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 OMNIBUS REPLY IN SUPPORT OF THE DEBTORS MOTION TO COMPENSATE FRIED FRANK AND THE MEMBERS OF THE INDEPENDENT COMMITTEE AND RESPONSES TO OBJECTIONS THERETO Innkeepers USA Trust and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors), hereby submit this omnibus reply (the Reply) in support of the Debtors Motion for the Entry of an Order Pursuant to Section 363 of the Bankruptcy Code
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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(I) Approving the Debtors Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [Docket No. 587] (the Motion) and in response to the Objections thereto.2 In support of this Reply, and in further support of the Motion, the Debtors respectfully state as follows:3 Preliminary Statement In light of the current contentious nature of the Debtors plan process and the difficult and complex issues surrounding a potentially consensual restructuring involving the Debtors many constituencies, and in light of this Courts ruling on the Debtors plan support agreement
2

The following objections have been filed in response to the Motion: Midland Loan Services, Inc.s Objection to Debtors Motion for the Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (I) Approving the Debtors Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [Docket No. 649] (the Midland Objection); Objection of Lehman ALI Inc. to Debtors Motion to Authorize Payment of Independent Committee Fees and Expenses [Docket No. 650] (the Lehman Objection); Objection of Ad Hoc Committee of Preferred Shareholders to Debtors Motion for the Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (I) Approving the Debtors Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [Docket No. 653] (the Preferred Shareholder Objection); Objection of Wells Fargo Bank, N.A., as Trustee for the Registered Holders of Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2007-C1 and U.S. Bank National Association, as Successor to LaSalle Bank N.A., Formerly Known as LaSalle National Bank, as Trustee for the Registered Holders of ML-CFC Commercial Mortgage Trust 2006-4, Commercial Mortgage Pass-Through Certificates, Series 2006-4 to the Debtors Motion for Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (I) Approving the Debtors Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [Docket No. 674] (the Wells Fargo Objection); and Joinder of TriMont Real Estate Advisors, Inc. as Special Servicer, to Midland Loan Services, Inc.s Objection to Debtors Motion for the Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (I) Approving the Debtors Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the Independent Committee of the Board of Trustees of Innkeepers USA Trust and Authorizing the Payment of Such Compensation by the Debtors and (II) Authorizing the Debtors to Compensate the Members of the Independent Committee [Docket No. 654] (the TriMont Joinder and, together with the Midland Objection, the Lehman Objection, the Preferred Shareholder Objection, and the Wells Fargo Objection, the Objections). Capitalized terms used herein but not otherwise defined shall have the meanings ascribed to such terms in the Motion.

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motion, the Debtors determined it was appropriate to formally appoint an Independent Committee of Board members who are not employees of Apollo Investment Corporation (AIC) or its affiliates. Because none of the members of the Independent Committee are employees of AIC or its affiliates, the Debtors believe that each is independent for purposes of fulfilling their responsibilities under the Independent Committees Role (as defined below).4 The Debtors adopted resolutions on October 19, 2010, which, among other things, formalized the role of the Independent Committee. The resolutions and the exhibits thereto are attached hereto as Exhibit A. Specifically, the Independent Committee is responsible for (a) reviewing and evaluating information concerning the Debtors restructuring alternatives, (b) conducting a preliminary analysis of all indications of interest or proposals received relating to a chapter 11 plan or other restructuring alternative, (c) making a recommendation with respect thereto to the Board, and (d) addressing any conflicts of interest appropriately (collectively, the Independent Committees Role).5 Appointing the Independent Committee and documenting the Independent Committees Role represents an important step towards facilitating the Debtors plan process, which was formulated in light of this Courts ruling on the Debtors plan support agreement motion and ensures that the Debtors have formalized the governance that will continue to appropriately address any actual or perceived conflicts that may arise as part of such process. Notwithstanding the history with the plan support agreement, arguments against the Debtors current efforts

One of the objecting parties, without basis, seeks to impugn the independence of the members of the Independent Committee. The resumes of these members were submitted and received into evidence as part of the hearing on the plan support agreement motion, and there is nothing in the rsums or the Objections to suggest that these members are anything other than independent from AIC. The Independent Committees Role is in addition to each of the Independent Committee members continuing duties as a member of the full Board, which duties have not changed. Corporate governance issues, including determining the appropriate members of the Board to consider Board action, will continue to be determined at the appropriate times based on the relevant facts and circumstances.

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attempting to relitigate issues already addressed in the context of the plan support agreement are moot. As discussed in the Debtors motion to extend exclusivity and their reply in support of the extension of exclusivity, the Debtor plan process includes soliciting outside interest in plan sponsorship for an enterprise-level restructuring.6 Given that AIC currently holds the interests in the equity of Grand Prix Holdings LLC, the ultimate parent of the Debtors, the Debtors believe that the establishment of the Independent Committee with members who are not employees of AIC or its affiliates to carry out the Independent Committees Role is appropriate. To advise the members of the Independent Committee in the discharge of their duties and their role in the Debtors restructuring process, the Independent Committee retained Fried Frank as their counsel. Because the fees incurred by Fried Frank will be in furtherance of and support a plan process that will benefit the Debtors estates and, consequently, the Debtors creditors and other constituencies, the Debtors believe it is an appropriate exercise of their business judgment to agree to compensate Fried Frank as counsel to represent and advise the Independent Committee in the Independent Committees Role. Furthermore, the additional compensation to be provided to the members of the Independent Committee as described in the Motion is appropriate and commensurate with the increased responsibilities of such members. For the reasons set forth herein, the Debtors respectfully assert the relief requested in the Motion is justified and should be approved. To resolve certain of the concerns raised in the Objections, the Debtors have revised the proposed order to, among other things: (a) clarify that

See Debtors Motion for Entry of an Order Extending the Exclusive Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof and Omnibus Objection to Motions to Terminate Exclusivity, filed on Oct. 27, 2010 [Docket No. 610]; see also Debtors Omnibus Reply in Support of the Debtors Motion for Entry of an Order Extending the Exclusive Periods During Which Only the Debtors May File a Chapter 11 Plan and Solicit Acceptances Thereof and Omnibus Response to Objections Thereto, filed contemporaneously herewith.

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the scope of the representation and assistance by Fried Frank will be compensated only to the extent it is in relation to the Independent Committees Role; (b) clarify that Fried Frank will file supplemental verified statements in accordance with Bankruptcy Rule 2014; and (c) provide that compensation to Fried Frank is subject to the fee application process and the Final Cash Collateral Order. A comparison of the proposed order filed with the Motion against the current proposed order is attach hereto as Exhibit B. Reply I. The Relief Requested in the Motion Is in the Best Interests of the Debtors Estates and Should Be Approved. A. It Is a Sound Exercise of the Debtors Business Judgment to Compensate Fried Frank and the Independent Committee.

Under applicable case law in this and other jurisdictions, if a debtors proposed use of its assets pursuant to section 363(b) represents a reasonable business judgment, such use should be approved.7 In light of the complex dynamic surrounding the Debtors plan process, the Debtors have determined that the relief requested in the Motion embodies a sound exercise of the Debtors business judgment.8 As discussed in the Debtors motion to extend exclusivity and

See, e.g., Official Committee of Unsecured Creditors v. LTV Corp. (In re Chateauguay Corp.), 973 F.2d 141, 143 (2d Cir. 1992); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1070 (2d Cir. 1983) (requiring some articulated business justification to approve the use, sale, or lease of property outside the ordinary course of business); Myers v. Martin (In re Martin), 91 F.3d 389, 395 (3d Cir. 1996) (citing Fulton State Bank v. Schipper (In re Schipper), 933 F.2d 513, 515 (7th Cir. 1991)); In re Delaware & Hudson Ry. Co., 124 B.R. 169, 175-76 (D. Del. 1991) (courts have applied the sound business purpose test to evaluate motions brought pursuant to section 363(b)); Comm. of Asbestos-Related Litigants v. Johns-Manville Corp. (In re Johns-Manville Corp.), 60 B.R. 612, 616 (Bankr. S.D.N.Y. 1986) (Where the debtor articulates a reasonable basis for its business decisions (as distinct from a decision made arbitrarily or capriciously), courts will generally not entertain objections to the debtors conduct). See, e.g., In re Kmart Corp., Case No. 02-02474 (Bankr. N.D. Ill. Aug. 29, 2002); see also In re Sahlen & Associates, Inc., 113 B.R. 152 (Bankr. S.D.N.Y. 1989); In re Woodworkers Warehouse, Inc., 323 B.R. 403 (Bankr. D. Del. 2005); In re Accuride Corp., et al., No. 09-13449 (Shannon) (Bankr. D. Del. Nev. Sept. 18, 2009) (Docket No. 909), In re Stations Casinos, Inc., No. 09-52477 (Zive) (Bankr. D. Nev. Sept. 18, 2009) (Docket No. 327); In re Interep Natl Radio Sales, Inc., No. 08-11079 (Drain) (Bankr. S.D.N.Y. April 28, 2008) (Docket No. 126). These cited cases, while retaining counsel for independent directors under sections 327 or 328 instead of section 363, stand for the proposition that courts agree that under certain circumstances it is

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their reply in support of the extension of exclusivity, the Debtors have already engaged in a significant number of communications with each of their key stakeholders and have been presented with numerous plan alternatives. The Debtors capital structure, which includes loans secured by different pools of collateral, has predictably resulted in such alternatives being widely divergent because each secured creditor is focused only on the value of and a recovery on account of its own collateral, creating vastly differing motivations throughout the Debtors creditor body. Additionally, other stakeholders, including the ad hoc committee of preferred shareholders, have yet another collection of concerns that they seek to address in the plan process. Recognizing this dynamic, the Debtors have taken deliberate measures to develop a process that takes into account the constituencies multiple views with the goal of pursuing a value maximizing plan process with support from their stakeholders. The Debtors believe, in their business judgment, that appointing the Independent Committee and formalizing the Independent Committees Role will aid in this process. The Debtors further believe that Fried Franks role in advising the Independent Committee and assisting its members in fulfilling the Independent Committees Role is beneficial to the Debtors restructuring process and furthers the goal of maximizing value for the Debtors estates. The Debtors formation of the Independent Committee and the Independent Committees retention of Fried Frank minimize the risk of a substantial impediment to the Debtors progress that could otherwise result from potential conflicts of interest (either actual or perceived) that may arise during the course of the Chapter 11 Cases and, in particular, the plan process that is currently underway. The Independent Committee will have its own counsel providing advice
appropriate for debtors to undertake to compensate counsel to independent directors or trustees of a debtor; the Debtors request here is similar.

6
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solely to the Independent Committee members with respect to the Independent Committees Role. Such members can be reassured that their interests are the only ones being taken into consideration with respect to the legal advice they request and receive from Fried Frank, which will foster the ability of the Independent Committee to act decisively in fulfilling its duties. Separately, the Independent Committee will receive counsel and advice on the Debtors businesses and restructuring from the Debtors retained advisors, including Kirkland & Ellis LLP and Moelis & Company LLC. By instituting these protective measures at this stage of the Chapter 11 Cases, the Debtors have taken another step forward in their process. In light of the Independent Committees Role, the Debtors believe that the proposed additional compensation provided to the members of the Independent Committee is appropriate and commensurate with the additional work that is expected. Specifically, in addition to the current compensation of $75,000 per year for services rendered plus reimbursement of expenses paid to the Independent Committee, the Debtors seek to provide (a) the three members of the Independent Committee an additional per meeting fee (other than for a regularly scheduled meeting of the Board) of $3,000 (the Per Meeting Fee)9 and (b) the Chairman of the Independent Committee an additional $3,500 for every daily equivalent of work completed in his capacity as Chairman, other than at a meeting of the Independent Committee or of the Board. The Motion explained that the compensation to the members of the Independent Committee is likely a transaction in the ordinary course of business (and, notably, none of the objecting parties has argued otherwise).10 The Motion explained that the compensation to Board

Members of the Independent Committee will receive only one Per Meeting Fee on days when both the Board and the Independent Committee meet. To determine whether a transaction is in the ordinary course of business, courts in this district employ the horizontal dimension test and the vertical dimension test. See In re Drexel Burnham Lambert Group, Inc., 157 B.R. 532, 537-38 (S.D.N.Y. 1993); In re Crystal Apparel, Inc., 220 B.R. 816, 831-32 (Bankr. S.D.N.Y. 1998). These tests require an investigation into whether, from an industry-wide perspective, the transaction is

10

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members is consistent with the Debtors governance documents and past practices and that the request was only included out of an abundance of caution. See Motion at 19. First, the additional compensation has been proposed and approved by the Board in accordance with the Debtors bylaws, which state that members of the Board are entitled to fixed sums per year or per meeting. Further, the Per Meeting Fee (and, in Mr. Ruisis case as Chairman of the Independent Committee, a work-day equivalent), when combined with the current compensation, is consistent with comparable board compensation in the Debtors industry. See Exhibit C.11 To the extent it is determined that the additional compensation is not in the ordinary course of business and the Debtors require Court approval under section 363, the Debtors maintain in their sound business judgment that the additional compensation is both appropriate and justified. As stated above, the work conducted by the members of the Independent

Committee is an important piece of the Debtors plan process and the compensation is commensurate with and justified by the enhanced role and additional time and effort that has been and will be expended by the members of the Independent Committee. Notably, the

additional compensation is only for the three members of the Board on the Independent Committee. While the Debtors recognize that each Board members responsibilities have

increased due to the complexities surrounding the Debtors plan process, the Debtors do not

of the sort commonly engaged in by businesses similar to the Debtors business in the ordinary course and whether the transaction subjects a creditor to economic risk of a nature different from those it accepted when it decided to enter into a contract with the Debtors, respectively. See In re GS Distribution, Inc., 331 B.R. 552, 559 (Bankr. S.D.N.Y. 2005); In re Lavigne, 183 B.R. 65, 70 (Bankr. S.D.N.Y 1995). Additionally, courts have held that the compensation of a debtors directors is an ordinary course transaction. See, e.g., In re Midway Games Inc, 428 B.R. 303 (Bankr. D. Del. 2010).
11

The information in Exhibit C contains board compensation for certain companies in the Debtors industry, which companies are not in bankruptcy. The compensation package proposed by the Debtors in the Motion is within the range of the company comparables, even though the directors in these Chapter 11 Cases have been and will be taking on additional work and responsibilities as part of the restructuring in which the Debtors are currently engaged.

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provide compensation to members of the Board that are employees of AIC or its affiliates.12 Finally, the structure of the additional compensation as a Per Meeting Fee (and, for the Chairman of the Independent Committee, a work-day equivalent) ensures that the Independent Committee members compensation is supplemented appropriately only to the extent that their additional role leads to extra work. Finally, while estate assets are limited and the Debtors are certainly mindful of costs, the Debtors believe that agreeing to compensate Fried Frank and providing the members of the Independent Committee with additional compensation is an appropriate and justified expense of the Debtors estate, with benefits that exceed their costs. Contrary to the Preferred Shareholder Committees Objection, judicial estoppel does not apply in these circumstances as a bar to the Debtors using estate assets to compensate Fried Frank and the members of the Independent Committee. See Preferred Shareholder Objection at 5-7. The Debtors opposed the

appointment of an examiner and equity committee in large part because any examiner and/or equity committee would duplicate the efforts and investigations of various stakeholders that were already underway, thus presenting an unnecessary drain on estate assets. By contrast, the formation of the Independent Committee is appropriate and justified in light of the nature of the Debtors plan process and its function is not duplicative of that of another party in these Chapter 11 Cases. Further, as explained below, there will not be duplication of services between Fried Frank and the Debtors advisors. Second, contrary to the suggestion in the Lehman Objection regarding insurance proceeds as a source of funding, the Debtors do not believe that their director and officer insurance policies cover the costs of the Independent Committees counsel in this situation and,

12

All members of the Board are entitled to reimbursement of expenses.

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accordingly, there are not applicable insurance proceeds from which Fried Frank can be compensated.13 Lehman also suggests that the fees and expenses incurred by Fried Frank are not expenses that properly fall within the scope of indemnification provisions of the Debtors organizational documents and, therefore, should not be paid. Lehmans suggestion that the Debtors cannot expend their cash to pay for Fried Franks services to the Independent Committee merely because the expense is neither covered by insurance proceeds nor properly indemnifiable under the Debtors corporate organization documents lacks merit. Both in the Motion and in this Reply, the Debtors have provided sufficient business justification based on the contributions of the members of the Independent Committee and their access to counsel will make to these Chapter 11 Cases. Based on that sound business justification, the Debtors believe the relief requested is appropriate under section 363 and should be approved. B. The Relief Requested in the Motion Is Properly Sought under Section 363 of the Bankruptcy Code.

The Motion seeks authority to use the Debtors assets in a manner that is arguably outside the ordinary course of businessthat is, to pay Fried Frank on the Independent Committees behalf. The Independent Committee has retained Fried Frank, and it is the Independent

Committee that is receiving counsel with respect to the Independent Committees Role. The Debtors are not seeking to retain Fried Frank, and section 327 of the Bankruptcy Code applies to employment of advisors by debtors (or trustees). 11 U.S.C. 327. Just like in other cases in which a subset or committee of a debtors board has retained separate counsel, the Debtors retained restructuring advisors who will continue to represent the enterprise and advise the

13

The Debtors reserve all rights to seek recovery under any of their insurance policies for any of the amounts authorized pursuant to the Motion, and nothing in the Motion, any order approving the relief requested in the Motion, or this Reply shall act or be construed as a waiver of any such rights.

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Board, the Independent Committee, and management.14

There will not be duplication of

services, as the Debtors restructuring advisors and Fried Frank serve different functionswith the Debtors restructuring advisors counseling the Debtors and the Board (including the Independent Committee when participating with the full Board or separately) on all aspects of the restructuring and Fried Frank advising the members of the Independent Committee in the discharge of their duties with respect to the Independent Committees Role. As such, section 363 of the Bankruptcy Code is the appropriate basis for the relief requested in the Motion.15 Notwithstanding this, the Debtors are not trying to avoid any requirements of section 327 of the Bankruptcy Code and are prepared to move under section 327 of the Bankruptcy Code if the Court believes that is appropriate. C. Fried Frank Will Continue to Supplement Its Declaration Disinterestedness and Will Be Subject to the Fee Application Process. of

Notwithstanding that the relief requested in the Motion is appropriate and being sought pursuant to section 363, as stated in the Motion and as clarified in the revised proposed order, Fried Frank will (a) comply with the requirements of Bankruptcy Rule 2014(a) with respect to filing supplemental16 verified statements applicable to professionals retained in accordance with section 327 of the Bankruptcy Code and (b) apply for compensation for services rendered and

14

See Order Authorizing the Retention and Employment of Kirkland & Ellis LLP as Attorneys for the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date, entered on Aug. 12, 2010 [Docket No. 191]; Order Authorizing the Debtors to Retain and Employ AP Services, LLC and Designating Nathan J. Cook as Interim Chief Financial Officer Nunc Pro Tunc to the Petition Date, entered on Aug. 12, 2010 [Docket No. 192]; Order Authorizing and Approving the Retention and Employment of Moelis & Company LLC as Financial Advisor and Investment Banker to the Debtors, Nunc Pro Tunc to the Petition Date, entered on Aug. 12, 2010 [Docket No. 193]. See, e.g., In re Kmart Corp., Case No. 02-02474 (Bankr. N.D. Ill. Aug. 29, 2002) (court entered an order pursuant to section 363 of the Bankruptcy Code authorizing payment by the debtor of fees and expenses of the special counsel to an independent group of the board of directors); see also cases cited supra note 7. Contemporaneously with the Motion, Fried Frank filed the Declaration of Bonnie Steingart, a member of Fried Frank (the Steingart Declaration) supporting Fried Franks disinterestedness and explaining that Fried Frank does not represent or hold an interest adverse to the Debtors estates.

15

16

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reimbursement of expenses incurred on behalf of the Independent Committee in compliance with the procedures contained in the Interim Compensation Order (and other law applicable to the filing of fee applications),17 and that such amounts will be administrative expenses under section 503 of the Bankruptcy Code to the same extent as professionals retained under section 327. Further, as discussed below, creditors will retain all of their rights under the Final Cash Collateral Order.18 The Debtors constituencies, thus, have a mechanism to review Fried Franks fees and expenses to determine whether or not the services provided are legitimate, appropriate, and reasonable and the ability to challenge such amounts, to the extent they deem necessary. In light of the parties rights to object to Fried Franks fees, the Debtors believe that a cap on such fees is unnecessary and not appropriate.19 Fried Franks representation of the

Independent Committee regarding the Independent Committees Role is not predictable, as the Independent Committee will be responding to issues as they arise and the extent of its involvement largely depends on the direction in which the restructuring proceeds. There remains the possibility that the plan process proceeds in such a way that the Independent Committees Role will be significant and time consuming, which could lead to a greater need to seek the advice of Fried Frank. In such a scenario, a cap on Fried Franks fees could halt the restructuring processs forward progress as the Independent Committee could be left without the ability to

17

Order Authorizing the Establishment of Procedures for Interim Compensation and Reimbursement of Expenses for Professionals and Official Committee Members, entered on Aug. 12, 2010 [Docket No. 189] (the Interim Compensation Order). 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, entered on Sept. 2, 2010 [Docket No. 402] (the Final Cash Collateral Order). It is noteworthy that cases cited in the Midland Objection where a debtor is permitted to compensate counsel retained by a group of independent directors do not include a cap on counsel fees. See In re Sahlen, 113 B.R. 152; In re Woodworkers Warehouse, Inc, 323 B.R. 403; In re Accuride Corp., et al., No. 09-13449 (Shannon) (Bankr. D. Del. Nev. Sept. 18, 2009) (Docket No. 909), In re Stations Casinos, Inc., No. 09-52477 (Zive) (Bankr. D. Nev. Sept. 18, 2009) (Docket No. 327); In re Interep Natl Radio Sales, Inc., No. 08-11079 (Drain) (Bankr. S.D.N.Y. April 28, 2008) (Docket No. 126).

18

19

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seek appropriate counseland thus unable to responsibly fulfill their dutiesduring critical moments in the Chapter 11 Cases. Parties in interest have the right to object to Fried Franks fees. This will ensure that the fees incurred by Fried Frank are reasonable under the

circumstances. D. The Debtors Are Appropriately Expending Estate Funds for the Benefit of the Entire Enterprise.

The expenditures contemplated by the Motion are in the best interests of the Debtors enterprise. The Debtors enterprise is integrated in crucial ways, and it is appropriate and acceptable for the Debtors to spend estate funds with the entire enterprise in mind. Senior management sits at parent-level entities, where, among other things, it manages consolidated aspects of the Debtor-entities, plans short- and long-term financing, maintains franchiser affiliations that reflect longstanding relationships and the significant number and strong locations of many of the Debtors hotels, and arranges property management contracts. As a result, in the ordinary course of business, the Debtors senior management and Board pursue key decisionmaking efforts for the benefit of all Debtors. These activities do not (and should not) terminate with respect to those properties that have declined in value such that the secured debt may be undersecured. Indeed, courts recognize that it is proper for a debtors decision-makers to consider the interests of the consolidated enterprise.20 Consequently, even if it is determined that assets do not exceed the secured debt for certain Debtor-entities, the use of estate funds to compensate the Independent Committee and Fried Frank as its counsel is appropriate. The Debtors are

proceeding through their restructuring process, which they believe will maximize the value of the
20

See, e.g., Duggan v. Sansberry, 327 U.S. 499 (1946); Heisley v. U.I.P. Engineered Prods. Corp. (In re U.I.P. Engineered Prods. Corp.), 831 F.2d 54, 56 (4th Cir. 1987); In re Gen. Growth Props., Inc., 409 B.R. 43, 62-63 (Bankr. S.D.N.Y. 2009).

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Debtors enterprise for the benefit of constituencies, and the allocation of value among the Debtors constituencies will be determined as part of that process. II. Fried Frank Is Disinterested. The Independent Committee engaged Fried Frank based on Fried Franks professional standing and reputation and its extensive experience and breadth of knowledge in the field of debtors and creditors rights. It is not uncommon for a firm of its size, with over 450 attorneys and offices in six countries, to provide a variety of legal services to a diverse client base, some of whom may be involved in the Chapter 11 Cases. Accordingly, the fact that there is an overlap between certain of Fried Franks clients and parties who may be involved in the Chapter 11 Cases is certainly not surprising and does not by itself disqualify Fried Frank from its representation of the Independent Committee. See In re Diva Jewelry Design, Inc. 367 B.R. 463 (Bankr. S.D.N.Y. 2007) ([S]ection 327(c) expresses the recognition that a prospective professional for a [debtor] may, fully consistent with the Code, have represented, or even continue to represent, one or more creditors. Section 327(c) requires, instead, once more by its express terms and plain language, inquiry into whether there is an actual conflict of interest. [A]n actual conflict of interest is an active competition between two interests, in which one interest can only be served at the expense of the other.) (internal quotations omitted). Fried Franks disclosure procedures were comprehensive, as described in the Steingart Declaration, and Fried Frank has stated that no actual conflict of interest exists. See also Fried Franks reply in support of the Motion filed contemporaneously herewith. III. The Relief Requested in the Motion Is in Accordance with and Subject to the Final Cash Collateral Order. The Court has entered the Final Cash Collateral Order, which authorizes the use of the Debtors Cash Collateral, including for operations and the restructuring. See, generally, Final

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Cash Collateral Order. The Final Cash Collateral Order affords parties with an interest in Cash Collateral a number of protections, including the ability to return to Court if they believe they are no longer adequately protected. See Final Cash Collateral Order 20. Nothing contained in the proposed order is meant to affect the Final Cash Collateral Order in any way and all compensation paid by the Debtors to Fried Frank under an order approving the Motion will be made in accordance with and subject to the terms of the Final Cash Collateral Order.21 Indeed, relitigating Cash Collateral issues each time the Debtors seek authority to use Cash Collateralincluding here where the Debtors seek to use Cash Collateral for activities within the purview of their reasonable business judgmentis an inappropriate use of the Courts time and the parties resources. IV. Objections Regarding the Independence of the Independent Committee and Other Features of the Plan Process Are Premature and Outside of the Scope of the Relief Requested. Pursuant to the Motion, the Debtors are requesting to make payments to Fried Frank and members of the Independent Committee. The Board is the proper party to determine

governance, and any request by a creditor constituency to change the process or condition the relief requested in the Motion on a changed process is improper. Moreover, objections to the means by which the Debtors ultimately determine the substance of a plan that is not currently before the Court are premature. All parties in interest will have an opportunity to object to the process under which the Debtors develop a plan of reorganization at the appropriate time. At this time, the Debtors seek only to compensate Fried Frank in providing advice to the Independent Committee with respect to the Independent Committees Role and to provide

21

The Debtors revised the proposed order to clarify that, for purposes of the Final Cash Collateral Order, payments made by the Debtors to Fried Frank are corporate overhead charges and expenses of the Debtors but shall be treated with the same priority of payment as the payment of Professional Fees and Representatives Expense Reimbursement (as such terms are defined in the Final Cash Collateral Order).

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additional compensation to the Independent Committee, both of which benefit the Debtors restructuring process for the benefit of all of the Debtors constituencies. The Debtors believe such compensation is justified under the circumstances and should be approved.

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Conclusion For the foregoing reasons, the Debtors respectfully request that this Court overrule the Objections and grant the relief requested in the Motion. New York, New York Dated: November 9, 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. (admitted pro hac vice) Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Street 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 October 19, 2010 Resolutions

K&E 17962523

INNKEEPERS USA TRUST RESOLUTIONS ADOPTED AT A SPECIAL MEETING OF THE BOARD OF TRUSTEES October 19, 2010 WHEREAS, on July 19, 2010, Innkeepers USA Trust, a Maryland real estate investment trust (the "Trust") along with certain of its affiliates (collectively, the "Debtors") commenced voluntary cases (the "Bankruptcy Cases") under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"); WHEREAS, in conjunction with the Bankruptcy Cases, the Board of Trustees of the Trust (the "Board"), wishes to appoint a Committee of Trustees of the Board comprised of Trustees who do not have a financial interest in sponsoring a chapter 11 plan for the Debtors or purchasing all or a portion of the Debtors' assets (the "Independent Committee"); WHEREAS, the Board has reviewed and discussed the materials presented by the management and the legal and financial advisors of the Trust regarding the matters relating to the resolutions contained herein; WHEREAS, the Board has approved the resolutions contained herein by unanimous consent; NOW, THEREFORE, BE IT RESOLVED, that with the unanimous consent of the Board, effective as of the date hereof, the Independent Committee be, and hereby is, formed and established; and be it further; RESOLVED, that the initial members ofthe Independent Committee shall be Mr. Lawrence Ruisi, Mr. Fred J. Kleisner, and Mr. Bernard L. Zuroff; and be it further; RESOLVED, that Mr. Lawrence Ruisi shall serve as Chairman of the Independent Committee; and be it further; RESOLVED, that the Independent Committee will (a) review and evaluate information about the Debtors' restructuring alternatives and, as appropriate, meet separately from the Board and (b) address any conflicts of interest appropriately; and be it further; RESOLVED, that with the help of management and the Debtors' advisors, the Independent Committee shall be responsible for (a) conducting a preliminary analysis of all indications of interest or proposals received (including the Five Mile proposal to Midland) relating to, among other things, sponsorship of a chapter 11 plan, a potential

K&E 17746717

recapitalization, or other financial/strategic alternative related to a chapter 11 plan and (b) making a recommendation with respect thereto to the Board; and be it further;
RESOLVED, that the Independent Committee be, and hereby is, authorized and empowered to engage counsel to represent and assist the Independent Committee in carrying out the Independent Committee's duties, and in connection therewith, the Independent Committee has determined to retain Fried, Frank, Harris, Shriver & Jacobson LLP ("Fried Frank") as such counsel; and be it further; RESOLVED, that the Independent Committee is hereby authorized to execute appropriate retention agreements with Fried Frank; and be it further; RESOLVED, that the Trust is authorized to, and shall, cause the Debtors to satisfy, pay, and reimburse on behalf of the Independent Committee all reasonable charges for professional services rendered and disbursements incurred by Fried Frank for the Independent Committee and shall file with the Bankruptcy Court any appropriate motion seeking an order authorizing and approving (a) the undertaking by the Debtors to satisfy, pay, and reimburse all reasonable charges for professional services rendered and disbursements incurred by Fried Frank and (b) such satisfaction, payment, reimbursement, and compensation; and be it further; RESOLVED, that the Trust is authorized, effective as of September 1, 2010, to cause the Debtors to (i) pay to (a) each member of the Independent Committee the amount of $3,000 for each meeting of the Independent Committee or of the Board (other than a regularly scheduled meeting of the Board) (the "Per Meeting Fee"), provided that members of the Independent Committee shall receive only one Per Meeting Fee on days when both the Board and the Independent Committee meet, and (b) the Chairman of the Independent Committee an additional $3,500 for every daily equivalent of work completed in his capacity as Chairman of the Independent Committee, other than at a meeting of the Independent Committee or of the Board; (ii) pay to each such member or Chairman all reasonable, documented out-of-pocket expenses incurred by each such member or Chairman in the fulfillment of his duties; and (iii) cause to be filed with the Bankruptcy Court any appropriate motion for authority to make such payments; and be it further; RESOLVED, that the Plan Process Protocol and Plan Process Responsibilities, substantially in the forms attached hereto as Exhibit A and which have been reviewed and discussed by the Board, are hereby authorized, adopted, and approved in all respects, including with respect to the roles of each applicable party as set for therein; and be it further; RESOLVED, that the Independent Committee be, and hereby is, authorized and empowered to take any other action that the Independent Committee determines to be necessary or appropriate solely in carrying out its responsibilities as expressly delegated to the Independent Committee by these Board Resolutions; and be it further;

K&E 17746717

RESOLVED, that the officers and authorized representatives ofthe Trust and any other person designated and so authorized to act (each, an "Authorized Officer") of the Trust be, and each hereby is, authorized and empowered on behalf of and in the name of the Trust, to execute such documentation as such Authorized Officer considers necessary, proper, or desirable to effectuate these resolutions, such determination to be evidenced by such execution or taking of such action; and be it further; RESOLVED, that any and all past actions heretofore taken by any Authorized Officer or the Board of the Trust in the name and on behalf of the Trust, in the Trust's own capacity and in Trust's capacity as the direct or indirect general partner, stockholder, beneficial interest holder, or member of each of its subsidiaries, in furtherance of any or all of the preceding resolutions be, and the same hereby are, ratified, confirmed, and approved.

*****

K&E 17746717

EXHIBIT A

Plan Process Protocol Innkeepers USA Trust ("Innkeepers" and, together with its affiliated debtors, the "Debtors") has established this plan protocol for its restructuring process. This protocol is subject to modification by the Board of Trustees of Innkeepers (the "Board"), based upon further developments and taking into consideration the input of Innkeepers' stakeholders, where appropriate. This protocol, as amended or modified from time to time, must be adhered to by Innkeepers' management and advisors.
I. Communication Protocol

Innkeepers intends to communicate with each of its key stakeholders and consider indications of interests and proposals from stakeholders and third parties. Innkeepers has engaged with all major stakeholders to solicit input regarding restructuring alternatives with the goal of proposing and filing a consensual plan. Meetings have already taken place and additional meetings will be scheduled, as appropriate. To enable parties in interest access to information relevant to evaluating a potential transaction, Innkeeper's financial advisor, Moelis & Company ("Moelis"), working with Innkeepers, is maintaining an electronic data room, and Moelis will ensure that it is populated. Innkeepers will work with its financial and legal advisors to ensure that the data room has appropriate information and is properly organized. Current stakeholders have been granted access to the data room. With respect to third parties who express interest, Moelis, in consultation with the Board and a special committee of the Board that is comprised of its independent members (the "Independent Committee"), will evaluate whether, if, and when to grant such parties access to the data room, subject to the parties signing an appropriate confidentiality agreement. All parties will be required to establish that they have adequate financial resources to complete a viable transaction before they are granted access to the data room. Consistent with the "Plan Process Responsibilities," any interested parties should contact Moelis directly. Moelis will provide regular status updates regarding the data room, discussions with stakeholders, discussions with third parties, and other relevant information to the Board, the Independent Committee, and stakeholders, as appropriate.
II. Consideration of Proposals

The Debtors are working on a reforecast of their results and projections to ensure that they represent the current expectations of the market over the next several years. This will assist with plan discussions, support various related valuation analyses, and be useful in the evaluation of plan proposals. In addition, at the Debtors' request, Moelis will: (a) develop plan concepts; (b) facilitate due diligence by interested parties; and (c) advise the Board, the Independent Committee, and management on views of valuation and debt capacity.

1
K&E 17748469

Additionally, the Debtors and their advisors are analyzing proposals that have been received and are working with certain parties who have expressed an interest in the Debtors to encourage them to complete their due diligence. As discussed above, the Independent Committee, will (a) review and evaluate information about the Debtors' restructuring alternatives and, as appropriate, meet separately from the Board and (b) address any conflicts of interest appropriately. With the help of management and the Debtors' advisors, the Independent Committee will be responsible for conducting a preliminary analysis of all indications of interest or proposals received (including the Five Mile proposal to Midland) relating to, among other things, sponsorship of a chapter 11 plan, a potential recapitalization, or other financial/strategic alternative related to a chapter 11 plan and making a recommendation with respect thereto to the Board. The Independent Committee will then make a recommendation to the Board on how to proceed after it has reviewed and evaluated all timely received credible indications of interest and proposals in whatever form or structure.
It should be noted, however, that the Debtors currently do not think that the value of their estates

will be maximized by conducting a piecemeal sales process. The Debtors currently believe that an enterprise-level restructuring maximizes value and, thus, will review and evaluate timely received indications of interest and proposal with this perspective.

2
K&E 17748469

Plan Related Tasks

Task Board of Trustees

Responsible Advisor(s) (working with Innkeepers)

1.

Calls of Board ofTrustees

K&E - responsible for ensuring calls established with the Board and the Independent Committee and for coordinating with Fried Frank with respect to the Independent Committee Fried Frank- responsible for working with the Independent Committee and coordinating with K&E with respect to Independent Committee recommendations

2.

Counsel for the Independent Committee

Discussions with Constituents and Parties in Interest

3. 4. Preliminary meetings with each major - stakeholder Moelis and K&E - schedule and attend

Create and manage contact log for major Moelis to maintain stakeholders and other parties in interest Prepare for Due Diligence and Plan Process Moelis - responsible for contact with parties

5.

Confidentiality agreements

K&E - responsible for negotiating agreements Moelis - primarily responsible for organization AP Services- responsible for compiling documents K&E- responsible for reviewing list of contents

6.

Compile information and organize data room

K&E 17748469

7.

Develop timeline for diligence and plan formulation process

K&E and Moelis - work together to develop appropriate timeline and determine how to address competing interests Moelis and Independent Committee to conduct a preliminary analysis of indications of interests and proposals received (including Five Mile proposal to Midland) Following recusals by members ofthe Board ofTrustees as appropriate, Moelis to present detailed analysis of indications of interest and proposals received K&E and Moelis further clarify/negotiate with parties as directed by the Board Independent Committee, in consultation with Moelis, to make recommendations to the Board K&E and Moelis to conduct detailed analysis and engage in negotiations with parties as directed by the Board Entire Board, taking into account recommendation of the Independent Committee Moelis - responsible for preparing reforecast Moelis - advise on views on valuation after projections completed

8.

Analyze proposals from constituents and third parties

9.

Presentation to Board of Trustees

10.

Clarification/negotiation of indications of interest and proposals

11.

Independent Committee Recommendation

12.

Negotiate plan proposals

13.

Select plan proposal

14.

Reforecast of projections

15.

Valuation of enterprise and components

2
K&E 17748469

Miscellaneous
K&E - primarily responsible with assistance from Moelis K&E, Moelis, and AP Services

16. 17.

Prepare for exclusivity hearing Consider additions and modifications to tasks

3
K&E 17748469

Plan Process Responsibilities Innkeepers USA Trust ("Innkeepers") has delineated the following plan process responsibilities to promote the interests of the estates. These responsibilities are subject to modification by the Board of Trustees of Innkeepers (the "Board"), based upon further developments, and, as amended or modified from time to time, must be adhered to by Innkeepers' management and advisors. The responsibilities are broken down into the following three categories: First, Moelis & Company ("Moelis"), under the guidance of Bill Derrough, will be primarily responsible for coordinating and negotiating with major stakeholders regarding all restructuring related financial and business inquiries, including communications from financial stakeholders and third parties expressing an interest in Innkeepers. Moelis will be the point of contact and will coordinate with Innkeepers and its other advisors, as appropriate. As part of its responsibilities, Moelis will maintain a contact log that tracks communications with stakeholders and other interested parties similar to those maintained in other comparable transactions. Second, Kirkland & Ellis LLP ("Kirkland"), under the guidance of Jamie Sprayregen, Paul Basta, and Anup Sathy, will be primarily responsible for the coordination of all restructuring related legal inquiries. Kirkland will be the point of contact and will coordinate with Innkeepers and its other advisors, as appropriate. Third, the Board will receive frequent updates in a formal and informal manner from the advisors as well as from management, and the Board is responsible for all significant strategic decisions. This process will include the entire Board as well as a committee of the Board that will be comprised of the independent members of the Board (the "Independent Committee") that will act in accordance with the responsibilities expressly delegated by the Board thereto. The Independent Committee will be separately represented by counsel; it has determined to retain Fried, Frank, Harris, Shriver & Jacobson LLP. The Board will meet regularly, with separate meetings for the Independent Committee. Additionally, the Board has an opportunity to enter executive session (without management or advisors) as part of or separate from these meetings. Innkeepers' advisors and management are available, as requested, for scheduled meetings of the Board and for the executive sessions of the Board and the meetings of the Independent Committee. Consistent with the roles described herein, Innkeepers' advisors and management report regularly to and take direction from the Board, or the Independent Committee, with respect to matters involving the Independent Committee's responsibilities as expressly delegated by the Board thereto.

K&E 17748484

CERTIFICATE

The undersigned, Mark Murphy, Vice President, General Counsel and Secretary of Innkeepers USA Trust, a Maryland Real Estate Investment Trust (the
"Trust"), hereby certifies as follows:

1.

I am the duly qualified and elected Vice President, General Counsel and Secretary and, as such, I am familiar with the facts herein certified and I am duly authorized to certify same on behalf of the Trust. Attached hereto is a true, complete, and correct copy of the resolutions of the Board of Trustees of the Trust, duly adopted at a properly convened meeting of the Board of Trustees of the Trust on October 19, 2010, in accordance with the Amended and Restated Declaration of Trust ofthe Trust, as amended. Such resolutions have not been amended, altered, annulled, rescinded, or revoked and are in full force and effect as of the date hereof. There exist no subsequent resolutions of the Board of Trustees of the Trust relating to the matters set forth in the resolutions attached hereto. IN WITNESS WHEREOF, the undersigned has executed this certificate as

2.

3.

ofOctober 19,2010.

Name: Mark Murphy Title: Vice President, General Counsel and Secretary

Exhibit B Comparison of Proposed Order

K&E 17962523

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 (I) APPROVING THE DEBTORS UNDERTAKING TO COMPENSATE FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP AS COUNSEL TO THE INDEPENDENT COMMITTEE OF THE BOARD OF TRUSTEES OF INNKEEPERS USA TRUST AND AUTHORIZING THE PAYMENT OF SUCH COMPENSATION BY THE DEBTORS AND (II) AUTHORIZING THE DEBTORS TO COMPENSATE THE MEMBERS OF THE INDEPENDENT COMMITTEE1 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) under section 363 of the Bankruptcy Code, (a) approving the Debtors undertaking to compensate Fried Frank as counsel to the Independent Committee and authorizing the payment of such compensation by the Debtors, (b) authorizing the Debtors to compensate the members of the Independent Committee, and (c) authorizing such other relief as is just and proper; and upon the Steingart Declaration; 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
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. All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the Motion.

1
K&E 17930713

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. 2. The Motion is granted to the extent provided herein. TheSubject to the terms of this Order, the Debtors undertakings to (a) satisfy,

pay, and reimburse on behalf of the Independent Committee all reasonable charges for professional services rendered and disbursements incurred by Fried Frank as counsel torepresenting and advising the Independent Committee in the Independent Committee (i) reviewing and evaluating information concerning the Debtors restructuring alternatives, (ii) conducting a preliminary analysis of all indications of interest or proposals received relating to a chapter 11 plan or other restructuring alternative, (iii) making a recommendation with respect thereto to the Board, and (iv) addressing any conflicts of interest appropriately (collectively, the Independent Committees Role) and (b) compensate the Independent Committee and continue to reimburse the expenses of the Independent Committee as described in the Motion and set forth herein are approved. 3. TheSubject to the terms of this Order, the Debtors are authorized to (a) satisfy,

pay, and reimburse on behalf of the Independent Committee all reasonable charges for professional services rendered and disbursements incurred by Fried Frank as counsel torepresenting and advising the Independent Committee in the Independent Committees Role and (b) compensate the Independent Committee and continue to reimburse the expenses of the Independent Committee. 4. Fried Frank will submit monthly invoices to the Independent Committee with

copies of the monthly invoices (redacted as appropriate) submitted at the same time to (a) the

2
K&E 17930713

Debtors, Innkeepers USA Trust, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480, Attn: Mark Murphy, (b) counsel for the Debtors, Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022, Attn: Paul M. Basta, and Kirkland & Ellis LLP, 300 North LaSalle Street, Chicago, Illinois 60654, Attn: Anup Sathy, P.C., (c) counsel to the Creditors Committee, Morrison & Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, Attn: Jordan Wishnew, (d) counsel to Midland Loan Services, Inc., Haynes and Boone, LLP, 1221 Avenue of the Americas, New York, New York 10020, Attn: Lenard M. Parkins and John D. Penn, (e) counsel to Wells Fargo Bank, N.A. and U.S. Bank National Association, as trustees, Bryan Cave LLP, 1290 Avenue of the Americas, New York, New York 10104, Attn: Lawrence P. Gottesman, and Duane Morris LLP, One Market Plaza, Spear Tower, Suite 2200, San Francisco, California 94105, Attn: Phillip K. Wang, and (f) the U.S. Trustee, 33 Whitehall Street, 21st Floor, New York, New York 10004, Attn: Paul Schwartzberg. Notwithstanding that the relief requested in the Motion is pursuant to section 363 of the Bankruptcy Code, Fried Frank (a) shall comply with the requirements of Bankruptcy Rule 2014(a) with respect to filing supplemental verified statements applicable to professionals retained in accordance with section 327 of the Bankruptcy Code and (b) shall apply for compensation for services rendered and reimbursement of expenses incurred on behalf of the Independent Committee as counsel representing and advising the Independent Committee in the Independent Committees Role in compliance with the applicable provisions of the Bankruptcy Code, the Bankruptcy Rules, the Local Bankruptcy Rules, the guidelines established by the U.S. Trustee, and any other applicable procedures and orders of the Court made applicable to professionals retained in accordance with section 327 of the Bankruptcy Code, including the Order Authorizing the Establishment of Procedures for Interim Compensation and

3
K&E 17930713

Reimbursement of Expenses for Professionals and Official Committee Members [Docket No. 189] and such amounts shall be administrative expenses under section 503 of the Bankruptcy Code to the same extent as professionals retained in accordance with section 327 of the Bankruptcy Code. 5. Nothing in this Order shall affect in any way 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 U.S.C. 361, 362, and 363 [Docket No. 402] (the Final Cash Collateral Order). 6. 5. The Debtors are hereby authorized to pay, in the ordinary course of its business

and on a monthly basis, all reasonable amounts invoiced by Fried Frank for fees and expenses.For purposes of the Final Cash Collateral Order, payments by the Debtors to Fried Frank are corporate overhead charges and expenses of the Debtors but shall be treated with the same priority of payment as the payment of Professional Fees and Representatives Expense Reimbursement (as such terms are defined in the Final Cash Collateral Order) as set forth in the Final Cash Collateral Order. 7. 6. The terms and conditions of this Order shall be immediately effective and

enforceable upon its entry. 8. 7. All time periods set forth in this Order shall be calculated in accordance with

Bankruptcy Rule 9006(a). 9. 8. The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 10. 9. The Court retains jurisdiction with respect to all matters arising from or related to

the implementation of this Order.

4
K&E 17930713

New York, New York Date: __________ 2010

United States Bankruptcy Judge

5
K&E 17930713

Exhibit C Chart of Board Compensation for Certain Companies

K&E 17962523

Selected Director/ Trustee Compensation Information for the Fiscal Year Ending December 31, 20091
Number of Directors/ Trustees Estimated Total Debt (in millions) Average Annual Cash Component (if available) Average Annual Equity Component (if available) Average Annual Total Compensation

Company

Source

Ashford Hospitality Trust DiamondRock Hospitality Company FelCor Lodging Trust Inc. Hersha Hospitality Trust Hospitality Properties Trust Host Hotels & Resorts, Inc. LaSalle Hotel Properties Strategic Hotels & Resorts, Inc. Sunstone Hotel Investors, Inc.

$2,489

$70,050

$15,3222

$85,372

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated April 14, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated March 19, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated April 2, 2010. Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated April 15, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated February 24, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated April 1, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated March 11, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated April 9, 2010 Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, dated March 23, 2010

$783

$60,000

$50,0003

$110,000

$1,573

$48,1074

$8,4205

$56,527

$762

$54,5006

$15,4697

$69,969

$2,090

$44,0008

$29,2439

$73,243

$5,424

$89,50010

$65,00011

$154,500

$760

N/A

N/A

$109,16712

$1,155

$66,32113

$11,05114

$77,372

$1,298

$52,125

$110,27815

$162,403

K&E 17978736

Cumulative Average (Mean) Cash Component of Directors/Trustees Compensation: Cumulative Average (Mean) Equity Component of Directors/Trustees Compensation: Cumulative Average (Mean) Total Directors/Trustees Compensation:
1

$60,575 $38,097 $99,839

2 3 4 5 6 7 8

9 10 11

12

13 14 15

These companies represent lodging Real Estate Investment Trusts with enterprise values and estimated debt liabilities that exceed $500 million. The equity component is composed of immediately vested shares of common stock in Ashford Hospitality Trust. The equity component is composed of immediately vested shares of common stock in DiamondRock Hospitality Company. Only those Directors that served for the entirety of 2009 are included. The equity component was paid in cash in 2009 due to historically low trading values. Only those Trustees that served for the entirety of 2009 are included. The equity component is composed of a grant of common shares of Hersha Properties Trust. Only those Trustees that served for the entirety of 2009 and that are not Managing Trustees (as defined in Hospitality Property Trusts April 15, 2010 proxy statement) are included. The equity component is composed of a grant of common shares of Hospitality Properties Trust. Only those Directors that served for the entirety of 2009 are included. The equity component is composed of stock units credited to each directors account created for such purposes. The stock units convert to common shares of Host Hotels & Resorts, Inc. upon the directors termination of service from the board of directors. A more complete description of the equity component is contained in the April 1, 2010 proxy statement. Each Trustee, at their election, may receive their annual fees in cash, common shares or deferred common shares. Deferred common shares refers to the deferral of the receipt of the allotted common shares. Only those Directors that served for the entirety of 2009 are included. The equity component is composed of immediately vested common shares of Strategic Hotels & Resorts, Inc. The equity component is composed of restricted stock of Sunstone Hotel Investors, Inc. that typically vests over a three year period.