that cover all but one of the Debtors hotel properties (the Policies)3 and (ii) grant AFCO a first priority security interest under the PFA in premiums that were paid in advance but are to be returned to Innkeepers due to a future cancellation or modification in the Policies (also known as unearned premiums), amounts that may become payable to Innkeepers under the Policies due to future reconciliations performed in accordance with the terms of the Policies (also known as dividends), and an increase in premiums owed to the insurance company as a result of a claim paid by the insurance company under the Policies, subject to any mortgagee or loss payee interests and subject to any applicable claim under the Final Order Authorizing the Debtors to (i) Use the Adequate Protection Parties Cash Collateral and (ii) Provide Adequate Protection to the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362, and 363 [Docket No. 402] (the Final Cash Collateral Order) of any Adequate Protection Party (as defined in the Final Cash Collateral Order) (also known as loss payments that reduce the unearned premiums) (collectively, the Security Interest), and (b) granting such other relief as is just and proper. In support of this Motion, the Debtors respectfully state as follows:
2

The PFA is for Policies with a term beginning December 1, 2010. Innkeepers and AFCO are in the process of finalizing their negotiations on the PFA, which they expect to complete at or around the time the term of the Policies begin. Once the terms are final, in the event the terms materially differ from the terms contained in the form PFA attached as Exhibit B, the Debtors will file a notice and attach the final PFA and include any appropriate information. The Policies do not cover the Debtors hotel property located in Fort Walton Beach, Florida, which property is covered by the insurance program of the third party that manages the property. Contemporaneously with the filing of this Motion, the Debtors have filed a motion for the financing of insurance premiums for insurance policies providing coverage for general liability, automobile liability, crime, workers compensation, employers practice liability, liquor liability, and umbrella liability.

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Jurisdiction 1. The United States Bankruptcy Court for the Southern District of New York

(the Court) has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. 3. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory bases for the relief requested herein are sections 363 and 364 of title

11 of the United States Code (the Bankruptcy Code), Rule 4001 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules), and Rule 4001-2 of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules) Background 4. On July 19, 2010 (the Petition Date), each of the Debtors filed a petition with

the Court under chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases). The Chapter 11 Cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee has been made in the Chapter 11 Cases. On July 28, 2010, the United States Trustee for the Southern District of New York (the U.S. Trustee) appointed an official committee of unsecured creditors (the Creditors Committee). 5. Additional information regarding the Debtors business, capital structure, and the

circumstances leading to the Chapter 11 Cases is contained in the Amended Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of First-Day Pleadings [Docket No. 33, as supplemented by Docket No. 516].

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Relief Requested 6. By this Motion, the Debtors seek entry of an order: (a) authorizing Innkeepers to

(i) enter into the PFA with AFCO and (ii) grant AFCO the Security Interest; and (b) granting such other relief as is just and proper. Concise Statement Pursuant to Bankruptcy Rule 4001 and Local Bankruptcy Rule 4001-2 7. Pursuant to Bankruptcy Rules 4001(c) and (d) and Local Bankruptcy Rule

4001-2, the following is a concise statement and summary of the proposed material terms of the PFA as expected based on current negotiations between the Debtors and AFCO and the Order:4
Material Terms of the Postpetition Financing PFA Parties Fed. R. Bankr. P. 4001(c)(1)(B) Maturity Fed. R. Bankr. P. 4001(c)(1)(B) Purpose and Limitations Fed. R. Bankr. P. 4001(c)(1)(B), 40012(a)(9) Interest Rate Fed. R. Bankr. P. 4001(c)(1)(B) Amount Financed Local Bankruptcy Rule 4001-2(a)(1); Fed. R. Bankr. P. 4001(c)(1)(B) Material Conditions to Borrowing Local Bankruptcy Rule Debtor Party: Innkeepers USA Trust Lender Party: AFCO Credit Corporation (PFA, at p. 1) Innkeepers final payment under the PFA is due July 1, 2011. (PFA, at p. 1) Funds obtained under the PFA will be used to finance certain premium payments or down payments being advanced by AFCO to certain insurance companies for certain property insurance policies. (PFA, at pp. 1-2) 3.68% annual percentage rate (PFA, at p. 1) Approximately $1,067,332.00 (PFA, at p. 1)

Innkeepers shall pay AFCO a cash down payment of approximately $582,668.00. Innkeepers shall repay AFCO in seven monthly payments of approximately

This summary is qualified in its entirety by reference to the applicable provisions of the final PFA, which the Debtors will attach to the notice that they will file with the finalized PFA in the event the terms of the final PFA materially differ from the terms contained in the form PFA attached as Exhibit B. To the extent there exists any conflicts between this summary and the provisions of the final PFA, the provisions of the final PFA shall govern.

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Material Terms of the Postpetition Financing 4001-2(a)(2); Fed. R. Bankr. P. 4001(c)(1)(B) $154,702.10 beginning on January 1, 2011. Innkeepers and AFCO shall execute the PFA, including the making of certain representations and warranties. (PFA, at pp. 1,3) Fees and Expenses: Approximately $15,532.70 (PFA, at p. 1)

Fees and Expenses Local Bankruptcy Rule 4001-2(a)(3); Fed. R. Bankr. P. 4001(c)(1)(B) Liens and Priorities Local Bankruptcy Rule 4001-2(a)(4); Fed. R. Bankr. P. 4001(c)(1)(B)

Pursuant to the PFA, Innkeepers will grant AFCO a first priority security interest in the Policies in unearned premiums and dividends that may become payable under the Policies and loss payments that reduce the unearned premiums, subject to any mortgagee or loss payee interests and subject to any applicable claim under the Final Cash Collateral Order of any Adequate Protection Party (as defined in the Final Cash Collateral Order (as described above). (PFA, at p. 3; Order, at 4)

Events of Default Local Bankruptcy Rule 4001-2(a)(10); Fed. R. Bankr. P. 4001(c)(1)(B) Automatic Stay & Remedies Local Bankruptcy Rule 4001-2(a)(10); Fed. R. Bankr. P. 4001(c)(1)(B)

The PFA includes defaults if payments are not made when due. (PFA, at p. 3)

In the event that Innkeepers defaults under the terms of the PFA (subject to any applicable cure periods under the PFA), AFCO may exercise such rights as it may otherwise have under state law, but for the pendency of the Chapter 11 Cases and, without the necessity of further application to the Court, cancel the Policies (or any amendment thereto) and receive and apply the unearned premiums to Innkeepers account and the automatic stay shall automatically modify to enable AFCO to exercise such rights. (Order, at 5)

The PFA 8. The Debtors request entry of an order, pursuant to sections 363 and 364 of the

Bankruptcy Code, for Innkeepers to enter into the PFA. The Debtors believe that the Court has already granted Innkeepers the authority to enter into the PFA in the Order Authorizing, but not Directing, the Debtors to (A) Maintain Prepetition Insurance Policies and Premium Financing Agreements and (B) Pay All Prepetition Obligations in Respect Thereof [Docket No. 186] (the

5
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Insurance Order).5 The terms of the insurance premium financing, including the interest rate, timing of payment, and remedies, are similar in all material respect to the premium financing agreements entered into by the Debtors in the past, including those referenced in the motion seeking approval of the Insurance Order.6 AFCO, the company that has offered to provide Innkeepers the best insurance premium finance agreement under the circumstances for the Policies, however, has conditioned its willingness to enter into the PFA upon the Debtors obtaining a court order explicitly authorizing Innkeepers to enter into the PFA with AFCO and providing for related relief requested herein. Accordingly, at the request of AFCO, the Debtors seek the relief requested herein to permit Innkeepers to enter into the PFA and obtain the considerable benefits provided thereunder. 9. Pursuant to the PFA, AFCO will provide financing to Innkeepers for the Policies,

which provide property insurance coverage. The Policies are essential to the preservation of the value of the Debtors business, properties, and assets. Moreover, in many cases, insurance coverage such as that provided by the Policies is required by the regulations, laws, and contracts that govern the Debtors commercial activities. Further, the guidelines of the Office of the United States Trustee for the Southern District of New York (the U.S. Trustee) require debtors to maintain insurance coverage throughout their chapter 11 proceedings. 10. The PFA, which the Debtors believe represents the best financing available to

Innkeepers under the circumstances, will allow Innkeepers to pay the insurance premiums for the

Specifically, paragraph four of the Insurance Order provides that the Debtors are authorized, but not directed, to enter into new policies and [premium finance agreements] on an as-needed basis during the postpetition period without further Court approval. See Debtors Motion for the Entry of an Order Authorizing, but not Directing, the Debtors to (A) Maintain Prepetition Insurance Policies and Premium Financing Agreements and (B) Pay All Prepetition Obligations in Respect Thereof [Docket No. 17] at 8-12.

6
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Policies over the applicable coverage periods7 and help Innkeepers manage its cash flow with reasonable financing costs. The PFA will finance total premiums of approximately

$1,067,332.00. The terms of the PFA provide that Innkeepers pay AFCO an initial down payment of approximately $582,668.00, followed by seven monthly installments,8 each in the amount of approximately $154,702.10 (bearing an annual interest rate of 3.68 percent), in exchange for AFCOs agreement to pay the insurance premiums to the insurance companies that will provide the Debtors with coverage under the Policies. 11. As collateral to secure the repayment of the indebtedness due under the PFA,

Innkeepers seeks to grant AFCO the Security Interest, which grants AFCO a security interest (but only to the extent permitted by applicable law) in unearned premiums and dividends that may become payable under the Policies and loss payments that reduce the unearned premiums, subject to any mortgagee or loss payee interests and subject to any applicable claim under the Final Cash Collateral Order of any Adequate Protection Party (as defined in the Final Cash Collateral Order) (as described above) (collectively, the Collateral). Further, pursuant to the terms of the PFA, in the event that Innkeepers defaults under the terms of the PFA (subject to any applicable cure periods under the PFA), AFCO may exercise such rights as it may otherwise have under state law, but for the pendency of the Chapter 11 Cases, and, without the necessity of further application to the Court, cancel the Policies (or any amendment thereto), and receive and apply the unearned premiums to Innkeepers account and the Debtors have consented to the automatic modification of the automatic stay to enable AFCO to exercise such rights. In

addition, in the event that, after such application of unearned premiums, any obligations due to
7 8

The coverage period for the Policies begins December 1, 2010 and extends through November 30, 2011. In the ordinary course of business and in accordance with the Insurance Order, Innkeepers expects to have made the down payment and make the first of the monthly payments before the hearing on the Motion.

7
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AFCO pursuant to the PFA have not been paid, such obligations shall be an allowed claim in the Chapter 11 Cases with priority as an administrative expense pursuant to section 503(b)(1) of the Bankruptcy Code. The Debtors submit that the granting of the liens in accordance with this Motion does not violate the terms of either of their two debtor-in-possession financing facilities,9 nor does it violate the terms of the final cash collateral order.10 12. The Debtors believe the terms of the PFA, including the granting of the Security

Interest, are commercially fair and reasonable and represent the best such financing available. In light of the importance of maintaining insurance coverage with respect to their business activities and preserving liquidity by financing certain of the insurance premiums under the Policies, the Debtors believe it is in the best interests of their estates to receive the Courts approval for Innkeepers to enter into the PFA. Basis for Relief 13. As discussed above, the Debtors believe the Court already has approved

Innkeepers entry into the PFA in the Insurance Order, and the Debtors are seeking the relief requested herein out of an abundance of caution and based on the requirement from AFCO. Innkeepers entry into the PFA is appropriate under section 363 of the Bankruptcy Code. Courts approve transactions under section 363(b) of the Bankruptcy Code using a business judgment standard. See, e.g., In re Lionel Corp., 722 F.2d 1063, 1070 (2d Cir. 1983) (noting that under normal circumstances, courts defer to a trustees judgment concerning use of property under
9

See Exhibit 1 to the Final Order Authorizing the Debtors to Obtain Postpetition Senior Secured Super-Priority Debtor-In-Possession Financing From Five Mile Capital II Pooling International LLC Pursuant to 11 U.S.C. 105, 361, 362, 364(c), 364(d) and 364(e) [Docket No. 400] at 5.02(a); Final Order Pursuant to Bankruptcy Code Sections 105, 361, 362, 363, 364 and 507 (I) Authorizing Floating Rate Debtors to Obtain Postpetition Financing and (II) Granting Liens and Super-Priority Claims [Docket No. 385] and Exhibit B to the Supplement to the Debtors Motion for the Entry of an Order Authorizing the Debtors to Obtain Postpetition Financing from an Affiliate of Lehman Ali Inc. on a Priming Basis Pursuant to Sections 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code [Docket No. 200] at 5.2.1. See Final Cash Collateral Order.

10

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section 363(b) when there is a legitimate business justification); Meyers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996) (same). A debtor has the burden of establishing that a valid business purpose exists for the use of estate property in a manner outside the ordinary course of business. See Lionel Corp., 722 F.2d at 1071. 14. Entry into the PFA is a valid exercise of the Debtors business judgment. The

PFA provides numerous benefits to the Debtors, including the ability to preserve liquidity and manage their cash flow by financing certain of the insurance premiums under the Policies at a reasonable rate. As discussed in the motion to approve the relief granted in the Insurance Order, Innkeepers has entered into premium financing agreements similar to the PFA in the past due to the benefits they provide. Since the coverage period under the Policies begins on December 1, 2010 (before a hearing will take place on this Motion) and the coverage period under the Debtors previous policies ends on November 30, 2010, AFCO has agreed to extend Innkeepers credit for a short period of time to permit Innkeepers to obtain the relief sought in this Motion and permit Innkeepers to bind the Policies to avoid any lapse in coverage. In the event that Innkeepers does not obtain the relief sought in this Motion, AFCO has asserted that they will not extend credit to finance the Policies. This would force Innkeepers to obtain replacement

financing on an expedited basis (and likely at greater expense, if replacement financing is available at all) in order to maintain the Policies without having to pay the entire annual premiums now or risk a lapse in coverage. Because the terms of the PFA are commercially fair and reasonable and because the ability of Innkeepers to finance the premiums for insurance coverage benefits the Debtors estates, entry into the PFA by Innkeepers is supported by valid business purposes and appropriate under section 363(b).

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15.

Further, sufficient cause exists for the Court to authorize Innkeepers to grant the

Security Interest. Section 364 provides, in relevant part, [i]f the [debtor] is unable to obtain unsecured credit . . . , the court, after notice and a hearing, may authorize the obtaining of [secured] credit or the incurring of [secured] debt . . . 11 U.S.C. 364(c). Section 364 authorizes a debtor, in the exercise of its business judgment, to incur secured debt if the debtor has been unable to obtain unsecured credit and the borrowing is in the best interests of the estates. See, e.g., In re Mastercraft Interiors, Ltd., Case Nos. 06-12769, 06-12770, 2006 WL 4595946, at *4 (Bankr. D. Md. Aug. 10, 2006) (authorizing the debtors incurrence of secured financing because the debtors financing needs were immediate and critical to the success of the proceedings and the debtor was unable to obtain unsecured credit); In re Budget Group, Inc., Case No. 02-12152, 2002 Bankr. LEXIS 1050 (Bankr. D. Del. Aug. 1, 2002) (court authorized funding of acquisition of property on a secured basis where acquired property was necessary to maintain operations and debtors could not obtain such funding on an unsecured basis); In re Ames Dept. Stores, 115 B.R. 34, 38 (Bankr. S.D.N.Y. 1990) (with respect to postpetition credit, courts permit debtors-in-possession to exercise their basic business judgment consistent with their fiduciary duties). Generally, lenders are unwilling to finance insurance premiums on an unsecured basis. Further, section 364(c) does not impose a duty on the debtor to request

unsecured credit from every potential lender before seeking secured credit. See In re Snowshoe Co., Inc., 789 F.2d 1085, 1088 (4th Cir. 1986). 16. Courts in this and other jurisdictions have approved relief similar to the relief

requested in this Motion with respect to premium financing agreements. See, e.g., Insurance Order at 4; Mark IV Indus., Inc., Case No. 09-12795 (Bankr. S.D.N.Y. May 27, 2009) [Docket No. 163]; In re Charter Commcns, Inc., Case No. 09-11435 (Bankr. S.D.N.Y. Apr. 15, 2009)

10
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[Docket No. 191]; In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. Apr. 13, 2009) [Docket No. 179]; In re Tronox Inc., Case No. 09-10156 (Bankr. S.D.N.Y. Feb. 6, 2009) [Docket No. 141]; In re Lyondell Chem. Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 8, 2009) [Docket No. 75]; In re Lenox Sales, Inc., Case No. 08-14679 (Bankr. S.D.N.Y. Dec. 16, 2008) [Docket No. 125]; In re Wellman, Inc., Case No. 08-10595 (Bankr. S.D.N.Y. Feb. 26, 2008) [Docket No. 40]; In re Musicland Holding Corp., Case No. 06-10064 (Bankr. S.D.N.Y. Feb. 1, 2006) [Docket No. 341]; In re Calpine Corp., No. 05-60200 (Bankr. S.D.N.Y. Jan. 4, 2006) [Docket No. 267].11 17. For the reasons set forth herein, Innkeepers should be authorized to enter into the

PFA and grant the Security Interest. Motion Practice 18. This Motion includes citations to the applicable rules and statutory authorities

upon which the relief requested herein is predicated and a discussion of their application to this Motion. Accordingly, the Debtors submit that this Motion satisfies Rule 9013-1(a) of the Local Rules for the United States Bankruptcy Court for the Southern District of New York. Waiver of Bankruptcy Rule 6004(a) and 6004(h) 19. To implement the foregoing successfully, the Debtors seek a waiver of the notice

requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use, sale, or lease of a property under Bankruptcy Rule 6004(h). The Debtors Reservation of Rights 20. Nothing in the Motion or the Order, nor as a result of the Debtors payment of

claims pursuant to the Order, shall be deemed or construed as: (a) an admission as to the validity or priority of any claim against the Debtors; (b) a waiver of the Debtors rights to dispute any
11

Because of the voluminous nature of the orders cited herein, the orders are not attached to the Motion. Copies of these orders are available on request of Debtors counsel.

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claim; or (c) an approval or assumption of any agreement, contract, or lease pursuant to section 365 of the Bankruptcy Code. Notice 21. The Debtors have provided notice of this Motion to: (a) the entities on the Master

Service List (as such term is defined in the Notice, Case Management, and Administrative Procedures [Docket No. 68]), which is available at www.omnimgt.com/innkeepers, the website maintained by Omni Management Group, LLC, the Debtors notice and claims agent; and (b) AFCO. The Debtors respectfully submit that no further notice is necessary. No Prior Request 22. Other than the motion to approve the relief granted in the Insurance Order, no

prior request for the relief sought in this Motion has been made to this or any other court.

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WHEREFORE, the Debtors respectfully request that the Court enter an order, substantially in the form attached hereto as Exhibit A, granting the relief requested herein and granting such other relief as is just and proper.

New York, New York Dated: November 23, 2010

/s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Counsel to the Debtors and Debtors in Possession

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EXHIBIT A Proposed Order

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

ORDER AUTHORIZING THE DEBTORS TO ENTER INTO A PREMIUM FINANCING AND SECURITY AGREEMENT WITH AFCO CREDIT CORPORATION1 Upon the motion (the Motion)2 of the Debtors, as debtors and debtors in possession (collectively, the Debtors), for the entry of an order (this Order) (a) authorizing the Debtors to (i) enter into the PFA and (ii) grant the Security Interest and (b) granting such other relief as is just and proper; it appearing that the relief requested is in the best interests of the Debtors estates, their creditors, and other parties in interest; the Court having jurisdiction to consider the Motion and the relief requested therein pursuant to 28 U.S.C. 157 and 1334; consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157(b); venue being proper before this court pursuant to 28 U.S.C. 1408 and 1409; notice of the Motion having been adequate and appropriate under the circumstances; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. The Motion is granted to the extent provided herein.

The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480. All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Motion.

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2.

Innkeepers is authorized to enter into the PFA. To the extent that the PFA differs

from this Order, this Order shall control. 3. Innkeepers is authorized to timely make all payments due under the PFA, and

AFCO is authorized to receive and apply such payments to the indebtedness owed by Innkeepers to AFCO as provided in the PFA. 4. Pursuant to section 364(c) of the Bankruptcy Code and the terms of the PFA,

Innkeepers is authorized to grant to AFCO a first priority security interest under the PFA in unearned premiums and dividends that may become payable under the Policies and loss payments that reduce the unearned premiums, subject to any mortgagee or loss payee interests and subject to any applicable claim under the Final Cash Collateral Order of any Adequate Protection Party (as defined in the Final Cash Collateral Order) (collectively, the Security Interest). 5. In the event that Innkeepers defaults upon any of the terms of the PFA (subject to

any applicable cure periods under the PFA), AFCO may exercise such rights as it may otherwise have under state law, but for the pendency of the Chapter 11 Cases and, without the necessity of further application to the Court, cancel the Policies (or any amendment thereto) and receive and apply the unearned premiums to Innkeepers account and the automatic stay shall automatically modify to enable AFCO to exercise such rights. 6. In the event that, after such application of unearned premiums, any obligations

due to AFCO pursuant to the PFA have not been paid, such obligations shall be an allowed claim in the Chapter 11 Cases with priority as an administrative expense pursuant to section 503(b)(1) of the Bankruptcy Code.

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7.

The Debtors are authorized, but not directed, to enter into new premium financing

and security agreements on an as-needed basis with an entity providing insurance premium financing, including AFCO, during the postpetition period without further Court approval. 8. The terms and conditions of this Order shall be immediately effective and

enforceable upon its entry. 9. All time periods set forth in this Order shall be calculated in accordance with

Bankruptcy Rule 9006(a). 10. The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 11. This Court retains jurisdiction with respect to all matters arising from or related to

the implementation of this Order. New York, New York Dated: ___________, 2010 United States Bankruptcy Judge

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EXHIBIT B PFA

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AFCO
TOTAL PREMIUMS

Premium Finance Agreement

14 Wall Street, Suite 8A-19, New York, NY 10005 TEL. NOS. 212-401-4400 800-288-0787
AGENT (NAME & PLACE OF BUSINESS) PRODUCER CODE NO.

(CHECK APPROPRIATE BOX) PERSONAL

COMMERCIAL

10361381

INSURED (NAME & RESIDENCE OR BUSINESS ADDRESS)

1,591,000.00
DOWN PAYMENT

Aon Risk Services Northeast, Inc. 199 Water Street 35th Floor New York, NY ZIP CODE 10038

Innkeepers USA Trust 340 Royal Poinciana Way Palm Beach, FL ZIP CODE 33480

B $

556,850.00
AMOUNT FINANCED (A Minus B)

C
$

NUMBER OF PAYMENTS 7 (Monthly)

POLICY PREFIX AND NUMBER EFFECTIVE DATE OF POLICY/ ANNUAL INSTALLMENT

PAYMENT SCHEDULE AMOUNT OF PAYMENTS

WHEN PAYMENTS ARE DUE

INSTALLMENT DUE DATES

FIRST INSTALLMENT DUE

1,034,150.00
FINANCE CHARGE

D
$

12,724.43
DOCUMENTARY STAMP TAX

NAME OF INSURANCE COMPANY AND NAME AND ADDRESS OF GENERAL OR POLICY ISSUING AGENT

$149,903.49 01/01/2011 SCHEDULE OF POLICIES

TYPE OF COVER

1st
MONTHS COVERED BY PREMIUM PREMIUM $

12/01/2010 12/01/2010 12/01/2010

Empire Indemnity Insurance Company Swiss Reinsurance America Corporation Lexington Insurance Company Tax Landmark American Insurance Company

PROP PROP PROP TAX XSPRO P

12 12 12 Ref 12

129,750.00 100,000.00 1,100,000.00 50,000.00 110,000.00

E
$

2,450.00
TOTAL OF PAYMENTS (C + D + E)

F
$

1,049,324.43
ANNUAL PERCENTAGE RATE

12/01/2010

3.680 %

TME = $385,250.00 Policy Detail Continued... TOTAL PREMIUMS must agree with Block "A" Above ---> TOTAL $

1,591,000.00

SECURITY AGREEMENT order to give the Agreement meaning. "Insurance company or 1. DEFINITIONS: The above named insured ("the insured") is the debtor. AFCO Credit Corporation ("AFCO"), is the lender to whom the debt is owed. company", "insurance policy or policy" and "premium" refer to those items listed under "Schedule of Policies". Singular words shall mean plural and vice versa as may be required in NOTICE: 1. DO NOT SIGN THIS AGREEMENT BEFORE YOU READ IT OR IF IT CONTAINS ANY BLANK SPACE. 2. YOU ARE ENTITLED TO A COMPLETELY FILLED-IN COPY OF THIS AGREEMENT. 3. UNDER THE LAW, YOU HAVE THE RIGHT TO PAY OFF IN ADVANCE THE FULL AMOUNT DUE AND UNDER CERTAIN CONDITIONS TO OBTAIN A PARTIAL REFUND OF THE SERVICE CHARGE. THE INSURED AGREES TO THE PROVISIONS ABOVE AND ON THE LAST PAGE OF THIS AGREEMENT

X
Date SIGNATURE OF INSURED(S) OR DULY AUTHORIZED AGENT OF INSURED(S) PRODUCER'S REPRESENTATIONS The undersigned warrants and agrees: (1) the insured has received a copy of this Agreement, and the Required Federal Truth-in-Lending Disclosures for Personal Lines Insurance, if applicable, (2) the policies are in full force and effect and the information in the schedule of policies and the premiums are correct, (3) the insured has authorized this transaction and recognizes the security interest assigned herein, (4) to hold in trust for AFCO any payments made or credited to the insured through or to the undersigned, directly, indirectly, actually or constructively by any of the insurance companies and to pay the monies to AFCO upon demand to satisfy the then outstanding indebtedness of the insured and that any lien the undersigned now has or hereafter may acquire on any return premium arising out of the above listed insurance policies is subordinated to AFCOs lien or security interest therein, (5) there are no exceptions to the policies financed other than those indicated and the policies comply with AFCOs eligibility requirements, (6) no Audit or Reporting Form Policies, policies subject to Retrospective Rating or to minimum earned premiums are included except as indicated and that the Deposit or Provisional Premiums are not less than anticipated premiums to be Indicate Policy & Prefix earned for the full term of the policies, if policy is subject to minimum earned premium, it is $ 385,250.00 , Number of Exceptions (7) the policies can be cancelled by the insured or the company on 10 days notice and the unearned premiums will be computed on the standard short rate or pro rata table except as indicated, (8) the undersigned represents that a proceeding in bankruptcy, receivership or insolvency has not been instituted by or against the named insured or if the named insured is the subject of such a proceeding it is noted on the Premium Finance Agreement in the space in which the insureds name and address is placed. Date X SIGNATURE OF AGENT OR BROKER
2M(5/98-win) c. 1998 AFCO Credit Corporation QIV# 100000318220.004

Page 1 of 3

AFCO
POLICY PREFIX AND NUMBER EFFECTIVE DATE OF POLICY/ ANNUAL INSTALLMENT

Premium Finance Agreement

14 Wall Street, Suite 8A-19, New York, NY 10005 TEL. NOS. 212-401-4400 800-288-0787 SCHEDULE OF POLICIES
NAME OF INSURANCE COMPANY AND NAME AND ADDRESS OF GENERAL OR POLICY ISSUING AGENT TYPE OF COVER

(CHECK APPROPRIATE BOX) PERSONAL

X
MONTHS COVERED BY PREMIUM

COMMERCIAL

PREMIUM $

12/01/2010

Arch Insurance Company

PROP

12

101,250.00

TOTAL PREMIUMS must agree with Block "A" Above ---> TOTAL $
2M(5/98-win) c. 1998 AFCO Credit Corporation QIV# 100000318220.004

1,591,000.00 Page 2 of 3

REMAINING PROVISIONS OF SECURITY AGREEMENT

Page 3 of 3

2. PROMISE OF REPAYMENT: The insured requests AFCO to pay the premiums on the policies shown above. The insured promises to pay to AFCO at its office the amount stated in Block F above, according to the Payment Schedule shown above subject to the rest of the terms of this contract. 3. SECURITY INTEREST: The insured assigns to AFCO as security for the total amount payable in this Agreement any and all unearned premiums and dividends which may become payable under the insurance policies and loss payments which reduce the unearned premiums, subject to any mortgagee or loss payee interest. The insured gives to AFCO a security interest in all items mentioned in this paragraph. 4. DEFAULT CHARGES: If the insured is more than 5 days late in making an installment payment to AFCO, then the insured will pay to AFCO, in addition to the delinquent installment, a default charge of 5% of the unpaid balance of the delinquent installment or $10, whichever is greater. If the loan is primarily for personal, family or household purposes, the default charge shall not exceed $10. 5. FINANCE CHARGE: The finance charge shown in Box D begins to accrue as of the earliest policy effective date. 6. THIS AGREEMENT BECOMES A CONTRACT: This Agreement becomes a binding contract when AFCO mails a written acceptance to the insured. 7. WARRANTY OF ACCURACY: The insured warrants to AFCO that the insurance policies listed in the schedule have been issued to the insured and are in full force and effect and that the insured has not assigned any interest in the policies except for the interest of mortgagees and loss payees. 8. REPRESENTATION OF SOLVENCY: The insured represents that the insured is not insolvent or presently the subject of any insolvency proceeding. 9. CANCELLATION: AFCO may cancel the insurance policies financed herein and the unpaid balance due to AFCO shall be immediately payable by the insured if, upon 10 days written notice to the insured, the insured does not pay any installment according to the terms of this Agreement. AFCO, at its option, may enforce payment of this debt without recourse to the security given to AFCO. 10. POWER OF ATTORNEY: The insured appoints AFCO its Attorney-in-Fact with full authority to cancel the insurance policies financed herein for nonpayment of premium. 11. MONEY RECEIVED AFTER NOTICE OF CANCELLATION: Any payments made to AFCO after AFCOs Notice of Cancellation of the insurance policies has been mailed may be credited to the insureds account without affecting the acceleration of this Agreement and without any liability or obligation on AFCOs part to request the reinstatement of the cancelled insurance polices. Any money AFCO receives from an insurance company shall be credited to the amount due AFCO with any surplus being paid over to the insured or the insureds agent for the benefit of the insured. No refund of less than $1.00 shall be made. If there is a balance due after AFCO receives the unearned premiums,dividends or loss payments from the insurance company then the insured will pay the balance to AFCO with interest at the rate shown in this contract. 12. REFUNDS: The insured will receive a refund of the finance charge if the account is prepaid in full prior to the last installment due date. The refund shall be computed according to the Rule of 78s subject to a $20 nonrefundable charge. If the refund is less than $1, no refund shall be made. 13. INSURANCE AGENT OR BROKER: AFCO makes no warrantees or representations concerning the financed insurance coverage nor has it played any part in the selection, structuring or acquisition of such coverage. This Agreement represents the entire understanding of the parties. AFCO has not authorized any party whatsoever to make any representations, commitments or promises or to play any role with respect to this premium finance transaction other than completing this contract on behalf of the insured. 14. SPECIAL INSURANCE POLICIES: If the insurance policy issued to the insured is auditable or is a reporting form policy or subject to retrospective rating, then the insured promises to pay the insurance company the earned premium computed in accordance with the policy provisions which is in excess of the amount of premium advanced by AFCO which the insurance company retains. 15. CANCELLATION CHARGES: If AFCO cancels the insurance policies, then the insured will pay AFCO a cancellation charge equal to the difference between $10 and the default charge. 16. ATTORNEY FEES: If, for collection, this Agreement is placed in the hands of an attorney who is not a salaried employee of AFCO, then the insured agrees to pay the attorney fees but no more than 20% of the amount due and payable under this Agreement. 17. SUCCESSORS AND ASSIGNS: All legal rights given to AFCO shall benefit AFCOs successors and assigns. The insured agrees not to assign the policy without AFCOs written consent except for the interest of mortgagees and loss payees. 18. MISSING INFORMATION: If the policy has not been issued at the time of signing this Agreement, then the insured agrees the name of the insurance company, and the policy numbers of the insurance policies may be left blank and may be subsequently inserted in this Agreement. AFCO will notify the insured of this information on its written Notice of Acceptance. 19. ADDITIONAL PREMIUMS: The money paid by AFCO is only for the premium as determined at the time the insurance policy is issued. AFCOs payment shall not be applied by the insurance company to pay for any additional premiums owed by the insured as a result of any type of misclassification of the risk. The insured agrees to pay the company any additional premiums which become due for any reason. AFCO may assign to the company any rights it has against the insured for premiums due the company in excess of the premiums returned to AFCO. 20. AGENTS WARRANTIES: To convince AFCO to enter this Agreement and accept the security underlying this Agreement, the person executing this Agreement, if not the insured, warrants severally and as the duly authorized agent of the insured: that he is the duly authorized agent of the insured appointed specifically to enter into this transaction on the insureds behalf; that he can perform any act the insured could or should perform with respect to this transaction; that he will hold in trust for AFCO any payments made or credited to the insured through the undersigned or to the undersigned, directly, indirectly, actually or constructively, by any of the insurance companies and that he will pay the monies to AFCO upon demand to satisfy the then outstanding indebtedness of the insured. 21. LAW GOVERNING THIS AGREEMENT: The insured agrees that this Agreement shall be governed by the laws of the State of Florida. 22. DISHONORED CHECK: If an insureds check is returned because of insufficient funds to pay it, AFCO may impose a charge of $10. 23. ENDORSEMENTS: The insured agrees that AFCO may endorse his or her name on any check or draft for all monies that may become due from the insuring company and apply the same as payment of this Agreement returning any excess to his or her agent, provided that if such excess is in an amount less than $1 no refund shall be made.

2M - Last(5/98-win)

INSURED'S INITIALS