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10-Q Page 76

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of a Libor plus 3.5% senior secured delayed draw term loan of Texas Competitive Electric Holdings ("TXU")
due 2014 through a non-recourse total return swap with an unaffiliated third party expiring on October 1 0,
2013 and pursuant to which Apollo TXU pays interest at Libor plus 1.5% and generally receives all proceeds
due under the delayed draw term loan of TXU (the "TXU Reference Obligation"). Like Apollo FDC, Apollo
TXU is entitled to 100% of any realized appreciation in the TXU Reference Obligation and, since the total
return swap is a non-recourse obligation, Apollo TXU is exposed up to the amount of equity used by AIC
Holdco to fund the investment in the total return swap, plus any additional margin we decide to post, if any,
during the term of the financing.
Through AIC Holdco, effective in September 2008, we invested $10,022 equivalent, in a special purpose
entity wholly owned by AIC Holdco, AIC (Boots) Holdings, LLC ("Apollo Boots"), which acquired 23,383 and
12,465 principal amount of senior term loans of AB Acquisitions Topco 2 Limited, a holding company for
the Alliance Boots group of companies (the "Boots Reference Obligations"), out of the proceeds of our
investment and a multicurrency $40,876 equivalent non-recourse loan to Apollo Boots (the "Acquisition
Loan") by an unaffiliated third party that matures in September 2013 and pays interest at LIBOR plus 1.25%
or, in certain cases, the higher of the Federal Funds Rate plus 0.50% or the lender's prime-rate. The Boots
Reference Obligations pay interest at the rate of LIBOR plus 3% per year and mature in June 2015.
We do not consolidate AIC Holdco or its wholly owned subsidiaries and accordingly only the value of our
investment in AIC Holdco is included on our statement of assets and liabilities. The Senior Note, total return
swap and Acquisition Loan are non-recourse to AIC Holdco, its subsidiaries and us and have standard
events of default including failure to pay contractual amounts when due and failure by each of the underlying
Apollo special purpose entities to provide additional credit support, sell assets or prepay a portion of its
obligations if the value of the FDC Reference Obligation, the TXU Reference Obligation or the Boots
Reference Obligation, as applicable, declines below specified levels. We may unwind any of these
transactions at any time without penalty. From time to time Apollo Investment may provide additional capital
to AIC Holdco for purposes of funding margin calls under one or more of the transactions described above
among other reasons. During the fiscal year ended March 31, 2009, we provided $18,480 in additional
capital to AIC Holdco. During the fiscal year ended March 31, 2010, $9,336 of net capital was returned to us
from AIC Holdco. During the three months ended June 30, 2010, $1,700 of net capital was provided to AIC
Holdco.
Dividends
Dividends paid to stockholders for the three months ended June 30, 2010 and June 30, 2009 totaled $54.3
million or $0.28 per share, and $37.0 million or $0.26 per share, respectively. Tax characteristics of all
dividends will be reported to shareholders on Form 1099 after the end of the calendar year. Our quarterly
dividends, if any, will be determined by our Board of Directors.
We have elected to be taxed as a RIC under Subchapter M of the Code. To maintain our RIC status, we
must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of
realized net long-term capital losses, if any, out of the assets legally available for distribution. In addition,
although we currently intend to distribute realized net capital gains (i.e., net long-term capital gains in excess
of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions,
we may in the future decide to retain such capital gains for investment.
We maintain an "opt out" dividend reinvestment plan for our common stockholders. As a result, if we declare
a dividend, then stockholders' cash dividends will be automatically reinvested in additional shares of our
common stock, unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash
dividends.
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APP-00546
10-Q Page 77
We may not be able to achieve operating results that will allow us to make distributions at a specific level or
to increase the amount of these distributions from time to time. In addition, due to the asset coverage test
applicable to us as a business development company, we may in the future be limited in our ability to make
distributions.
51
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APP-00547
10-Q Page 78
Table of Contents
Also, our revolving credit facility may limit our ability to declare dividends if we default under certain
provisions. If we do not distribute a certain percentage of our income annually, we will suffer adverse tax
consequences, including possible loss of the tax benefits available to us as a regulated investment
company. In addition, in accordance with U.S. generally accepted accounting principles and tax regulations,
we include in income certain amounts that we have not yet received in cash, such as contractual payment-
in-kind interest, which represents contractual interest added to the loan balance that becomes due at the
end of the loan term, or the accrual of original issue or market discount. Since we may recognize income
before or without receiving cash representing such income, we may have difficulty meeting the requirement
to distribute at least 90% of our investment company taxable income to obtain tax benefits as a regulated
investment company.
With respect to the dividends to stockholders, income from origination, structuring, closing, commitment and
other upfront fees associated with investments in portfolio companies is treated as taxable income and
accordingly, distributed to stockholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are subject to financial market risks, including changes in interest rates. During the three months ended
June 30, 2010, many of the loans in our portfolio had floating interest rates. These loans are usually based
on floating LIBOR and typically have durations of one to six months after which they reset to current market
interest rates. As the percentage of our U.S. mezzanine and other subordinated loans increase as a
percentage of our total investments, we expect that more of the loans in our portfolio will have fixed rates. At
June 30, 2010, our floating-rate assets and floating-rate liabilities were closely matched. As such, a change
in interest rates would not have a material effect on our net investment income. However, we may hedge
against interest rate fluctuations from time-to-time by using standard hedging instruments such as futures,
options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may
insulate us against adverse changes in interest rates, they may also limit our ability to participate in the
benefits of lower interest rates with respect to our portfolio of investments. During the three months ended
June 30, 2010, we did not engage in interest rate hedging activities.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of June 30, 2010 (the end of the period covered by this report), we, including our Chief Executive Officer
and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer, concluded that our
disclosure controls and procedures were effective and provided reasonable assurance that information
required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within
the time periods specified in the SEC.s rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure
controls and procedures, management recognized that any controls and procedures, no matter how well
designed and operated can provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of
such possible controls and procedures.
(b) Changes in Internal Controls Over Financial Reporting
There have been no changes in the Company's internal control over financial reporting that occurred during
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APP-00548
10-Q Page 79
the first quarter of fiscal 2011 that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
52
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APP-00549
Table of Contents
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
10-Q Page 80
On April 13, 2010, InnKeepers USA Trust ("InnKeepers"), a subsidiary of Grand Prix Holdings, LLC, a
portfolio company of the Company, disclosed that it had not made certain scheduled monthly interest
payments on certain of its debt obligations, and had retained financial and legal advisors to assist it in an
evaluation of financial alternatives, including a potential restructuring of its balance sheet.
On May 21, 2010, the special servicer with respect to certain of InnKeepers' indebtedness, Midland Loan
Services, Inc., filed a complaint against the Company in New York State Supreme Court, New York County
(the "New York Court"). The Complaint alleges that the Company guaranteed certain property improvement
projects which InnKeepers has failed to timely complete. The Complaint asserts a single claim for specific
performance of the Company's guaranty. On June 30, 2010, the Company filed a motion to dismiss with the
New York Court. As of August 4, 2010, the New York Court had not ruled on the Company's motion to
dismiss. The Company intends to vigorously defend the lawsuit, to which it believes it has meritorious
defenses.
On July 19, 2010, Innkeepers disclosed that it had filed a voluntary petition in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court") under Chapter 11 of the United States
Bankruptcy Code in order to effectuate a pre-arranged plan of reorganization (the "Plan").
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed
in Part I "Item 1 A. Risk Factors" in our Annual Report on Form 1 0-K for the fiscal year ended March 31,
2010, which could materially affect our business, financial condition and/or operating results. The risks
described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks
and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
and adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
None.
53
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APP-00550
Table of Contents
Item 6. Exhibits
(a) Exhibits
10-Q Page 81
Listed below are the exhibits that are filed as part of this report (according to the number assigned to them in
Item 601 of Regulation S-K):
*
3.1 Articles of Amendment and Restatement, as amended ( 1)
3.2 Third Amended and Restated Bylaws (2)
4.1 Form of Stock Certificate (3)
10.1 Amended and Restated Investment Advisory Management Agreement between Registrant and
Apollo Investment Management, L.P. (4)
10.2 Amended and Restated Administration Agreement between Registrant and Apollo Investment
Administration, LLC (4)
10.3 Dividend Reinvestment Plan (3)
10.4 Custodian Agreement (3)
10.5 License Agreement between the Registrant and Apollo Management, L.P. (4)
10.6 Form of Transfer Agency and Service Agreement (4)
10.7 Amended and Restated Senior Secured Revolving Credit Agreement (5)
22.1 Proxy Statement (6)
31.1 * Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
31.2* Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934.
32.1 * Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(18 U.S.C. 1350).
32.2* Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(18 U.S.C. 1350).
Filed herewith.
(1) Incorporated by reference from the Registrant's post-effective Amendment No. 1 to the Registration
Statement under the Securities Act of 1933, as amended, on Form N-2, filed on August 14, 2006.
(2) Incorporated by reference from the Registrant's Form 8-K filed on November 6, 2009.
(3) Incorporated by reference from the Registrant's pre-effective Amendment No. 1 to the Registration
Statement under the Securities Act of 1933, as amended, on Form N-2, filed on March 12, 2004.
(4) Incorporated by reference from the Registrant's Form 10-K, filed on May 26, 2010.
(5) Incorporated by reference from the Registrant's Form 8-K filed on December 23, 2009.
(6) Incorporated by reference from the Registrant's 14A filed on June 18, 2010.
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APP-00551
10-Q Page 82
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on
August 4, 2010.
55
APOLLO INVESTMENT CORPORATION
By: /s/ JAMES C. ZEL TER
James C. Zeiter
Chief Executive Officer
By: /s/ RICHARD L. PETEKA
Richard L. Peteka
Chief Financial Officer and Treasurer
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APP-00552
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MOELIS
Moelis & Company prepared this presentation based on information received from third parties. Moelis
has not and does not intend to verify independently any of such information, all of which Moelis
assumes is accurate and complete in all material respects. If this presentation contains projections,
forecasts or other forward-looking statements, Moelis assumes that they were prepared based on the best
available estimates of the future events underlying such statements. This presentation speaks only as of
its date and Moelis assumes no duty to update it or to advise any person that its conclusions or advice
has changed.
This presentation is solely for your information purposes only. Consider it along with all other facts,
advice and its own insights before making your own independent decisions. Do not provide a copy of
this presentation to any person without Moelis' prior consent. No other person should rely on it for any
purpose. Moelis does not offer tax, accounting or legal advice.
Moelis & Company provides mergers and acquisitions, restructuring and other advisory services to
clients and its affiliates manage private investment partnerships. Its personnel may make statements or
provide advice that is contrary to information contained in this material. Our proprietary interests may
conflict with your interests. Moelis may from time to time have positions in or effect transactions in
securities described in this presentation. Moelis & Company may have advised, may seek to advise and
may in the future advise or invest in companies mentioned in this presentation.
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MOELIS
In this presentation we are running a scenario where projections have been developed on a hotel-by-hotel
basis for the portfolio
Management estimates financial performance will not return to 2007levels for at least four to six years
2010 reflects management budget, with actual data for January and February
Management anticipates 5-10 properties to be deflagged by 2015, regardless of PIPs
FISCAL YEAR 2010 - SCENARIO ASSUMPTIONS
ADR level assumptions range $107-$113
Slightly down from FY2009
Downward estimates mainly due to price
pressure as a result of continued effects of
economic environment
Occupancy levels 63%-67%, slightly down from
FY2009
RevPAR $70-$75, down approximately 2%-4%
from FY2009 levels
Expenses in line with FY2007-FY2009 average
margins
Estimates take into consideration adjustments due
to cycle renovations
FISCAL YEAR 2011 - SCENARIO ASSUMPTIONS
ADR levels $110-$116
Occupancy levels 65%-70%, up from FY2010
and back at FY2009 levels
RevPAR $74-$79, up approximately 4%-7%
from FY2010 levels
Expenses in line with FY2007-FY2009 average
margins
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Key Operating Statistics:
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ADR ($) $123 $126 $111 $110 $113
Growth -- 2.3% (11.8%) (0.8%) 2.6%
Occupancy (%) 74.2% 72.8% 67.2% 65.5% 67.4%
Growth (bps) -- (141) bps (565) bps (168) bps 195 bps
RevPAR ($) $92 $92 $75 $72 $76
Growth -- 0.4% (18.6%) (3.3%) 5.7%
Revenue $337 $352 $290 $282 $288
Growth -- 4.3% (17.5%) (2.8%) 2.1%
Department Expenses 83 84 74 74 75
Gross Operating Income $254 $268 $216 $209 $213
Margin 75.4% 76.2% 74.6% 73.9% 73.8%
Operating Expenses 110 112 101 100 106
House Profit $145 $156 $115 $109 $107
Margin 42.9% 44.3% 39.6% 38.5% 37.1%
Other Expenses 17 20 19 17 17
Hotel EBITDA $127 $136 $96 $91 $90
Growth -- 6.9% (29.5%) (5.0%) (1.7%)
Margin 37.7% 38.7% 33.1% 32.3% 31.1%
Corporate Expenses 11 12 12 9 9
Corporate EBITDA $116 $125 $84 $82 $80
Growth -- 7.0% (32.2%) (2.7%) (2.1 %)
Margin 34.5% 35.4% 29.1% 29.1% 27.9%
z
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ADR ($) $120 $124 $109 $109 $111
Growth -- 3.1% (12.0%) (0.7%) 2.2%
Occupancy (%) 76.0% 74.1% 69.2% 68.2% 69.5%
Growth (bps) -- (191) bps (491) bps (101) bps 129 bps
RevPAR ($) $92 $92 $76 $74 $77
Growth -- 0.6% (17.8%) (2.2%) 4.1%
Revenue $195 $197 $161 $158 $164
Growth -- 0.8% (18.1 %) (2.1%) 4.1%
Department Expenses 41 40 35 35 36
Gross Operating Income $154 $157 $126 $123 $128
Margin 45.7% 44.6% 43.4% 43.6% 44.3%
Operating Expenses 63 63 56 56 61
House Profit $91 $94 $70 $67 $67
Margin 26.9% 26.7% 24.0% 23.8% 23.1%
Other Expenses 10 11 10 10 9
Hotel EBITDA $81 $83 $60 $58 $57
Growth -- 2.3% (28.1%) (3.4%) (1.2%)
Margin 24.1% 23.6% 20.6% 20.5% 19.8%
Cap Ex
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Total CapEx $11 $11 $9 $18 $39
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ADR ($) $118 $121 $108 $107 $112
Growth -- 2.5% (10.1%) (1.0%) 4.5%
Occupancy (%) 66.7% 67.7% 61.2% 57.9% 60.0%
Growth (bps) -- 95 bps (650) bps (331) bps 211 bps
RevPAR ($) $78 $82 $66 $62 $67
Growth -- 3.9% (18.7%) (6.4%) 8.3%
Revenue $79 $93 $80 $76 $73
Growth -- 18.3% (14.1 %) (4.9%) (3.8%)
Department Expenses 25 28 26 26 25
Gross Operating Income $54 $65 $54 $50 $48
Margin 16.0% 18.5% 18.7% 17.7% 16.8%
Operating Expenses 27 31 29 28 28
House Profit $26 $34 $25 $22 $21
Margin 7.8% 9.7% 8.7% 7.8% 7.2%
Other Expenses 4 5 5 5 4
Hotel EBITDA $22 $29 $20 $17 $16
Growth -- 30.3% (31.1%) (13.2%) (5.4%)
Margin 6.6% 8.3% 6.9% 6.2% 5.7%
Cap Ex
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ADR ($) $144 $145 $125 $124 $126
Growth -- 0.5% (13.3%) (1.0%) 1.0%
Occupancy (%) 79.7% 77.6% 71.2% 69.8% 72.5%
Growth (bps) -- (209) bps (646) bps (137) bps 274 bps
RevPAR ($) $115 $112 $89 $87 $91
Growth -- (2.1 %) (20.5%) (2.9%) 5.0%
Revenue $64 $62 $49 $49 $51
Growth -- (2.6%) (20.3%) (1.4%) 5.1%
Department Expenses 17 16 13 13 14
Gross Operating Income $46 $46 $36 $35 $37
Margin 13.7% 13.1% 12.4% 12.6% 12.8%
Operating Expenses 19 18 16 16 17
House Profit $27 $28 $20 $19 $20
Margin 8.1% 7.9% 6.9% 6.8% 6.8%
Other Expenses 4 4 4 3 4
Hotel EBITDA $24 $24 $16 $16 $16
Growth -- 0.4% (32.3%) (0.5%) 0.7%
Margin 7.0% 6.8% 5.6% 5.7% 5.6%
Cap Ex
z
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Addison RI Marriott Residence Inn 150 6 14 $0.0
-I Altamonte Springs Marriott Residence Inn 128 1 25 Yes 0.0
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Arlington Marriott Residence Inn 114 4 15 0.0
r Atlanta Downtown Marriott Residence Inn 160 Custom 14 0.0
Atlanta Peachtree Marriott Residence Inn 120 6 12 0.0
Bellevue Marriott Residence Inn 120 1 26 0.0
Belmont Summerfield Suites 132 14 0.0
Binghamton Marriott Residence Inn 72 1 22 Yes 1.3
Bothell Marriott Residence Inn 120 4 19 0.0
Cherry Hill Marriott Residence Inn 96 1 21 Yes 0.0
Columbia Hampton Inn 83 9 0.0
Denver Downtown Marriott Residence Inn 159 1 28 Yes 2.5
Denver Tech Marriott Residence Inn 128 1 29 Yes 2.1
ElSegundo Summerfield Suites 122 15 0.0
F art Lauderdale Marriott Courtyard 136 11 0.0
Fremont Marriott Residence Inn 80 1 25 Yes 1.4
Gaithersburg Marriott Residence Inn 132 6 12 0.0
Germantown Hampton Inn 178 14 0.0
Horsham Marriott Towneplace Suites 95 11 0.0
Islandia Hampton Inn 120 22 0.0
Las Colinas Summerfield Suites 148 14 0.0
Lexington KY Marriott Residence Inn 80 1 24 Yes 1.1
Livonia Marriott Residence Inn 112 6 11 0.0
Lombard Hampton Inn 128 22 Yes 0.0
Louisville RI Marriott Residence Inn 96 1 26 Yes 1.7
Lynnwood Marriott R<>sidence Inn 120 1 23 0.0
Mount Laurel Summerfield Suites 116 14 0.0
Mountain View Marriott Residence Inn 112 1 24 1.9
Naples Hampton Inn 107 19 0.0
Portland ME Marriott Residence Inn 78 5 14 1.3
Richmond Marriott Residence Inn 80 1 24 Yes 1.1
RichmondNW Marriott Residence Inn 104 6 12 0.0
Rosemont Marriott Residence Inn 192 6 12 0.0
Saddle River Marriott Residence Inn 174 6 7 0.0
San Jose Marriott Residence Inn 80 1 24 Yes 0.0
San Jose South Marriott Residence Inn 150 6 12 0.0
San Mateo Marriott Residence Inn 160 1 25 2.9
Schaumburg Hampton Inn 128 23 Yes 0.0
z
Shelton Marriott Residence Inn 96 1 22 Yes 1.7
z
Silicon Valley I Marriott Residence Inn 231 1 26 4.1
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Silicon Valley II Marriott Residence Inn 247 1 25 4.4
-
Tukwila Marriott Residence Inn 144 1 25 0.0
0 Westchester Hampton Inn 112 22 0.0
0
Willow Grove Hampton Inn 150 19 0.0
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Windsor Marriott Residence Inn 96 1 24 Yes 1.7
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Altamonte Springs Marriott Residence Inn
Binghamton Marriott Residence Inn
Cherry Hill Marriott Residence Inn
Denver Downtown Marriott Residence Inn
Denver Tech Marriott Residence Inn
Fremont Marriott Residence Inn
Lexington KY Marriott Residence Inn
Lombard Hampton Inn
Louisville RI Marriott Residence Inn
Richmond Marriott Residence Inn
San Jose Marriott Residence Inn
Schaumburg Hampton Inn
Shelton Marriott Residence Inn
Windsor Marriott Residence Inn
Total
128 1 12/31/2021
72 1 12/31/2021
96 1 12/31/2021
159 1 12/31/2021
128 1 12/31/2021
80 1 12/31/2021
80 1 12/31/2021
128 6/30/2013
96 1 12/31/2021
80 1 12/31/2021
80 1 12/31/2021
128 6/30/2013
96 1 12/31/2021
96 1 12/31/2021
1,447
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS
$0.7 $0.8
0.9 0.8
1.1 1.0
1.7 1.8
1.0 1.0
0.4 0.4
1.0 1.0
0.6 0.5
0.8 0.6
0.4 0.3
1.0 1.0
0.4 0.3
0.8 0.7
0.5 0.4
$11.4 $10.4
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MOELIS
z
($in millions)
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z
2007A 2008A 2009A 2010E 2011E
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Revenue $150 $151 $125 $123 $128
Growth 0.5% (17.3%) (1.7%) 4.7%
Hotel EBITDA $64 $65 $48 $47 $47
Growth 1.1% (25.6%) (2.4%) (0.6%)
Margin 19.1% 18.5% 16.7% 16.8% 16.3%
Cap Ex
FF&E $8 $8 $7 $9 $13
PIPs 0 0 0 3 11
Total CapEx $8 $8 $7 $12 $25
% ofRevenue 2.4% 2.4% 2.4% 4.4% 8.7%
Yearly
2007A 2008A 2009A 2010E 2011E
Revenue $45 $46 $36 $35 $36
Growth 1.9% (21.0%) (3.6%) 2.1%
Hotel EBITDA $17 $18 $11 $10 $10
Growth 7.1% (36.9%) (8.0%) (3.8%)
Margin 5.0% 5.1% 3.9% 3.7% 3.5%
Cap Ex
FF&E $2 $3 $2 $3 $4
z
PIPs 0 0 0 3 10
z Total CapEx $2 $3 $2 $5 $14
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% ofRevenue 0.7% 0.7% 0.7% 1.9% 5.0%
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Lehman Hotels (lJ
($ in millions)
Illustrative Value [$150- $190]
Multiples
2010E EBITDA 8.6x -10.9x
2011E EBITDA 9.1x -11.5x
Cap Rates
2010E NOI 6.2%- 7.8%
2011E NOI 4.8%-6.1%
(1) Lehman hotels consists of all core and terminal hotels in the floating pool
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS
Fixed Pool Hotels
Other
Hotels
Core Terminal
[$400 - $525] [$25- $50] [$125 - $175]
8.5x -11.1x 2.4x- 4.8x 8.0x -11.1x
8.5x -11.2x 2.5x- 5.0x 7.7x -10.8x
7.3%-9.5% 15.7%-31.4% 6.9%-9.6%
6.4%- 8.4% 11.5%-23.1% 6.7%-9.4%
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Debt Amount [$400- $575]
Maturity
Coupon
Hotels
2017-2019
0-10 Hotels
to CMBS Pool
[6%]
35-45
Lehman/ Investor
Others
Debt Amount
Maturity
Coupon
Hotels
[95%]
[5%]
[$0- $50]
2017
[6%]
20
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS
Key Statistics
2010E EBITDA
Debt Amount [$125 - $175]
Maturity 2016-2018
Coupon [6%]
Hotels 6-7
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Fixed Pool
Floating Pool
Other Pools
Total
Equity Value
Fixed Pool
Floating Pool
Other Pools
Total
$825
351
238
$1,414
[144%- 206%]
[185% - 234%]
[136% -190%]
[155%- 209%]
[$250 - $425] [$400 - $575]
[301- 351] [0- 50]
[63- 113] [125- 175]
[$689 - $889] [$525 - $725]
[$150- $190]
[100%]
[0%- 26%]
[100%]
[73%- 83%]
[6%]
[6%]
[6%]
[6%]
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS
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HIGHLY CONFIDENTIAL DRAFT
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r
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SUBJECT TO FRE 408
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0
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z
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Fixed Pool 2009A 2010E 2011E
z
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NOI $51 $46 $39
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Interest [24- 35] [24- 35] [24- 35]
DSCR [1.5x- 2.1x] [1.3x- 1.9x] [1.1x- 1.6x]
Floating Pool 2009A 2010E 2011E
NOI $16 $12 $9
Interest [0- 3] [0- 3] [0- 3]
DSCR [5.2x- NM] [3.9x- NM] [3.1x- NM]
Other Pools 2009A 2010E 2011E
NOI $13 $12 $12
Interest [8- 11] [8- 11] [8- 11]
DSCR [1.3x- 1.8x] [1.1x- 1.6x] [1.1x- 1.6x]
Consolidated 2009A 2010E 2011E
NOI $68 $61 $51
Interest [32- 44] [32- 44] [32- 44]
DSCR [1.6x- 2.2x] [1.4x- 1.9x] [1.2x- 1.6x]
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Lehman and Investor to share control of the Trust
[2] board members selected by Lehman
[2] board members selected by Investor
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS
[3] independent board members mutually acceptable to Lehman and Investor
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Project Tavern
Midland Discussion Materials
April 28, 2010
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELTS&.._COMPANY
EXHIBIT 10
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Legal Disclaimer
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SFITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS "-.COMPANY
Moelis & Company prepared this presentation based on information received from third parties. Moelis
has not and does not intend to verify independently any of such information, all of which Moelis
assumes is accurate and complete in all material respects. If this presentation contains projections,
forecasts or other forward-looking statements, Moelis assumes that they were prepared based on the best
available estimates of the future events underlying such statements. This presentation speaks only as of
its date and Moelis assumes no duty to update it or to advise any person that its conclusions or advice
has changed.
This presentation is solely for your information purposes only. Consider it along with all other facts,
advice and its own insights before making your own independent decisions. Do not provide a copy of
this presentation to any person without Moelis' prior consent. No other person should rely on it for any
purpose. Moelis does not offer tax, accounting or legal advice.
Moelis & Company provides mergers and acquisitions, restructuring and other advisory services to
clients and its affiliates manage private investment partnerships. Its personnel may make statements or
provide advice that is contrary to information contained in this material. Our proprietary interests may
conflict with your interests. Moelis may from time to time have positions in or effect transactions in
securities described in this presentation. Moelis & Company may have advised, may seek to advise and
may in the future advise or invest in companies mentioned in this presentation.
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Tavern Situation Overview
COMPANY COMMENTARY
2010 budgeted EBITDA of $82 million
-Total leverage of 17x
-Debt service requirements consume substantially all
the cash flow
On March 16, 2010, Tavern received a default notice
from Marriott on 23 hotels
-Franchise termination date of Jnne 14-15, 2010
-Implies capital need of $50 million
Retained Kirkland & Ellis and Moelis to assist in
evaluating recapitalization alternatives
Did not make April debt service payment on fixed rate
CMBSpool
Have engaged with Lehman and Marriott
Capital needs, given the current asset base, cannot be
solved within current capital structure
Total debt level nnsustainable in context of a
recapitalization
Source: Industry datil taken from: SNl Financial, CapitallQ and company filings
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS&.._COMPANY
INDUSTRY OPERATING STATISTICS
~
;;;
RevPAR
2007 2008 2009
ADR
2007 2008 2009
Industry Tavern
REIT SECTOR PRICE PERFORMANCE
140 .
6 100
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0
Oc..-cupaacy
rl
;:!:
2007 2008 2009
Nov-()6 Apr-{)7 Sep-07 Feb-oS Jul..OB Dec-08 May-{)9 Oct-o9 Mar-10
N o t ~ : REITSector includes Host Hotels & Resorts Inc, Hospitality Properties Trust, Ashford llospitality Trust Inc, LaSalle Hotel Propertie>, FdCor Lodging Trust Inc . Sunstone Hotel
Investors Inc., Strategic Hotels & Resorts, Inc., Diamondrock Hospitality Co., Hersha Hospitality Trust, Supertel I lospitality, Inc., MHJ Hospitality Corp.
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Current Capital Structure by Financing Pool
Parent
I
Holdings
Trast
$173aunAIC Common
$15mm AIC Preferftd
SI45mm Public Preferred
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SElTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
Maagement
S700k Common
and Prefened
MOELIS&,_COMPA'IY
JV(49%)
Genwuod
Raleigh(l
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II II II II
$825mm FJXecl Rate
CMBSPool
LB-UBS 2007-<:6
Securil:izatioo Ammmt $26 billion
Jnnlreepers Portion: $412.5 million
SeMaer: Wadlovia
Sp. Sei'Vicer. Midlmd
LB-UBS 'JlXfi-Cl
Securitization Amount $3.0 billion
lnnkeepenl Portioo: $l12.5 million
Servia!I'!.Wadwvia
Sp. Servicer: LNR
Pools 200'1-G l!lld M-c:/
45 Ho1eJs I 5.6116 Keys
2009 HoleJ EBITDA: $59.8mm
200IJ Leverage: 13.8x
Debt I Key: $145,(193
Maturity: 2.017
Coupoo:6.71%
Note: I. Borrowers under $33rnm CSE mortgage loan
2. Each hotel has a separate uncrossed loan
$359mm Floating Rate
CMBSPool
($238 Snr I $121 Mezz)
Maturity: 2m2
Snr. Coupon: L+205
Meu: 5% Callh /15%PIK
Servio!r: TriMont
Sp. ServiQer: "friMont
CoDatenl
20 1iae1s I 2.778 Keys
2009 Holl!l EBIIDA:
$10.lmm
2009 Leverage: 17.9x
0./ Key: $129,230
$3Smm Anaheim
CMBSIModpge
(SeniodMezz)
Securitizatioo Amount:
$2.9billmn

Snr. Couporl: 5.41%
Mezz:lO%
Sei'Vicer. Capuwk
Sp. Servicer: cw Cap.
Collalml
1 Holl:l I 230 Keys
2009 Hole) EBI11>A:
$1.8nun
2009 Leverage: 18.7x
Debt I Key: $152,174
$120aun Capawk
CMBS Finanrin&
Securlti7.ation Amount:
$27 I $3.4 billion
Mablrity. 2D16
c:::oupore-5.98%
Semoer.Capmalk
Sp. Senia!r. Midland
,.. . .....,.
3 HoleJs /701 Keyls
2009 Hctl!l EBl1DA:
$7.4Dmt
2009 Leverage: 16.2x
Debt I IGey; $171,184
Jlo!cl!(2) IDebt ill le-t
Anaheim Rl ($38)
Mi8aion Valley ($47)
OnlarioHDtoo($35)
$75mm Menill
CMBS finaodns
Securitization Amount
$1.5billion
Maturity: 2.016
Coupon: 6.03%
Servicer: Well5 Fargo
Sp. ServitEr: LNR
CoD.....,.
3 Holel& I 372 Keys
2009 Hotel EBIIDA:
$6.8mm
2009 Leverage: tl.Ox
Debt I Key: $101.612

San Antonio ($2-4)
'IY-Corner ($25)
Waebingma DC ($26)
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Challenges
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IDGHL Y CONFJDENTIAL DRAFT
PROJECfiONS SUBJECT TO CHANGE
FOR SElTLEMENT PURPOSES ONLY
SUBJECT TO FRE ~
MOE LIS .'\..._COMPANY
As a result of the current situation, the Company has to address a number of challenges
Too much debt
- Leverage of -17x
- Debt service requirements unsustainable
- Industry metrics suggest blended leverage of:
60 - 75% debt I capitalization
l.Sx- 2.0x debt service coverage<
1
>
7x - 9x debt I EBITDA
Possible new money requirement to fund PIPs and provide liquidity
Nature of capital stack adds complexity
-Multiple CMBS pools with separate collateral
- Pool asset mix not homogenous
Differing new money requirements
Certain hotels will lose flags
- Based on experience, deflagging results in significant value erosion that is more pronounced in older assets
- Structure of vehicles may constrain creditor flexibility
Substantial timing constraints
- Marriott default letter dated March 16 requires cure or filing by mid June
- Drawn out restructuring process will not maximize value to constituents
Operating performance is not expected to materially improve until 2012
Note: 1. Debt Service Coverage Ratio calculated as Net Operating Income I (Interest Expense)
151
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Company Objectives
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECfTO CHANGE
FOR SElTLEMENT PURPOSES ONLY
SUBJECT TO FilE 408
MOE LIS '-.COMPAKY
Significant PIP requirements to maintain flag relationships and preserve asset value
Existing capital structure cannot be supported -new money investment is required
Leverage levels too high
Interest consuming all cash flow
Pro forma debt to capitalization under [75%] appears appropriate
Develop solutions that provide optimal form of consideration to each stakeholder
Minimize time of transaction to enable near-term PIP funding
Moving quickly is critical to minimizing friction, preserving value and maximizing risk-adjusted recoveries
161
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Portfolio Summary
HIGHLY CONFIDENTIAL DRAFT
PROJECfiONS SUBJECT TO CHANGE
FOR SE'ITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOE LIS ,'-.COMPANY
Fixed Pool Hotels
.. : ~ ~ : .... "'
Lehman Hotels
~ ~ ~
($ in millions) Core Terminal
Hotels 20 31 14 7
Total Keys 2,778 4,239 1,447 1,303
2009A Hotel EBITDA $20 $48 $11 $16
2010P Hotel EBTIDA 17 47 10 16
2011 E Hotel EBITDA 16 47 10 16
Debt Outstanding $362 $654 $172 $229
Debt I 2010P EBITDA 20.8x 13.8x 16.4x 14.6x
PIPs Required $17 $15 $15 $4
Notes: Terminal hotels are hotels that are expected to lose their flags over the next 12 years and primarily include Generation 1 Residence Inn facilities
Assumes PIPs arc fully funded on Non-Terminal hotels
Total
72
9,767
$96
91
90
$1,417
15.6x
$50
171
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HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
r
MOELIS,\._COMPANY
F--:-itnct'l:st' \.on-
Propert\ Flag fl Kcv... Generation L\g(' IOpln:ngl P:r ... (S:-rml
Addison RJ Marriott Residence Inn 150 6 14 $0.0
Altam<Jrtte Springs Marriott Residence Inn 128 1 2S Yes 0.0
Arlington Marriott Residence Inn 114 4 15 0.0
Atlanta Downtown Marriott Inn 160 Custom 14 0.0
Atlanta Peachtree Marriott Residence Inn 120 6 12 ().(]
Bellevue Marriott Residence Inn 120 1 26 0.0
Belmont Swnmerfield Suites 132 14 0.0
Binghamton Marriott Resickoce Inn 72 1 22 Yes 1.3
Botrell Marriott Residence Inn 120 4 19 0.0
OlenyHill Marriott Residence Inn 96 1 21 Yes 0.0
Columbia Hampton Inn 83 9 0.0
Denver Downtown Marriott Residence Inn 159 1 28 Yes 2.5
Denver Tech Marriott Residence Inn 128 1 ']9 Yes 2.1
EISegWldo Suounerfield Suiles 122 15 0.0
Fort Lauderdale Marriott Courtyard 136 11 0.0
Fremont Marriott Inn 80 1 25 Yes u
Gaithersburg Marriott Residence Inn 132 6 12 0.0
German laWn Hampton Inn 178 14 0.0
Horsham Marriott Towneplace Suites 95 11 0.0
Islandia Hampton Inn 120 22 0.0
LasColinas Summerfield Suites 148 14 0.0
Lexington ICY Marriott Residence Inn 80 1 24 Yes 1.1
Livonia Marriott Residence Inn 112 6 11 0.0
wmbard Hampton hut 128 22 Yes 0.0
Louisville RJ Marriott Residence Inn 96 1 26 Yes 1.7
Lyrmwood Marriott Residence Inn 120 1 23 0.0
Mount Laurel Summerfield Suiles 116 14 0.0
Mountain View Marriott Residence Inn 112 1 24 1.9
Naples Hampton hut 107 19 0.0
Portland ME Marriott Residence Inn 78 5 14 1.3
Richmond Marriott Residence Inn 80 I 24 Yes 1.1
RichmondNW Marriott Residence Inn 104 6 12 0.0
Rosemont Marriott Residence Inn 192 6 12 0.0
Saddle River Marriott Residence Inn 174 6 7 0.0
San jose Marriott ResidPnet> Jnn 80 1 24 Yes 0.0
San Jose South Marriott Residence Inn 150 6 12 0.0
San Mateo Marriott Residence Inn 160 1 25 2.9
Schaumburg Hampton hut 128 23 Yes 0.0
Shelton Marriott Residence Inn % I 22 Ye< 1.7
Silicon Valley I Marriott Residence Inn 231 1 26 4.1
Silicon Valley II Marriott Residence Inn 247 1 2S 4.4
Tulcwila Marriott Residence Inn 144 1 25 0.0
Westchester Hampton Inn 112 22 0.0
Willow Grove Hampton hut 150 19 0.0
Windsor Marriott ResidHtce Inn % 1 24 Yes 1.7
Tot.ol/Av.,nge 5,6116 19 $29.3
fill
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HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETIT.EMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOE LIS ,,COMPANY
Proper!\ Fla1' #Keys Generation franchise l1fe 2009A EBITDA 2010[ [DJTDA
Altamonte Springs Marriott Residence Inn 128 1 12/31/2021 $0.7 $0.8
Binghamton Marriott Residence Inn 72 1 12/31/2021 0.9 0.8
ChenyHill Marriott Residence Inn 96 1 12/31/2021 1.1 1.0
Denver Downtown Marriott Residence Inn 159 1 12/31/2021 1.7 1.8
Denver Tech Marriott Residence Inn 128 1 12/31/2021 1.0 1.0
Premont Marriott Residence Inn 80 1 12/31/2021 0.4 0.4
Lexington KY Marriott Residence Inn 80 1 12/31/2021 1.0 1.0
Louisville Rl Marriott Residence Inn 96 1 12/31/2021 0.8 0.6
Richmond Marriott ResidencP Inn 80 1 12/31/2021 0.4 0.3
San Jose Marriott Residence Inn 80 1 12/31/2021 1.0 1.0
Shelton Marriott Residence Inn 96 1 12/31/2021 0.8 0.7
Windsor Marriott Residence Inn 96 1 12/31/2021 0.5 0.4
Lombard Hampton Inn 128 6/30/2013 0.6 0.5
Schaumburg Hampton Inn 128 6/30/2013 0.4 0.3
Total MilrrioH Residence Inn 1,191 $10.3 $9.7
Total Hampton Inn 256 1.1 0.8
Total 1,447 $11.4 $10.4
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Floating and Other Pools Properties Overview
Floatin& Pool
t
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HJGHL Y CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SEITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
r
MOELIS,"'-.COMPANY
F r.:tnchi sc '\.on"
l'nptr1) Flag I> 1\Fys GenFration AgF !Opening) Lxten;ion Risk LnfundFd I'll'; ISmm)
Addison 55 Hyatt 132 14 ($0.8)
Albany Hampton Inn 126 19 Yes 0.0
Atlantic Gty Marriott Courtyard 206 2 0.0
Bulfinch Bulfinch 79 5 0.0
East lansing Gatehouse Inn 60 1 25 Yes 0.0
Fort Walton Beach Sheraton 216 24 0.2
Fort Wayne Marriott Residena! Inn 80 1 24 Yes 0.0
Grand Rapids Marriott Inn 96 I 26 Yes 0.0
Harrisburg Marriott Residena! Inn 122 I 15 0.3
hldianapolis Gatehouse Inn 88 1 26 Yes 0.0
Louisville HI Hampton Inn I73 5 0.0
Montvale Marriott Courtyard 184 3 0.0
Morristown Westin 224 6 1.4
Ontario Marriott Residence Inn 200 1 24 Yes 3.2
Rockville Sheraton 154 3 0.0
Troy Central Marriott Residence Inn I 52 1 24 Yes (0.5)
Troy Southeast Marriott Residence Inn 96 1 24 Yes (0.1)
Valencia Hilton Embassy Suites 156 2 0.0
West Palm Beach Best Western 135 24 0.0
Woburn HamEton Inn 99 13 (0.1)
Totilll/ Ave1age 2,778 15 $3.7
Other Pools
I
Propoh rlag j; Kns GFneration Age (Opening> Lxtension Hisk CnfunJeJ l'lP> (SrnmJ
Anaheim Hilton Hilton Suites 230 21 $0.0
AnaheimRI Marriott Residence Inn 200 7 0.0
Mission Valley Marriott Residence Inn 192 7 0.0
Ontario Hilton Hilton 309 24 0.0
San Antonio Hilton Homewood Suites 146 14 0.0
Tysons Comer Marriott Residau:e Inn 121 Cust 9 2.2
Washington DC Doublt>trt>f' 105 40 0.0
Totilll/ Average 1,303 17 $2.2
110 I
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Scenario Projections
HIGHLY CONADENTIAL DRAFT
PROJECfiONS SUBJECf TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS&:.._COMPANY
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Scenario Projection Assumptions
HIGHLY CONFIDENTIAL DRAFT
PROJECilONS SUBJECf TO CHANGE
FOR SFITLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
M 0 E I. I S ,'\._ C 0 M PAN Y
In this presentation we are running a scenario where projections have been developed on a hotel-by-hotel
basis for the portfolio
- Management estimates financial performance will not return to 2007 levels for at least four to six years
- 2010 reflects management budget, with actual data for January and February
-Management anticipates 5-10 properties to be deflagged by 2015, regardless of PIPs
FISCAL YEAR 2010- SCENARIO ASSUMPTIONS
ADR level assumptions range of- $107-$113
- Slightly down from FY2009
- Downward estimates mainly due to price
pressure as a result of continued effects of
economic environment
Occupancy levels of - 63%-67%, slightly down from
FY2009
Rev PAR of- $70-$75, down approximately 2%-4%
from FY2009 levels
Expenses in line with FY2007-FY2009 average
margins
Estimates take into consideration revenue
displacements due to PIPs and cycle renovations
FISCAL YEAR 2011- SCENARIO ASSUMPTIONS
ADR levels of- $110-$116
Occupancy levels of- 65%-70%, up from FY2010
and back at FY2009 levels
RevPAR of- $74-$79, up approximately 4%-7%
from FY2010 levels
Expenses in line with FY2007-FY2009 average
margins
Assumes certain non-recurring expense savings are
not sustainable
1121
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Consolidated Financial Overview
($in millions)
Consolidated
hnancial Overview
Key Operating Statistics:
ADR($)
Growth
Occupancy (%)
Growth (bps)
RevPAR($)
Growth
Revenue
Growth
Department Expenses
Gross Operating Income
Margin
Operating Expenses
House Profit
Margin
Other Expenses
Hotel EBITDA
Growth
Margin
Corporate Expenses
Corporate EBITDA
Growth
Margin
Cap Ex
FF&E
PIPs
Total CapEx
% ofRroenue
2007A
$123
74.2%
$92
$337
83
$254
75.4%
110
$145
42.9%
17
$127
37.7%
11
$116
34.5%
$19
0
$19
5.5%
2008A
$126
2.3%
72.8%
(141) bps
$92
0.4%
$352
43%
84
$268
76.2%
112
$156
44.3%
20
$136
6.9%
38.7%
12
$125
7.0%
35.4%
$19
0
$19
5.5%
Yearly
2009A
$111
(11.8%)
67.2%
(565) bps
$75
(18.6%)
$290
(17.5%)
74
$216
74.6%
101
$115
39.6%
19
$96
(29.5%)
33.1%
12
$84
(32.2%)
29.1%
$16
0
$16
5.5%
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
M 0 E I. I S "'--. C 0 M PAN Y
2010E 2011E
$110 $113
(0.8%) 2.6%
65.5% 67.4%
(168) bps 195 bps
$72 $76
(3.3%) 5.7%
$282 $288
(2.8%) 2.1%
74 75
$209 $213
73.9% 73.8%
100 106
$109 $107
38.5% 37.1%
17 17
$91 $90
(5.0%) (1.7%)
32.3% 31.1%
9 9
$82 $80
(2.7%) (2.1%)
29.1% 27.9%
$21 $29
24 21
$45 $51
15.9% 17.7%
1111
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r r r r r r r r f' r r r r r r r r r r r ,. ,,. r r- r r r r r
Fixed Pool Financial Overview
($in millions)
Fi.\ed Pool
Financial Overview
Key Operating Statistics:
ADR($)
Growth
Occupancy(%)
Growth (bps)
RevPAR ($)
Growth
Revenue
Growth
Deeartment
Gross Operating Income
Margin
Expenses
House Profit
Margin
Other Expenses
Hotel EBITDA
Growth
Margin
Cap Ex
FF&E
PIPs
Total Cap Ex
%of Revenue
2007A 2008A
$120 $124
- 3.1%
76.0% 74.1%
- (191) bps
$92 $92
- 0.6%
$195 $197
- 0.8%
41 40
$154 $157
45.7% 44.6%
63 63
$91 $94
26.9% 26.7%
10 11
$81 $83
-- 2.3%
24.1% 23.6%
$11 $11
0 0
$11 $11
55% 5.5%
Yearly
2009A
$109
(12.0%)
69.2%
(491) bps
$76
(17.8%)
$161
(18.1%)
35
$126
43.4%
56
$70
24.0%
10
$60
(28.1%)
20.6%
$9
0
$9
5.5%
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELISoS..._COMPANY
2010E 2011E
$109 $111
(0.7%) 2.2%
68.2% 69.5%
(101)bps 129 bps
$74 $77
(2.2%) 4.1%
$158 $164
(2.1%) 4.1%
35 36
$123 $128
43.6% 44.3%
56 61
$67 $67
23.8% 23.1%
10 9
$58 $57
(3.4%) (1.2%)
20.5% 19.8%
$12 $18
6 21
$18 $39
11.3% 23.9%
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Fixed Pool Ongoing I Terminal Properties Financial Overview
($in millions)
F i ~ e d Pool Ongoing Properties
Financial Oveniew
Revenue
Growth
Hotel EBITDA
Growth
Margin
Cap Ex
FF&E
PIPs
TotalCapEx
%of Revenue
Fi.\ed Pool Terminal l'ropE'rtil';
Financia: OvE'nipw
Revenue
Growth
Hotel EBITDA
Growth
Margin
Cap Ex
FF&E
PIPs
Total CapEx
%of Revenue
2007A
$150
$64
19.1%
$8
0
$8
5.5%
2007A
$45
$17
5.0%
$2
0
$2
5.5%
Yearly
2008A 2009A
$151 $125
0.5% (17.3%)
$65 $48
1.1% (25.6%)
18.5% 16.7%
$8 $7
0 0
$8 $7
5.5% 5.5%
Yearly
2008A 2009A
$46 $36
1.9% (21.0%)
$18 $11
7.1% (36.9%)
5.1% 3.9%
$3 $2
0 0
$3 $2
5.5% 5.5%
HIGHLY CONFIDENTIAL DRAFT
PROJECTIONS SUBJECT TO CHANGE
FOR SETTLEMENT PURPOSES ONLY
SUBJECT TO FRE 408
MOELIS,'\._COMPANY
2010E 2011E
$123 $128
(1.7%) 4.7%
$47 $47
(2.4%) (().6%)
16.8% 16.3%
$9 $13
3 11
$12 $25
10.1% 19.4%
2010E 2011E
$35 $36
(3.6%) 2.1%
$10 $10
(8.0%) (3.8%)
3.7% 3.5%
$3 $4
3 10
$5 $14
15.4% 40.2%
(15(
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APP-00594
Term Sheet Alternative A
Deche1i Draft
Preliminary and Confidential
Subject to FRE 408
lllustrative Terms of Proposed Restructuring
June 23,.July 8. 2010
The following are the proposed principal terms of a restructuring transaction between
Lehman ALI Inc. ("Lehman"), as mortgage lender, and Innkeepers USA Trust
("Innkeepers" and, collectively with its subsidiaries, the "Company").
1
The transaction
(the "Transaction") contemplates a conversion of the Company's obligations under that
certain mortgage loan agreement, dated as of June 29, 2007, among Lehman and the
affiliates of the Company parties thereto (the "Floating Rate Debt")._c_olJateralized by_2_0
ofthe Companv' s properties (the "Floating Rate Collateral") into significantly all the
equity of the reorganized Company. The Transaction would be effectuated through a
prepackaged or prearranged plan of reorganization (the "Plan") in chapter 11 bankruptcy
cases filed by Innkeepers and..certain of its subsidiaries (the "Chapter 11 Cases") in the
United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). This term sheet has been prepared for discussion purposes only and is
non-binding, but shall serve as the basis for further negotiations regarding a definitive
agreement.
The terms discussed herein areconstitute an integrated offer, are-not divisible except as
described herein, and are subject to the terms and conditions hereof This term sheet is
provided in confidence and may be distributed only with the express written consent of the
parties fiereto"Cehman.iiiia..Jlie-Company_. as aoruica15.fu. This term sheet does not include a
description of all of the terms, conditions and other provisions that are to be contained in
the definitive documentation governing such matters, which remain subject to discussion
and negotiation to the extent not inconsistent with the specific matters set forth herein.
This term sheet remains subject to the completion of Lehman's tax due diligence. This
term sheet is proffered in the nature of a settlement proposal in furtherance of settlement
discussions, and is intended to be entitled to the protections ofRule 408 of the Federal
Rules of Evidence and any other applicable statutes or doctrines protecting the use or
disclosure of confidential information and information exchanged in the context of
settlement discussions, and shall not be treated as an admission regarding the truth,
accuracy or completeness of any fact or the applicability or strength of any legal theory.
+hel&hman's entry into any definitive transaction on the terms set forth in this :ferm
SheeHerm.shee.t, or otherwise, are subject to approval of the United States Bankruptcy
Court administering the chapter 11 case ofLehman Brothers Holdings Inc.
Tllis term sheet is not being provided on behalf of SASCO 2008-C2, LLC (the "Mezzanine
Lender") in collilection with the mezzanine loan with respect to tl1e collateral securing the Floating
Rate Debt or the mezzanine loan witll respect to the Anahein1 property (the "Mezzanine Debt").
Lehman does not make any representations with respect to tl1e Mezzanine Lender.
17()381.1615798647 3
HIGHLY CONFIDENTIAL
INN MID00001381
APP-00595
EHXIBIT 12
Deche11 Draft GZf:aJ/10
Preliminary and Confidential
Subject to FRE 408
THIS TERM SHEET IS NOT AN OFFEROR A SOLICITATION WITH
RESPECT TO ANY SECURITIES OF THE COMPANY ORA SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:
2
Treatment of Claims and Eguity Interests Under the Plan:
2
Floating Rate Lehman will receive, in full and final satisfaction of its secured
Debt mortgage claims in respect of the Floating Rate Debt, at least 97100%
of the issued and outstanding Ne>.v BqHitynew shares of common stock
issued bx Innkee12ers (the "Ne_w_ErultiY.'.:J.==subject to dilution hx the
Management Eguitxjncentive P(Qg(am (as defined below) __and New
distributions" if for other Plan uses, as agreed bx

Mezzanine Debt The Mezzanine Debt will be deemed cancelled, and the Mezzanine
Lender will not retain any property or interest on account of such debt
under the Plan. The Mezzanine Lender will be deemed to vote against
the Plan. No action by the Mezzanine Lender will be required under
this Term Sheet or any definitive documentation with respect to the
terms set herein.
Fixed Rate Debt Holders of the meft-gage-debt secHred by-the--pffii3erties in the Fixed
Rate Peel Ethe "Find Rate ebtclaims against the Comt)anlior its
as of
Jtme 29, 2007, !l1Jl()_l1g I,ehll1an of the
theretQ{ihe "Fixe_!LRate by 45 of the
groperties (the "Eixed Rate Collateral") will receive, in full and final
satisfaction of their claims in respect of such debt, new mortgage notes
secured bx on the Fixed Rat_e Collateral either (a) in an
aggregate face amount not to exceed $550 million, secured by
mortgages on the properties in the Fixed Rate Pool: or (htif such
holders make an election for application of section 1111 (Jili2)_ gf the
BankruJ:lli:. Code in the amQunt ofthe aggregate amount Qfsuch
holders' Fixed RateDeht, with a nresentvalue of the new mortgage
notes not_J;Q exceed_$550 million. The terms of the new Fixed Rate
Debt notes are subject to the reasenable approval, in form and
substance, by
t.
Lehrl!an and the Comoanv.
The descriptions herein of the expected treatment of holders of the Mezzanine Debt, the Fixed Rate
Debt and the Otl1er Secured Debt are based on the Moelis & Co presentation.
157()3581.1615798647.3 2
HIGHLY CONFIDENTIAL
INN MID00001382
APP-00596
Other Secured
Debt
General
Unsecured Claims
157035&1.16 J5798647.3
HIGHLY CONFIDENTIAL
Deche1'1 Draft
Preliminary and Confidential
Subject to FRE 408
IfhelaeFs of the I<ixea Rate !)eat make a llll eleetien, the J3Fesent
value of the new I<ixea Rate l)eet note Fefleeting sueh eleetien shall net
exeeea $Q million ana the aj3j3iieaele aiseoUflt Fate ana the teFmS of
sueh note shall be subjeet to the Feasenaele apJ3mval, in fuFm and
SUBStanee, ey the J3afties heFeto.
Holders of meFtgage aeet seeHFea ey meFtgages at the
sevenclaims against the for its_OOligations unde.Lthose certain
includin1Uhe Floating Rate
Debt or the Eixed Rate Debt (the "Other Secured Debt")
collateralized [seven] ofthe Com12anx"s properties Ethe "Qthel'
outside. not including the Floating Rate Pool
the Fixed Rate PeelCollaJeral (the "Other Secured
Debt Collateral") will receive, in full and final satisfaction of their
claims in respect of such debt, new mortgage notes secured liens on
holder's Other S.ek1.li.ed Debt Collat.e.rnl (''Other_ Secured
Debt New Mortgage Notes") either (!!) in an aggregate face amount
not to exceed $150 million, seeHFed ey mortgages on the OtheF
PFOJ3eFties. 'fhe teFms ofthe (b) if a holder of Other Secured
llibtcla.irns_make.s .an for aunlic.ation of...se..ction 111Jlb..l(2:Lof
the Bankru12tcy_Code in the amount of the amount of.such
ho!der' s claims with_Qresent DebtNew
Mm::tgage Note egualing the yalue of the collateral
holder's claims,_J2rovided, however thatthe aggrega_te IJresenl.Y.ah.te__of
all O__ilier Secured Debt New 12ursuant to (a) and
herein shall Thy ten}}s qfthe Other
Secured Debt netesl'{ew Motlgage Notes are subject to the Feasonaele
approval, in form and substance, by the J3arties heFeto.I&hmau_and the
Com12any.
If any heldeFs of OtheF SeeuFed !)eat make a llll eleetien, the
aggFegate J3Fesent value Fetleeting any sueh eleetion tegetheF with the
faee amount efany non eleeting OtheF SeeHFed l)eet shall net exeeea
diseeunt Fate and the teFms ef-s.ooh
notes shall ee subjeet to the Feasonaele aJ3J3FOval, in IDFffi ana suastanee,
by the paFties heFete.
Debt allocation among the Other PFepeFtiesSecured Debt Collateral and
identification of any Other PmpeFtiesSecured Debt Collateral that
should be removed from the Company's systemportfoliQ shall be
agreed among the parties hereto.
Shall"General Unsecured Claim" shall mean J.!llsecured claim
any___of the Dehtors ..thatis not:J:.a),_an Ad mini .a
3
INN_MID00001383
APP-00597
Deficiency
Claims
Administrative
Claims
Priority Claims
Existing Equity
15703581.161579&647.3
HIGHLY CONFIDENTIAL
Dechert Draft
Preliminary and Confidential
Subject to FRE 408
Prioritx CJaim_(tax pr otherwisek_(c)
se_c_tion510(b} claim, if any.
Holders of Generall]nsecured Claims shall not receive any recovery
under the Plan or olherwis_e and shall be deemed to have voted against
the Plan. bellman shall aeteFmine, in its sele aiseFetien, .vhethef te
IJFe.iae a gi:l=t efeash eF eEJHity te any elass efgeneml HflseeuFea elaims.
[9iseuss im13aiFed aeee13tiHg elass ana REI+
Unsecured deficiency claims of holders ofFloating Rate Debt, Fixed
Rate Debt and Other Secured Debt shall not receive any recovery under
the Plan or otherwise without the consent ofLehman and the Company,
and shall be deemed to have voted against the Plan.
Shal!Allowe<ladministra:tiYe.J;laims shall be paid in cash in the ordinary
course of business or upon the effective date of the Plan (the "Effective
Date"), unless the holders of such Administrative Claims agree to
different treatment.
Shal!Allowed priority claims shall be paid in cash on the Effective
Date; provided, that on the Effective Date Lehman and the Company
may determine to defer priority tax claims in accordance with the
Bankruptcy Code.
On the Effective Date, all prepetition common and preferred shares of
Innkeepers will be cancelled, and holders of such interests wewaw_i1l
not retain any property on account of such interests under the Plan. To
the extent Lehman and the Company determine that the Company's
existing corporate structure would be the most tax efficient for Lehman
and the Company on the Effective Date, the prepetition equity interests
of each oflnnkeepers' subsidiaries will be deemed reissued in
accordance with the Company's prepetition corporate structure__on
t.erms mutuallx accentable to the I!arties hereto. If Lehman and the
Company determine that a different structure would be more beneficial
to Lehman and the Company on the Effective Date, the Plan shall
provide for such structure, on terms mutually acceptable to the parties
hereto.
4
INN_MID00001384
APP-00598
Dechert Draft
Preliminary and Confidential
Subject to FRE 408
Means of Imnlementation:
Bankruptcy All material pleadings filed by the Company in connection with the
Pleadings Chapter 11 Cases, including all first-day motions, shall be in form and
substance reasonably acceptable to Lehman.
DIP Financing DIP financing to be provided in two separate facilities:
a DIP facility provided in an amount equal to $[51-55] million,
which is necessary to complete certain Marriott PIP
reElHirememsurouertx im:QrQvement Jilitn ("PIP") fQr (i)
certain of those hotels collateralizing the Fixed Rate the_hotel
c_olla.t.er..alizin&1,hat !;;ertain m_mtgageJillill. date.d_as_Qf_Qcmb_er 4, 2006,.
bx and between KP A RIMV, LLC and Caumark Bank (the "Residence
Inn in San Diego'l and (iii) the hotel !:<ollateralizing that Qer:tain
mQitga,ge_loan as of Seutember 19 2006_, bx and betwee_n KP A
Ty_sonsJ.::m:ner Rl LLC.and Merrill LY!l!:<h
"Residence Inn in Corner"), secured by senior, priming liens
on the Fixed Rate Collateral the Inn in San Diesp_,_a,nd the
Residence Inn in Tyson's Corner on terms acce_Qtable to be reasonably
agreee by A (the "Fixed
Rate DIP Facility"). -l=heQn the Effectiye Date of the
;li!l01Jnts outstandin&-l!_nder Fixed Rate DIP Facility shall have-a
matHrity Elate at least l months alter the Petition :9ate ana shaii ha-ve
no finaneial 60'Ienants or any eontrol featuresb__e reQ_ajd from_jhe__New
Funding_(as defined below).
Lb) a DIP facility: umvided b_y: _ _Le_hm_a_n oca_ny: of its affiliates in an
aroountegualto aimroximately: $[1 41 million, secuxed_ by senior,
.llli_rni_ug liens on_ the Floatin,g Rate Collateral on tenus to be
between the Gomnany_and Lehman as substantially set forth on Exhibit
B (the "Eioating Rate DIP On the Effective Date of the
Plan which is consistent with the terms hereof, all amounts outstanding
under the medFloating Rate DIP Facility shall. at Lehman's option
either convert to New Equity or be repaid from the pmeeeds ofthe New
Funaing (as aefinea Of a eomaination thereof. All or a portion
efthe Fixea Rate :9IP Faeility may ae pmviaea ay Apello Investment
Gorp. in its sel-e-tliseretion, -prel'ided that the-terms of sueh
faeility shall be in ferm ana sHastance reasonably aeeeptable to
behmafr.Ne_w_Fun_di_ngc
a DIP faeility proviaea ay :behman in an
appro-xima-tely-$l8.9 million (funaea ay million H=om the PIP
esero'.v ana $8. 4 million FF&E
15703581.1615798647 3 5
HIGHLY CONFIDENTIAL INN_MID00001385
APP-00599
Use of Cash
Collateral
15703581.1615798(i_<F.3
HIGHLY CONFIDENTIAL
Dechert Draft
Preliminary and Confidential
Subject to FRE 408
1-iens--en-the-Fleating R:ate-Gelffitefa+-en--ter-ms--te--be agrees betw-een-t-he
Gempany--an-6 behman Ethe "Floating Rate DIP Faeility'l
Immediately prier te the eemmeneement efthe Ghapter ll Gases,
behman will sv.'eep aU funes tfem 'v'arieHs eserews,lt:esewes ana the
Gempany's bleekee aeeeHnts that eenstitHte its eash eellateml, whieh
funas .vill be maae available as leans Hnaer the Fleating Rate DIP
Facility. The ether terms efthe Pleating Rate DIP Facility are te be
aeterminee. Gn the Bffeetive Date efthe Plan .vhieh is censistent .vith
the terms hereef, aR-ameunts-eutstanffi-n-g--tmtl-er--the Pleating Rate DIP
Facility shall cenvert te Ne"tv Bftuity.
In addition to providing the Floating Rate DIP Facility, Lehman will
consent to the use of its cash collateral en terms aeeeptable te behman,
inciHaingyursuant toJheJerms of the cash.c_ollateral agr_eement attached
hereto as Exhibit C, which shall include, among other the


Current payment ofLehman's legal and financial
advisors' fees and expenses;

Current adequate protection payments during the
pendency of the Chapter 11 Cases in an amount equal to
interest at the non-default contract rate under the
Floating Rate Debt;

Gempany' s Hse ef behmaa' sN o cash collateral s-flal.l--.!3e
Iimttee te Hse fer the benefit used for
Qther than maintaini_ng the Floating Rate
Collateral unless (i) L_ehman ha.s__rn_ceive_dmQ_IJ1hly
.. and
adeguate urotection and (ii) such borrQwing"'
inan amQJJJ1tnQt to mi1liQn,js
senior uriming lien onJhe Fixed Rate ouhe
Sem_e.d_De.bt Collateral. as__aJ2Dlic.able, subje_ct
to the liel)s securing the fixed Rate DIP Facilitx;

The_Company shall not take any action, and shall not
solicit, encourage or support any action by a third party,
seeking to amend, modify or extend the Plan Milestones
(as defined below) (the foregoing provision is
hereinafter referred to as the "Milestones Covenant");
6
INN MID00001386
APP-00600
New Equity
Conditions
Precedent to
Lehman's
Obli ations
15793581.1615798647.3
HIGHLY CONFIDENTIAL
and
Decheti Draft
Preliminary and Confidential
Subject to FRE 408
The Company's use ofLehman's cash collateral will
terminate immediately upon the occurrence of a
Termination Event (as defined below), including the
failure of the Company to meet the Plan Milestones.
The Plan shall provide that Innkeepers .viii issue nev<' shares of
common stock (the "New Equity"), which shall be initially allocated as
follov,rs:
Shares of the New Equity representing at least 97% of
the issued and outstanding New Equity .vill be
distributed to Lehman pursuant to the Plan in full
satisfaction of the Floating Rate Debt and the Floating
Rate DIP Facility (the "Initial Lehman Shares"); and
Shares ofthe New Equity representing up to 3% ofthe
issued and outstanding Nevt' Equity .vill be available for
distribution to the Company's management and/or
unsecured creditors.
The Plan shall provide that the issuance of the New Equity and any
subseuuenura.nsfer ofNew Lehman._prior to the Effective
Date will be exempt from (ill) securities laws in accordance with
section 1145 ofthe Bankruptcy Code and (iih) transfer taxes in
accordance with section 1146 of the Bankruptcy Code.
The Transaction will become binding on Lehman when Lehman,.AIG
and the Company execute a plan support agreement (the "PSA") that
incorporates the Transaction as set forth herein, including:
7
INN_MID00001387
APP-00601
Under PSA)md
UseofCash
Collateral
Termination
Events Under
PSA; Floating
Rate DIP Facility
and Use of Cash
Collateral
15703581.1615798647.3
HIGHLY CONFIDENTIAL





-
Dechert Draft
Preliminary and Confidential
Subject to FRE 408
Receipt by Lehman of a Plan term sheet incorporating
the terms set forth herein and otherwise reasonably
acceptable in form and substance acc;eQtabltt to Lehman;
Agreement reached with Marriott in fonn and substance
reasonably satisfactory to behman;the fQrtn _attached
hereto as Exhibit12.;_
Agreement reached .vith AIC in-form and substance
satisfactory to Lehman; and
Innkeepers and each of _OW!!(!P subsidiaries,
including each obligor under the Floating Rate Debt,
shall be a signatory to the
Bankrupty in the ch<rnter 11 bankmptcy
Qfl&hm_an Bro1her.s__Holdings Inc.
The and the use ofLehman's cash
collateral shall terminate automaticallybe terminable upon nQ less than
o_ne__bu.si.nes...s da.\Cs Lehman QLi Cmnl{anY.......a.s
.ap__plicable_, upon the occurrence of any of the following events (each, a
"Termination Event"):
A. --Failure to meet any of the following milestones (the
"Plan Milestones"):
ill
e-Motion to assume the PSA filed on the Petition
Datepetiiiun_date;
ilil
e-Order entered authorizing the assumption of the PSA
no later than 45 days after the Petition Datepetition date;
(ili1
e-Final Orders entered authorizing the Fixed Rate DIP
Facility, Floating Rate DIP Facility, the use of Lehman's
cash collateral and the use of the cash collateral securing
the Fixed Rate Debt consistent with the terms hereof no
later than W:t5. days after the Petition Datep.etition date;
(00 e-Disclosure Statementtatement and Plan consistent
with the terms hereof filed no later than L30} days after
8
INN_MID00001388
APP-00602
the petition date;
Deche11 Draft
Preliminary and Confidential
Subject to FRE 408
(il e-Disclosure Statementstatement consistent with the
terms hereof approved by the Bankruptcy Court no later
than days after tkpetition date;
vi) Lehman and the Company shall have reached mutual
agreement no later than 120 days after the petition date on
the term_s_of a sale process to be conducted pursuant to
section 3 63 of the Bankruptcy_C_ode u12on occ1,m:ence
of Termination Event A vii) or Aviii) below;
(vii) e-Order confirming a Plan consistent with the terms
hereof entered no later than 240 days after the petition
date; and
(viii) e-Effective Date of the Plan no later than the earlier of(i)
270 days after the Petition Date and (ii) ___ ,
2G-l--l-:-270 days afterJhe petition_ date.
B. _Lehman _b_as !!QJ executep defiDcitiye_ a_gr__eem_ents_'Y_iih
respect to the sale of 50% of the New Eguits_il_he "New
Equity Sale Transaction") by , 2010
C.. --The failure by AIC to purchase the SharesLehman_h_as
not consummated the New Equity Sale Transaction by
____ ,2011;
The taking of any action by Marriott, including without
limitation the filing of a motion seeking relief from the
automatic stay or seeking to terminate any franchise
agreement with respect to any of the Company' s hotel
properties other than those franchise agreements listed
on Schedule A;
--The entry of any order of the Bankruptcy Court
granting relief from the automatic stay, including (i) to
permit any exercise of remedies by the lenders or special
servicer under the Fixed Rate Debt other than limited relief
solely to permit the delivery of default notices under the
terms of the Fixed Rate Debt and (ii) to permit tennination
15703581.1615798647.3 9
HIGHLY CONFIDENTIAL INN MID00001389
APP-00603
15703581.16 J 5798647.3
HIGHLY CONFIDENTIAL
Dechert Draft 6,:Y23/10
Preliminary and Confidential
Subject to FRE 408
of any franchise agreement with Marriott or any other hotel
brand other than those franchise agreements listed on
Schedule A;
--The filing by the Company or Marriott of any motion or
other request for relief seeking to (i) dismiss any of the
Chapter 11 Cases, (ii) convert any ofthe Chapter 11 Cases
to a case under chapter 7 of the Bankruptcy Code or (iii)
appoint a trustee or an examiner with expanded powers
pursuant to section 1104 of the Bankruptcy Code in any of
the Chapter 11 Cases;
--(i) The filing by the Company of any motion or other
request for relief seeking an extension of the Plan
Milestones or any alteration of the remedies upon
termination set forth herein without the express written
consent ofLehman in its sole discretion; (ii) the filing by
the Company of any pleading supporting any motion from
any other party to obtain such extension or alteration; (iii)
the failure of the Company to oppose any motion from any
other party to obtain such extension; or (iv) the violation by
the Company of the Milestones Covenant;
--The entry of an order by the Bankruptcy Court (i)
dismissing any of the chapter 11 cases, (ii) converting any
of the Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code, (iii) appointing a trustee or an examiner
with expanded powers pursuant to section 1104 ofthe
Bankruptcy Code in any ofthe Chapter 11 Cases or (iv)
making a finding offraud, dishonesty or misconduct by any
officer or director of the Company, regarding or relating to
the Company;
--The withdrawal, amendment or modification by the
Company of, or the filing by the Company of a pleading
seeking to amend or modify, the Plan or PSA, which
withdrawal, amendment, modification or pleading is
materially inconsistent with the terms hereof or the Plan or
is materially adverse to Lehman, in each case in a manner
not reasonably acceptable to Lehman, or if the Company
files any motion or pleading with the Bankruptcy Court that
is inconsistent in any material respect with the terms hereof
10
INN MID00001390
APP-00604
15703581. Hi) 5798647.3
HIGHLY CONFIDENTIAL
Dechert Draft
Preliminary and Confidential
Subject to FRE 408
or the Plan (in each case with such amendments and
modifications as have been effected in accordance with the
terms hereof) and such motion or pleading has not been
withdrawn within three (3) business days;
l --The filing of any motion to approve a disclosure
statement or Plan by the Company, AIC or Marriott, or the
Court of any rnotioo--flled--.b
any other party, that incorporates a Pro Forma Capital
Structure or any other terms inconsistent with the terms and
conditions set forth herein;
L --The granting by the Bankruptcy Court of relief that is
inconsistent with the terms hereof or the Plan in any
material respect (in each case with such amendments and
modifications as have been as have been effected in
accordance with the terms hereof);
K.:. --The issuance by any governmental authority, including
the Bankruptcy Court or any other regulatory authority or
----- --------
M
N
determination or order making illegal or otherwise
restricting, preventing or enjoining the consummation of a
material portion of the Transaction, including an order
denying confirmation of the Plan and such ruling,
determination or order has not been vacated or reversed
within five (5) business days of issuance; and
The occurren.ce and continuation of a default under the
Fixed Rate DIP_ Eacility,_Q.mY.id.ed that a cure of such
default before the expiration of the notice-12riod shall be a
cure of such default
The and continuation of a default under the
forth_on
Exhibit Ji_provided that a cure of su_ch default before the
expiration of the notice Jleri od. shall &_ cure_qf
default
The occurrence and continuation of a default in connection
with the Company's use ofLehman's cash collateral.
nrovided that '!cure of such default of
11
INN_MID00001391
APP-00605
Q-'
157035 81.16 I 5798647.3
HIGHLY CONFIDENTIAL
Deche1i Draft
Preliminary and Confidential
Subject to FRE 408
the notice period shalLbe a cure of such default
and
-The occurrence after execution ofthe PSA of(i) a
change that has a material adverse effect on the use, value
or condition of the Company or AIC, their respective. its
assets or the legal or financial status or business operations
of the Company or AIC or (ii) a material disruption or
material adverse change in the financial, real estate,
banking or capital markets.
12
INN_MID00001392
APP-00606
Remedies Upon
Termination
Dechert Draft &1/U/10
Preliminary and Confidential
Subject to FRE 408
Upon the occurrence of a Termination Event, theany: of Termination
Events A through 0. Lehmn,n may terminate the PSA and use of cash
collateral.
UQotLthe of Terminati.P_n_Eyent AC viil_or A{ viii). the
Company shall immediately upon the occurrence_ 9f such Termination
Event elect one of the following remedies,Jzrovided however that if
tbe___C_QIDpany fails to make such electio_n__w_ith_in__one day after the
occurrence of the applicahle_Termination_E_vent,_Lehman shall have the
rjght_tp
(a} The_CQIDJ2_any_w.ill FloatinLRate Ccllateral
p:ursuant to 363 of the BankruRtcxJ;oJLe.
subject to the following conditions. which shall be
il)corporated into any order approving the (i) the
sale_pmc..edur.eclall b.e_a_gr_eed_upQ!lin_advan_ce and
inCQip..orat__edinto the the
Lehman shall have the right to credit bid the Floating
Rate Debt (iii) if sale proceeds are not tq Lehman
within 60 days __of the Terminati_on EY:ent. title to the
Floating Rate Collateral shall be conveyed to Lehman
__ _ ______ free and clear of all liens. claims and encumbrances ________ _
Civ) the 60-d'!X-,pgriod shall not be extended and the
Company: waiv:es__its_right to seek anv_extension such
period.;__or
(b) The Company will be deemed to have consented to the
modification of the automatic stay to permit Lehman to
take any or all ofthe follm.ving actio-ns without further
order of or application to the Bankruptcy
Geufr.exercise anund all remedies with resyyct to the
Floating Rate Collateral and no further court <rnPJ-Oval
shall be required._
Terminate the-bempany's use of cash col-lateral and use
of proceeds under the Floating Rate DIP Facility;
Declare all adequate protection obligations mveEl-to
Lehman to be immediately due and payable;
Require the Company to file a motion to conduct a sale
of the Floating Rate Collateral pursuant to 363 ofthe
Ba-nlffUPtcy Code;
1570358l.l615798647.3. 13
HIGHLY CONFIDENTIAL INN_MID00001393
APP-00607
Bankruptcy Court
Approval ofPSA
Pro Forma Capital
Structure
Governance
HIGHLY CONFIDENTIAL


Decheti Draft &Zfa3af10
Preliminary and Confidential
Subject to FRE 408
R-ettuir-e-the Company to consent-te-tlle-tet=mi-n-atiefref
to file a Plan; or
E*ercise rights ana remedies as to all or s1:1ch part of the
Flooting-Rate-CeJ.l-ateral that behman shall elect in its
sole discretion, including, without limitation,
ferecl-esing 1:1pon ana selling all or a portion of such
collateral.
The Company shall, on or immediately after the commencement of the
Chapter 11 Cases, file a motion seeking authorization to assume the
PSA. The order approving the PSA shall include provisions that the
Company (i) shall not seek an extension of the Plan Milestones or any
alteration of the remedies upon termination set forth herein without the
express written consent ofLehman in its sole discretion, (ii) shall not
support any motion from any other party to obtain such extension or
alteration; and (iii) will oppose any motion from any other party to
obtain such extension or alteration.
Following the consummation of the Transaction, the reorganized
Company will have at least $1501 million in pre-funded Marriott capital
expenditures and brand standard work and $1101 million of cash on
hand after repayment of the Fixed Rate DIP Facility and be capitalized
as follows:
Fixed Rate Debt: pre..sent y_al_@_less than or equal to $5 50 million
Other Secured Debt: present value less than or equal to $150 million
New Funding: At least $[75] million, plus such additional amounts in
form and substance as may be determined by the
parties. Prior to any i'>tevt Funding, the Company shall
aeli''er a comprehensive PIPs euaget, 'Nhich BtHlget
shall ee Ei) prepared 'Nith the assistance of, ana
valiaatea ey, a thira party e*pert ana Eii) acceptable in
all respects to the parties hereto. Such PIPs euaget
shall ee updated anooally or more frettl:!ently as may ee
ey AIC ana behman.
Except as set forth above, on the Effective Date, the Company shall not
have any debts or liens encumbering the Company's assets.__ex.Qepi.fur
pennittedliens and the CQmpanx.
'fhe Beare of Directors '.vill initially consist of+ memeers: memeers
nominated ey behman, memeers nominated ey AIC ana 3 memeers
14
INN MID00001394
APP-00608

From: Joseph D. Glatt [JGlaU@ApolloCapitaJ.com]
Sent: Wednesday, July 07, 2010 12:45 PM
To: 'mbeilinson@beilinsonpartners.com'
Subject: Fw: InnKeepers--CONFIDENTIAL
Attachments: Tenn Sheet Alternative A (Lehman- Innkeepers).doc; Term Sheet (Lehman - AIC).doc
Fyi
Prom: Alan W Kornberg <akomberg@paulweiss.com>
To: Sage, Michael <michael.sage@dechert.com>; brian.greer@dechert.com <brian.greer@dechert.com>;
andrew.buck@dechert.com <andrew.buck@dechert.com>
Cc: Ba5!:a, Paul <pbasta@kirkland.com>; anup.sathy@kirkland.com <anup.sathy@kirkland.com>; Joseph o. Glatt
Sent: Wed Jul 07 12:35:07 2010
Subject: InnKeepers--CONFIDENTIAL
All,
As discussed last week, we are attaching two termsheets: 0) one relating to the proposed agreements between Lehman
and InnKeepers and 0 ~ the other relating to those between Lehman and AIC. We think this approach more accurately
reflects the transactions under discussion.
I hope that we can continue the very constructive discussions the parties have had to date.
Please note that the attached are subject to further comments and revisions by AIC.
Best regards,
Alan
IRS Circular 230 disclosure:
To ensure complance with requirements Imposed by the IRS, we Inform you that any U.S. federal tax advice contained in
this communication Oncluding any aHachments) is not intended or written to be used, and cannot be used, for the purpose
o f ( ~ avoiding penalties under the Internal Revenue Code or (il) promoting, marketing or recommending to another party
any transaction or matter addressed herein.
Click Here for More Information
Alan W. Kornberg I Partner
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1255 Avenue of the Amtrlcasl New York, NY 10019-6084
(212) 373-3209(Direct Phone) 1 (212) 373-2053 (Cluster Fax)
ilk9mlooQORIIulwllilr.I.!;Om I w.vw_.paylwe.lu..t:P.m
This message is intended only for the use of the Addressee and may
contain information that is privileged and confidential. If you are not the
intended recipient, you are hereby notified that any dissemination of this
communication is strictly prohibited. If you have received this communication
in error, please erase all copies of the message and its attachments and
notify us immediately.
Confidential AIC 00000127
APP-00609
EXHIBIT 13
Confidential
PWRW&G DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
FOR DISCUSSION PURPOSES ONLY
TERM SHEET
1
(Lehman/AIC)
July u, 2010
This term sheet (''Term Sheet") contains indicative terms and conditions for discussion purposes
only. It does not constitute an offer, is not intended to be complete and is qualified in its entirety by
the terms of the final definitive agreements that may be entered into by the parties, and is not
intended to create any legal obligations with respect to the parties hereto. The parties hereto will
only be bound upon execution and delivery qfthe agreements referred to herein. This Term Sheet is
proffered in the nature of a settlement proposal in furtherance of settlement discussions, and is
intended to be entitled to the protection of Rule 408 for the Federal Rules of Evidence and any other
applicable stat11tes or doctrines protecting the use or disclosure qf confidential if!formation and
information exchanged in the context of settlement discussions, and shall not be treated as an
admission regarding the tnllh, accuracy or completeness of any fact or the applicability or strength
of any legal theory. The entry into any definitive transaction on the terms set forth in this Term
Sheet, or otherwise, is subject to approval of the United States Bankruptcy Court administering the
Chapter 11 case of Lehman Brothers Holdings Inc.
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH RESPECT TO
ANY SECURITIES OF INNKEEPERS USA TRUST OR A SOLICITATION OF
ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR SOLICITATION
SHALL COMPLY WITH ALL APPLICABLE SECURITIES LAWS, IF ANY, AND/OR
PROVISIONS OF THE BANKRUPTCY CODE.
SeHer:
Acquirer:
Description of Transaction:
Lehman ALI Inc. ("Lehman").
Apollo Investment Corporation or its designees ("AIC").
Following the confirmation by the Bankruptcy Court for the
Southern District ofNew York (the "Bankruptcy Court") ofthe
prepackaged or prearranged plan (the "Plan") of reorganization of
Innkeepers USA Trust ("Innkeepers" or the "Company") as
described in the term sheet, dated as of July [_]. 2010, by and
between Lehman and the Company, and attached hereto as
Exhibit A (the "Lehman-Innkeepers Term Sheet") and prior to the
effective date ofthe Plan (the "Effective Date"), Lehman and AIC
will enter into an agreement (the "Stock Purchase Agreement")
whereby Lehman will agree to sell to AIC the right to receive
SO% of the equity in the Company that Lehman receives in
Note to Draft: Discuss additional sections such as operating and tax distributions, employment agreements,
restrictive covenants, registration rights and information/inspection rights.
Doc#: USJ.6466247v8
AIC 00000128
APP-00610
Confidential
Distribution of Innkeepers
Equity:
Conditions to Execution of
Stock Purchase Agreement:
Doc#: USI 6 4 6 6 2 4 7 v ~
connection with consummation of the Plan (such 50%, the
"Transferred Equity") in exchange for cash in an amount equal to
$107.5 million (the "Sale Proceeds"). In the event the transfer tax
exception under 1146(a) ofthe Bankruptcy Code is determined
by the Bankruptcy Court to be inapplicable, AIC and Lehman will
cooperate to structure the sale of the Transferred Equity in a
manner that will not incur transfer taxes; provided, however, that
in the event such taxes are incurred as a result of the sale, AIC
shall be responsible for payment of such taxes in addition to the
Sale Proceeds.
After giving effect to the sale of Transferred Equity described
above, the equity in the reorganized Company (the "New
fuuiliy") will be held as follows:
At least 48.5% by Lehman;
At least 48.5% by AIC; and
Up to 3% available for distribution to the
Company's management and/or unsecured
creditors.
The execution of the Stock Purchase Agreement will be subject to
the satisfaction or waiver by Lehman or AIC, as applicable, of the
following conditions:
approval ofthe Bankruptcy Court of a plan
support agreement executed by Lehman, AIC
and the Company as contemplated by the
Lehman-Innkeepers Term Sheet;
receipt by AIC and Lehman of all necessary
internal approvals to consummate the
transaction (which may be withheld (for any
reason or no reason) in their sole discretion),
including, without limitation, final approval by
AIC's Investment Committee; and
the negotiation, execution and delivery of
definitive documents reflecting the terms set
forth in this Term Sheet and containing other
terms and conditions mutually acceptable to
AIC and Lehman, including, but not limited to,
terms customary for transactions of this type.
2
AIC 00000129
APP-00611
Conditions to Closing:
Termination Events:
Governance:
Doc#: USJ :6466247v8
Confidential
The consummation of a transaction on the terms described herein
will be subject to the satisfaction or waiver by Lehman or AIC, as
applicable, of customary closing conditions including, without
limitation, the following:
the consummation of the proposed restructuring
transaction between Lehman and Innkeepers on
the terms and as contemplated by the Lehman-
Innkeepers Term Sheet;
the reorganized Company will have the pro
forma capitalization structure contemplated by
the Lehman-Innkeepers Term Sheet;
termination of the Required Capital
Improvements Guaranty, dated as of June 29,
2007, by AIC for the benefit of Lehman and
release of all liabilities thereunder; and
completion of third party and regulatory notices
and receipt of all necessary consents and
waivers.
Each party's obligations pursuant to the Stock Purchase
Agreement shall be terminable by either Lehman or AIC upon the
earliest to occur of (i) the occurrence of any Termination Event
described in the Lehman-Innkeepers Term Sheet other than the
transactions contemplated by this Term Sheet or (ii) [ ],
2011.
AIC may terminate its obligations pursuant to the Stock Purchase
Agreement (i) upon the waiver, modification or amendment of
any term, condition or provision of the Lehman-Innkeepers Term
Sheet, or the definitive documents (including the Plan)
implementing the same, in a manner not acceptable to AIC, (ii)
any extension of the period of time to achieve the Plan Milestones
set forth in the Lehman-Innkeepers Terms Sheet or (iii) if AIC
seeks but does not obtain the approval of its Investment
Committee within 60 days of approval of the Plan Support
Agreement by the Bankruptcy Court.
The board of directors of the Company will initially consist of
7 members: 2 members nominated by Lehman, 2 members
nominated by AIC and 3 members to be mutually agreed.
A super-majority vote of 66 2/3% will be required for material
transactions, including, among others, a merger or
consolidation, equity issuances, debt issuances in excess of $10
3
AIC 00000130
APP-00612
Shareholders Agreement:
REIT Status:
Property Manager:
Professional Fees:
Governing Law:
Doc#: US! :6466247v8
Confidential
million in the aggregate, sale or disposal of a property and such
other events as determined by Lehman, AIC and the Company.
Lehman, AIC and the Company shall agree on a future date by
which the Company shall engage an investment banker to market
and sell the Company; provided, that such date shall not be later
than three years after the Effective Date unless otherwise agreed
by Lehman and AIC.
The Plan shall provide that, on the Effective Date, Lehman, AIC
and all other holders of New Equity to be issued pursuant to the
Plan shall enter into a shareholders agreement that provides,
among other things, for restrictions on the transfer of the New
Equity and customary protections, including, but not limited to,
tag-along/drag-along rights, all on terms to be mutually agreed.
Lehman, AIC and the Company shall, after the Effective Date,
determine whether to maintain Innkeepers' status as a real estate
investment trust.
Prior to the Effective Date of the Plan, Lehman, AIC and the
Company shall designate a manager for the Company's
properties. Iflsland Hospitality Management, Inc. ("Island") is
not selected as the manager, the Plan shall provide that Island
shall cooperate with the Company and the replacement manager
to effectuate an orderly transition to the replacement manager.
Any agreement to effectuate such transition shall be in form and
substance acceptable to Lehman and AIC.
The Company shall pay the professional fees and expenses
incurred by Lehman and AIC in connection with the transaction
contemplated by this Term Sheet.
This Term Sheet and all agreements entered into pursuant thereto
shall be governed by New York law with jurisdiction in the courts
in New York.
4
AIC 00000131
APP-00613
Confidential
ACKNOWLEDGED AND AGREED:
APOLLO INVESTMENT CORP.
By: __________ _
Name:
Title:
LEHMAN ALI INC.
By: ___________ _
Name:
Title:
(Sii!J1ature Page to Term Sheet]
AIC 00000 132
APP-00614
Exhibit A
LEHMAN-INNKEEPERS TERM SHEET
A-1
Doc#: USI 6466247v8
Confidential
AIC 00000133
APP-00615
Confidential
Term Sheet Alternative A
(Lehman/Innkeepers)
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
Illustrative Terms of Proposed Restructuring
July Ll, 2010
The following are the proposed principal terms of a restructuring transaction between
Lehman ALI Inc. ("Lehman"), as mortgage lender, and Innkeepers USA Trust
("Innkeepers" and, collectively with its subsidiaries, the "Company").
1
The transaction
(the "Transaction") contemplates a conversion of the Company's obligations under that
certain mortgage loan agreement, dated as of June 29, 2007, among Lehman and the
affiliates of the Company parties thereto (the "Floating Rate Debt") into significantly all
the equity of the reorganized Company. The Transaction would be effectuated through a
prepackaged or prearranged plan of reorganization (the "Plan") in chapter 11 bankruptcy
cases filed by Innkeepers and its subsidiaries (the "Chapter 11 Cases") in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). This term sheet has been prepared for discussion purposes only and is non-
binding, but shall serve as the basis for further negotiations regarding a definitive
agreement.
The terms discussed herein are an integrated offer, are not divisible except as described
herein, and are subject to the terms and conditions hereof This term sheet is provided in
confidence and may be distributed only with the express written consent of the parties
hereto. This term sheet does not include a description of all of the terms, conditions and
other provisions that are to be contained in the definitive documentation governing such
matters, which remain subject to discussion and negotiation to the extent not inconsistent
with the specific matters set forth herein. This term sheet remains subject to the
completion of Lehman's tax due diligence. This term sheet is proffered in the nature of a
settlement proposal in furtherance of settlement discussions, and is intended to be entitled
to the protections of Rule 408 of the Federal Rules of Evidence and any other applicable
statutes or doctrines protecting the use or disclosure of confidential information and
information exchanged in the context of settlement discussions, and shall not be treated
as an admission regarding the truth, accuracy or completeness of any fact or the
applicability or strength of any legal theory.
The entry into any definitive transaction on the terms set forth in this Term Sheet, or
otherwise, are subject to approval ofthe United States Bankruptcy Court administering
the chapter 11 case ofLehman Brothers Holdings Inc.
TI1is tenn sheet is not being provided on behalf of SASCO 2008-C2, LLC (the "Mezzanine
Lender") in connection with the mezzanine loan with respect to the collateral securing the
Floating Rate Debt or the mezzanine loan with respect to the Anaheim property (the "Mezzanine
Debt"). Lehman does not make any representations with respect to the Mezzanine Lender.
Doc# US1.6466527v7
AIC 00000134
APP-00616
Confidential
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH
RESPECT TO ANY SECURITIES OF THE COMPANY OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:
Trilatment of Claims and Eguitt Interests Under the Plan:l
Floating Rate Debt Lehman will receive, in full and final satisfaction of its secured
mortgage claims in respect of the Floating Rate Debt, at least 97% of
the issued and outstanding New Equity (as defined below).
Mezzanine Debt The Mezzanine Debt will be deemed cancelled, and the Mezzanine
Lender will not retain any property or interest on account of such debt
under the Plan. The Mezzanine Lender will be deemed to vote against
the Plan. No action by the Mezzanine Lender will be required under
this Term Sheet or any definitive documentation with respect to the
terms set herein.
Fixed Rate Debt Holders of the mortgage debt secured by the properties in the Fixed
Rate Pool (the "Fixed Rate Debt") will receive, in full and final
satisfaction of their claims in respect of such debt, new mortgage
notes in an aggregate face amount not to exceed $550 million, secured
by mortgages on the properties in the Fixed Rate Pool. The terms of
the new Fixed Rate Debt notes are subject to the reasonable approval,
in form and substance, by the parties hereto.
If holders ofthe Fixed Rate Debt make a llll(b) election, the
present value of the new Fixed Rate Debt note reflecting such election
shall not exceed $550 million and the applicable discount rate and the
terms of such note shall be subject to the reasonable approval, in form
and substance, by the parties hereto.
Other Secured Holders of mortgage debt secured by mortgages at the existing seven
Debt properties (the "Other Properties") outside the Floating Rate Pool
and the Fixed Rate Pool (the "Other Secured Debt") will receive, in
full and tina! satisfaction of their claims in respect of such debt, new
mortgage notes in an aggregate face amount not to exceed $150
million, secured b_y mortgages on the Other Properties. The terms of
2
The descriptions herein of the expected treatment of holders of the Mezzanine Debt, the Fixed
Rate Debt and the Other Secured Debt are based on the Moelis & Co presentation.
Doc# 1 1 ~ I :6466S27v7 2
AIC 00000135
APP-00617
General Unsecured
Claims
Deficiency Claims
Administrative
Claims
Priority Claims
Existing Equity
fJnc# !IS I 1i41\M27v7
Confidential
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
the new Other Secured Debt notes are subject to the reasonable
approval, in form and substance, by the parties hereto.
If any holders of Other Secured Debt make a 1 Ill (b) election, the
aggregate present value reflecting any such election together with the
face amount of any non-electing Other Secured Debt shall not exceed
$150 million, and the applicable discount rate and the terms of such
notes shall be subject to the reasonable approval, in form and
substance, by the parties hereto.
Debt allocation among the Other Properties and identification of any
Other Properties that should be removed from the Company's system
shall be agreed among the parties hereto.
Shall not receive any recovery under the Plan and shall be deemed to
have voted against the Plan. Lehman shall determine, in its sole
discretion, whether to provide a gift of cash or equity to any class of
general unsecured claims. [Discuss impaired accepting class and
REIT issues]
Unsecured deficiency claims of holders of Floating Rate Debt, Fixed
Rate Debt and Other Secured Debt shall not receive any recovery
under the Plan or otherwise without the consent of Lehman and the
Company, and shall be deemed to have voted against the Plan.
Shall be paid in cash in the ordinary course ofbusiness or upon the
effective date of the Plan (the "Effective Date"), unless the holders of
such Administrative Claims agree to different treatment.
Shall be paid in cash on the Effective Date; provided, that on the
Effective Date Lehman and the Company may determine to defer
priority tax claims in accordance with the Bankruptcy Code.
On the Effective Date, all prepetition common and preferred shares of
Innkeepers will be cancelled, and holders of such interests will not
retain any property on account of such interests under the Plan. To the
extent Lehman and the Company determine that the Company's
existing corporate structure would be the most tax efficient for
Lehman and the Company on the Effective Date, the prepetition
equity interests of each of Innkeepers' subsidiaries will be deemed
reissued in accordance with the Company's prepetition corporate
structure. If Lehman and the Company determine that a different
structure would be more beneficial to Lehman and the Company on
the Effective Date, the Plan shall provide for such structure, on terms
mutually accej)table to the parties hereto.
3
AIC 00000136
APP-00618
Confidential
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
Means of Implementation:
Bankruptcy
Pleadings
DIP Financing
Use of Cash
Collateral
Dnc# liS I
All material pleadings filed by the Company in connection with the
Chapter 11 Cases, including all first-day motions, shall be in form and
substance reasonably acceptable to Lehman.
DIP financing to be provided in two separate facilities:
(i) a DIP facility provided in an amount equal to $[51-55] million,
which is necessary to complete certain Marriott PIP requirements,
secured by senior, priming liens on the Fixed Rate Collateral on terms
reasonably acceptable to Lehman (the "Fixed Rate DIP Facility").
The Fixed Rate DIP Facility shall have a maturity date at least 12
months after the Petition Date and shall have no financial covenants or
any control features. On the Effective Date of the Plan which is
consistent with the terms hereof, all amounts outstanding under the
Fixed Rate DIP Facility shall be repaid from the proceeds of the New
Funding (as defined below).
(ii) a DIP facility provided by Lehman in an amount equal to
approximately $18.9 million (funded by $12.5 million from the PIP
escrow and $6.4 million FF&E escrow), secured by senior, priming
liens on the Floating Rate Collateral on terms to be agreed between
the Company and Lehman (the "Floating Rate DIP Facility").
Immediately prior to the commencement of the Chapter 11 Cases,
Lehman will sweep all funds from various escrows/reserves and the
Company's blocked accounts that constitute its cash collateral, which
funds will be made available as loans under the Floating Rate DIP
Facility. The other terms of the Floating Rate DIP Facility are to be
determined. On the Effective Date of the Plan which is consistent
with the terms hereof, all amounts outstanding under the Floating Rate
DIP Facility shall convert to New Equity.
In addition to providing the Floating Rate DIP Facility, Lehman will
consent to the use of its cash collateral on terms acceptable to
Lehman, including the following:


Current payment ofLehman's legal and financial
advisors' fees and expenses;
Current adequate protection payments during the
pendency of the Chapter 11 Cases in an amount equal
to interest at the non-default contract rate under the
Floating Rate Debt;
4
AIC 00000137
APP-00619
New Equity
Conditions
Precedent to
Lehman's
Obligations Under
PSA
6466.527v7
Confidential



PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
Company's use ofLehman's cash collateral shall be
limited to use for the benefit of the Floating Rate
Collateral;
Company shall not take any action, and shall not
solicit, encourage or support any action by a third
party, seeking to amend, modify or extend the Plan
Milestones (as defined below) (the foregoing provision
is hereinafter referred to as the "Milestones
Covenant"); and
Company's use of Lehman's cash collateral will
terminate immediately upon the occurrence of a
Termination Event (as defined below), including the
failure of the Company to meet the Plan Milestones.
The Plan shall provide that Innkeepers will issue new shares of
common stock (the "New Equity"), which shall be initially allocated
as follows:

Shares of the New Equity representing at least 97% of
the issued and outstanding New Equity will be
distributed to Lehman pursuant to the Plan in full
satisfaction of the Floating Rate Debt and the Floating
Rate DIP Facility (the "Initial Lehman Shares"); and

Shares of the New Equity representing up to 3% ofthe
issued and outstanding New Equity will be available
for distribution to the Company's management and/or
unsecured creditors.
The Plan shall provide that the issuance of the New Equity will be
exempt from (i) securities laws in accordance with section 1145 ofthe
Bankruptcy Code and (ii) transfer taxes in accordance with section
1146 of the Bankruptcy Code.
The Transaction will become binding on Lehman when Lehman,
Apollo Investment Corp. ("AIC") and the Company execute a plan
support agreement (the "PSA") that incorporates the Transaction as
set forth herein, including:

Receipt by Lehman of a Plan term sheet incorporating
the terms set forth herein and otherwise reasonably
acceptable in form and substance to Lehman;
5
AIC 00000138
APP-00620
Termination
Events Under
PSA, Floating Rate
DIP Facility and
Use ofCash
Collateral
11oc# USJ6466527v7
Confidential



PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
Agreement reached with Marriott in form and
substance reasonably satisfactory to Lehman;
Execution of the definitive agreements contemplated
by the term sheet, dated as of July U. 2010, by and
between Lehman and AIC (the "Lehman-AIC Term
Sheet"); and
Innkeepers and each of its subsidiaries, including each
obligor under the Floating Rate Debt, shall be a
signatory to the PSA.
The PSA, Floating Rate DIP Facility and use of Lehman's cash
collateral shall be terminable automatically upon the occurrence of
any of the following events (each, a "Termination Event"); provided,
that the party seeking to terminate must provide I 0 business days
written notice of its intent to terminate:

Failure to meet any ofthe following milestones (the
"Plan Milestones"):
0 Motion to assume the PSA filed on the Petition Date;
0 Order entered authorizing the assumption ofthe PSA
no later than 45 days after the Petition Date;
0 Final Orders entered authorizing the Fixed Rate DlP
Facility, Floating Rate DIP Facility, the use of
Lehman's cash collateral and the use ofthe cash
collateral securing the Fixed Rate Debt consistent with
the terms hereof no later than 30 days after the Petition
Date;
0 Disclosure Statement and Plan consistent with the
terms hereof filed no later than 30 days after petition
date;
0 Disclosure Statement consistent with the terms hereof
approved by the Bankruptcy Court no later than 75
days after petition date;
0 Order confirming a Plan consistent with the terms
hereof entered no later than 240 days after petition
date; and
6
AIC 00000139
APP-00621





Doc# USI:646M27v7
Confidential
PWRW&G LLP DRAYf 7/6/10
Preliminary and Confidential
Subject to FRE 408
o Effective Date of the Plan no later than the earlier of
(i) 270 days after the Petition Date and (ii) ___ ,
2011.
Material breach by AIC of the Stock Purchase
Agreement or other definitive documents contemplated
by the Lehman-AIC Term Sheet or any termination of
the Stock Purchase Agreement in accordance with its
terms;
The taking of any action by Marriott, including without
limitation the filing of a motion seeking relief from the
automatic stay or seeking to terminate any franchise
agreement with respect to any ofthe Company's hotel
properties other than those franchise agreements listed
on Schedule A which motion, if filed by Marriott, is
not withdrawn or denied within[_] days of the filing
thereof;
The entry of any order ofthe Bankruptcy Court
granting relief from the automatic stay, including (i) to
permit any exercise of remedies by the lenders or
special servicer under the Fixed Rate Debt other than
limited relief solely to permit the delivery of default
notices under the terms of the Fixed Rate Debt and
(ii) to permit termination of any franchise agreement
with Marriott or any other hotel brand other than those
franchise agreements listed on Schedule A;
The filing by the Company or Marriott of any motion
or other request for relief seeking to (i) dismiss any of
the Chapter 11 Cases, (ii) convert any ofthe
Chapter 11 Cases to a case under chapter 7 ofthe
Bankruptcy Code or (iii) appoint a trustee or an
examiner with expanded powers pursuant to
section 11 04 of the Bankruptcy Code in any of the
Chapter 11 Cases which motion, if filed by Marriott, is
not withdrawn or denied within[_] days ofthe filing
thereof;
(i) The filing by the Company of any motion or other
request for relief seeking an extension of the Plan
Milestones or any alteration of the remedies upon
termination set forth herein without the express written
consent ofLehman in its sole discretion; (ii) the filing
7
AIC 00000140
APP-00622




DocH liS I 0466527v7
Confidential
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
by the Company of any pleading supporting any
motion from any other party to obtain such extension
or alteration; (iii) the failure of the Company to oppose
any motion from any other party to obtain such
extension; or (iv) the violation by the Company of the
Milestones Covenant;
The entry of an order by the Bankruptcy Court
(i) dismissing any of the chapter 11 cases, (ii)
converting any ofthe Chapter 11 Cases to a case under
chapter 7 of the Bankruptcy Code, (iii) appointing a
trustee or an examiner with expanded powers pursuant
to section 11 04 of the Bankruptcy Code in any of the
Chapter 11 Cases or (iv) making a finding of fraud,
dishonesty or misconduct by any officer or director of
the Company, regarding or relating to the Company;
The withdrawal, amendment or modification by the
Company of, or the filing by the Company of a
pleading seeking to amend or modify, the Plan or PSA.
which withdrawal, amendment, modification or
pleading is materially inconsistent with the terms
hereof or the Plan or is materially adverse to Lehman,
in each case in a manner not reasonably acceptable to
Lehman, or if the Company files any motion or
pleading with the Bankruptcy Court that is inconsistent
in any material respect with the terms hereof or the
Plan (in each case with such amendments and
modifications as have been effected in accordance with
the terms hereof) and such motion or pleading has not
been withdrawn within three (3) business days;
The filing of any motion to approve a disclosure
statement or Plan by the Company, AIC or Marriott, or
the approval by the Bankruptcy Court of any motion
filed by any other party, that incorporates a Pro Forma
Capital Structure or any other terms inconsistent with
the terms and conditions set forth herein;
The granting by the Bankruptcy Court of relief that is
inconsistent with the terms hereof or the Plan in any
material respect (in each case with such amendments
and modifications as have been effected in accordance
with the terms hereof);
8
AIC 00000141
APP-00623


Doc# IJSI
Confidential
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
The issuance by any governmental authority, including
the Bankruptcy Court or any other regulatory authority
or court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise
restricting, preventing or enjoining the consummation
of a material portion of the Transaction, including an
order denying confirmation of the Plan and such ruling,
determination or order has not been vacated or reversed
within five (5) business days of issuance; and
The occurrence after execution of the PSA of a change
that has a material adverse effect on the use, value or
condition of the Company, its assets or the legal or
financial status or business operations of the Company
pro11ided, however, that changes relating to or resulting
from the following shall be excluded from such
determination: (i) any change, effect or circumstance
in the industries or markets in which the Company
operates; (ii) any change in any law or GAAP (or the
interpretation thereof) applicable to the Company;
(iii) the filing and pendency of the Chapter II Cases
and the status of the Company as a debtor in
possession; or (iv) a material disruption or material
adverse change in the financial, real estate, banking or
capital markets.
9
AIC 00000142
APP-00624
Confidential
Remedies Upon
Termination
Bankruptcy Court
Approval of PSA
Pro Forma Capital
Structure
PWRW&G LLP DRAFT 7/6/10
Preliminary and Confidential
Subject to FRE 408
Upon the occurrence of a Termination Event, the Company will be
deemed to have consented to the modification of the automatic stay to
permit Lehman to take any or all of the following actions without
further order of or appJication to the Bankruptcy Court:
Terminate the Company's use of cash collateral and
use of proceeds under the Floating Rate DIP Facility;
Declare all adequate protection obligations owed to
Lehman to be immediately due and payable;
Require the Company to file a motion to conduct a sale
of the Floating Rate Collateral pursuant to 363 ofthe
Bankruptcy Code;
Require the Company to consent to the termination of
exclusivity to permit Lehman to file a Plan; or
Exercise rights and remedies as to all or such part of
the Floating Rate Collateral that Lehman shall elect in
its sole discretion, including, without limitation,
foreclosing upon and selling all or a portion of such
collateral.
The Company shall, on or immediately after the commencement of
the Chapter II Cases, file a motion seeking authorization to assume
the PSA. The order approving the PSA shall include provisions that
the Company (i) shall not seek an extension of the Plan Milestones or
any alteration ofthe remedies upon termination set forth herein
without the express written consent of Lehman in its sole discretion,
(ii) shall not support any motion from any other party to obtain such
extension or alteration; and (iii) will oppose any motion from any
other party to obtain such extension or alteration.
Following the consummation of the Transaction, the reorganized
Company will have at least $50 million in pre-funded Marriott capital
expenditures and brand standard work and $1 0 million of cash on
hand after repayment of the Fixed Rate DIP Facility and be capitalized
as follows:
Fixed Rate Debt: less than or equal to $550 million
Other Secured Debt: less than or equal to $150 million

Doc# I 10
AIC 00000143
APP-00625
Management
Incentive Plan
Releases
Professional Fees
Confidential
New Funding:
PWRW&G LLP DRAFf 7/6/10
Preliminary and Confidential
Subject to FRE 408
At least $(75] million, plus such additional amounts in
form and substance as may be determined by the
parties. Prior to any New Funding, the reorganized
Company shall deliver a comprehensive PIPs budget,
which budget shall be (i) prepared with the assistance
of, and validated by, a third party expert and (ii)
acceptable in all respects to the parties hereto. Such
PIPs budget shall be updated annually or more
frequently as may be requested by Lehman or any
other holder of more than [5]% ofthe total issued and
outstanding New Equity.
Except as set forth above, on the Effective Date, the Company shall
not have any debts or liens encumbering the Company's assets.
The Plan shall provide for a management incentive plan in form and
substance acceptable to Lehman and the Company providing for a
reserve of up to 3% of the New Equity for options to be allocated to
management under the management incentive plan.
The Plan shall include a full discharge and release of liability, other
than a release ofthe obligations described herein, in favor of(a) the
Company and each of its subsidiaries, (b) Lehman, (c) ArC and
(d) each of their respective principals, employees, agents, officers,
directors, and professionals from: (i) any and all claims and causes of
action arising prior to the Effective Date and (ii) any and all claims
arising from the actions taken or not taken in good faith in connection
with the Transaction.
The Company shall pay the professional fees and expenses incurred
by Lehman in connection with the Transaction.
II
AIC 00000144
APP-00626
Lehman ALI Inc.
399 Park Avenue, 8th Floor
New York, NY 10022
Attn: Michael Lascher
Re: Residence Inn by Marriott
7101 Chestnut Street
June 29, 2007
Rosemont, IL 60018-3400 (the "Hotel")
Dear Lender:
Marriott International, Inc. ("Franchisor'') has entered into a Relicensing Franchise Agreement (the
"Franchise Agreement") dated as of the date hereof with Grand Prix Fixed Lessee LLC ("Franchisee''). The
Franchise Agreement pennits Franchisee to operate the Hotel as a Residence Inn by Marriott hotel. As of this
date and to the best of our knowledge and belief, the Franchise Agreement is in full force and effect and
Franchisor has issued no notice pursuant to which the Franchise Agreement is currently in default (the ''No-
Defaults Representation"). In connection with the execution of the Franchise Agreement, Grand Prix Chicago
LLC ("Owner") has entered into an Owner Agreement (the "Owner Agreement") dated as of the date hereof with
Franchisor and Franchisee. Lehman ALI Inc. ("Lender'') hereby consents to the Owner entering into and
perfonning its obligations under the Owner Agreement.
Lender and Franchisee have informed Franchisor that Lender has issued a commitment to loan funds
or have loaned funds that will be used for the direct benefit of the Hotel and are secured by the Hotel (the
"Loan"). Lenders, Owner and Franchisee have requested that Franchisor enter into this comfort letter, and the
undersigned parties agree as follows:
1. Franchisee Default. Franchisor will copy Lender on any notice of default or termination issued to
Franchisee under the Franchise Agreement. Lender shall have the right, but not the obligation, upon notice to
Franchisor to cure such default on behalf of Franchisee during the time period for cure established in the
default notice. Franchisor shall extend Lender's right to cure for such reasonable period oftime beyond the
cure period established in the default notice (not to exceed an additional ten (1 0) days for a monetary default
or thirty (30) days for a non-monetary default) if: (i) the default is not related to health or safety; (ii) the
default is susceptible to cure by Lender; (iii) Lender notifies Franchisor of Lender's agreement to cure the
default as soon as reasonably possible but by no later than two (2) days prior to expiration of the cure period
established in the default notice; (iv) subject to any cure period provided hereunder, all royalties, fees, charges
and other amounts due to Franchisor or any of its affiliates under the Franchise Agreement or in connection
with the Hotel are kept current; (v) Lender diligently pursues cure of the default; and (vi) the Hotel is at all
times operated in accordance with the Franchise Agreement except for the specific default described in the
default notice.
2. Lender Foreclosure.
A. If Lender acquires the Hotel through foreclosure, a deed in lieu of foreclosure, or through any
other exercise of its rights as a secured lender and Lender desires the Hotel to continue to be operated as a
Residence Inn by Marriott hotel, Lender may by notice and payment to Franchisor of a non-refundable $5,000
339549- Chicago O'Hare/Rosemont, IL (4898931)
319141v3- 2007 Fonn Comfort Letter
APP-00627
EXHIBIT 14
Lehman ALI Inc.
Page 2
application fee within ten ( 1 0) days of Lender's acquisition elect to do either of the following, subject, in
either case, to compliance with Paragraph 2.B. below:
(i) within thirty (30) days of Lender's acquisition of the Hotel, enter into a management
agreement for Franchisor (or Franchisor's affiliated designee) to manage the Hotel on
Lender's behalf on mutually agreeable terms; or
(ii) request Franchisor to approve substitute qualified management for the Hotel pursuant to
Paragraph 5. If Franchisor approves substitute management, Lender and Franchisor will
execute a new Residence Inn by Marriott franchise agreement within thirty (30) days of
Lender's acquisition of the Hotel. Such new franchise agreement shall be dated as of the date
that Lender acquired the Hotel and shall be for a term equal to Franchisee's then remaining term
and shall be substantially identical to Franchisor's then current form of agreement (as same is
described in Franchisor's then current franchise offering circular) except that Franchisor shall not
charge Lender any initial fee or require Lender to implement a new property improvement plan
in connection with the execution of a new franchise agreement for the Hotel, but Lender shall be:
(a) required to comply with any renovation or upgrading requirements that are set forth in the
Franchise Agreement, (b) required to cure any quality, service or other deficiency in
Franchisee's prior performance of obligations under the Franchise Agreement, and (c) subjectto
any renovation or upgrading requirements that are set forth in Franchisor's then current form of
agreement or are required of other Residence Inn by Marriott franchisees.
B. Franchisor's obligations under Paragraph 2.A. are subject to receipt by Franchisor of
evidence, in form and substance satisfactory to Franchisor, that any party with whom Franchisor enters into a
management agreement or franchise agreement pursuant to Paragraph 2.A. (including, without limitation, any
and all of its directors, officers and owners) is not: (i) a Specially Designated National or Blocked Person (as
defined in the Franchise Agreement); or (ii) directly or indirectly owned or controlled by the government of
any country that is subject to an embargo by the United States government or acting on behalf of a
government of any country that is subject to such an embargo.
C. If Lender acquires the Hotel through foreclosure, a deed in lieu thereof, or through any other
exercise of its rights as a secured lender, and Lender no longer desires that the Hotel be operated as a
Residence Inn by Marriott hotel, Lender agrees to notify Franchisor within ten (10) days of Lender's
acquisition of same, to cooperate with Franchisor in the removal of the Hotel from the Residence Inn by
Marriott hotel system, and to promptly comply with Paragraph 13 hereof, and Lender will not be liable for
liquidated damages or termination fees not paid by Franchisee, in accordance with the provisions of
Paragraph 12 hereof.
D. Lender may designate a wholly-owned subsidiary (a "Lender Entity") to enter into the
management agreement or franchise agreement referred to in Paragraph 2.A. provided that such Lender
Entity is not (i) a Competitor (as defined in the Franchise Agreement) or an affiliate of a Competitor; (ii) a
Specially Designated National or Blocked Person (as defined in Paragraph 2.B.); and/or (iii) directly or
indirectly owned or controlled by the government of any country that is subject to an embargo by the
United States government or acting on behalf of a government of any country that is subject to such an
embargo). If a Lender Entity enters into such franchise or management agreement, Franchisor may
condition its obligations under this Paragraph 2 on posting of a performance bond for the Lender Entity's
obligations to Franchisor, on terms and conditions acceptable to Franchisor, or on receipt of Lender's
339549- Chicago O'Hare/Rosemont,IL (4898931)
319141v3- 2007 Form Comfort Letter
APP-00628
Lehman ALI Inc.
Page3
guaranty or (or a guaranty from an entity acceptable to Franchisor, in its sole discretion) of such Lender
Entity's obligations under any agreement with Franchisor.
3. Receivership. IfLenderhas a receiver appointed for the Hotel, Lender shall have the right to have the
Hotel operated by Franchisor or a management company approved by Franchisor pursuant to Paragraph 4 if,
with respect to the Hotel: (i) Franchisor and Lender have reached agreement concerning the cure of any
deficiencies in Franchisee's prior performance obligations under the Franchise Agreement, including any
deficiencies Wlder any other agreements with Franchisor and its affiliates relating to the Hotel; (ii) Lender or the
receiver enters into a management agreement with Franchisor or a franchise agreement with Franchisor on terms
acceptable to Franchisor and in accordance with the terms set forth in Paragraph 2 hereof; and (iii) the receiver is
specifically authorized by order of the court appointing such receiver to enter into a franchise agreement or
management agreement as described herein and such order further requires the Hotel to be operated in accordance
with state, local and federal laws. If the receiver is the party contracting with Franchisor, Franchisor may
condition its obligations under this Paragraph 3 on posting of a performance bond for the receiver's obligations to
Franchisor, on terms and conditions acceptable to Franchisor, or on receipt ofLender's guaranty of such receiver's
obligations under any agreement with Franchisor.
4. Substitute Manager. Lender's right to propose a substitute manager for the Hotel Wlder this comfort letter
shall be on the terms and conditions of this Paragraph 4. Upon Lender's request, Franchisor will provide Lender
a list of management companies that Franchisor would approve for operation of the Hotel and, if possible,
such list shall contain at least three (3) management companies. Franchisor reserves the right to approve only
those management companies to operate the Hotel that, in Franchisor's sole judgment, are experienced and
qualified in operating Residence Inn by Marriott hotels and are otherwise able to adhere fully to the
obligations and requirements of the Franchise Agreement. Notwithstanding anything to the contrary in this
comfort letter, if the Hotel is operated by a management entity not approved by Franchisor, Franchisor shall
have the right upon notice to Lender to terminate the Franchise Agreement in accordance with its terms, this
comfort Jetter and the Hotel's relationship with the Residence Inn by Marriott system of hotels.
Notwithstanding anything to the contrary contained in this comfort letter, Franchisor will not be obligated to
manage the Hotel if, in Franchisor's reasonable business judgment, such management would violate any
contractual or other legal obligation of Franchisor or its affiliates.
5. Notification ofFranchisor. Lender agrees to notify Franchisor ten (1 0) days in advance of any action to:
(i) commence foreclosure proceedings regarding the Hotel; (ii) petition for appointment of a receiver, obtain the
entry of an order for relief or take any action under federal or state bankruptcy laws or similar laws with regard to
the Hotel; (iii) accept a deed for the Hotel in lieu of foreclosure; or (iv) take ownership, possession or control of
the Hotel, directly or indirectly, in any manner. Lender shall notify Franchisor in writing of the commencement
by another party of foreclosure proceedings or the filing of an action for the appointment of a receiver or petition
for relief W1der state or federal bankruptcy laws within thirty (30) days after Lender receives notice of
commencement of such proceedings. Lender also agrees to notify Franchisor within ten (1 0) days after any
termination or release of Lender's mortgage, security deed or interest in the Hotel. Lender's obligations under the
immediately preceding sentence ofthis Paragraph 5 shall survive termination of this comfort letter.
6. No Assignment of Franchise Agreement or Owner Agreement. Lender, Owner and Franchisee
represent, warrant and covenant to Franchisor that Franchisee and Owner have not and will not collaterally
assign, pledge, grant a security interest or otherwise transfer to Lender or its affiliates any interest in the
Franchise Agreement or the Owner Agreement. Franchisee and Owner further represent, warrant and
covenant to Franchisor that the granting of the Loan will not cause Franchisee or Owner to violate any
financial covenants contained in the Franchise Agreement or the Owner Agreement. If the Hotel is acquired
339549- Chicago O'Hare/Rosemont, IL (4898931)
31914Jv3- 2007 Form Comfort Letter
APP-00629
Lehman ALI Inc.
Page4
by anyone other than Lender (or a Lender Entity complying with Paragraph 2.0. above), neither Lender,
Owner nor Franchisee shall have the right or authority to sell, convey, assign or in any manner transfer any
rights under this comfort letter (which is non-assignable) or under the Franchise Agreement or the Owner
Agreement without the consent of Franchisor.
7. Transition of Control of the Hotel. Lender, Owner, Franchisor and Franchisee shall cooperate so that
any change in control of the Hotel pursuant to this comfort letter shaJl be conducted efficiently without
inconvenience to the guests and employees of the Hotel and in accordance with applicable law, including, but
not limited to, the WARN Act (29 U.S.C. 2101et seg.).
8. No Claims. Franchisor may discuss with Lender or its designees the status of the Hotel, the Franchise
Agreement, the Owner Agreement, or the tenns of any agreement contemplated by this comfort letter or any of the
matters to which Lender is entitled to notice. Franchisee and Owner hereby agree that Franchisor and its
respective owners, affiliates, agents, employees, officers, directors, successors, assigns and representatives
("Released Persons") shall not be liable to any person for taking any action or providing any information required
or contemplated by this comfort letter ("Comfort Letter Acts") and Franchisee and Owner, on behalf of themselves
and their respective owners, affiliates, agents, officers, directors, employees, representatives, successors and
assigns, hereby releases the Released Persons of and from any and all actions, causes of action, suits, claims,
demands, contingencies, debts, accounts and judgments whatsoever, at law or in equity, for any Comfort Letter
Acts.
9. Notices. All notices required under this comfort letter shall be in writing, sent by certified mail, return
receipt requested, or by Federal Express or other national express delivery service and addressed, if to Lender, to:
Lehman ALI Inc.
399 Park Avenue, 8th Floor
New York, NY 10022
Attn: Michael Lascher
With a copy to:
DechertLLP
CiraCentre
2929 Arch Street
Philadelphia, Pennsylvania 19104
Attention: David Forti
If to Fmnchisor, to:
Marriott International, Inc.
1 0400 Fernwood Road
Department 52/923
Bethesda, Maryland 20817
Attention: Franchise Attorney
Any notice sent pursuant to this comfort letter shall be deemed to be given three (3) days after mailing or on the
next business day after such notice is deposited with a national express delivery service.
339549- Chicago O'Hare/Rosemont, IL (4898931)
319141v3- 2007 Fonn Comfort Letter
APP-00630
Lehman ALI Inc.
Page 5
10. No Representations or Warranties. In no event shall this comfort letter or any other circumstances
surrounding the provision of financing by Lender be construed to involve: (i) any representation by
Franchisor that it endorses, approves, recommends or otherwise concurs in the financing; (ii) any guarantee or
assurance by Franchisor that Franchisee, Owner, or any other party to the Loan will be able to repay the Loan
in accordance with their terms; (iii) any endorsement, approval, recommendation or concurrence in any
financial projections submitted to Lender in connection with the Loan; or (iv) any endorsement, approval or
recommendation ofFranchisee' s or Owner's character or reputation. Because the No-Defaults Representation
only covers the status of the Franchise Agreement as of the date of this comfort letter, Lender shall not rely on
its belief, whether or not correct, that Franchisor has not given any notice under this comfort letter when
Lender is making any decision or representation or warranty in connection with any material modification,
securitization, or sale of the Loan. Franchisor agrees that upon the written request of Lender in connection
with any material modification, securitization, or sale of the Loan, Franchisor will represent to Lender
whether, as of that date, Franchisor has issued a notice pursuant to which the Franchise Agreement is then
currently in default.
11. Substitute Comfort Letter. Upon receipt of a written request from Lender, Franchisor will issue a
replacement comfort letter, substantially similar to this comfort letter, to a Lender Entity (subject to the
satisfaction of the requirements of Paragraph 2.0. hereof; provided any replacement comfort letter issued to a
Lender Entity shall not contain Paragraph 2.D.), to the trustee of a trust established in connection with the
securitization of the Loan, to a third-party loan servicing agent or to a successor mortgagee that is a
commercial bank, investment bank, pension fund, insurance company or other fmancial institution or similar
entity in the business of routinely financing real estate transactions (or purchasing interests in real estate
financings), in good financial condition, is not a "Competitor," or an affiliate of a Competitor, as defined in
the Franchise Agreement, and is not an affiliate of Franchisee. Any such replacement comfort letter shall
supersede this comfort letter.
12. Lender not Liable for Liquidated Damages. Franchisor specifically acknowledges and agrees that
Lender shall not be liable for payment of any liquidated damages or termination fees not paid by the
Franchisee, but Franchisor does not waive any liquidated damages claims or termination fees that may arise
from operation of the Hotel pursuant to any management agreement or franchise agreement entered into by
Lender and Franchisor following Lender's election under Paragraph 2.A. hereof or pursuant to any
management agreement or franchise agreement entered into by Lender or by a receiver under Paragraph 3
hereof.
13. Possession of the Hotel. If Lender owns, controls or possesses the Hotel after termination of the
Franchise Agreement for any reason, Lender shall (i) upon Franchisor's request immediately perform the
requirements of Section XVIII of the Franchise Agreement with respect to de-identifying the Hotel as a
Residence Inn by Marriott hotel and (ii) indemnify, defend and hold harmless Franchisor and its affiliates
from and against any loss, claim or other liability of any kind arising from or in connection with the operation
ofthe Hotel as a Residence Inn by Marriott hotel during such ownership, control or possession. Lender's
obligations under this Paragraph 13 shall survive termination of this comfort letter, and nothing in the comfort
letter shall limit Franchisor's rights, if any, to seek legal redress for any unauthorized use of Franchisor's
trademarks, service marks, or systems.
339549- Chicago O'Hare/Rosemont, IL (4898931)
319141v3- 2007 Form Comfort Letter
APP-00631
Lehman ALI Inc.
Page 6
14. Tennination. This comfort letter shall terminate with respect to Lender and Lender shall have no rights
hereunder if:
(i) Lender has been taken over in any marmer by any state or federal agency or is in a receivership,
conservatorship, reorganization, or liquidation, or Lender or any of its officers or directors has
entered into or is subject to a cease and desist order or any other fonnal or informal written
agreement with a federal or state regulatory agency that is likely, as a result of the adverse
publicity that has occurred in connection with such cease and desist order or any other
formal or informal written agreement with a federal or a state regulatory agency, in
Franchisor's sole discretion, to adversely affect the System, the Proprietary Marks, the
goodwill associated therewith, or Franchisor's interest therein;
(ii) Lender no longer holds a valid first mortgage or security deed with respect to the Hotel;
(iii) the Franchise Agreement has expired or terminated, unless such occurrence is the result of
the timely exercise of Lender's rights pursuant to Paragraphs 2, 3 or 4 of this comfort letter,
in which such event this comfort letter shall terminate upon the exercise or expiration of such
rights, which in any event shan expire no more than forty-five ( 45) days after the expiration
or termination of the Franchise Agreement; or
(iv) Lender breaches this comfort letter.
15. Effectiveness. Franchisor shall have no obligations hereunder unless Lender, Owner and Franchisee
have evidenced their agreement with the provisions hereinabove by the execution of a copy of this comfort
letter, which may be executed in a number of identical counterparts, each of which shall be deemed an
original for all purposes and all of which shall constitute, collectively, one and the same comfort letter.
Delivery of an executed signature page to this comfort letter by facsimile transmission shall be effective as
delivery of a manually signed counterpart of this comfort letter.
16. Subordination. Franchisor hereby agrees that, to the extent there is any right of first refusal contained
in the Franchise Agreement which creates any interest in real estate in favor of Franchisor, such right of first
refusal is and shall continue to be subject and subordinate to Lender's mortgage or security deed securing the
Loan for so long as: (i) such mortgage or security deed is in compliance with requirements pertaining to
financings or indebtedness in the Franchise Agreement, if any, and remains validly recorded and in full force
and effect; and (ii) Lender is a bona fide Lender and is not a Competitor or affiliate of a Competitor (as
defined in the Franchise Agreement). Lender and Franchisee acknowledge that this subordination (a) relates
only to the real interests in the Hotel held by Franchisor and (b) is not a subordination of the Franchise
Agreement or waiver of any other rights Franchisor may have thereunder.
17. Confidentiality. The terms of this comfort letter that have been negotiated and differ from the
standard fonn comfort letter (the "Negotiated Terms") are strictly confidential. Except as otherwise required
by law, or as may be necessary to enforce this comfort letter in any legal proceedings, the Negotiated Terms
shall be disclosed only to those managers, members, officers, directors, employees, attorneys, accountants or
agents of Franchisee or Lender as is necessary for the operation or financing of the Hotel, unless Franchisor
has consented to such disclosure in writing. Any unauthorized disclosure of the Negotiated Terms shall be a
default hereunder. Additionally, Lender shall have the right to disclose the terms of this comfort letter to any
party acquiring an interest in the Loan; provided, however, that such party is a commercial bank, investment
bank, pension fund, insurance company or other financial institution or similar entity in the business of
339549- Chicago O'Harc/Rosemont, IL (4898931)
3 19141 v3 - 2007 Fonn Comfon Letter
APP-00632
Lehman ALI Inc.
Page7
routinely financing real estate transactions (or purchasing interests in real estate financings ), in good financial
condition, is not a "Competitor," or an affiliate of a Competitor, as defined in the Franchise Agreement, and is
not an affiliate of Franchisee.
{Signatures appear on the following page.)
339549- Chicaj!o O'Hare/Rosemont,IL (4898931)
3 1914lv3- 2007 Fonn Comfort Lener
APP-00633
Lehman ALI Inc.
Page 8
GRAND PRIX FIXED LESSEE LLC
By:
Nrune: --------------------------
Title:
GRAND PRIX CHICAGO LLC
By:
Name:
Title:
LEHMAN ALI INC.
By:
Its:
cc: Tashia A. Urland, Esq.
339549- Chicago O'Hare/Rosemont, IL (4898931)
319141 v3 - 2007 Fonn Comfort Letter
Very truly yours,
By:
Vice President
Nick Kelloclt
9r. Viee President, Owner and Fratrefrise Services
APP-00634
Lehman ALI Inc.
Page 8
GRAND PRIX FIXED LESSEE LLC
By:
~ ~ /
Name:
Title:
GRAND PRIX CHr
B y : ~ ~
Name: <::;i?.t'l!l\.\.J:.. c._mt.)...QJ("\
Title: "J:Cl?cee u
LEHMAN ALI INC.
By:
Its:
cc: Tashia A Urland, Esq.
339549- Chicago O'Hare/Rosemont, lL (4898931)
319141 v3- 2007 Form Comfort Letter
Very truly yours,
MARRIOTT INTERNATIONAL, INC.
By:
Vice President
APP-00635
Lehman ALI Inc.
Page 8
GRAND PRIX FIXED LESSEE LLC
By:
Name: --------------------------
Title:
GRAND PRIX CHICAGO LLC
By:
Name:
Title:
~
Authorized Signatory
cc: Tashia A. Urland, Esq.
339549- Chicago O'Hare/Rosemont, IL (4898931)
319141v3- 2007 Fonn Comfort Letter
Very truly yours,
MARRIOTT INTERNATIONAL, INC.
By:
Vice President
APP-00636
From:
Sent:
To:
Cc:
Subject:
RULE 408
Greer, Brian <brian.greer@dechert.com>
Wednesday, July 14, 2010 4:55AM (GMT)
Joseph D. Glatt <JGlatt@ApolloCapital.com>
Sage, Michael <michael.sage@dechert.com>; Lascher, Michael
<michael.lascher@lamcollc.com>; Frey, Susanne <susanne.frey@lamcollc.com>; Marc
Beilinson <mbeilinson@beilinsonpartners.com>; Forti, David
<david.forti@dechert.com>; Brandon.Aebersold@lazard.com
Lehman Proposal - Rule 408
Settlement Discussion
Joseph,
As requested, below are the terms on which Lehman will resolve the open issues with Apollo. The following remains subject to client
review and comment. This email is subject to Rule 408. All other caveats apply.
Brian
- Mutual termination event for 45 days from petition date.
- AIC will not be a signatory to the PSA.
- AIC or an affiliate of AIC shall be the purchaser of the New Equity. Lehman will not consent to a third party purchaser.
-Materiality thresholds for AIC in termination events and consent requirements
- AIC counsel fees to be paid by Innkeepers only if the Lehman- AIC deal closes
- Guaranty language below
"Lehman shall not object to Innkeepers' performance of the primary obligations underlying the Required Capital Improvements
Guaranty, dated as of June 29, 2007 (the "Guaranty"), regardless of whether such obligations are fulfilled during Innkeepers' chapter
11 cases or after emergence from chapter 11 so long as (a) during the chapter 11 cases, such obligations are exclusively limited to the
Marriott PIP obligations in the Fixed Rate Pool and such obligations are paid solely with funds available under the Fixed Rate DIP
Facility, (b) after the chapter 11 cases, any Marriott PIP obligations in the Fixed Rate Pool that were not paid during the chapter 11
cases are paid from the proceeds of the Exit Funding, (c) after the chapter 11 cases, discretionary capital expenditures agreed to by
Lehman and AIC are paid from the proceeds of the Exit Funding or excess cash flow, (d) the payment of the Marriott PIP obligations
and discretionary capital expenditures from the proceeds of the Exit Funding shall not result in any change to the pro forma capital
structure set forth in the plan term sheet between Lehman and Innkeepers, and (e) the funding of the obligations set forth above is
within the sound business judgment of the board of directors of Innkeepers and reorganized Innkeepers, as applicable. In addition,
Lehman shall not object to the settlement or termination of the Guaranty so long as such settlement or termination occurs at least 45
days after the Petition Date. In the event this Agreement is terminated in accordance with its terms, this provision shall not be binding
and shall be of no force or effect."
-----Original Message-----
From: Joseph D. Glatt [ mailto:JGlatt(illApolloCapital.com]
Sent: Tuesday, July 13, 2010 8:33PM
To: Greer, Brian
Cc: Sage, Michael
Subject: Re:
I thought the ball was on both sides of the court. Can you lay out in an email Lehman's proposal. Sorry, a lot of balls in the air (I think
I beat that proverbial dead horse) on many different fronts want to make sure we are on the same page. Also, my email was also
referring to next steps assuming a deal gets done. I am concerned about timing and want to ensure the document (in whatever form it
takes) is being drafted. To that end I have asked PW to reach out to you. Thx.
----- Original Message -----
From: Greer, Brian <brian.greer@dechert.com>
CONFIDENTIAL LEH-ALI 005298
APP-00637
EXHIBIT 15
To: Joseph D. Glatt
Cc: Sage, Michael <michael.sage@dechert.com>
Sent: Tue Jull3 20:23:25 2010
Subject: RE:
The ball is in your court. Has Apollo agreed to the key deal points we discussed?
-----Original Message-----
From: Joseph D. Glatt [ mailto:JGlatt(illApolloCapital.com]
Sent: Tuesday, July 13, 2010 8:07PM
To: Greer, Brian
Subject:
Hey there. Hope all is well. Do you have any update as to where we are at?
This email and any files transmitted with it are confidential and intended solely for the person or entity to whom they are addressed
and may contain confidential and/or privileged
material. Any review, retransmission, dissemination or
other use of, or taking of any action in reliance upon this information by persons or entities other than the intended
recipient is prohibited. If you have received this email in
error please contact the sender and delete the material from any computer.
Apollo Global Management, LLC
This e-mail is from Dechert LLP, a law firm, and may contain information that is confidential or privileged. If you are not the intended
recipient, do not read, copy or distribute the e-mail or any attachments. Instead, please notify the sender and delete the e-mail and any
attachments. Thank you.
This email and any files transmitted with it are confidential and intended solely for the person or entity to whom they are addressed
and may contain confidential and/or privileged
material. Any review, retransmission, dissemination or
other use of, or taking of any action in reliance upon this information by persons or entities other than the intended
recipient is prohibited. If you have received this email in
error please contact the sender and delete the material from any computer.
Apollo Global Management, LLC
CONFIDENTIAL LEH-ALI 005299
APP-00638
From:
Sent:
To:
Subject:
mbeilinson@beilinsonpartners. com
Sunday, July 18, 2010 12:44 PM (GMT)
Lascher, Michael <michael.lascher@lamcollc.com>
Re: One More Decision
Not inclined. I understand its only a word but it gives midland a real hook and I'm filing the motion to assume on day one and already
reviewing the plan. I won't be amending our deal without your consent. I'm trusting that you won't terminate AIC in first 45
days .... please do the same with me on this issue for this short period of time
Dinner was really fun last night
------Original Message------
From: Lascher, Michael
To: Marc
Subject: Fw: One More Decision
Sent: Jull8, 2010 7:55AM
Good morning. Did you think about this?
----- Original Message -----
From: Lascher, Michael
To: 'mbeilinson@beilinsonpartners.com' <mbeilinson@beilinsonpartners.com>
Sent: Sat Jul17 17:50:25 2010
Subject: One More Decision
Can you live with giving me the ability to terminate cash collateral if you "breach your obligations to Lehman in connection with the
Restructuring" 7
Just say yes and I promise I won't ask you for anything else. Until tomorrow ...
Confidentiality Notice: The contents of this email, all related responses and any files and/or attachments transmitted with it are
CONFIDENTIAL and are intended solely for the use of the individual or entity to whom they are addressed. This email may contain
legally privileged or confidential information and may not be disclosed or forwarded to anyone else without authorization from the
originator of this email. If you have received this email in error, please notify the sender immediately and delete all copies from your
system.
Sent via BlackBerry by AT&T
CONFIDENTIAL LEH-ALI 005676
APP-00639
EXHIBIT 16
August 20, 2010
Midland Loan Services, Inc.
10851 Mastin, 6th Floor, Overland Park, KS 66210
Attention: Kevin S. Semon
Vice President, Special Servicing Manager
NOT A SOLICITATION OF VOTES ON A PLAN
FIVE
MILE
FIVF MILF CAPITAl. PAIHNfRS
THREE STAMFORD PLAZA. 9TH FLOOR
STA'<!FORD. l.ONKFCTICUT o69'"
TELEPHOKE zo:l')0\-095o
PAC:SI'<!ILE 203901-o954
Binding Commitment for the
Acquisition of Innkeepers USA Trust
Five Mile Capital II Pooling REIT LLC, through its investment advisor Five Mile Capital Partners
LLC (collectively, "Five Mile"), is pleased to submit this letter (this "Commitment Letter") to
Midland Loan Services, Inc. ("Midland"), which sets forth, among other things, our binding
commitment (the "Commitment") to provide equity capital for the restructuring of the debt and
equity of Innkeepers USA Trust ("Innkeepers") and its subsidiaries (collectively with Innkeepers, the
"Company"), resulting in Five Mile directly or indirectly owning 100% of the equity interests in the
reorganized Company (the "Transaction"). The funding from our Commitment will be used to
finance and otherwise implement a confirmed plan of reorganization to be ftled by Midland (the
"Plan") acceptable to us in our reasonable discretion, which will provide for the treatment of claims
and other terms outlined below and will otherwise contain terms and treatment of claims consistent
with the applicable provisions of the Bankruptcy Code.
Five Mile is uniquely qualified to consummate the Transaction, given our substantial investment and
the rights we have in certain indebtedness in Innkeepers. As you know, we have made available,
subject to Court approval, debtor-in-possession fmancing to the Company in excess of $50 million.
As a result, we are familiar with the Company's assets and operating performance, gleaned from our
review of public filings and our own unassisted due diligence. We also have general expertise in the
hospitality market and the extended stay lodging sector.
I. Value & Proposed Capital Structure
Innkeepers is a leading owner of upscale and extended stay hotel properties throughout the United
States with interests in 73 hotels and approximately 10,000 rooms across 19 states. As with many
other lodging assets, the Company experienced adverse asset performance as a result of the
economic downturn and became unable to perform under its existing debt obligations leading to the
Company's bankruptcy filing on July 19,2010.
FIVE MILE CAPITAl P A R T ~ E R S LlC
Given the economic environment's adverse impact on operating performance, reduced valuations
within the lodging sector, required capital investments, and pending or existing franchise expirations,
we believe the Company must resize its existing capital structure.
Our Commitment is based on a valuation of the Company of $1.04 billion and results in a final
capital structure of $803.4 million in aggregate indebtedness and $236.6 million in new equity capital
to be invested by us. The details of the reorganized capital structure for the Company are provided
in Section IV below.
II. Capital Commitments
Subject to the conditions set forth above, we hereby submit this binding and irrevocable offer to
provide $236.6 million of cash to fund the Transaction to be effectuated in accordance with the
terms of this Commitment Letter on the effective date of the Plan. Five Mile's investment will be
used to recapitalize the Company, and more specifically, will be used to pay down existing debt and
provide funds for future property improvement work ("PIP"), furniture, fixtures, and equipment
investments ("FF&E"), cash reserves and potential growth opportunities. We will provide the cash
investment required to consummate the Transactions from our existing investment vehicles. In
connection therewith, we hereby confirm that we have available, and will have available at all times
prior to consummation of the Transaction or the termination of the Commitment, investor
commitments that exceed, in the aggregate, $240 million.
III. Plan Subject to Higher and Better Offers; Five Mile Free to Pursue
Other Transactions
Subject to Court approval of the bid protections for Five Mile described in Section VI herein, Five
Mile acknowledges that the Plan will be subject to higher and better offers for creditor treatment as
may be reflected in competing reorganization plans filed with the Court. For avoidance of doubt,
our providing this Commitment does not preclude us in any way from discussing alternate
transactions, including competing plans of reorganization, or engaging in any discussions regarding
providing financing or participating in any such alternate transactions (each, an "Alternate
Transaction"); provided however, that we will not enter into a binding commitment with respect to,
or otherwise consummate, any Alternate Transaction prior to the occurrence of a Termination
Event (as defmed in Section IX hereof).
IV. Restructuring of Debt and Equity of the Company- New Equity, Debt Forgiveness,
& Cash Pay Downs
Based on our analysis of the Company's filings we believe that as of July 2010, the Company has
approximately $1.47 billion in outstanding debt obligations of which approximately $1.055 billion is
pre-petition obligations not related to Lehman ALI, Inc. ("Lehman") (i.e., exclusive of Lehman's
Floating Rate Mortgage Loan & Floating Rate Mezzanine Loan). Our Commitment contemplates a
restructuring whereby the current debt is reduced through debt forgiveness and cash pay downs to
approximately $803.42 million allowing non-Lehman pre-petition creditors to realize value for
72.4% of their outstanding obligations ($764.24 million of value realization on $1.055 billion of
current indebtedness), calculated after giving consideration to the present value of B-Notes to be
2
FIVE MILE CAPITAl PARTKERS UC
purchased by us as proposed in this Commitment Letter.
1
This recovery is materially better than the
66.3% maximum of value recovery for those same creditors described in the Plan Support
Agreement advanced by Lehman (the "Lehman Plan"), with the potential for less (there is a ceiling
but no floor on the creditor recovery and the Lehman Plan sponsor(s) benefits dollar-for-dollar to
the extent recovery by the secured creditors is reduced). We believe that the amount realized on the
Lehman's Floating Rate Mortgage Loan under our Commitment better reflects the value of the
collateral supporting that obligation versus the premium value contemplated in the Lehman Plan
which provides for a 90% recovery on Lehman's secured claim and appropriates the entirety of any
residual value of the enterprise to Lehman. The higher value going to Lehman under its plan is
realizable by Lehman only because there is a transfer of value from the non-Lehman prepetition
creditors to Lehman (and Apollo Investment Corporation ("Apollo")) under the Lehman Plan.
An illustration and an explanation of the debt restructuring portion of our Commitment are detailed
below:
($in millions)
r -A -l
--------
Debt Final

FQq:ir.enw! .!lil!ims: Par. Down
Five Mile DIP $50.8 $0.0
I
$50.8 -$50.8 $0.0
Lehman DIP $17.0 $0.0 $17.0 -$17.0 $0.0
Fixed Rate CMBS Mortgage Loan $825.4 -$225.4 $600.0 -$66.4 $533.6
Floating Rate Mortgage Loan $238.5 -$86.8 $151.7 -$16.8 $134.9
Floating Rate Mezzanine Loan $121.0 -$121.0 $0.0 -$2.6 $0.0
Anaheim Mortgage Loan $13.7 -$3.7 $10.0 -$1.1 $8.9
Anaheim Mezzanine Loan $21.3 -$21.3 $0.0 -$0.4 $0.0
Capmark Mission Valley CMBS Mortgage Loan $47.4 -$12.9 $34.5 -$3.8 $30.6
Capmark Garden Grove CMBS Mortgage I nan $37.6 -$10.3 $27.3 -$3.0 $24.3
Capmark Ontario CMBS Mortgage I nan $35.0 -$9.6 $25.4 -$2.8 $22.6
Merrill Lyn<h Washington D.C. CMBS Mortgage lnan $25.6 -$7.0 $18.6 -$2.1 $16.5
Merrill Lynm Tysons Comer CMBS Mortgage I nan $25.2 -$6.9 $18.3 -$2.0 $16.3
Merrill Lynm San Antonio CMBS Mortgage lnan $24.2 -$6.6 $17.6 -$1.9 $15.6
Present Value of B-Notes(t) $0.0 $0.0 $16.4 -$16.4 $0.0
Total Debt $1,482.6 -$511.4 $987.5 -$187.1 $803.4
DIP Retirement $67.8 $67.8
Pre-Petition Creditor Pay downs $103.0 $103.0
Fixed Rate CMBS Mortgage Special Serviocr Fcc $3.3 $3.3
Funding ofFF&E Reserve $13.8 $13.8
Pre-funding of Future PIP Work $15.0 $15.0
Additional Cash on Balanoc Sheet (2) $17.3 $17.3
Purmase ofB-Notcs at Present Value $16.4 $16.4
New Cash $0.0 $0.0 $46.1 $190.5 $236.6
Total Cagital Structure $11482.6 -$511.4 $11033.6 $3.3
(t) B-Notcs represent an in the equity waterfall of the new capital stru<turc that is subordinate to a 2.0x multiple on the I nvcstors'
Investment. The note faoc value is set at 20% of the deficiency claim. Present Value established based upon 5 to 7 year period and no interest
a=ual.
(2) Includes amount allocated to pay unsecured creditors (other than holders of deficiency claims) their pro rata share of$500,000.
1
Any recovered [net) proceeds from Midland's lawsuit against Apollo, which alleges among other things that Apollo is
required to pay for certain property improvement projects that guaranteed and Innkeepers failed to timely
complete, will go to the B-Note holders of the Fixed Rate CJ\ffiS Mortgage Loan as additional consideration.
3
FIVE MILE CAPITAL PART:'\ERS LLC
Cash Proceeds & Uses
Our Commitment contemplates that the cash investment of $236.6 million will be used as follows:
o Repayment of the Five Mile and Lehman DIP in the amount of $67.75 million
o Pay down of Pre-Petition Mortgage lenders, after debt forgiveness, by $100 million
o Funding of $28.8 million of FF&E and PIP reserves to cover 2011 FF&E and future
PIP work
o Funding of $17.3 million of additional cash on the post-conftrmation balance sheet.
o $16.4 million for us to purchase the B-Notes issued to holders of deficiency claims
based upon the present value of $73.8 million in B-Notes (20% of the deficiency
claim amount) subordinate to a 2.0x multiple on our investment
o Payment on non-deficiency unsecured claims in the amounts of: $2,550,949 to
Floating Rate Mezzanine Loan lenders; $449,051 to Anaheim Mezzanine Loan
lenders; and $500,000 to trade unsecured creditors
o Payment of fees to the Special Servicer of the Fixed Rate CMBS Mortgage equal to
0.625% of the Final Balance of the Fixed Rate CMBS Mortgage as complete
consideration for effecting the restructuring transactions
Debt Forgiveness & Pay Downs
Fixed Rate CMBS Mortgage Loan: Reduction to $600.0 million and a cash pay down of
$66.4 million to reduce the outstanding balance to $533.6 million. Company's issuance of B-
Notes to lender, which notes we agree to purchase immediately for $10.0 million in cash.
Floating Rate Mortgage Loan: Reduction to $151.7 million and a cash pay down of$16.8
million to reduce the outstanding balance to $134.9 million. Company's issuance of B-Notes
to lender, which notes we agree to purchase immediately for $6,350,949 in cash, of which
$2,550,949 shall be subordinated and paid over to the Floating Rate Mezzanine Loan. Please
note our estimates for this mortgage pool are based on de minimis information as compared
with some of the other properties and therefore will require extra diligence
Floating Rate Mezzanine Loan: Payment of $2,550,949 as described above. Debt cancelled.
Anaheim Mortgage Loan: Reduction to $10.0 million and a cash pay down of $1.1 million to
reduce the outstanding balance to $8.9 million. Company's issuance of B-Notes to lender,
which notes we agree to purchase immediately for $619,050 in cash, of which $500,000 shall
be subordinated and paid over to the Anaheim Mezzanine Loan.
Anaheim Mezzanine Loan: Payment of $449,051 as described above. Debt cancelled.
Capmark Mission Valley CMBS Mortgage Loan: Reduction to $34.5 million and a cash pay
down of $3.8 million to reduce the outstanding balance to $30.6 million. Company's issuance
of B-Notes to lender, which notes we agree to purchase immediately for $0.6 million in cash.
Capmark Garden Grove CMBS Mortgage Loan: Reduction to $27.3 million and a cash pay
down of $3.0 million to reduce the outstanding balance to $24.3 million. Company's issuance
of B-Notes to lender, which notes we agree to purchase immediately for $0.5 million in cash.
Capmark Ontario CMBS Mortgage Loan: Reduction to $25.4 million and a cash pay down
of $2.8 million to reduce the outstanding balance to $22.6 million. Company's issuance of B-
Notes to lender, which notes we agree to purchase immediately for $0.4 million in cash.
4
FIVE MILE CAPITAL PARTl\ERS U.C
Merrill Lynch Washington D.C. CMBS Mortgage Loan: Reduction to $18.6 million and a
cash pay down of $2.1 million to reduce the outstanding balance to $16.5 million.
Company's issuance ofB-Notes to lender, which notes we agree to purchase immediately for
$0.3 million in cash.
Merrill Lynch Tysons Corner CMBS Mortgage Loan: Reduction to $18.3 million and a cash
pay down of $2.0 million to reduce the outstanding balance to $16.3 million. Company's
issuance of B-Notes to lender, which notes we agree to purchase immediately for $0.3
million in cash.
Merrill Lynch San Antonio CMBS Mortgage Loan: Reduction to $17.6 million and a cash
pay down of $1.9 million to reduce the outstanding balance to $15.6 million. Company's
issuance of B-Notes to lender, which notes we agree to purchase immediately for $0.3
million in cash.
Unsecured trade creditors (not including holders of deficiency claims) that are not otherwise
paid pursuant to a "first day" order, will receive a share of a cash allocation of $500,000.
All equity interests in the Company, including common and preferred stock, will be
cancelled, and no distributions will be made on account of such interests. The Plan will
provide for an equity incentive program for management of the reorganized Company.
V. Proposed Debt Rates, Maturities, Extensions, Amortization, & Release Prices
The Commitment includes the following terms for the restructured debt:
Fixed Rate CMBS Mortgage Loan: A proposed interest rate of 6.71% and no change to the
existing maturity date of July 9, 2017. Amortization will begin 48 months after the
confirmation of the Plan and will be based on a 30 year amortization schedule. Release
prices will be established and properties can be released at 115% of the allocated loan
amount. The loan is subject to prepayment at par without penalty. Allocated FF&E of
$7,840,067.
Floating Rate CMBS Mortgage Loan: A proposed interest rate of Libor + 2.05%, with an
initial maturity date of July 9, 2015, two one-year extension options, at the borrower's
option, and not subject to any fmancial covenants. Release prices will be established and
properties can be released at 115% of the allocated loan amount. The loan is subject to
prepayment at par without penalty. Allocated FF&E of $3,510,782.
Anaheim Mortgage Loan: A proposed interest rate of 5.41% and a maturity date of July 9,
2017. Amortization will begin 48 months after the confirmation of the Plan and will be
based on a 30 year amortization schedule. The loan is subject to prepayment at par without
penalty. Allocated FF&E of$407,400.
Cap mark Mission Valley CMBS Mortgage Loan: A proposed interest rate of 5. 98% and a
maturity date of July 9, 2017 as compared to the original maturity date of November 11,
2016. The loan is subject to prepayment at par without penalty. Allocated FF&E of
$446,681.
Capmark Garden Grove CMBS Mortgage Loan: A proposed interest rate of 5.98% and a
maturity date of July 9, 2017 as compared to the original maturity date of November 11,
2016. The loan is subject to prepayment at par without penalty. Allocated FF&E of
$357,674.
5
FIVE CAPITAl UC
Capmark Ontario CMBS Mortgage Loan: A proposed interest rate of 5.98% and a maturity
date of July 9, 2017 as compared to the original maturity date of November 11,2016. The
loan is subject to prepayment at par without penalty. Allocated FF&E of $456,855.
Merrill Lynch Washington D.C. CMBS Mortgage Loan: A proposed interest rate of 6.03%
and a maturity date of July 9, 2017 as compared to the original maturity date of October 1,
2016. The loan is subject to prepayment at par without penalty. Allocated FF&E of
$266,428.
Merrill Lynch Tysons Corner CMBS Mortgage Loan: A proposed interest rate of 5.98% and
a maturity date of July 9, 2017 as compared to the original maturity date of October 1, 2016.
The loan is subject to prepayment at par without penalty. Allocated FF&E of $235,718.
Merrill Lynch San Antonio CMBS Mortgage Loan: A proposed interest rate of 6.03% and a
maturity date of July 9, 2017 as compared to the original maturity date of October 1, 2016.
The loan is subject to prepayment at par without penalty. Allocated FF&E of $278,395.
VI. Offer Structure and Protections
As stated, the Transaction will be implemented by a recapitalization of the Company through the
Plan. Since the Company has rejected our request to perform due diligence and has expressed no
real interest in engaging us in meaningful discussions regarding a potential transaction in lieu of
continuing on with the Lehman Plan, it will be necessary for Midland or another party in interest to
seek and obtain a bankruptcy court order terminating the Company's plan exclusivity period in order
for Midland to flle the Plan. Assuming exclusivity is so terminated, we require that stalking horse
protection be immediately sought by Midland from the Court, including the following: (i) a break-
up fee of $10 million in favor of Five Mile (the "Break-Up Fee") if an alternative Chapter 11 plan
financed by a different party is confirmed by the Court and consummated; (ii) a first over-bid in the
competing plan in the form of additional capital into the Company in the minimum amount of $25
million cash (inclusive of amount allocable to pay the Break-Up Fee, which shall only be payable
from the cash realized from the first overbid), with subsequent over-bids in the form of additional
capital into the Company in minimum $10 million increments of additional cash (or additional debt
on identical terms as described in our Commitment), and (iii) a reimbursement of all of our legal fees
and expenses incurred in connection with this offer and its conftrmation and consummation
(including due diligence fees and expenses) in an amount not to exceed $2,000,000. Midland
conftrms its agreement with such terms.
Midland conftrms that, other than the sale of equity interests in the reorganized Company, the Plan
will not contemplate or provide for a sale of the Company or any of its assets pursuant to section
1129(b)(2)(a)(ii) or (iii) or section 363 of the Bankruptcy Code. As such, no holder of a lien on any
asset of the Company shall be permitted to credit bid its claim as part of the Plan. The conftrmation
of the best plan of reorganization providing for the highest and best return to creditors is
contemplated, subject to the protections being granted to Five Mile as set forth above in this Section
VI. In lieu of participating in the recapitalization provided in the Plan, the Plan should provide that
each secured creditor shall have the option to take ownership of its collateral in full satisfaction,
settlement, release and exchange for its claim(s) against the Company, in which case there shall be an
attendant adjustment to the consideration hereunder.
VII. Strength of the Plan
6
FIVE !\fiLE CAPITAl PART.\"FRS LlC
We believe the Plan (consistent with the terms of this Commitment Letter) is (i) superior to the
Lehman Plan, (ii) beneficial to all creditors, not just Lehman, and (iii) in the best interests of the
Company and its bankruptcy estates. The Plan values the Company at $1.04 billion, which is higher
than the valuation of $915 million in the Lehman Plan. The Plan provides for approximately $67.24
million in additional recovery value for the Non-Lehman Pre-Petition creditors (or 9% more) and
$187.1 million in cash pay downs of indebtedness, including retirement of$67.75 million of DIP
financing and the purchase of the B-Notes for $16.4 million. Further, there is substantially higher
certainty and less execution risk with the Plan, financed by our Commitment, as it will provide for
the exit financing component critical to the success and emergence of Innkeepers from bankruptcy.
The Lehman Plan does not include a commitment for $75 million of exit financing, which is
required for Innkeepers to successfully emerge from bankruptcy.
We believe the Plan also provides additional stability for the Company as compared to the Lehman
Plan by providing approximately $28.8 million in cash reserves to fund future FF&E and PIP
investments and an additional $17.3 million in general cash liquidity (includes amount allocated to
pay the unsecured creditors- other than holders of deficiency claims) to manage seasonality within
the business, cover operating or interest shortfalls should they occur, and provide funds to pay
administrative and priority expenses upon emergence. Our Commitment's suggested amortization of
the Fixed Rate and Anaheim Mortgage Loans, after a 48 month period will allow the Company to
reach a more normalized level of operating performance. We are ready to move forward and have
all the resources, including available funds, to conclude the transactions outlined in this
Commitment Letter.
VIII. Midland Covenants
In consideration for our Commitment, Midland hereby covenants and agrees to
(a) perform its undertakings set forth in the second paragraph of Section VI above, (b) use its best
efforts to seek a bankruptcy court order to terminate the Company's plan exclusivity period, and (c)
upon termination of the Company's plan exclusivity period, to (i) immediately thereafter ftle a
motion seeking approval of the bid protections identified above and ftle the Plan consistent with the
terms of this Commitment Letter, (ii) take all necessary steps to obtain an order approving a
disclosure statement in respect of the Plan, (iii) thereafter solicit votes for the Plan, and (iv)
thereafter take all necessary steps to seek confirmation and effectiveness of the Plan. All orders and
ftlings by Midland relating to the Plan shall be subject to our prior review and approval, which
approval shall not be unreasonably withheld or delayed.
IX. Termination of Commitment
This Commitment Letter outlines only some of the essential terms regarding the proposed
Transaction, is not all-inclusive and does not purport to summarize or contain all of the conditions,
covenants, representations, warranties and other provisions which would be contained in definitive
documentation for the Transaction.
In addition, this Commitment Letter shall terminate and be of no further force or effect, and we
and you shall no longer be obligated with respect to our Commitment (and, in such event, we shall
not be entitled to any of the bid protections in favor of us, including, without limitation, those set
forth in Section VI herein) and other agreements set forth herein (including, without limitation, our
7
FIVE MILE CAPITAl PARTKfRS UC
agreement with respect to Alternate Transactions set forth in Section III hereof), upon the earliest to
occur of the following (each, a "Termination Event"):
the occurrence of any material adverse condition, change in or material disruption of
conditions in the fmancial, banking, capital or hospitality markets and extended stay lodging
sector that, in our reasonable judgment, would impair the viability or success of the
Transaction;
the occurrence of any condition, change or development that could reasonably be expected
to have a material adverse effect on the business, assets, liabilities (actual or contingent),
operations, condition (fmancial or otherwise) or prospects of the Company;
the Company fails to provides us with unfettered and reasonable access to its properties,
books and records, subject to a non-disclosure agreement for a period of thirty (30) days
("Due Diligence Access Period"), such period to commence by September 15, 2010;
our determination, on or prior to the last day of the Due Diligence Access Period, that the
results of our due diligence investigation with respect to mortgage pools (and underlying
properties) are not satisfactory to us in our sole discretion;
our inability to negotiate and execute all related documents (including customary
representations, warranties, covenants, conditions, and indemnities) necessary to effectuate
the Transaction, in each case in form and substance satisfactory to us in our reasonable
discretion;
any breach by you of, or non-compliance with, the covenants set forth in Section VIII
herein;
your failure, by October 15, 2010 (or such later date to which we shall agree in writing), to
(a) obtain a bankruptcy court order terminating the Company's plan exclusivity period, (b)
ftle a motion to approve bid protections in favor of us (including, without limitation, those
set forth in Section VI herein) with respect to the Plan, or (c) ftle the Disclosure Statement
and Plan;
the Court's failure to (a) approve your motion to approve protections in favor of us
(including, without limitation, those set forth in Section VI herein) before October 27, 2010
(or such later date to which we shall agree in writing), (b) approve the Disclosure Statement
for the Plan on or before November 15, 2010 (or such later date to which we shall agree in
writing), or (c) enter a fmal order approving the Plan (acceptable to us in our reasonable
discretion) by December 31, 2010 (or such later date to which we shall agree in writing);
the Court's confirmation of the Lehman Plan; or
mutual agreement of Midland and Five Mile.
Time is of the essence with respect to the Termination Events.
X. Miscellaneous
All notices, requests, claims, demands and other communications hereunder shall be given (and shall
be deemed to have been duly received if given) by hand delivery in writing or by facsimile
transmission with confirmation of receipt, as follows:
if to Five Mile:
8
Three Stamford Plaza
301 Tresser Boulevard, Ninth Floor
Stamford, CT 06901
Attention: James G. Glasgow, Jr.
Email: jglasgow@fivemilecapital.com
Facsimile: (203) 905-0954
if to Midland:
1 0851 Mastin, 6th Floor
Overland Park, KS 6621 0
Attention: Kevin S. Semon
Email: kevin.semon@midlandls.com
Facsimile: (913) 253-9723
FIVE MilE CAPITAL PARTXFRS UC
This Commitment Letter, the rights of the parties, and all actions arising in whole or part under or in
connection herewith will be governed by and construed in accordance with the laws of the State of
New York.
This Commitment Letter constitutes the entire agreement between the parties and supersedes any
and all prior discussions, negotiations, proposals, undertakings, understandings and agreements,
whether written or oral, between you (or the Company), on the one hand, and us, on the other hand.
No modification or waiver of any provision hereof shall be enforceable unless approved by you and
us in writing. Neither you, on the one hand, nor us, on the other hand, is relying upon any
statement or representation made by or on behalf of the other, except as expressly provided in the
Commitment Letter.
We are prepared to enter into a transaction on the terms set forth herein. Upon receipt of a fully
executed counterpart to this Commitment Letter, both parties agree to negotiate in good faith
regarding the implementation of the Transaction contemplated in this Commitment Letter,
including engaging in the preparation and negotiation of definitive documents, and Midland agrees
to move forward with its undertakings described in Section VIII herein.
This Commitment Letter shall be considered withdrawn and can no longer be accepted if we have
not received from you, in accordance with the notice provisions herein, a fully-executed counterpart
to this Commitment Letter on or before August 25, 2010, at 5:00PM (Eastern time), unless we
extend such deadline in writing.
9
From:
Sent:
To:
Subject:
Marc Beilinson <mbeilinson@beilinsonpartners.com>
Saturday, July 17, 2010 5:27AM (GMT)
'Lascher, Michael' <michael.lascher@lamcollc.com>
RE:
Ok .... let's get that for you ....
Sincerely,
Marc A. Beilinson
Chief Restructuring Officer
Innkeepers Hospitality
Marc A. Beilinson
Minerva Group LLC
Cell: 310-990-2990
Email: MBeilinson@BeilinsonPartners.com
www.MinervaGroupLLC.com
From: Lascher, Michael [mailto:michael.lascher@lamcollc.com]
Sent: Saturday, July 17, 2010 1:26AM
To: Marc Beilinson
Subject: RE:
I need the ability to transfer without any consent from AI C. Not every situation warrants reciprocal rights (i.e., I still
need a consent right (sole discretion) over any transfer AIC wants to make).
From: Marc Beilinson [mailto:mbeilinson@beilinsonpartners.com]
Sent: Saturday, July 17, 2010 1:19AM
To: Lascher, Michael
Subject: RE:
Ok ... what are you asking them?
Sincerely,
Marc A. Beilinson
Chief Restructuring Officer
Innkeepers Hospitality
Marc A. Beilinson
Minerva Group LLC
Cell: 310-990-2990
Email: MBeilinson@BeilinsonPartners.com
www.MinervaGroupLLC.com
From: Lascher, Michael [mailto:michael.lascher@lamcollc.com]
Sent: Saturday, July 17, 2010 1:16AM
To: Marc Beilinson
Subject: RE:
I'm sending an email to Joe and Skyler. They should not have a consent right, even if it's only a reasonable one.
From: Marc Beilinson [mailto:mbeilinson@beilinsonpartners.com]
Sent: Saturday, July 17, 2010 1:11AM
CONFIDENTIAL LEH-ALI 005549
APP-00650
EXHIBIT 18
i
To: Lascher, Michael
Subject:
Wow .... slow burn. Any thoughts on the AIC reasonable consent issue?
This will be darn interesting once the process gets going.
I AM TOO OLD FOR THESE LONG DAYS!
Sincerely,
Marc A. Beilinson
Chief Restructuring Officer
Innkeepers Hospitality
Marc A. Beilinson
Minerva Group LLC
Cell: 310-990-2990
Email: MBeilinson@BeilinsonPartners.com
www.MinervaGroupLLC.com
Confidentiality Notice: The contents of this email, all related responses and any files and/or attachments
transmitted with it are CONFIDENTIAL and are intended solely for the use of the individual or entity to whom
they are addressed. This email may contain legally privileged or confidential information and may not be
disclosed or forwarded to anyone else without authorization from the originator of this email. If you have
received this email in error, please notify the sender immediately and delete all copies from your system.
Confidentiality Notice: The contents of this email, all related responses and any files and/or attachments
transmitted with it are CONFIDENTIAL and are intended solely for the use of the individual or entity to whom
they are addressed. This email may contain legally privileged or confidential information and may not be
disclosed or forwarded to anyone else without authorization from the originator of this email. If you have
received this email in error, please notify the sender immediately and delete all copies from your system.
CONFIDENTIAL LEH-ALI 005550
APP-00651
From:
Sent:
To:
Cc:
Subject:
Attach:
Jim,
Greer, Brian <brian.greer@dechert.com>
Thursday, June 17,2010 11:51 PM (GMT)
jzelter@apollolp.com
Sage, Michael <michael.sage@dechert.com>; Forti, David <david.forti@dechert.com>;
Gdula, Justin <justin.gdula@dechert.com>; Buck, Andrew
<andrew.buck@dechert.com>; Smith, Steven <steven.smith@dechert.com>; Herther-
Spiro, Nicole <ni col e. herther -spiro@dechert. com>; 'Andrew .Domont@lazard. com';
'andrew.yearley@lazard.com'; 'Brandon.Aebersold@lazard.com';
'Adam.Preiss@lazard.com'; 'Jeffrey.Altman@Lazard.com';
'MBeilinson@BeilinsonPartners.com'; 'Lascher, Michael'
<michael.lascher@lamcollc. com>; 'Frey, Susanne' <susanne.frey@lamcollc. com>
Innkeepers - Restructuring Termsheet Alternative A.DOC
Attached is Lehman's proposal related to the Innkeepers transaction. Please call Michael Sage or me with any questions.
Brian
Brian E. Greer
Dechert LLP
1095 Avenue of the Americas
New York, NY 1 0036-6797
(212) 698-3536 telephone
(212) 698-0456 facsimile
www.dechert.com
This e-mail is from Dechert LLP, a law firm, and may contain information that is confidential or privileged. If
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CONFIDENTIAL LEH-ALI 004791
APP-00652
EXHIBIT 19
Term Sheet Alternative A
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
Illustrative Terms of Proposed Restructuring
June 17, 2010
The following are the proposed principal terms of a restructuring transaction between
Lehman ALI Inc. ("Lehman"), as mortgage lender, and Innkeepers USA Trust
("Innkeepers" and, collectively with its subsidiaries, the "Company").
1
The transaction
(the "Transaction") contemplates a conversion of the Company's obligations under that
certain mortgage loan agreement, dated as of June 29, 2007, among Lehman and the
affiliates of the Company parties thereto (the "Floating Rate Debt") into significantly all
the equity ofthe reorganized Company. The Transaction would be effectuated through a
prepackaged or prearranged plan of reorganization (the "Plan") in chapter 11 bankruptcy
cases filed by Innkeepers and its subsidiaries (the "Chapter 11 Cases") in the United
States Bankruptcy Court for the Southern District ofNew York (the "Bankruptcy
Court"). This term sheet has been prepared for discussion purposes only and is non-
binding, but shall serve as the basis for further negotiations regarding a definitive
agreement.
The terms discussed herein are an integrated offer, are not divisible except as described
herein, and are subject to the terms and conditions hereof This term sheet is provided in
confidence and may be distributed only with the express written consent ofLehman.
This term sheet does not include a description of all of the terms, conditions and other
provisions that are to be contained in the definitive documentation governing such
matters, which remain subject to discussion and negotiation to the extent not inconsistent
with the specific matters set forth herein. This term sheet is proffered in the nature of a
settlement proposal in furtherance of settlement discussions, and is intended to be entitled
to the protections ofRule 408 of the Federal Rules ofEvidence and any other applicable
statutes or doctrines protecting the use or disclosure of confidential information and
information exchanged in the context of settlement discussions, and shall not be treated
as an admission regarding the truth, accuracy or completeness of any fact or the
applicability or strength of any legal theory.
The entry into any definitive transaction on the terms set forth in this Term Sheet, or
otherwise, are subject to approval of the United States Bankruptcy Court administering
the chapter 11 case ofLehman Brothers Holdings Inc.
THIS TERM SHEET IS NOT AN OFFER ORA SOLICITATION WITH
RESPECT TO ANY SECURITIES OF THE COMPANY OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR
This term sheet is not being provided on behalf of SASCO 2008-C2, LLC (the "Mezzanine
Lender") in connection with the mezzanine loan with respect to the collateral securing the
Floating Rate Debt or the mezzanine loan with respect to the Anaheim property (the "Mezzanine
Debt"). Lehman does not make any representations with respect to the Mezzanine Lender.
15703581.13.BUSINESS
CONFIDENTIAL LEH-ALI 004792
APP-00653
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:
Treatment of Claims and Eguity Interests Under the Plan:L
Floating Rate Debt Lehman will receive, in full and final satisfaction of its secured
mortgage claims in respect of the Floating Rate Debt, 97% of the
issued and outstanding New Equity (as defined below).
Mezzanine Debt The Mezzanine Debt will be deemed cancelled, and the Mezzanine
Lender will not retain any property or interest on account of such debt
under the Plan. The Mezzanine Lender will be deemed to vote against
the Plan. No action by the Mezzanine Lender will be required under
this Term Sheet or any definitive documentation with respect to the
terms set herein.
Fixed Rate Debt Holders of the mortgage debt secured by the properties in the Fixed
Rate Pool (the "Fixed Rate Debt") will receive, in full and final
satisfaction of their claims in respect of such debt, new mortgage
notes in an aggregate face amount not to exceed $550 million, secured
by mortgages on the properties in the Fixed Rate Pool. The terms of
the new Fixed Rate Debt notes are subject to approval, in form and
substance, by Lehman and the Company.
If holders of the Fixed Rate Debt make a 1111 (b) election, the
present value of the new Fixed Rate Debt note reflecting such election
shall not exceed $550 million and the applicable discount rate and the
terms of such note shall be subject to approval, in form and substance,
by Lehman and the Company.
Other Secured Holders of mortgage debt secured by mortgages at the existing seven
Debt properties (the "Other Properties") outside the Floating Rate Pool
and the Fixed Rate Pool (the "Other Secured Debt") will receive, in
full and final satisfaction of their claims in respect of such debt, new
mortgage notes in an aggregate face amount not to exceed $150
million, secured by mortgages on the Other Properties. The terms of
the new Other Secured Debt notes are subject to approval, in form and
substance, by Lehman and the Company.
2
The descriptions herein of the expected treatment of holders of the Mezzanine Debt, the Fixed
Rate Debt and the Other Secured Debt are based on the Moelis & Co presentation.
15703581.13.BUSINESS 2
CONFIDENTIAL LEH-ALI 004793
APP-00654
CJeneral lJnsecured
Claims
Deficiency Claims
Administrative
Claims
Priority Claims
Existing Equity
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
If any holders of Other Secured Debt make a 1111 (b) election, the
aggregate present value reflecting any such election together with the
face amount of any non-electing Other Secured Debt shall not exceed
$150 million and the applicable discount rate and the terms of such
notes shall be subject to approval, in form and substance, by Lehman
and the Company.
Debt allocation among the Other Properties and identification of any
Other Properties that should be removed from the Company's system
shall be agreed between Lehman and the Company.
Shall not receive any recovery under the Plan and shall be deemed to
have voted against the Plan. Lehman shall determine, in its sole
discretion, whether to provide a gift of cash or equity to any class of
general unsecured claims.
lJnsecured deficiency claims of holders of Fixed Rate Debt and Other
Secured Debt shall not receive any recovery under the Plan without
the consent ofLehman and the Company, and shall be deemed to have
voted against the Plan.
Shall be paid in cash in the ordinary course of business or upon the
effective date of the Plan (the "Effective Date"), unless the holders of
such Administrative Claims agree to different treatment.
Shall be paid in cash on the Effective Date; provided, that on the
Effective Date Lehman and the Company may determine to defer
priority tax claims in accordance with the Bankruptcy Code.
On the Effective Date, all prepetition common and preferred shares of
Innkeepers will be cancelled, and holders of such interests would not
retain any property on account of such interests under the Plan. To the
extent Lehman and the Company determine that the Company's
existing corporate structure would be the most tax efficient for
Lehman and the Company on the Effective Date, the prepetition
equity interests of each of Innkeepers' subsidiaries will be deemed
reissued in accordance with the Company's prepetition corporate
structure. If Lehman and the Company determine that a different
structure would be more beneficial to Lehman and the Company on
the Effective Date, the Plan shall provide for such structure, provided,
however, that the tax objectives of Lehman shall be prevailing.
3
LEH-ALI 004794
APP-00655
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
Means of Implementation:
Bankruptcy
Pleadings
DIP Financing
Use ofCash
Collateral
15703581.13.BUSINESS
CONFIDENTIAL
All material pleadings filed by the Company in connection with the
Chapter 11 Cases, including all first-day motions, shall be in form and
substance acceptable to Lehman.
DIP financing to be provided in two separate facilities:
(i) a DIP facility provided in an amount equal to $75 million, which is
necessary to complete certain Marriott PIP requirements, secured by
senior, priming liens on the Fixed Rate Collateral on terms to be
reasonably agreed by Lehman (the "Fixed Rate DIP Facility"). The
Fixed Rate DIP Facility shall have a maturity date at least 12 months
after the Petition Date and shall have no financial covenants or any
control features. On the Effective Date of the Plan which is consistent
with the terms hereof, all amounts outstanding under the Fixed Rate
DIP Facility shall be repaid from the proceeds of the New Debt and
the AIC Equity Contribution (each as defined below).
(ii) a DIP facility provided by Lehman in an amount equal to
approximately $18.9 million (funded by $12.5 million from the PIP
escrow and $6.4 million FF&E escrow), secured by senior, priming
liens on the Floating Rate Collateral on terms to be agreed between
the Company and Lehman (the "Floating Rate DIP Facility").
Immediately prior to the commencement of the Chapter 11 Cases,
Lehman will sweep all funds from various escrows/reserves and the
Company's blocked accounts that constitute its cash collateral, which
funds will be made available as loans under the Floating Rate DIP
Facility. The other terms of the Floating Rate DIP Facility are to be
determined. On the Effective Date of the Plan which is consistent
with the terms hereof, all amounts outstanding under the Floating Rate
DIP Facility shall convert to New Equity.
In addition to providing the Floating Rate DIP Facility, Lehman will
consent to the use of its cash collateral on terms acceptable to
Lehman, including the following:



Current payment ofLehman's legal and financial
advisors' fees and expenses;
Current payment of interest during the pendency of the
Chapter 11 Cases at an interest rate equal to the non-
default contract rate under the Floating Rate Debt;
Company's use ofLehman's cash collateral shall be
4
LEH-ALI 004795
APP-00656
New Equity
AIC Purchase of
New Equity
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
limited to use for the benefit of the Floating Rate
Collateral; and
Company's use ofLehman's cash collateral will terminate
immediately upon the occurrence of a Termination Event (as defined
below), including the failure of the Company to meet the Plan
Milestones (as defined below).
The Plan shall provide that Innkeepers will issue new shares of
common stock (the "New Equity"), which shall be initially allocated
as follows:
Shares of the New Equity representing 97% of the
issued and outstanding New Equity will be distributed
to Lehman pursuant to the Plan in full satisfaction of
the Floating Rate Debt and the Floating Rate DIP
Facility (the "Initial Lehman Shares"); and
Shares of the New Equity representing 3% of the
issued and outstanding New Equity will be distributed
to the Company's management and/or unsecured
creditors.
The Plan shall provide that the issuance of the New Equity will be
exempt from (i) securities laws in accordance with section 1145 ofthe
Bankruptcy Code and (ii) transfer taxes in accordance with section
1146 of the Bankruptcy Code.
After confirmation of the Plan and prior to the Effective Date, Lehman
will sell, without any representations or warranties, its right to receive
50% ofthe Initial Lehman Shares (the "Shares"), to Apollo
Investment Corp. ("AIC") in exchange for cash in an amount equal to
$117.5 million, with the proceeds payable to Lehman (the "Sale
Proceeds"). In the event the transfer tax exception under 1146(a) of
the Bankruptcy Code is determined by the Bankruptcy Court to be
inapplicable, AIC and Lehman will cooperate to structure the sale of
such rights in a manner that will not incur transfer taxes; provided,
however, that in the event such taxes are incurred as a result of the
sale, AIC shall be responsible for payment of such taxes in addition to
the Sale Proceeds. Thereafter, Innkeepers will incur senior secured
debt in an amount equal to $75 million less the amount of the AIC
Equity Contribution (the "New Debt"), provided by AIC, with the
proceeds to be contributed to the Company to fund property
improvement plans ("PIPs") and cycle renovation. The New Debt
shall be on terms mutually agreeable to Lehman and the Company.
5
LEH-ALI 004796
APP-00657
Conditions
Precedent to
Lehman's
Obligations Under
PSA
Termination
Events Under
PSA, Floating Rate
DIP Facility and
Use ofCash
Collateral
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
AIC shall make an additional equity contribution in an amount equal
to $[_] million in respect of its guarantee of the Company's PIP
obligations with respect to the Fixed Rate Pool (the "AIC Equity
Contribution").
On the Effective Date, Innkeepers shall distribute the New Equity as
follows:
48.5% to Lehman;
48.5% to AIC; and
3% to the Company's management and/or unsecured
creditors.
The Transaction will become binding on Lehman when Lehman, AIC
and the Company execute a plan support agreement (the "PSA") that
incorporates the Transaction as set forth herein, including:
Receipt by Lehman of a Plan term sheet incorporating
the terms set forth herein and otherwise acceptable in
form and substance to Lehman;
Agreement reached with Marriott in form and
substance satisfactory to Lehman;
Agreement reached with AIC in form and substance
satisfactory to Lehman; and
Innkeepers and each of its subsidiaries, including each
obligor under the Floating Rate Debt, shall be a
signatory to the PSA.
The PSA, Floating Rate DIP Facility and use ofLehman's cash
collateral shall terminate automatically upon the occurrence of any of
the following events (each, a "Termination Event"):
Failure to meet any of the following milestones (the
"Plan Milestones"):
o Motion to assume the PSA filed on the Petition Date;
o Order entered authorizing the assumption of the PSA
no later than 30 days after the Petition Date;
6
LEH-ALI 004797
APP-00658
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
o Final Orders entered authorizing the Fixed Rate DIP
Facility, Floating Rate DIP Facility, the use of
Lehman's cash collateral and the use of the cash
collateral securing the Fixed Rate Debt consistent with
the terms hereof no later than 30 days after the Petition
Date;
o Disclosure Statement and Plan consistent with the
terms hereof filed no later than 20 days after petition
date;
o Disclosure Statement consistent with the terms hereof
approved by the Bankruptcy Court no later than 60
days after petition date;
o Order confirming a Plan consistent with the terms
hereof entered no later than 180 days after petition
date; and
o Effective Date of the Plan no later than the earlier of
(i) 240 days after the Petition Date and (ii) April 15,
2011.
The failure by AIC to purchase the Shares by April 15,
2011;
The taking of any action by Marriott, including without
limitation the filing of a motion seeking relief from the
automatic stay or seeking to terminate any franchise
agreement with respect to any ofthe Company's hotel
properties other than those franchise agreements listed
on Schedule A;
The entry of any order of the Bankruptcy Court
granting relief from the automatic stay, including (i) to
permit any exercise of remedies by the lenders or
special servicer under the Fixed Rate Debt other than
limited relief solely to permit the delivery of default
notices under the terms of the Fixed Rate Debt and

(ii) to permit termination of any franchise agreement
with Marriott or any other hotel brand other than those
franchise agreements listed on Schedule A;
The filing by the Company or Marriott of any motion
or other request for relief seeking to (i) dismiss any of
7
LEH-ALI 004798
APP-00659




15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
the Chapter 11 Cases, (ii) convert any ofthe
Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code or (iii) appoint a trustee or an
examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the
Chapter 11 Cases;
(i) The filing by the Company of any motion or other
request for relief seeking an extension of the Plan
Milestones or any alteration of the remedies upon
termination set forth herein without the express written
consent ofLehman in its sole discretion; (ii) the filing
by the Company of any pleading supporting any
motion from any other party to obtain such extension
or alteration; or (iii) the failure of the Company to
oppose any motion from any other party to obtain such
extension or alteration;
The entry of an order by the Bankruptcy Court (i)
dismissing any of the chapter 11 cases, (ii) converting
any of the Chapter 11 Cases to a case under chapter 7
of the Bankruptcy Code, (iii) appointing a trustee or an
examiner with expanded powers pursuant to section
1104 of the Bankruptcy Code in any of the Chapter 11
Cases or (iv) making a finding of fraud, dishonesty or
misconduct by any officer or director of the Company,
regarding or relating to the Company;
The withdrawal, amendment or modification by the
Company of, or the filing by the Company of a
pleading seeking to amend or modify, the Plan or PSA,
which withdrawal, amendment, modification or
pleading is materially inconsistent with the terms
hereof or the Plan or is materially adverse to Lehman,
in each case in a manner not acceptable to Lehman, or
if the Company files any motion or pleading with the
Bankruptcy Court that is inconsistent in any material
respect with the terms hereof or the Plan (in each case
with such amendments and modifications as have been
effected in accordance with the terms hereof) and such
motion or pleading has not been withdrawn within
three (3) business days;
The filing of any motion to approve a disclosure
statement or Plan by the Company, AIC or Marriott, or
8
LEH-ALI 004799
APP-00660
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
the approval by the Bankruptcy Court of any motion
filed by any other party, that incorporates a Pro Forma
Capital Structure or any other terms inconsistent with
the terms and conditions set forth herein;
The granting by the Bankruptcy Court of relief that is
inconsistent with the terms hereof or the Plan in any
material respect (in each case with such amendments
and modifications as have been as have been effected
in accordance with the terms hereof);
The issuance by any governmental authority, including
the Bankruptcy Court or any other regulatory authority
or court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise
restricting, preventing or enjoining the consummation
of a material portion of the Transaction, including an
order denying confirmation of either of the Plans and
such ruling, determination or order has not been
vacated or reversed within five ( 5) business days of
Issuance;


The occurrence of (i) a change that has a material
adverse effect on the use, value or condition of the
Company or AIC, their respective assets or the legal or
financial status or business operations of the Company
or AIC or (ii) a material disruption or material adverse
change in the financial, real estate, banking or capital
markets; and
Lehman determines, in its sole discretion, after
completion of its tax due diligence, that the anticipated
tax obligations of the Company on the Effective Date
are unacceptable to Lehman.
9
LEH-ALI 004800
APP-00661
Remedies Upon
Termination
Bankruptcy Court
Approval ofPSA
Pro Forma Capital
Structure
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
Upon the occurrence of a Termination Event, the Company will be
deemed to have consented to the modification of the automatic stay to
permit Lehman to take any or all of the following actions without
further order of or application to the Bankruptcy Court:
Terminate the Company's use of cash collateral and
use of proceeds under the Floating Rate DIP Facility;
Declare all adequate protection obligations owed to
Lehman to be immediately due and payable;
Require the Company to file a motion to conduct a sale
of the Floating Rate Collateral pursuant to 363 of the
Bankruptcy Code;
Require the Company to consent to the termination of
exclusivity to permit Lehman to file a Plan; or
Exercise rights and remedies as to all or such part of
the Floating Rate Collateral that Lehman shall elect in
its sole discretion, including, without limitation,
foreclosing upon and selling all or a portion of such
collateral.
The Company shall, on or immediately after the commencement of
the Chapter 11 Cases, file a motion seeking authorization to assume
the PSA. The order approving the PSA shall include provisions that
the Company (i) shall not seek an extension of the Plan Milestones or
any alteration of the remedies upon termination set forth herein
without the express written consent of Lehman in its sole discretion,
(ii) shall not support any motion from any other party to obtain such
extension or alteration; and (iii) will oppose any motion from any
other party to obtain such extension or alteration.
Following the consummation of the Transaction, the reorganized
Company will have at least $50 million in pre-funded Marriott capital
expenditures and brand standard work and $10 million of cash on
hand after repayment of the Fixed Rate DIP Facility and be capitalized
as follows:
Fixed Rate Debt: less than or equal to $550 million
Other Secured Debt: less than or equal to $150 million
10
LEH-ALI 004801
APP-00662
Governance
Shareholders
Agreement
Management
Incentive Plan
REIT Status
Property Manager
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
New Debt: less than or equal to $75 million less the amount of the
AIC Equity Contribution
Except as set forth above, on the Effective Date, the Company shall
not have any debts or liens encumbering the Company's assets.
The Board ofDirectors will initially consist of7 members: 2 members
nominated by Lehman, 2 members nominated by AIC and 3 members
to be mutually agreed.
A super-majority vote of 66 2/3% vote will be required for material
transactions, including, among others, a merger or consolidation,
equity issuances, debt issuances in excess of $10 million in the
aggregate, sale or disposal of a property and such other events as
determined by Lehman and the Company.
Lehman and the Company shall agree on a future date by which the
Company shall engage an investment banker to market and sell the
Company; provided, that such date shall not be later than three years
after the Effective Date unless otherwise agreed by Lehman.
The Plan shall provide that, on the Effective Date, Lehman, AIC and
all other holders ofNew Equity to be issued pursuant to the Plan shall
enter into a shareholders agreement that provides, among other things,
for restrictions on the transfer of the New Equity and customary
protections, including, but not limited to, tag-along/drag-along rights,
all on terms to be mutually agreed.
The Plan shall provide for a management incentive plan in form and
substance acceptable to Lehman and the Company providing for a
reserve of up to 3% of the New Equity for options to be allocated to
management under the management incentive plan.
Lehman and the Company shall, after the Effective Date, determine
whether to maintain Innkeepers' status as a real estate investment
trust.
Prior to the Effective Date of the Plan, Lehman and the Company
shall designate a manager for the Company's properties. If Island
Hospitality Management, Inc. ("Island") is not selected as the
manager, the Plan shall provide that Island shall cooperate with the
Company and the replacement manager to effectuate an orderly
transition to the replacement manager. Any agreement to effectuate
such transition shall be in form and substance acceptable to Lehman.
11
LEH-ALI 004802
APP-00663
Releases
Professional Fees
15703581.13.BUSINESS
CONFIDENTIAL
Dechert Draft 6/17/10
Preliminary and Confidential
Subject to FRE 408
The Plan shall include a full discharge and release of liability in favor
of (a) the Company and each of its subsidiaries, (b) Lehman, and
(c) each oftheir respective principals, employees, agents, officers,
directors, and professionals from: (i) any and all claims and causes of
action arising prior to the Effective Date and (ii) any and all claims
arising from the actions taken or not taken in good faith in connection
with the Transaction.
The Company shall pay the professional fees and expenses incurred
by Lehman in connection with the Transaction.
12
LEH-ALI 004803
APP-00664
Preliminary and Confidential
Privileged (Prepared with Counsel)
Subject to FRE 408
Illustrative Terms of Proposed Restructuring
May [25], 2010
The following are the proposed principal terms of a restructuring transaction
between [Lehman ALI] ("Lehman"), as lenders, and [Innkeepers USA Trust] (the
"Company"), as borrower. The transaction (the "Transaction") contemplates a
conversion of [Floating Rate Mortgage] (the "Floating Rate") into a substantial portion of
the equity of the reorganized Company (the "Equity"). Prior to emergence from
bankruptcy, the Company will conduct an equity offering in which the Company will
issue new Equity and, as part of the offering, Lehman will sell a portion of its Equity.
The Transaction structure outlined herein assumes an enterprise value for the
reorganized Company of $[975]
1
million and a value of the Floating Rate collateral of
$[200] million.
[Counsel to insert disclaimer language re final documentation, etc.]
Terms:
Plan of
Reorganization
Treatment of
Floating Rate Debt
Treatment of
Lehman Mezzanine
Debt
DIP Financing
Transaction to be executed through a chapter 11 plan of
reorganization (the "Plan") filed by the Company and supported by
Lehman as a plan proponent.
Converted in full into [96]%, pre-dilution from the primary shares
issues in the Equity Offering (as defined), or [34.91]%, post-dilution
for the Equity Offering, of the Equity.
Terminated upon consummation of the Transaction.
[To discuss whether it is possible to have two separate and distinct DIP
financings on separate collateral and if it is advantageous to fund
Lehman's escrowed amounts as a DIP financing]
Collateral of the Fixed Rate to secure a DIP financing to be provided
by [Wachovia] on terms to be reasonably agreed by Lehman.
Collateral of the Floating Rate to secure a DIP financing of $18.9
million, which will be provided by Lehman using the PIP escrow of
$12.5 million and FF&E escrow of $6.4 million. Terms to be mutually
1
Values are based on Moelis presentation and have been included for illustrative purposes only.
THESE TERMS ARE BEING PROPOSED FOR SETILEMENT PURPOSES AND ARE SUBJECT TO THE
PROVISIONS OF RULE 408 OF THE FEDERAL RULES OF EVIDENCE THE TERMS SHAll NOT BE BINDING
ON ANYPARTYUNTIL RECEIPT OF NECESSARY AND APPROPRIATE APPROVALS AND ENTRY INTO
DEFINITIVE DOCUMENTATION.
1570358l.l.BUSINESS
LEH-ALI 000001
APP-00665
EXHIBIT 20
Equity
Equity Offering
Backstop
Conditions
Precedent
Preliminary and Confidential
agreed.
Prior to the Equity Offering (as defined), to be allocated as follows:


96% to Lehman as consideration for the retirement of the
Floating Rate and
4% to the [Company's management] [unsecured creditors]
Following the Equity Offering (as defined), to be allocated as follows:
[34.91]% to Lehman
[2.91]% to the [Company's management] [unsecured creditors]
[62.18]% to the New Equity Owner (as defined)
As part of the Plan, the Company will conduct an equity offering in
which the Company will sell a total of [62.18]% of its Equity to a new
holder (the "New Owner"). [27.27]% of the Equity will be sold
through a primary issuance by the Company (the "Primary Shares"),
with the proceeds to be contributed to the Company to fund property
improvement plans ("PIPs") and cycle renovation, and 34.91% of the
Equity will be a secondary issuance of Lehman shares (the "Secondary
Shares"), with the proceeds payable to Lehman.
The Equity Offering will be marketed by the Company, in
consultation with Lehman and its advisors, following [the resolution
of Conditions Precedent (as defined)]. Timing and mechanics of
marketing process to be mutually agreed.
Apollo Investment Corp. ("AIC") to provide a backstop to purchase
[62.18]% of the Equity in the Equity Offering at a price of $[171]
million, which consists of $[95] million for the [34.91]% of Secondary
Shares and $75 million for the [27.27]% of Primary Shares.
As consideration for providing the Backstop, if AIC is not the New
Owner, then AIC will be paid a break-up fee equal to [2.5]% of the
backstopped amount, or $[4.275] million (the "Break-Up Fee").
The Transaction will become binding on Lehman when each of the
following conditions precedent have been satisfied in a manner
reasonably satisfactory to Lehman [to be discussed how threshold
amount changes based on changes in other economic terms of the
debt, including interest expense]:
2
THESE TERMS ARE BEING PROPOSED FOR SETTLEMENT PURPOSES AND ARE SUBJECT TO THE
PROVISIONS OF RULE 408 OF THE FEDERAL RULES OF EVIDENCE. THE TERMS SHALL NOT BE
BINDING ON ANY PARTY UNTIL RECEIPT OF NECESSARY AND APPROPRIA 1E APPROVALS AND
ENTRY INTO DEFINITIVE DOCUMENTATION.
1570358l.l.BUSINESS
LEH-ALI 000002
APP-00666




Preliminary and Confidential
Fixed Rate principal amount to be less than $[550] million at
an interest rate of less than [xx%]
Other mortgage principal amount to be less than $[150]
million at an interest rate of less than [xx%] [individual
amounts for each of the mortgages to be specified -in process]
Agreement reached with Marriott [and other brands TBDJ
Others TBD
Failure to meet any of the Conditions Precedent will be a Termination
Event (as defined).
Termination Event To include the following:





Plan is not confirmed, or a failure to satisfy all of the
Conditions Precedent, by the earlier of (i) 8 months after
commencement of a bankruptcy proceeding or (ii) March 15,
2011 [To discuss how timing for marketing process will
correspond with expiration date];
[De-flagging] of any of the Company's assets other than those
listed on Schedule A [to come];
[MAE definition to come from counsel];
A ruling by the Bankruptcy Court that would prevent the
Company from meeting the Conditions Precedent; and
Others TBD
Company will provide in its cash collateral order that upon the
occurrence of a Termination Event, the automatic stay provisions of
section 362 of the Bankruptcy Code will be modified to permit
Lehman to take any or all of the following actions without further
order of or application to the court:



Terminate the Company's use of cash collateral;
Declare all adequate protection obligations owed to Lehman to
be immediately due and payable;
Force the Company to file a motion to conduct a sale of the
Floating Rate collateral pursuant to 363 of the Bankruptcy
3
THESE TERMS ARE BEING PROPOSED FOR SETTLEMENT PURPOSES AND ARE SUBJECT TO THE
PROVISIONS OF RULE 408 OF THE FEDERAL RULES OF EVIDENCE. THE TERMS SHALL NOT BE
BINDING ON ANY PARTY UNTIL RECEIPT OF NECESSARY AND APPROPRIA 1E APPROVALS AND
ENTRY INTO DEFINITIVE DOCUMENTATION.
1570358l.l.BUSINESS
LEH-ALI 000003
APP-00667
Pro Forma Capital
Structure
Governance
Transfer
Restrictions

Preliminary and Confidential
Code; or
Exercise rights and remedies as to all or such part of the
Floating Rate collateral that Lehman shall elect in its sole
discretion, including, without limitation, foreclosing upon and
selling all or a portion of such collateral.
Following the consummation of the Transaction, the reorganized
Company will have at least $75 million of cash on hand and be
capitalized as follows:
Fixed Rate debt: less than or equal to $[550] million
Other Mortgages: less than or equal to $[150] million
Equity: greater than or equal to $[275] million
Board of Directors to initially consist of [7] members, of which 3 to be
nominated by Lehman and 4 to be nominated by New Owner.
Super-majority vote of 66 2/3% vote required for material transactions,
including, among others, a merger or consolidation, equity issuances,
debt issuances in excess of $[50] million in the aggregate, sale or
disposal of a property [discuss materiality threshold], [others TBDJ.
TBD.
4
THESE TERMS ARE BEING PROPOSED FOR SETTLEMENT PURPOSES AND ARE SUBJECT TO THE
PROVISIONS OF RULE 408 OF THE FEDERAL RULES OF EVIDENCE. THE TERMS SHALL NOT BE
BINDING ON ANY PARTY UNTIL RECEIPT OF NECESSARY AND APPROPRIA 1E APPROVALS AND
ENTRY INTO DEFINITIVE DOCUMENTATION.
1570358l.l.BUSINESS
LEH-ALI 000004
APP-00668
Term Sheet Alternative A
Dechert Draft 6/29/10
Preliminary and Confidential
Subject to FRE 408
Illustrative Terms of Proposed Restructuring
June 29, 2010
The following are the proposed principal terms of a restructuring transaction between
Lehman ALI Inc. ("Lehman"), as mortgage lender, and Innkeepers USA Trust
("Innkeepers" and, collectively with its subsidiaries, the "Company").
1
The transaction
(the "Transaction") contemplates a conversion of the Company's obligations under that
certain mortgage loan agreement, dated as of June 29, 2007, among Lehman and the
affiliates of the Company parties thereto (the "Floating Rate Debt"), collateralized by 20
of the Company's properties (the "Floating Rate Collateral") into significantly all the
equity of the reorganized Company. The Transaction would be effectuated through a
prepackaged or prearranged plan of reorganization (the "Plan") in chapter 11 bankruptcy
cases filed by Innkeepers and certain of its subsidiaries (the "Chapter 11 Cases") in the
United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). This term sheet has been prepared for discussion purposes only and is non-
binding, but shall serve as the basis for further negotiations regarding a definitive
agreement.
The terms discussed herein constitute an integrated offer, are not divisible except as
described herein, and are subject to the terms and conditions hereof This term sheet is
provided in confidence and may be distributed only with the express written consent of
the parties hereto. This term sheet does not include a description of all of the terms,
conditions and other provisions that are to be contained in the definitive documentation
governing such matters, which remain subject to discussion and negotiation to the extent
not inconsistent with the specific matters set forth herein. This term sheet remains
subject to the completion of Lehman's tax due diligence. This term sheet is proffered in
the nature of a settlement proposal in furtherance of settlement discussions, and is
intended to be entitled to the protections ofRule 408 of the Federal Rules ofEvidence
and any other applicable statutes or doctrines protecting the use or disclosure of
confidential information and information exchanged in the context of settlement
discussions, and shall not be treated as an admission regarding the truth, accuracy or
completeness of any fact or the applicability or strength of any legal theory.
Lehman's entry into any definitive transaction on the terms set forth in this Term Sheet,
or otherwise, are subject to approval of the United States Bankruptcy Court administering
the chapter 11 case of Lehman Brothers Holdings Inc.
This term sheet is not being provided on behalf of SASCO 2008-C2, LLC (the "Mezzanine
Lender") in connection with the mezzanine loan with respect to the collateral securing the
Floating Rate Debt or the mezzanine loan with respect to the Anaheim property (the "Mezzanine
Debt"). Lehman does not make any representations with respect to the Mezzanine Lender.
15773750.2
LEH-ALI 000254
APP-00669
EXHIBIT 21
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
THIS TERM SHEET IS NOT AN OFFER OR A SOLICITATION WITH
RESPECT TO ANY SECURITIES OF THE COMPANY OR A SOLICITATION
OF ACCEPTANCES OF A CHAPTER 11 PLAN. ANY SUCH OFFER OR
SOLICITATION SHALL COMPLY WITH ALL APPLICABLE SECURITIES
LAWS, IF ANY, AND/OR PROVISIONS OF THE BANKRUPTCY CODE.
Terms:
Treatment of Claims and Eguitv Interests Under the Plan:
2
Floating Rate Debt Lehman will receive, in full and final satisfaction of its secured
mortgage claims in respect of the Floating Rate Debt, at least 97% of
the issued and outstanding New Equity (as defined below).
Mezzanine Debt The Mezzanine Debt will be deemed cancelled, and the Mezzanine
Lender will not retain any property or interest on account of such debt
under the Plan. The Mezzanine Lender will be deemed to vote against
the Plan. No action by the Mezzanine Lender will be required under
this Term Sheet or any definitive documentation with respect to the
terms set herein.
Fixed Rate Debt Holders of the mortgage debt secured by the properties in the Fixed
Rate Pool (the "Fixed Rate Debt") will receive, in full and final
satisfaction of their claims in respect of such debt, new mortgage
notes in an aggregate face amount not to exceed $550 million, secured
by mortgages on the properties in the Fixed Rate Pool. The terms of
the new Fixed Rate Debt notes are subject to the reasonable approval,
in form and substance, by the parties hereto.
If holders of the Fixed Rate Debt make a llll(b) election, the
present value of the new Fixed Rate Debt note reflecting such election
shall not exceed $550 million and the applicable discount rate and the
terms of such note shall be subject to the reasonable approval, in form
and substance, by the parties hereto.
Other Secured Holders of mortgage debt secured by mortgages at the existing seven
Debt properties (the "Other Properties") outside the Floating Rate Pool
and the Fixed Rate Pool (the "Other Secured Debt") will receive, in
full and final satisfaction of their claims in respect of such debt, new
mortgage notes in an aggregate face amount not to exceed $150
million, secured by mortgages on the Other Properties. The terms of
2
The descriptions herein of the expected treatment of holders of the Mezzanine Debt, the Fixed
Rate Debt and the Other Secured Debt are based on the Moelis & Co presentation.
2
LEH-ALI 000255
APP-00670
General Unsecured
Claims
Deficiency Claims
Administrative
Claims
Priority Claims
Existing Equity
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
the new Other Secured Debt notes are subject to the reasonable
approval, in form and substance, by the parties hereto.
If any holders of Other Secured Debt make a 1111 (b) election, the
aggregate present value reflecting any such election together with the
face amount of any non-electing Other Secured Debt shall not exceed
$150 million and the applicable discount rate and the terms of such
notes shall be subject to the reasonable approval, in form and
substance, by the parties hereto.
Debt allocation among the Other Properties and identification of any
Other Properties that should be removed from the Company's system
shall be agreed among the parties hereto.
Shall not receive any recovery under the Plan and shall be deemed to
have voted against the Plan. Lehman shall determine, in its sole
discretion, whether to provide a gift of cash or equity to any class of
general unsecured claims. [Discuss impaired accepting class and
REIT issues]
Unsecured deficiency claims of holders of Floating Rate Debt, Fixed
Rate Debt and Other Secured Debt shall not receive any recovery
under the Plan without the consent of Lehman and the Company, and
shall be deemed to have voted against the Plan.
Shall be paid in cash in the ordinary course of business or upon the
effective date of the Plan (the "Effective Date"), unless the holders of
such Administrative Claims agree to different treatment.
Shall be paid in cash on the Effective Date; provided, that on the
Effective Date Lehman and the Company may determine to defer
priority tax claims in accordance with the Bankruptcy Code.
On the Effective Date, all prepetition common and preferred shares of
Innkeepers will be cancelled, and holders of such interests would not
retain any property on account of such interests under the Plan. To the
extent Lehman and the Company determine that the Company's
existing corporate structure would be the most tax efficient for
Lehman and the Company on the Effective Date, the prepetition
equity interests of each of Innkeepers' subsidiaries will be deemed
reissued in accordance with the Company's prepetition corporate
structure. If Lehman and the Company determine that a different
structure would be more beneficial to Lehman and the Company on
the Effective Date, the Plan shall provide for such structure, on terms
mutually acceptable to the parties hereto.
3
LEH-ALI 000256
APP-00671
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
Means of Implementation:
Bankruptcy
Pleadings
DIP Financing
Use of Cash
Collateral
All material pleadings filed by the Company in connection with the
Chapter 11 Cases, including all first-day motions, shall be in form and
substance reasonably acceptable to Lehman.
DIP financing to be provided in two separate facilities:
(i) a DIP facility provided in an amount equal to $[51-55] million,
which is necessary to complete certain Marriott PIP requirements,
secured by senior, priming liens on the Fixed Rate Collateral on terms
to be reasonably agreed by Lehman (the "Fixed Rate DIP Facility").
The Fixed Rate DIP Facility shall have a maturity date at least 12
months after the Petition Date and shall have no financial covenants or
any control features. On the Effective Date of the Plan which is
consistent with the terms hereof, all amounts outstanding under the
Fixed Rate DIP Facility shall be repaid from the proceeds of the New
Funding (as defined below) or a combination thereof All or a portion
of the Fixed Rate DIP Facility may be provided by a third party as
designated by Lehman in its sole discretion.
(ii) a DIP facility provided by Lehman in an amount equal to
approximately $18.9 million (funded by $12.5 million from the PIP
escrow and $6.4 million FF&E escrow), secured by senior, priming
liens on the Floating Rate Collateral on terms to be agreed between
the Company and Lehman (the "Floating Rate DIP Facility").
Immediately prior to the commencement of the Chapter 11 Cases,
Lehman will sweep all funds from various escrows/reserves and the
Company's blocked accounts that constitute its cash collateral, which
funds will be made available as loans under the Floating Rate DIP
Facility. The other terms of the Floating Rate DIP Facility are to be
determined. On the Effective Date of the Plan which is consistent
with the terms hereof, all amounts outstanding under the Floating Rate
DIP Facility shall convert to New Equity.
In addition to providing the Floating Rate DIP Facility, Lehman will
consent to the use of its cash collateral on terms acceptable to
Lehman, including the following:
Current payment ofLehman's legal and financial
advisors' fees and expenses;
Current adequate protection payments during the
pendency of the Chapter 11 Cases in an amount equal
to interest at the non-default contract rate under the
4
LEH-ALI 000257
APP-00672
New Equity
Distribution of
New Equity



Floating Rate Debt;
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
Company's use ofLehman's cash collateral shall be
limited to use for the benefit of the Floating Rate
Collateral;
Company shall not take any action, and shall not
solicit, encourage or support any action by a third
party, seeking to amend, modify or extend the Plan
Milestones (as defined below) (the foregoing provision
is hereinafter referred to as the "Milestones
Covenant"); and
Company's use ofLehman's cash collateral will
terminate immediately upon the occurrence of a
Termination Event (as defined below), including the
failure of the Company to meet the Plan Milestones.
The Plan shall provide that Innkeepers will issue new shares of
common stock (the "New Equity"), which shall be initially allocated
as follows:

Shares of the New Equity representing at least 97% of
the issued and outstanding New Equity will be
distributed to Lehman pursuant to the Plan in full
satisfaction of the Floating Rate Debt and the Floating
Rate DIP Facility (the "Initial Lehman Shares"); and

Shares of the New Equity representing up to 3% of the
issued and outstanding New Equity will be available
for distribution to the Company's management and/or
unsecured creditors.
The Plan shall provide that the issuance of the New Equity will be
exempt from (i) securities laws in accordance with section 1145 of the
Bankruptcy Code and (ii) transfer taxes in accordance with section
1146 of the Bankruptcy Code.
On the Effective Date, Innkeepers shall distribute the New Equity as
follows:


at least 97% to Lehman (or to such third parties as
Lehman shall designate); and
up to 3% available for distribution to the Company's
5
LEH-ALI 000258
APP-00673
Conditions
Precedent to
Lehman's
Obligations Under
PSA
Termination
Events Under
PSA, Floating Rate
DIP Facility and
Use of Cash
Collateral
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
management and/or unsecured creditors.
The Transaction will become binding on Lehman when Lehman and
the Company execute a plan support agreement (the "PSA") that
incorporates the Transaction as set forth herein, including:

Receipt by Lehman of a Plan term sheet incorporating
the terms set forth herein and otherwise reasonably
acceptable in form and substance to Lehman;

Agreement reached with Marriott in form and
substance reasonably satisfactory to Lehman;

Agreement reached with Apollo Investment Corp .
("AIC") in form and substance satisfactory to Lehman;

Innkeepers and each of its subsidiaries, including each
obligor under the Floating Rate Debt, shall be a
signatory to the PSA.
The PSA, Floating Rate DIP Facility and use of Lehman's cash
collateral shall terminate automatically upon the occurrence of any of
the following events (each, a "Termination Event"):

0
0
0
0
0
Failure to meet any of the following milestones (the
"Plan Milestones"):
Motion to assume the PSA filed on the Petition Date;
Order entered authorizing the assumption of the PSA
no later than 45 days after the Petition Date;
Final Orders entered authorizing the Fixed Rate DIP
Facility, Floating Rate DIP Facility, the use of
Lehman's cash collateral and the use of the cash
collateral securing the Fixed Rate Debt consistent with
the terms hereof no later than 30 days after the Petition
Date;
Disclosure Statement and Plan consistent with the
terms hereof filed no later than 30 days after petition
date;
Disclosure Statement consistent with the terms hereof
approved by the Bankruptcy Court no later than 75
6
LEH-ALI 000259
APP-00674
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
days after petition date;
o Order confirming a Plan consistent with the terms
hereof entered no later than 240 days after petition
date; and
o Effective Date of the Plan no later than the earlier of
(i) 270 days after the Petition Date and (ii) ___ ,
2011.
The taking of any action by Marriott, including without
limitation the filing of a motion seeking relief from the
automatic stay or seeking to terminate any franchise
agreement with respect to any of the Company's hotel
properties other than those franchise agreements listed
on Schedule A;
The entry of any order of the Bankruptcy Court
granting relief from the automatic stay, including (i) to
permit any exercise of remedies by the lenders or
special servicer under the Fixed Rate Debt other than
limited relief solely to permit the delivery of default
notices under the terms of the Fixed Rate Debt and
(ii) to permit termination of any franchise agreement
with Marriott or any other hotel brand other than those
franchise agreements listed on Schedule A;
The filing by the Company or Marriott of any motion
or other request for relief seeking to (i) dismiss any of
the Chapter 11 Cases, (ii) convert any of the
Chapter 11 Cases to a case under chapter 7 of the
Bankruptcy Code or (iii) appoint a trustee or an
examiner with expanded powers pursuant to
section 1104 of the Bankruptcy Code in any of the
Chapter 11 Cases;
(i) The filing by the Company of any motion or other
request for relief seeking an extension of the Plan
Milestones or any alteration of the remedies upon
termination set forth herein without the express written
consent of Lehman in its sole discretion; (ii) the filing
by the Company of any pleading supporting any
motion from any other party to obtain such extension
or alteration; (iii) the failure of the Company to oppose
any motion from any other party to obtain such
7
LEH-ALI 000260
APP-00675
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
extension; or (iv) the violation by the Company of the
Milestones Covenant;
The entry of an order by the Bankruptcy Court
(i) dismissing any ofthe chapter 11 cases, (ii)
converting any of the Chapter 11 Cases to a case under
chapter 7 of the Bankruptcy Code, (iii) appointing a
trustee or an examiner with expanded powers pursuant
to section 1104 of the Bankruptcy Code in any of the
Chapter 11 Cases or (iv) making a finding of fraud,
dishonesty or misconduct by any officer or director of
the Company, regarding or relating to the Company;
The withdrawal, amendment or modification by the
Company of, or the filing by the Company of a
pleading seeking to amend or modify, the Plan or PSA,
which withdrawal, amendment, modification or
pleading is materially inconsistent with the terms
hereof or the Plan or is materially adverse to Lehman,
in each case in a manner not reasonably acceptable to
Lehman, or if the Company files any motion or
pleading with the Bankruptcy Court that is inconsistent
in any material respect with the terms hereof or the
Plan (in each case with such amendments and
modifications as have been effected in accordance with
the terms hereof) and such motion or pleading has not
been withdrawn within three (3) business days;
The filing of any motion to approve a disclosure
statement or Plan by the Company, AIC or Marriott, or
the approval by the Bankruptcy Court of any motion
filed by any other party, that incorporates a Pro Forma
Capital Structure or any other terms inconsistent with
the terms and conditions set forth herein;
The granting by the Bankruptcy Court of relief that is
inconsistent with the terms hereof or the Plan in any
material respect (in each case with such amendments
and modifications as have been effected in accordance
with the terms hereof);
The issuance by any governmental authority, including
the Bankruptcy Court or any other regulatory authority
or court of competent jurisdiction, of any ruling,
determination or order making illegal or otherwise
8
LEH-ALI 000261
APP-00676
Remedies Upon
Termination
Bankruptcy Court
Approval ofPSA
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
restricting, preventing or enjoining the consummation
of a material portion of the Transaction, including an
order denying confirmation of the Plan and such ruling,
determination or order has not been vacated or reversed
within five (5) business days of issuance; and
The occurrence of (i) a change that has a material
adverse effect on the use, value or condition of the
Company, its respective assets or the legal or financial
status or business operations of the Company or (ii) a
material disruption or material adverse change in the
financial, real estate, banking or capital markets.
Upon the occurrence of a Termination Event, the Company will be
deemed to have consented to the modification of the automatic stay to
permit Lehman to take any or all of the following actions without
further order of or application to the Bankruptcy Court:

Terminate the Company's use of cash collateral and
use of proceeds under the Floating Rate DIP Facility;

Declare all adequate protection obligations owed to
Lehman to be immediately due and payable;

Require the Company to file a motion to conduct a sale
of the Floating Rate Collateral pursuant to 363 of the
Bankruptcy Code;

Require the Company to consent to the termination of
exclusivity to permit Lehman to file a Plan; or

Exercise rights and remedies as to all or such part of
the Floating Rate Collateral that Lehman shall elect in
its sole discretion, including, without limitation,
foreclosing upon and selling all or a portion of such
collateral.
The Company shall, on or immediately after the commencement of
the Chapter 11 Cases, file a motion seeking authorization to assume
the PSA. The order approving the PSA shall include provisions that
the Company (i) shall not seek an extension of the Plan Milestones or
any alteration of the remedies upon termination set forth herein
without the express written consent of Lehman in its sole discretion,
9
LEH-ALI 000262
APP-00677
Pro Forma Capital
Structure
Governance
Shareholders
Agreement
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
(ii) shall not support any motion from any other party to obtain such
extension or alteration; and (iii) will oppose any motion from any
other party to obtain such extension or alteration.
Following the consummation of the Transaction, the reorganized
Company will have at least $50 million in pre-funded Marriott capital
expenditures and brand standard work and $10 million of cash on
hand after repayment of the Fixed Rate DIP Facility and be capitalized
as follows:
Fixed Rate Debt: less than or equal to $550 million
Other Secured Debt: less than or equal to $150 million
New Funding: At least $[75] million, plus such additional amounts in
form and substance as may be determined by the
parties. Prior to any New Funding, the Company shall
deliver a comprehensive PIPs budget, which budget
shall be (i) prepared with the assistance of, and
validated by, a third party expert and (ii) acceptable in
all respects to the parties hereto. Such PIPs budget
shall be updated annually or more frequently as may
be requested by Lehman.
Except as set forth above, on the Effective Date, the Company shall
not have any debts or liens encumbering the Company's assets.
The Board of Directors will initially consist of 7 members. A super-
majority vote of 66 2/3% vote will be required for material
transactions, including, among others, a merger or consolidation,
equity issuances, debt issuances in excess of $10 million in the
aggregate, sale or disposal of a property and such other events as
determined by Lehman and the Company.
Lehman and the Company shall agree on a future date by which the
Company shall engage an investment banker to market and sell the
Company; provided, that such date shall not be later than three years
after the Effective Date unless otherwise agreed by Lehman.
The Plan shall provide that, on the Effective Date, Lehman and all
other holders of New Equity to be issued pursuant to the Plan shall
enter into a shareholders agreement that provides, among other things,
for restrictions on the transfer of the New Equity and customary
protections, including, but not limited to, tag-along/drag-along rights,
all on terms to be mutually agreed.
10
LEH-ALI 000263
APP-00678
Management
Incentive Plan
REIT Status
Property Manager
Releases
Professional Fees
Dechert Draft 6/23/10
Preliminary and Confidential
Subject to FRE 408
The Plan shall provide for a management incentive plan in form and
substance acceptable to Lehman and the Company providing for a
reserve of up to 3% of the New Equity for options to be allocated to
management under the management incentive plan.
Lehman and the Company shall, after the Effective Date, determine
whether to maintain Innkeepers' status as a real estate investment
trust.
Prior to the Effective Date of the Plan, Lehman and the Company
shall designate a manager for the Company's properties. Iflsland
Hospitality Management, Inc. ("Island") is not selected as the
manager, the Plan shall provide that Island shall cooperate with the
Company and the replacement manager to effectuate an orderly
transition to the replacement manager. Any agreement to effectuate
such transition shall be in form and substance acceptable to Lehman.
The Plan shall include a full discharge and release of liability, other
than a release of the obligations set forth herein, in favor of (a) the
Company and each of its subsidiaries, (b) Lehman, and (c) each of
their respective principals, employees, agents, officers, directors, and
professionals from: (i) any and all claims and causes of action arising
prior to the Effective Date and (ii) any and all claims arising from the
actions taken or not taken in good faith in connection with the
Transaction.
The Company shall pay the professional fees and expenses incurred
by Lehman in connection with the Transaction.
11
LEH-ALI 000264
APP-00679
)>
-u
-u
I
0
0
0>
(X)
0
D Financing Pool
Fee Owner/Ground Lessee Borrower
Lessees of Properties from Fee Owners/Ground Lessees
Mezzanine Borrower
Guarantor

entts are l:'lA.fl ""*"' OC.'Wf\'.te no::.o

45Hoce!s
Sp.s..-.... -
Draft- Subject to Revision
Not Admissible in Any Proceeding
CAliiiiW Cou.uerot! Couuerat
CA II
RettallflC l tW1 In S.n OouoltlrMin HorM\wood In
G.:wdenGrovc, CA Olo9<>. CA \'\'o$1Wlg'.on o.c. r,sonsComer TX
59. s.rvar- c m I""-). VA
Sp. SEn-ar - lNR So, SeMOir - LNR Sp. So<V"" - LKR
p..,_.
p""""" Perlnors Sp.--LN'l
p.....,.
Guarantor of Capttal Expenditure obllgatrons under the $825 Axed R.lte CMBS Pool
2. Guarantor of (I) Non-RecolJfSO carvo Out Obligations under all Loan Pools, Iii) Capital
Expen<fdures under the Anaheim HS Mof19898 Loan and (iii} Payment and Performance
under d'te Anaheim HS Meaanine Loan
3. Operatilg Tenant for all hotels In the $825 Fixed Rate CMBS POOl
4. Operating Tenant tor all ho:els in the Aoatlng Rate POOl
5. Operating Teoa.nt for the Anaheim HS Loans
6. Tenant for the Ontario Mortgage Loan
7. Operating Tenant for tho Garden Gro110 Mortgage Loan
8. Operating Tenant for the Missron Valley Mortgage Loan
""""""'
9. Operating Tenant for tne Washington DC. Tysons Comer and San Antonio Mortgage Loans
EXHIBIT 22