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Hearing Date: July 21, 2011 at 3:00 pm (prevailing Easter Time)

Adam C. Harris SCHULTE ROTH & ZABEL LLP 919 Third Avenue New York, New York 10022 Telephone: (212) 756-2000 Facsimile: (212) 593-5955 Attorneys for Cerberus Capital Management, L.P. 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

OBJECTION TO FIVE MILE BIDDERS APPLICATION PURSUANT TO SECTIONS 503(b)(3)(D) AND 503(b)(4) OF THE BANKRUPTCY CODE FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS Cerberus Capital Management, L.P. by and through its subsidiary Cerberus Series Four Holdings, LLC (collectively, Cerberus) hereby objects to the application, dated June 8, 2011 (the Application) of Five Mile Capital Partners LLC and its affiliates (collectively, Five Mile) and Hunt Realty Investments, Inc. and its affiliates (collectively, Hunt and together with Five Mile, the Five Mile Bidder) for allowance and payment of an administrative expense claim in the amount of $718,257.33 pursuant to section 503(b) of the Bankruptcy Code (Code) [Docket No. 1643], and in support thereof respectfully represents as follows:

Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Application, the Findings of Fact, Conclusions of Law, and Order Confirming Debtors Plans of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, entered June 29, 2011 [Docket No. 1804] (the Confirmation Order), or the Debtors Plans of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code, dated June 29, 2011 [Docket No. 1799] (as the same may have been subsequently modified, supplemented, or otherwise amended from time to time, the Plan), as applicable.

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PRELIMINARY STATEMENT The Five Mile Bidders Application is really nothing more than an effort to re-litigate the amount of the expense reimbursement that Five Mile Bidder agreed to at the time the Bidding Procedures Order was entered. At that time, Five Mile Bidder agreed to remove the $7 million break up fee from its bid, leaving only its $3 million expense reimbursement. Payment of the $3 million expense reimbursement is provided for in the Plan; Five Mile Bidder, however, now wants more, despite the fact that the terms of the Bidding Procedures -- which the Five Mile Bidder played a role in negotiating -- clearly states that all bidders in the Fixed/Floating Auction waived their right to seek additional compensation under section 503(b). This waiver precludes the Five Mile Bidder from pursuing the relief it seeks in the Application. In addition, the Five Mile Bidders request suffers from another problem. The Five Mile Bidder bases its request for allowance of a substantial contribution administrative expense claim principally on its assertion that its conduct resulted in a material improvement to the recoveries of creditors in these cases. Even if true, the problem with Five Mile Bidders argument is that the creditors who obtained that benefit will not be the parties bearing the burden of paying this administrative expense claim, if allowed. Rather, the administrative expense claim will be paid by the Fixed/Floating Plan Sponsors in accordance with the terms of the Plan, as confirmed by this Court in its Confirmation Order.2 Thus, approval of the request made by Five Mile Bidder will essentially constitute an increase in the purchase price being paid by the Fixed/Floating Plan Sponsors for the Fixed/Floating Debtors. The Fixed/Floating Plan Sponsors agreed to pay the Five Mile Bidder its $3 million expense reimbursement, and relied on the Bidding Procedures Order to assure itself it would not have to pay any more.
2

Ironically, the Five Mile Bidder negotiated the provisions of the Plan that required the Fixed/Floating Plan Sponsors to assume and pay all accrued and unpaid administrative expense claims.

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For these reasons, the Application should be denied.

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). Venue is proper pursuant to 28 U.S.C. 1408 and 1409. BACKGROUND 2. On July 19, 2010, Innkeepers USA Trust and certain of its affiliates (collectively,

the Debtors) each filed a petition with the Court under chapter 11 of the Code. 3. On March 11, 2011, the Court entered its Order (I) Authorizing the Debtors to

Enter Into The Amended Commitment Letter With Five Mile Capital II Pooling REIT LLC, Lehman ALI Inc, and Midland Loan Services, (II) Approving the Amended New Party/Midland Commitment Between the Debtors and Midland Loan Services, (III) Approving Fixed/Floating Bidding Procedures, (IV) Approving Bid Protections, (V) Authorizing An Expense Reimbursement to Bidder D, and (VI) Modifying Cash Collateral Order to Increase Expense Reserve, [Docket No. 1009] (the Bidding Procedures Order), which, among other things: Approved a $3 million expense reimbursement for Five Mile in the event that it lost the Fixed/Floating Auction (as defined below); Approved certain Bidding Procedures for the Fixed/Floating Debtors (the Bidding Procedures);3 and

The Bidding Procedures were attached to the Bidding Procedures Order as Exhibit 2.

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Authorized the Debtors to conduct a formal auction process for the Fixed/Floating Debtors (as defined in the Bidding Procedures) (the Fixed/Floating Auction).

4.

The Bidding Procedures provided that [b]y submitting a Bid, a Competing

Bidder shall be deemed to waive the right to assert or seek payment of any administrative expense claim, including a substantial contribution claim under section 503 of the Bankruptcy Code, with respect to its Bid or the marketing or auction process. Bid Procedures at p. 6.4 5. Relying on the Bidding Procedures, Cerberus, along with Chatham Lodging Trust

(together, the Fixed/Floating Plan Sponsors), participated in the Fixed/Floating Auction, on May 2, 2011. The Five Mile Bidder also participated. 6. Eventually, the Fixed/Floating Plan Sponsors submitted a bid of approximately

$1.12 billion for sponsorship of the Fixed/Floating Plan. The Five Mile Bidder, despite having participated in 11 other rounds of competitive bidding, decided not to offer a higher or otherwise better offer. The Debtors, therefore, declared the Fixed/Floating Plan Sponsors final bid -- of approximately $1.12 billion -- to be the Successful Bid (as defined in the Bidding Procedures) and thus closed the auction pursuant to the terms of the Bidding Procedures.5

Five Miles stalking horse Term Sheet (as defined below) required Five Mile or any subsequent bidder to provide sufficient capital to pay all administrative and other claims and expenses not paid pursuant to the [Cash Collateral Orders] . . . See Term Sheet at p. 5; see also Bidding Procedures Order at p. 4 (requiring any subsequent bid to contain at least $10 million in cash to pay all administrative and other claims and expenses not paid pursuant to the [Cash Collateral Orders] that are necessary for the Fixed/Floating Debtors to emerge from bankruptcy); Plan at p. 48 (providing for funding of distributions provided for under the Plan from (a) Cash on hand from operations in accordance with the Commitment Letter and, as applicable, and permitted by the Cash Collateral Orders and (b) the Investment by the Fixed/Floating Sponsors). This Court should not lose sight of the fact that both Five Mile and Hunt received a materially enhanced recovery on the CMBS securities it owns that are associated with the Fixed Rate Pool Mortgage Loan Agreement as a result of the offer submitted by the Fixed/Floating Plan Sponsors.

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7.

On May 19, 2011, the Debtors, in consultation with the Fixed/Floating Plan

Sponsors, proposed the Fixed/Floating Plan,6 which, among other things, provides for: Five Mile to be paid in full in Cash for the outstanding amount on account of the Five Mile DIP; Five Mile to be paid up to $3 million for its reasonable and documented fees and expenses paid pursuant to the Bidding Procedures Order; and Five Mile to be provided a comprehensive release by the other Fixed/Floating Releasing Parties7 from any and all claims, interests, obligations, debts, rights, suits, damages, remedies, causes of action, liabilities, and all preferences . . . to the extent known or unknown, foreseen or unforeseen, liquidated or unliquidated, contingent or noncontingent . . . See Plan at p. 8-9 (definition of Five Mile DIP Claims, Five Mile Expense Reimbursement, and Fixed/Floating Releasing Parties); at p. 22-24 (providing for payment in full of Five Mile DIP Claims and Five Mile Expense Reimbursement); at p. 70-71 (Fixed/Floating Debtors Plan General Release).
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The Fixed/Floating Plan was one of multiple chapter 11 reorganization plans included in the Plan. Fixed/Floating Releasing Parties means, collectively, each of the following parties in their respective capacities as such: (a) the Lehman DIP Lenders; (b) Five Mile; (c) the Five Mile DIP Agent; (d) the Five Mile DIP Lenders; (e) the Debtors (other than Grand Prix Holdings solely with respect to any guaranty Claims of Midland, Lehman, LCPI, or SASCO); (f) Lehman; (g) New HoldCo and each of the Fixed/Floating Plan Sponsors; (h) Midland; (i) the master servicer for the C6 and C7 Trusts; (j) trustees for the C6 and C7 Trusts; (k) the C6 and C7 Trusts; (l) TriMont, in its capacity as special servicer for the Floating Rate Pool Mezzanine Loan Agreement; (m) Apollo; (n) the Committee; (o) the Independent Committee; (p) SASCO, as holder of 100% of the economic and beneficial interests under the Floating Rate Pool Mezzanine Loan Agreement; (q) LCPI, as administrative agent for SASCO with respect to the Floating Rate Pool Mezzanine Loan Agreement and holder of 100% of the economic and beneficial interests in SASCO; (r) Island Hospitality Management, Inc.; (s) all other Holders of Claims against or Interests in the Fixed/Floating Debtors; (t) the officers, directors, trustees, and members of the Debtors; and (u) each of the foregoing entities respective predecessors, successors and assigns, shareholders, affiliates, subsidiaries, principals, employees, agents, officers, directors, trustees, members, master servicers, special servicers, trusts and trustees, and professionals. For the avoidance of doubt, certificate holders in the C6 and C7 Trusts, in their capacity as such, are not Fixed/Floating Releasing Parties.

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8.

On June 8, 2011, the Five Mile Bidders filed the Application, seeking additional

compensation -- above and beyond those items described above. 9. On June 29, 2011, the Court entered the Confirmation Order. OBJECTION I. The Five Mile Bidders Are Seeking To Re-Open The Bidding Procedures Order. 10. As the Application points out, the outcome of the Fixed/Floating Auction was

not accomplished overnight or by mere happenstance. Application at p. 2. On the contrary, it was achieved through the direction of this Court and the effort of [multiple] parties. See id. Indeed, the value generated by the Fixed/Floating Action was the by-product of extensive negotiations by multiple parties, each with their own concerns and motivations. 11. One of the issues addressed in these negotiations was how much value the Five

Mile Bidder would be entitled to if it lost the Fixed/Floating Auction. At the March 11, 2011 hearing on this issue (the Bidding Procedures Hearing), counsel for Five Mile stated the following in responding to the Courts invitation to be heard on the 503(b) issue: . . . in the connection of multiple gives and takes, you know, this [503(b) issue] is just yet one more and that the Court should view it as part of the overall package that [Debtors counsel] described, and approve it as part of, you know, the entire package. Bidding Procedures Hrg Tr. 28:4-6, 30:13-15 (Mar. 11, 2011).8 12. As the Application points out, the Five Mile Bidders[s], Lehman, Midland and

the Debtors worked tirelessly to negotiate and finalize what materialized into the commitment letter, which was later renegotiated and submitted to the Court in the form of an Amended and Restated Binding Commitment Agreement Regarding the Acquisition and Restructuring of
8

Applicable pages from the March 11, 2011 Bidding Procedures Hearing Transcript are attached hereto as Exhibit A.

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Certain Subsidiaries of InnKeepers USA Trust, dated March 9, 2011 (the Commitment Letter),9 which included, as Exhibit B, a Term Sheet (the Term Sheet and together with the Commitment Letter, the Agreement). Application at 15 (emphasis added); see also

Application at p. 8-10. The Agreement was further negotiated on the eve of the Bidding Procedures Hearing, with the elimination of the break-up fee. See Bidding Procedures Hrg Tr. 9:2-6 (Mar. 11, 2011) (Debtors Counsel: The time was used yesterday to have, you know, candid discussions with a number of the constituents and sponsors. The result of those

discussions is an additional concession . . .). Thus, on March 11, 2011, the Court approved the fully-negotiated terms that formed the basis for the Fixed/Floating Auction -- the Agreement minus the break-up fee (the Final Agreement) -- in its Bidding Procedures Order. 13. This Final Agreement fully integrates and encapsulates the negotiations that led to

the Fixed/Floating Auction. See Commitment Letter at p. 5 (This Amended Commitment Letter and the Term Sheet . . . represent the entire understanding and agreement among the Parties hereto with respect to the subject matter hereof . . .). 14. The Final Agreement, in the Term Sheet, explicitly provides that in the event

[that the Five Mile Bidders fail to be deemed the Successful Bidder10 the Five Mile Bidders] will receive . . . reimbursement of all of Five Miles reasonable and documented fees and expense, not to exceed $3 million . . . Term Sheet at p. 9 (emphasis added). 15. The Five Mile Bidders intent and understanding that it would be bound by the

terms of the Final Agreement -- including the limitation on what it would receive if it were to lose the auction -- is further evidenced by Five Miles signature on the Commitment Letter. See

The Commitment Letter was attached to the Bidding Procedures Order as Exhibit 1. As defined in the Bidding Procedures.

10

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Commitment Letter (containing the signature of A. Nickerson III, Managing Director of Five Mile Capital Partners LLC). 16. As this Court recently recognized, [g]iving effect to the plain language of

agreements such as those leading up to the Fixed/Floating Auction reinforces general principles of public policy. Affirming the legal efficacy of unambiguous [agreements] leads to more predictable and efficient commercial outcomes and minimizes the potential for wasteful and vexatious litigation. In re Ion Media Networks, Inc., 419 B.R. 585, 590-95 (Bankr. S.D.N.Y. 2009) (disallowing sophisticated and economically motivated creditor from ignoring the terms of its intercreditor agreement); cf., In re Boston Generating LLC, 440 B.R. 302, 319-320 (Bankr. S.D.N.Y. 2010) (Chapman, J.) (absent explicit language in intercreditor agreement -similar to language in ABA model, there is no bar from subordinated creditors to be heard; Court felt constrained by the language of the [i]ntercreditor [a]greement.). 17. As sophisticated investors, the Five Mile Bidder should not now be allowed to

re-open this issue. See Ion Media Networks, 419 B.R. at 595; see also, In re Pub. Service Co. of New Hampshire, 160 B.R. 404, 453-54 (Bankr. D.N.H. 1993) ( . . . any party who contemplates making a section 503(b)(3) or section 503(b)(4) application upon becoming a losing bidder in a bankruptcy auction process is under an affirmative duty to establish their legal entitlement to such compensation prior to the auction bidding process by an appropriate motion. That way, everybody involved in the case will know that one bidder may be making an application after the fact and others can seek similar rights or can adjust their bids accordingly.) (emphasis added).

II.

The Five Mile Bidders Waived Any Right To Seek A 503(b) Claim. 18. By participating in the Fixed/Floating Auction, the Five Mile Bidder explicitly

waived its right to seek a substantial contribution claim based on section 503(b). Indeed, the
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Bidding Procedures -- which the Five Mile Bidder participated in negotiating -- states that [b]y submitting a Bid, a Competing Bidder11 shall be deemed to waive the right to assert or seek payment of any administrative expense claim, including a substantial contribution claim under section 503 of the Bankruptcy Code, with respect to its Bid or the marketing or auction process. Bidding Procedures at p. 6 (emphasis added). 19. Furthermore, the Court, in considering this particular provision, stated the

following: . . . I see that it reflects the provision . . . that any bidder that comes in is not going to have the right to request expense reimbursement. In other word[s] -- any competing bidder shall be deemed to waive the right to seek or assert a 503(b) claim. Bidding Procedures Hrg Tr. 22:3-7 (Mar. 11, 2011) (emphasis added). 20. A valid waiver requires no more than the voluntary and intentional

abandonment of a known right which, but for the waiver would have been enforceable. Golfo v. Kycia Assocs., Inc., 45 A.D.3d 531, 532-33 (N.Y. App. Div. 2007) (internal quotation omitted), cited in In re Boston Generating, LLC, 440 B.R. 302, 319 (Bankr. S.D.N.Y. 2010) (Chapman, J.); see also In Diberto, 164 B.R. 1, 3-4 (Bankr. D.N.H. 1993) (concluding that creditors waived any right to seek a substantial contribution claim when they failed to require disclosure that creditors may seek such claims in disclosure statement). 21. By seeking a section 503(b) claim, the Five Mile Bidder is seeking to enforce a

right that they have already waived. Indeed, the terms of the Bidding Procedures dictate -- and the Courts own comments reinforce -- that it was the intention of the parties, including the Five Mile Bidder, that bidders in the Fixed/Floating Auction give up their right to pursue a claim in
11

The Bidding Procedures defines Competing Bidders as entities that submit higher or otherwise better proposalsas compared to initial Five Mile/Lehman Bid of $970.7 million -- for the sponsorship and funding of the Debtors chapter 11 plans of reorganization. Bidding Procedures at p. 2. Moreover, at the March 22, 2011, counsel for Five Mile encouraged the Court to view Five Mile as a bidder. Bidding Procedures Hrg Tr. 28:67 (Mar. 11, 2011) (And, obviously, I rise, Im a bidder.)

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exchange for the opportunity to participate. The Fixed/Floating Plan Sponsors relied on this understanding in participating in the process and it is inappropriate for the Five Mile Bidders to re-write the rules on the eve of confirmation.

III. A.

Section 503(b) Does Not Provide Five Mile Bidders Another Bite at the Apple. Standard for Award of Compensation for Substantial Contribution. 22. Code 503(b) authorizes the Court to award compensation to a party who makes

a substantial contribution to the case. The section provides, in pertinent part, as follows: (b) After notice and a hearing, there shall be allowed administrative expenses . . . including (3) the actual, necessary expenses . . . incurred by (D) a creditor, an indenture trustee, an equity security holder, or a committee representing creditors or equity security holders other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter 9 or 11 of this title; (4) reasonable compensation for professional services rendered by an attorney or an accountant of an entity whose expense is allowable under subparagraph (A), (B), (C), (D), or (E) of paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney or accountant (emphasis added). 23. The Five Mile Bidder bears the burden of proving, by a preponderance of the

evidence, that it has rendered a substantial contribution. In re Dana Corp., 390 B.R. 100, 107-08 (Bankr. S.D.N.Y. 2008); In re Granite Partners, L.P., 213 B.R. 440, 447 (Bankr. S.D.N.Y. 1997). The Five Mile Bidder must demonstrate a credible connection between its efforts and the reorganization process. Granite Partners, 213 B.R. at 447, citing In re Calumet Realty Co., 34
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B.R. 922, 926 (Bankr. E.D.Pa. 1983).

Further, courts construe substantial contribution

narrowly and in hindsight so as to scrutinize[] the actual benefit to the case. Id. at 445, 447. 24. A party making a substantial contribution application must also show that benefit

received by the estate is more than an incidental one arising from activities the applicant has pursued in protecting his or her own interest. Dana Corp., 390 B.R. at 108 citing Lebron v. Mechem Fin. Inc., 27 F.3d 937, 944 (3d Cir. 1994). Further, [e]xtensive participation alone is insufficient to justify an award. Granite Partners, 213 B.R. at 445. Creditors face an

especially difficult burden in passing the substantial contribution test since they are presumed to act primarily in their own interests. Dana Corp., 390 B.R. at 108 (quoting In re U.S. Lines, Inc., 103 B.R. 427, 430 (Bankr. S.D.N.Y. 1989), affd, 1991 WL 67464 (S.D.N.Y. Apr. 22, 1991)).

B.

Five Mile Bidders Not Entitled To Additional Compensation Because Were Acting In Their Own Interests. 25. In applying the substantive contribution provisions, courts have come to the

fundamental economic understanding that creditors in a bankruptcy auction context are in pursuit of their own economic self-interest. This being the case, any benefit to the estate is at best indirect and incidental and will not support a creditor's after-the-fact substantial contribution claim. In re Pub. Service Co. of New Hampshire, 160 B.R. 404, 453-54, 456 (Bankr. D.N.H. 1993) (holding that unsuccessful bidder in auction not entitled to compensation under sections 503(b)(3) and 503(b)(4) where not established beforehand). 26. Indeed, in order to seek reimbursement, a creditor is generally required to

demonstrate that it was not merely acting in its own self interest. Lebron v. Mechem Fin., Inc., 27 F.3d 937, 946 (3d Cir. 1994) (creditor presumed to be acting in his or her own interest;
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absent finding that actions were designed to benefit others, expenses are not reimbursable under section 503(b)(3)(D)); In re Lister, 846 F.2d 55, 57 (10th Cir. 1988) (Efforts undertaken by a creditor solely to further his own self-interest, however, will not be compensable, notwithstanding any incidental benefit accruing to the bankruptcy estate.); In re AM Intern., Inc., 203 B.R. 898, 904 (D.Del. 1996) (Even though a benefit may have been conferred to the estate, reimbursement should be excluded where the activities primarily served the interest of the interested parties . . .); In re U.S. Lines, Inc., 103 B.R. 427, 430 (Bankr. S.D.N.Y. 1989), affd, 1991 WL 67464 (S.D.N.Y. Apr. 22, 1991) (. . . legal services which are provided solely in order to benefit the client-as-creditor are not compensable, even where they confer an incidental benefit upon the estate.).12 Finally, substantial contribution does not change the basic rule that the attorney must look to his own client for payment. Granite Partners, 213 B.R. at 445. 27. In this instance, the Application fails on its face because Five Mile and Hunt were

acting with a single purpose in mind: they wanted to purchase the Debtors. See e.g., Application at p. 5 (After the Petition Date, the Five Mile Bidder began conducting due diligence for a potential transaction for the Debtors . . . at the same time that it was opposing the PSA, it was also preparing a proposal to acquire the Debtors equity.) (emphasis added). 28. As this Court recently noted, [S]ervices calculated primarily to benefit the client

do not justify an award even if they also confer an indirect benefit on the estate. Dana Corp., 390 B.R. at 108. In Dana Corp., the largest single holder of stock and creditor of the Dana Corp.
12

The Applications reliance on limited comments from Judge Drain in In re DPH Holdings Corp. are misplaced. As Judge Drain noted in In In re Bayou Group, the rule that efforts undertaken by creditors solely to further their own self interest are not compensable is relevant not because the creditor's mere motive should determine the outcome but that it recognizes that section 503(b)(3)(D) focuses on process as much as on contribution . . . In re Bayou Group, LLC, 431 B.R. 549, 561 (Bankr. S.D.N.Y. 2010) (internal citations omitted); see also DPH Holdings Corp Hrg Tr. 113:21 (relying on Judge Drains Bayou case; attached as Exhibit A to the Application). In this case, the collective parties came together to form a process, which entitles the Five Mile Bidders to no more than a $3 million expense reimbursement. The Five Mile Bidders are simply seeking to ignore this process in seeking additional compensation.

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sought to acquire the company in bankruptcy. In doing so, it fought the debtors preferred method for restructuring in an effort to facilitate an alternative restructuring that would ultimately lead to the creditor taking over the company. See id. at 104-06. So too here, the Five Mile Bidder initially opposed the Debtors plan support agreement and then constructed a process by which it would acquire the Debtors through the Fixed/Floating Auction. See

Application at p. 4-6 (Five Mile opposed the PSA, delivered a deal backed by Midland, and then emerged as a stalking horse bidder.). 29. To be sure, factual distinctions exist between Dana Corp. and the Five Mile Indeed, the creditor in Dana Corp. was given nothing for its efforts at

Bidders actions.

restructuring. See id. at 111 (determining that creditor failed to meet its burden). However, in this case, the Five Mile Bidder will be paid the agreed amount of $3 million for reimbursement of its expenses as a bidder, paid in full for the outstanding amount on account of the Five Mile DIP, and provided with a valuable release pre-empting potential litigation. See Plan at p. 8-9, 2223, 70-71. In light of the Five Bidders selfish motivations, it is inappropriate for the Five Mile Bidders to seek additional compensation.

C.

Allowance of the Five Mile Bidders Substantial Contribution Claim Will Impose an Increase in Purchase Price on the Fixed/Floating Plan Sponsors 30. In addition to the other issues raised above, this Court should recognize the In

practical implications of allowing Five Mile Bidders substantial contribution claim.

particular, the creditors who have arguably been benefited by the Five Mile Bidders conduct will not be the parties bearing the burden of paying the allowed administrative expense. Rather, pursuant to the terms of the Plan, any such allowed administrative expense will have to be paid by the Fixed/Floating Plan Sponsors. See Plan at p. 48 (providing for funding of distributions from (a) Cash on hand from operations in accordance with the Commitment Letter and, as
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applicable, and permitted by the Cash Collateral Orders and (b) the Investment by the Fixed/Floating Sponsors). Imposing that obligation on the Fixed/Floating Plan Sponsors, given their good faith reliance on the Bidding Procedures and their participation in the Fixed/Floating Auction (including the submission of the Fixed/Floating Successful Bid predicated on an expense reimbursement claim for the Five Mile Bidder of $3 million), would be unfair, inequitable, and inconsistent with this Courts prior orders. WHEREFORE, Cerberus respectfully requests that the Court enter an order denying the Application. Dated: July 18, 2011 New York, New York SCHULTE ROTH & ZABEL LLP

By: __ /s/ Adam C. Harris____ Adam C. Harris 919 Third Avenue New York, New York 10022 Telephone: (212) 756-2000 Facsimile: (212) 593-5955 E-mail: adam.harris@srz.com

Attorneys for Cerberus Capital Management, L.P.

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EXHIBIT A

Page 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
VERITEXT REPORTING COMPANY www.veritext.com

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Case No. 10-13800-scc - - - - - - - - - - - - - - - - - - - - -x In the Matter of:

INNKEEPERS USA TRUST, et al.,

Debtors. - - - - - - - - - - - - - - - - - - - - -x

U.S. Bankruptcy Court One Bowling Green New York, New York

March 11, 2011 10:04 a.m.

B E F O R E: HON. SHELLEY C. CHAPMAN U.S. BANKRUPTCY JUDGE

212-267-6868

516-608-2400

Page 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Transcribed by: Esther Accardi DOC #820, DEBTORS' Motion for Entry of an Order (I) Authorizing the Debtors to Enter Into the Commitment Letter With Five Mile Capital II Pooling REIT LLC, Lehman ALI Inc., and Midland Loan Services, (II) Approving the New Party/Midland Commitment Between the Debtors and Midland Loan Services, (III) Approving Bidding Procedures, (IV) Approving Bid Protections, (V) Authorizing an Expense Reimbursement to "Bidder D," and (VI) Modifying Cash Collateral Order to Increase Expense Reserve.

212-267-6868

VERITEXT REPORTING COMPANY www.veritext.com

516-608-2400

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A P P E A R A N C E S : KIRKLAND & ELLIS LLP Attorneys for Debtors 655 Fifteenth Street, N.W. Washington, DC 20005

BY:

DANIEL T. DONOVAN, ESQ. PATRICK M. BRYAN, ESQ.

KIRKLAND & ELLIS LLP Attorneys for Debtors 601 Lexington Avenue New York, New York 10022

BY:

ANUP SATHY, P.C.

MORRISON & FOERSTER LLP Attorneys for Creditors' Committee 1290 Avenue of the Americas New York, New York 10104

212-267-6868

516-608-2400

Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 BY: LAWRENCE P. GOTTESMAN, ESQ. MICHELLE MCMAHON, ESQ.


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A P P E A R A N C E S : (continued) HAYNES AND BOONE LLP Attorneys for Midland Loan Services 30 Rockefeller Plaza, 26th Floor New York, New York 10112

BY:

LENARD M. PARKINS, ESQ.

HAYNES AND BOONE LLP Attorneys for Midland Loan Services 201 Main Street, Suite 2200 Fort Worth, Texas 76102

BY:

JOHN D. PENN, ESQ.

BRYAN CAVE LLP Attorneys for LNR 1290 Avenue of the Americas New York, New York 10104

212-267-6868

516-608-2400

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A P P E A R A N C E S : SIDLEY AUSTIN LLP Attorneys for Appaloosa Funds 787 Seventh Avenue New York, New York 10019

BY:

DEBRA J. MINOFF, ESQ. LEE S. ATTANASIO, ESQ.

WACHTELL, LIPTON, ROSEN & KATZ Attorneys for Chatham Realty Trust 51 West 52nd Street New York, New York 10019

BY:

DAVID C. BRYAN, ESQ. DAVID FISCHMAN, ESQ.

212-267-6868

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A P P E A R A N C E S : DECHERT LLP Attorneys for Lehman 1095 Avenue of the Americas New York, New York 10036

BY:

MICHAEL J. SAGE, ESQ. BRIAN E. GREER, ESQ.

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Attorneys for Apollo Investment Corporation 1285 Avenue of the Americas New York, New York 10019

BY:

ANDREW J. EHRLICH, ESQ.

KILPATRICK TOWNSEND & STOCKTON LLP Attorneys for Trimont 1100 Peachtree Street, N.E., Suite 2800 Atlanta, Georgia 30309

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A P P E A R A N C E S : KASOWITZ, BENSON, TORRES & FRIEDMAN LLP Attorneys for Five Mile Capital 1633 Broadway New York, New York 10019

BY:

HOWARD W. SCHUB, ESQ. ADAM L. SHIFF, ESQ. DANIEL A. FLIMAN, ESQ.

APPEARING TELEPHONICALLY: MICHAEL FRANCO, FAIRMONT AARON K. BRYSON, SPRING HILL CAPITAL PARTNERS DAVID NEFF, PERKINS COIE LLP SINA TOUSSI, ONE EAST PARTNERS JOE CRISCIONE, ESOPUS CREEK ADVISORS MARK FINK, KILPATRICK TOWNSEND ANDREW SOLE, ESOPUS CREEK ADVISORS

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Page 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 please. pending. The time was used yesterday to have, you know, candid discussions with a number of the constituents and sponsors. The result of those discussions is an additional concession that the debtors have received, which is the elimination of the breakup fee in total, under the Five Mile Lehman proposal. The expense reimbursement continues, but the breakup fee is gone. THE COURT: MR. SATHY: on the motion. All right. We're prepared to move forward, obviously

All of the declarations, I believe, have been

submitted, and we ask that they be submitted into evidence. THE COURT: MR. SATHY: All right. We don't believe that any of the parties

are seeking direct or cross-examination, including Appaloosa, and so we're prepared to move forward however the Court wants with argument, or -- Your Honor, we obviously still reserve our position with respect to standing, but we will move forward -THE COURT: MR. SATHY: THE COURT: Okay. -- with the Court's direction. All right. Before we go further, let me

find out or confirm who's on the phone, because we still have the confidentiality concerns that have always existed here. So can I hear from the folks who are on the phone,

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Page 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. SATHY: THE COURT: Correct. Okay. By the way, if you have any extra But on that point, I see that it

copies it would be helpful.

reflects the provision on page 5 that any bidder that comes in is not going to have the right to request expense reimbursement. In other word -- any competing bidder shall be

deemed to waive the right to seek or assert a 503(b) claim. I'm just wondering whether that's a good thing, and whether you can really do that. MR. SATHY: THE COURT: MR. SATHY: THE COURT: This is the 503 claim? Yeah. Well, Your Honor, I think that -I mean, we're still giving -- you're still

asking to approve 500,000 dollars to so-called bidder D. MR. SATHY: THE COURT: MR. SATHY: THE COURT: That's correct. Right? That's correct, yes. So, hypothetically, if bidder E shows up

and the deal improves -- stays with Five Mile Lehman but improves by a bigger number I'm just asking if -- what your basis is for urging that I approve that provision? MR. SATHY: Yeah. Your Honor, I think -- again, in

the context of a negotiation this was a request by the sponsor so that we don't have numerous expenses -- expense requests coming in from bidders who are seeking expense reimbursements.

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Page 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. SHIFF: Adam Shiff of Kasowitz, Benson, Torres &

Friedman on behalf of Five Mile. Your Honor, I think a few points with respect to this specific provision. Needless to say, Mr. Sathy made the point

that, obviously, in the connection of multiple gives and takes, you know, this is just yet one more. I'm a bidder. And, obviously, I rise,

So needless to say, you know, the Court may view

my perspective a little different than it might from the debtors -- you know, at the debtor themselves expressing a provision. Your Honor, I think this was an imp -- a very important point to us in terms of really being a stalking horse. And, really, what is the stalking horse? In other

words, especially now, right, we've eliminated the breakup fee. So to suggest, for example, now someone else can come in now and start getting a breakup fee really, I guess, what have we gotten to by getting to this date, getting the auction off the ground and getting up and running. I think, secondly, at this point, assuming the procedures stick, and, obviously, Mr. Sathy noted that they may not stick, you're really talking about a fifty-day process right now until you have an auction. You've heard that there

are tremendous number of people knocking down their doors for all types of different bids. It doesn't seem that you need to

provide any added incentive at this point for people to do

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Page 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 process. that. And, indeed, I think it's also fair to say -- and,

again, I don't want to wander into stuff that may cross, because I don't know who's on the phone and the like. But, you

know, it is fair to say that anyone else who's bidding now does have a large benefit of six months or more of work done by our clients. And to I think sort of suggest that someone could

come in now for the last forty-five days piggyback on that and then sort of reap all those benefits, would be, you know, demonstratively unfair to us. I think you could compare and

contrast that to what we agreed with for bidder D. Bidder D we understood got in early, they drove the You saw the testimony it caused our bid to up just to So we agreed, okay, we hear you, bidder D

even to get to here. did that work.

At this point I think really it's sort of a But the price is pretty low. It's a fifty-day

price to entry a little bit.

Because a lot of the work's been done. period.

I think specifically with respect to the breakup fee provision -- I mean, here, the debtors obviously got us to waive this yesterday. So it now suggests after having put us

through those final paces, and really limited us to the most minimal bidder protections, which is really just this one expense reimbursement, it seems to us -- it really seems that it would be, you know, really unfair to let it go to anyone else. But I think maybe, more importantly to the Court,

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Page 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 there's -- the people are bidding. a very short period of time. They're coming in, there's

So we really don't believe that

it would in any way inhibit the process that's being run, or the debtors' flexibility to leave it. And, you know, we also

think it provides at least the one sort of stalking horse protection, which we are now the stalking horse at least going forward, that would set us maybe apart from someone else for having done what we did. So we do believe there's an important point to continue, and we would urge the Court not to -- and I get we get into a tough issue if the Court wants to strike one provision, not others, as opposed to the package, but really to view it as part of the overall package that Mr. Sathy described, and approve it as part of, you know, the entire package. THE COURT: Well, playing devils advocate to my own

thinking out loud on the issue, it's a bid reminiscent of what I think is in one of Mr. Derrough's declarations with regard to the Lehman cash out provision. it was Mr. Bojmel, forgive me. And I think there -- or maybe The notion that someone who

wants to come in here at this level would be able to raise their own cash. So I guess kind of what I'm hearing you say is

that someone who wants to come in, and I understand your view as a bit jaundiced wearing your bidder hat. But I think maybe

what Mr. Sathy was trying to tell me was that this is not going

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