Hearing Date and Time: June 7, 2011 at 2:00 p.m. Reply Deadline: June 3, 2011 at 4:00 p.m.

HAYNES AND BOONE, LLP 30 Rockefeller Plaza, 26th Floor New York, New York 10112 Telephone: (212) 659-7300 Facsimile: (212) 884-8211 Lenard M. Parkins (NY Bar # 4579124) John D. Penn (NY Bar # 4847208) Mark J. Elmore (admitted pro hac vice) Attorneys for Midland Loan Services, a division of PNC Bank, N.A. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al., Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

MIDLAND LOAN SERVICES MOTION FOR AN ORDER DETERMINING ITS GUARANTY CLAIM AGAINST GRAND PRIX HOLDINGS LLC TO BE ALLOWED IN FULL Midland Loan Services, a division of PNC Bank, N.A., as special servicer for the Debtors Fixed Rate Mortgage Loan (Midland),1 by its undersigned attorneys, respectfully

Midland pursuant to the Servicing Agreement services and administers that certain secured loan in the amount of not less than $825,402,542 plus interest, costs and fees (the Fixed Rate Mortgage Loan) owed by certain of the Debtors. The Fixed Rate Mortgage Loan was made pursuant to that certain loan agreement dated as of June 29, 2007 (as amended, the Fixed Rate Mortgage Loan Agreement), and is evidenced by (i) a certain Replacement Note A-1 and (ii) a certain Replacement Note A-2, each dated as of August 9, 2007, and each in the original principal amount of $412,701,271. Replacement Note A-1 was assigned to LaSalle Bank National Association as trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007-C6. Bank of America, N.A. was the successor-in-interest to LaSalle Bank National Association and U.S. Bank, National Association is the successor-in-interest to Bank of America, N.A. (the Fixed Rate Trustee). Replacement Note A-1 is currently held by the Fixed Rate Trustee. Replacement Note A-2 was assigned to and is currently held by the trustee for the holders of the LB-UBS Commercial Mortgage Trust 2007-C7.

d-1961218

submits this motion for an order determining its guaranty claim against Grand Prix Holdings LLC to be allowed in full and for other relief (the Motion) and in support thereof, respectfully states as follows:2 INTRODUCTION 1. Grand Prix Holdings LLC (Holdings) is the corporate parent of the Innkeepers

USA Trust Debtors. Its recovery, based on the issues presented in this Motion, is depicted in the chart attached hereto as Exhibit A. Holdings stands to recover millions of dollars if the Debtors Plan (as defined below) is confirmed and becomes effective. Those dollars will either flow to Holdings creditors, including Midland upon its Guaranty Claim (as defined below), or to Apollo Investment Corporation (Apollo), the Debtors ultimate corporate parent depending upon this Courts ruling. 2. The Debtors Disclosure Statement (as defined below) includes a reference to the

Debtors recent dispute regarding the Guaranty Claim, and it appears that an objection will be forthcoming in the not too distant future. Indeed, the Debtors note (on p. 36) that they intend to file objections no later than June 15, 2011.3 This Motion preempts any objection by the Debtors. 3. Holdings The Disclosure Statements argument that Midlands Guaranty Claim against was waived in the Five Mile/Lehman Commitment Letter and the

[Cerberus/Chatham] Commitment Letter is wrong and is summarily disposed of by reading those documents and the Final Cash Collateral Order entered in these cases. The documents are clear and unambiguous. The Debtors have never raised the allegation that either of the Five

Terms not defined herein shall have the meaning given to them in the Plan and Disclosure Statement (each as defined below). Filing an objection only eight days before the June 23, 2011 confirmation hearing to preclude Midland from voting its Guaranty Claim (as permitted by the Solicitation Procedures) would put unnecessary pressure on both the parties and this Court to resolve the issues in a timely manner.
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Mile/Lehman Commitment Letter or the Cerberus/Chatham Commitment Letter (each as defined below, and collectively, the Commitment Letters) are ambiguous in any way. 4. By their express terms, the Commitment Letters only deal with the Fixed/Floating

Debtors and, as between Midland and the Debtors, address only Midlands claims against the Fixed/Floating Debtors. The Commitment Letters do not purport to dispose of Midlands claims against Holdings. The Commitment Letters also specifically state that Midland reserved all of its respective rights, claims, and interests with respect to [Holdings and the other nonFixed/Floating Debtors] . . . and all assets of [Holdings and the other non-Fixed/Floating Debtors]. The entire auction process to determine the winning bidder to sponsor a plan of reorganization for the Fixed/Floating Debtors was premised on the Commitment Letters. They were fully negotiated among sophisticated parties and the Five Mile/Lehman Commitment Letter was approved by this Court after a contested hearing. The documentation was so complete that the only material changes were the insertion of the identity of winning bidder, the successful bid amount and minimal conforming changes. There was never an issue regarding any ambiguity. 5. This Court should determine that Midlands Guaranty Claim against Holdings is

allowed as provided in the Final Cash Collateral Order. The Guaranty Claim has not been waived. Alternatively, temporarily allowing the Guaranty Claim in full for voting and

distribution purposes is an appropriate way to quickly dispose of the Debtors allegations. Finally, the Claims Agent has failed to provide a Ballot for Midland to vote the Guaranty Claim in connection with the Remaining Debtor Plan. The Court should order the Claims Agent to promptly provide Midland with a Ballot to vote on the Remaining Debtor Plan.

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BACKGROUND 6. On July 19, 2010 (the Petition Date), each of the Debtors filed a petition with

this Court under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and managing their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. On July 28, 2010, the United States Trustee for the Southern District of New York appointed the official committee of unsecured creditors. 7. On September 2, 2010, the Court entered the Final Order Authorizing the Debtors

to (i) Use the Adequate Protection Parties Cash Collateral and (ii) Provide Adequate Protection to the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362 and 363 [Docket No. 402] (the Final Cash Collateral Order). The Final Cash Collateral Order includes the following, binding findings: (i) The Debtors listed on Schedule 1 hereto (collectively, the Fixed Rate Debtors) acknowledge and agree that they are party to that certain Loan Agreement, dated as of June 29, 2007 (as amended, restated, replaced, supplemented or otherwise modified from time to time, and together with such supporting and ancillary documents thereto, the Fixed Rate Mortgage Loan Agreement), among the Fixed Rate Debtors, as borrowers thereunder, Grand Prix Fixed Lessee LLC, as operating lessee, Grand Prix Holdings, LLC, as guarantor, and Lehman ALI Inc., as the original lender thereunder (the Fixed Rate Lender). The Fixed Rate Mortgage Loan Agreement provides for loan to the Fixed Rate Debtors in the aggregate principal amount of $825,402,542 (the Fixed Rate Mortgage Loan Obligations). The Fixed Rate Mortgage Loan Agreement is evidenced by a certain Replacement Promissory Note A-1 (the Fixed Rate Note A-1) and a certain Replacement Promissory Note A-2 (the Fixed Rate Note A-2), each in the principal amount of $412,701,271 and each dated as of August 9, 2007 (emphasis supplied). (v) The Fixed Rate Debtors further acknowledge and agree that (a) the Fixed Rate Mortgage Loan Obligations are valid, binding, and enforceable obligations of the Fixed Rate Debtors in accordance with the terms set forth in the Fixed Rate Mortgage Loan Documents, and (b) the Fixed Rate Mortgage and other liens and security interests granted to the Fixed Rate Lender with respect to the Fixed Rate Collateral, as security for the Fixed Rate Mortgage

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Loan Obligations are valid, perfected and enforceable liens, mortgages, deeds of trust, and security interests in accordance with the terms set forth in the Fixed Rate Mortgage Loan Documents.4 See Final Cash Collateral Order at pp. 3-5. If no such Adversary Proceeding is properly and timely filed and served by such date the liens and security interests of, and payments made on account thereof to, the Adequate Protection Parties shall not be subject to any other or further Challenge and shall not be determined to have been, as of the Petition Date, valid binding, perfected, enforceable, unavoidable, and having the priority asserted, and the Debtors, their estates and creditors, and any trustee in a Successor Case shall be bound by Debtors acknowledgements, stipulations, and agreements set forth in this Order (emphasis supplied). See Final Cash Collateral Order at p. 43. 8. Included among the documents comprising the Fixed Rate Mortgage Loan

Agreement (with such documents as defined in the Fixed Rate Mortgage Loan Agreement) is that certain Guaranty executed as of June 29, 2007 by Grand Prix Holdings LLC for the benefit of Lehman ALI Inc (the Holdings Guaranty). The Debtors acknowledged the validity of the Holdings Guaranty under the Final Cash Collateral Order. See Final Cash Collateral Order at pp. 3-5. 2010. Thus, Midlands Guaranty Claim against Holdings was an Allowed Claim as of July (In arguing that the Guaranty Claim was waived, the Debtors recognize that the

Guaranty Claim had already been allowed.) 9. Under the Holdings Guaranty, Holdings guarantees to Lender and its successors

and assigns the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Holdings Guaranty at 1.1. Guaranteed Obligations means the obligations or liabilities of Borrower to Lender for which Borrower shall be liable pursuant to Section 9.4(b) and (c) of the
The Challenge Period for any party (including the Creditors Committee) to challenge the Courts findings regarding the Fixed Rate Mortgage Loan has expired, and the Courts findings regarding the same are now final.
4

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Loan Agreement. Holdings Guaranty at 1.2. Section 9.4(c) of the Fixed Rate Mortgage Loan Agreement provides in part that the Lenders agreement not to pursue recourse liability against the Borrower shall be of nothing and of no force and effect upon the Borrowers bankruptcy filing. See Fixed Rate Mortgage Loan Agreement 9.4(c). The Holdings Guaranty is a continuing guaranty of payment and performance and not a guaranty of collection. Holdings Guaranty at 1.3. 10. On March 11, 2011, the Bankruptcy Court entered the Bidding Procedures Order,

approving the Debtors entry into the Amended and Restated Binding Commitment Agreement Regarding the Acquisition and Restructuring of Certain Subsidiaries of Innkeepers USA Trust (the Five Mile/Lehman Commitment Letter) under which the Debtors were authorized to conduct an auction for the Debtors equity interests. 11. The agreement embodied in the Five Mile/Lehman Commitment Letter addresses

the treatment of the Fixed Rate Mortgage Loan with respect to only the Fixed/Floating Debtors.5 See Five Mile/Lehman Commitment Letter, Term Sheet at Treatment of Fixed Rate Mortgage Loan. Additionally, Midlands agreement to provide a general release with respect to certain Releasing Parties under the Fixed/Floating Plan was limited to the Fixed/Floating Debtors and such release did not include Holdings. See Five Mile/Lehman Commitment Letter, Term Sheet at Releases. Finally, Midland expressly reserved its rights, claims and interest against the non-Fixed/Floating Debtors. See Five Mile/Lehman Commitment Letter, Term Sheet at Releases (Additionally, the Releasing Parties reserve all of their respective rights, claims, and interests with respect to the Excluded Debtors and all assets of the Excluded Debtors.). See Five Mile/Lehman Commitment Letter, Term Sheet at Reservation of Rights. 12.
5

Before the May 2, 2011 auction, the documents and Orders provided:

Holdings is not one of the Fixed/Floating Debtors.

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-and, --

Midlands Guaranty Claim was an Allowed Claim (Final Cash Collateral Order);

Midlands Guaranty Claim was not waived (the Five Mile/Lehman Commitment

Letter which dealt with Midlands claims against the Fixed/Floating Debtors and reserved all rights regarding the other Debtors). These remain true today as well. The Debtors argument that the results of the auctions drove Midland to change its position is misplaced. Instead, the results of the auctions appear to drive the Debtors to pursue a release more vigorously in the hope that Apollo will receive millions of dollars. 13. Fixed/Floating On May 2, 2011, the Debtors commenced the auction to sponsor a plan for the Debtors with competitive bidding between Five Mile/Lehman and

Cerberus/Chatham. The Debtors closed the auction for the equity of the Fixed/Floating Debtors after Cerberus/Chatham submitted a bid valued by the Debtors at $1.1187 billion. 14. In connection with the Cerberus/Chatham winning bid, the Debtors entered into

the Amended and Restated Binding Commitment Agreement Regarding the Acquisition and Restructuring of Certain Subsidiaries of Innkeepers USA Trust dated May 16, 2011 (the Cerberus/Chatham Commitment Letter). The Cerberus/Chatham Commitment Letter contains the same reservation of rights with respect to the Guaranty Claim as contained in the Five Mile/Lehman Commitment Letter. To that end, the Cerberus/Chatham Commitment Letter provides that [t]he Releasing Parties reserve all of their respective rights, claims, and interests with respect to the Excluded Debtors and all assets of the Excluded Debtors. See

Cerberus/Chatham Commitment Letter, Amended and Restated Term Sheet at Reservation of Rights. The only material change between the Five Mile/Lehman and Cerberus/Chatham

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Commitment Letters was the insertion of the winning bidder, the successful bid amount and minimal conforming changes. There were no other material changes because the substantive agreement had been fully negotiated. 15. Additionally, the parties to the Cerberus/Chatham Commitment Letter agreed that

the [Cerberus/Chatham Commitment Letter] and the Amended and Restated Term Sheet, together with the Appendices and Exhibits thereto, represent the entire understanding and agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings among parties hereto, both written and oral, with respect to the subject matter hereof, including without limitation the Commitment Letter and Term Sheet dated April 25, 2011 by the Plan Sponsors and New Holdco.6 Cerberus/Chatham Commitment Letter at 5. 16. As a result of the Courts findings under the Final Cash Collateral Order, Midland

has a valid claim under the Holdings Guaranty against Holdings (the Guaranty Claim) that remains unaffected by either the Five Mile/Lehman Commitment Letter or the

Cerberus/Chatham Commitment Letter. See Final Cash Collateral Order at pp. 3-5. 17. On May 18, 2011, the Debtors filed their Plans of Reorganization Pursuant to

Chapter 11 of the Bankruptcy Code (collectively, the Plan)7 and Disclosure Statement for Debtors Plans of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the

This integration clause tracks the same provision found in the Five Mile/Lehman Commitment

Letter.
7

The Plan is an aggregation of four separate and distinct plans of reorganization, which includes the Fixed/Floating Plan. Classes of Claims in the Fixed/Floating Plan are designated as Class FF_ while those in the Remaining Debtor Plan are designated as Class R__.

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Disclosure Statement).8 Under Class FF3A of the Plan, Midland will receive a new mortgage note in the amount of $723,797,283.03 and cash in the amount of $12,802,450.37 on account of its claims against the Fixed/Rate Debtors under the Fixed Rate Mortgage Loan Agreement. See Plan at Article III.B, p. 31. The Guaranty Claim will be treated in Class R4B as a General Unsecured Claim of Holdings and will receive the available proceeds from the Chatham Hotel Sale Transaction Purchase Consideration and other assets in accordance with the Distribution Waterfall under the Plan. See Plan at Article III.B, p. 46. 18. Midlands Guaranty Claim against Holdings in Class R4B will be in amount not

less than $83,956,0009, which represents the approximate remaining principal amount due under the Fixed Rate Mortgage Loan after Midland receives its treatment under Class FF3A of the Fixed/Floating Plan, and the Guaranty Claim is allowable in that amount. Under the Distribution Waterfall, the aggregate dollar recoveries for holders in Class R4B are expected to be in the range of $0 to approximately $6.8 million. Disclosure Statement at Article I.E, p. 17, n. 13. 19. Notwithstanding the allowance of the Guaranty Claim under the Final Cash

Collateral Order, the Debtors Disclosure Statement indicates that a dispute exists with respect to the validity of the Guaranty Claim. The Debtors state that [t]he Debtors believe that, pursuant to the Five Mile/Lehman Commitment Letter and the Commitment Letter, Midland and Lehman waived any rights they had to assert or pursue any Mortgage Loan Deficiency Claims or any

On May 19, 2011, the Court entered its Order Approving (A) Adequacy of the Disclosure Statement; (B) Certain Dates Related to Confirmation of the Plan; (C) Certain Voting Procedures and the Form of Certain Documents to be Distributed in Connection with Solicitation of the Plan; and (D) Proposed Voting and General Tabulation Procedures [Docket #1441] (the Disclosure Statement Order). 9 $83,956,000 represents 10% of the amount reflected on the Ballot the Claims Agent provided to Midland to vote on the Fixed/Floating Plan. One interpretation of the Loan Agreement would limit the Guaranty Claim to 10% of the amount owed by the Fixed Rate Debtors. Midland does not concede that to be an accurate reading of the agreement and reserves the right to show that its Guaranty Claim is actually greater.

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guaranty claims against any of the Debtors arising from or related to the Fixed Rate Pool Mortgage Loan Agreement . Disclosure Statement at Article IV.I, p. 41 (Disputes

Regarding Guaranty Claims). The Debtors argue further that any related guaranty claims should be deemed canceled, released, and extinguished as of the Effective Date of the Fixed/Floating Plan. Disclosure Statement at Article IV.I, p. 41 (Disputes Regarding Guaranty Claims). The Debtors never identify or specify either the provision or provisions of the

Commitment Letters or the clear and unambiguous conduct by Midland whereby this waiver occurred. 20. In response, Midland included a statement in the Disclosure Statement that the

plain language of the documents at issue, the Five Mile/Lehman Commitment Letter and the Cerberus/Chatham Commitment Letter, do not support the Debtors theory that Midland has waived its Guaranty Claim. Disclosure Statement at Article IV.I, p. 42 (Statement of Midland and Lehman Regarding Guaranty Claims). Incredulously, the Debtors argue again that Midland waived its claim under the Five Mile/Lehman Commitment Letter. Disclosure Statement at Article IV.I, p. 42. (Debtors Response to Statement of Midland and Lehman Regarding Guaranty Claims). 21. The Disclosure Statement (p. 36) also indicates that the Debtors intend to file

objections to all disputed claims on or before June 15, 2011 (a mere eight calendar days before the Confirmation Hearing and two days before the Voting Deadline). Based on the other statements in the Disclosure Statement, a formal objection appears inevitable and the later an objection is filed in the plan process, the more problematic its timely resolution becomes. Joining the issue now, rather than at the end of the plan voting and confirmation process, allows

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the parties a full opportunity to present the issue to the Court before the Voting Deadline. It also eliminates expedited extraneous litigation in conjunction with the Confirmation Hearing. 22. Notwithstanding the clear and unambiguous language of the Five Mile/Lehman

Commitment Letter and the Cerberus/Chatham Commitment Letter, the Debtors appear resolute in their efforts to challenge the Guaranty Claim for the sole benefit of Apollo, the sole equity holder in Holdings. Midland questions and objects to the Debtors wasting any estate resources to benefit Apollo in derogation of its duty to recognize and abide by the absolute priority rule which places creditors ahead of equity. Midland also reserves the right to seek to recover the

fees and expenses it incurs if the Debtors litigate issues for Apollos benefit. 23. On May 23, 2011, Midlands counsel requested electronic copies of the Ballots

the Claims Manager mailed to Midland (the Fixed/Floating Secured Claim Ballot and the general unsecured claim ballot for Holdings). The Claims Manager provided a copy of the secured claim ballot promptly by email. The repeated requests on May 23 and 24 for the general unsecured claim ballot for Holdings did not receive a reply. RELIEF REQUESTED AND BASIS THEREFOR 24. Midland requests the Court enter an order deeming its Guaranty Claim allowed in

full in all respects as well as other relief as described herein. Section 502 provides in relevant part that [a] claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general partner in a partnership that is a debtor in a case under Chapter 7 of this title, objects. 11 U.S.C. 502(a). The Debtors have not objected to the Guaranty Claim, and thus it should be determined to be allowed in full.

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A. To the Extent Necessary, Midlands Guaranty Claim should be Estimated and Allowed in Full 25. Because the Debtors i) stipulated to its allowance under the Final Cash Collateral

Order and ii) did not object as of the Voting Record Date (as defined under the Disclosure Statement Order to be May 13, 2011), Midlands Guaranty Claim should be allowed in full, and estimation of the Guaranty Claim should not be necessary. Notwithstanding the Debtors

stipulations and the solicitation procedures contained in the Disclosure Statement to the contrary, the Debtors have included the unfounded arguments described above in the Disclosure Statement challenging Midlands right to recovery against Holdings on account of its Guaranty Claim. By placing the validity of Midlands Guaranty Claim into question, estimation by the Court under section 502(c) is an appropriate way to put the waiver issue to rest based on the documents themselves. Additionally, allowance or estimation of the Guaranty Claim at this stage eliminates any confusion created under the Disclosure Statement Order for resolving objections filed by the Debtors after the Voting Record Date. The Court can eliminate any confusion and any potential scheduling hurdles that may rise by estimating the Guaranty Claim in full for both voting and distribution purposes.10 26. Section 502(c) of the Bankruptcy Code provides that:

(c) There shall be estimated for purpose of allowance under this section (1) any contingent or unliquidated claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of the case; 11 U.S.C. 502(c).

One interpretation of the Solicitation Procedures approved in connection with the Disclosure Statement would permit an Objection to the Midlands Guaranty Claim on Wednesday, June 8 and require a Resolution Event (such as an Order, after notice and hearing) no later than Monday, June 13 or Midland would be disenfranchised from voting the Guaranty Claim. See Solicitation Procedures C.(2)(a) and D.(4).

10

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27.

The purpose of section 502(c)(1) is to allow the estimation of claims in an attempt

to avoid unnecessary delay in the administration of the bankruptcy case. See In re Chateaugay Corp., 10 F.3d 944, 957 (2d Cir. 1993) (holding [t]he clearly stated purpose of Section 502(c)(1) is to allow estimation of claims in order to avoid undue delay in the administration of bankruptcy proceedings). In fact, [s]ection 502(c) of the Bankruptcy Code requires the court to estimate contingent and unliquidated claims to prevent undue delay in the administration of the case. In re Frontier Airlines, Inc., 137 B.R. 811, 814 (D. Colo. 1992) (emphasis in the original). 28. Estimation of claims under 502(c)(1) may be used for a variety of purposes,

including to determine the allowance of a claim. See In re Chemtura Corp., 2011 Bankr. LEXIS 1394 at *28 (Bankr. S.D.N.Y. 2011) (holding that claims estimation under 502(c)(1) can be used for a variety of purposes including determining voting rights on a reorganization plan, gauging plan feasibility, determining the likely aggregate amount of a related series of claims, seeking claim distribution reserves, or (though this is less commonly wise) allowing claims.). 29. Estimation under 502(c) should generally result in an allowed claim for all

purposes in a bankruptcy case. See Collier On Bankruptcy 502.04[3] (15th ed. rev. 2011). Estimation of a claim should ultimately result in the courts best estimate of the allowed amount of the claim so as to permit the bankruptcy case to go forward without unnecessary delay. See, e.g., Chateaugay, 10 F.3d at 957. 30. There is no prescribed method for estimating a claim, but, rather, it is left to the

discretion of the court to employ the best method, bound by the rules that govern the ultimate value of the claim. See In re Ralph Lauren Womenswear, Inc., 197 B.R. 771, 775 (Bankr.

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S.D.N.Y. 1996); see also Seaman Furniture Co. of Union Square, Inc., 160 B.R. 40, 42 (Bankr. S.D.N.Y. 1993); Chemtura at *28-35. 31. With respect to a courts process to estimate a claim, courts have utilized various

methods. These methods include summary trial, evidentiary hearings and/or the review of pleadings and briefs followed by oral argument. Chemtura at *28-35. 32. Given the specific treatment of the Fixed Rate Mortgage Loan under the

Fixed/Floating Plan and the provisions of the Final Cash Collateral Order, the Court can easily estimate the amount of the Guaranty Claim against Holdings. This determination and the ultimate examination should not be burdensome because it begins with the Debtors stipulation to the validity and allowance of the Guaranty Claim under the Final Cash Collateral Order and the fact that the deadline to challenge the Guaranty Claim has passed. B. 33. Midland has not Waived its Guaranty Claim The Debtors attempted elimination of Midlands Guaranty Claim against

Holdings, with absolutely no consideration in exchange therefor, would open the door for funds to flow to Apollo, as the equity owner of Holdings, instead of being distributed to Holdings creditors, including Midland on its Guaranty Claim. Any proposed distribution scheme under the Remaining Debtor Plan that would result in an equity holder of Holdings receiving value before Midlands unsecured claim against Holdings is paid in full clearly violates the absolute priority rule. See 11 U.S.C. 1129(b)(2)(B)(ii). With this fundamental bankruptcy concept preventing any distribution to Apollo on account of its equity in Holdings, the Debtors argue that waiver prevents the application of the absolute priority rule by elimination of Midlands Guaranty Claim.

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34.

The law regarding waiver is clear. Waiver is the intentional relinquishment of a

known right. See In re Jamesway Corp., 201 B.R. 73, 76-77 (Bankr. S.D.N.Y. 1996) (emphasis added). The alleged intent to waive a right or privilege must be proven by clear, unambiguous and unmistakable evidence. Jamesway Corp. at 76-77 (holding that [w]aiver must be evidenced by a clear manifestation of intent and be unmistakable and unambiguous). 35. The party asserting the defense that a waiver has occurred bears the burden of

proof on the issue. Jamesway Corp. at 76-77; In re Bradlees Stores, Inc., 2001 U.S. Dist. LEXIS 14755, at *38-40 (Bankr. S.D.N.Y. 2001) (holding that party alleging the waiver had to prove that upon entrance into a settlement agreement there was an explicit intention to waive the right to invoke section 365(f) of the Bankruptcy Code in a subsequent proceeding and that at no time was there such explicit, unmistakable and/or unambiguous waiver); see also Port Distrib. Corp. v. Pflaumer, 880 F. Supp. 204, 211 (S.D.N.Y. 1995), affd 70 F.3d 8 (2d Cir. 1995) (holding that a waiver of the obligation to perfect the security interest must be express the waiver must state specifically that it contemplates some release or reduction of the collateral or that the secured status of the debt is irrelevant to the guaranty. This rule is in accordance with the general principle that a waiver is the intentional relinquishment of a known right which must be evidenced by a clear manifestation of intent.). 36. Under New York law, where the terms of a contract are clear and unambiguous,

the court cannot look outside the four corners of the contract, and parol evidence should be deemed inadmissible. See R/S Assoc. v. New York Job Dev. Auth., 98 N.Y.2d 29, 33 (2002) ([W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms [u]nless the court finds ambiguity, the rules governing the interpretation of ambiguous contracts does not come into play. Thus, when

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interpreting an unambiguous contract term evidence outside the four corners of the document is generally inadmissible to add or to vary the writing. Extrinsic and parol evidence is not admissible to create an ambiguity in a written agreement which is complete and clear and unambiguous upon its face.) (internal citations omitted); see also 1701 Rest. on Second, Inc. v. Aramato Props., Inc., 2011 NY Slip Op 3106 at *2 (2011). 37. When a contract contains a clear and unambiguous integration clause, parol

evidence cannot be introduced to contradict the clear terms of the contract. Sasson Licensing Corp. v. Monte Carlo Shirt, Inc., 1989 U.S. Dist. Lexis 10927, *6 (S.D.N.Y. 1989) (providing that the clear and unambiguous terms of a valid, integrated written instrument cannot be contradicted or varied by prior or contemporaneous extrinsic oral or written evidence.). Moreover, sophisticated parties are able to negotiate and memorialize their intended dealings. It is not the role of the courts to relieve sophisticated parties from detailed, bargained-for contractual provisions that allocate risks between them, and to provide extra-contractual rights or obligations for one side or the other. DynCorp. v. GTE Corp., 215 F. Supp. 2d 308, 322 (S.D.N.Y. 2002). 38. Midland never waived its Guaranty Claim. To the contrary, Midland expressly

reserved its Guaranty Claim against Holdings in both the Five Mile/Lehman Commitment Letter and the Cerberus/Chatham Commitment Letter. Not only did the treatment of the Fixed Rate Mortgage Loan therein apply only to the Fixed/Floating Debtors, but the parties additionally included an express reservation of rights in each of the commitment letters with respect to claims against non-Fixed/Floating Debtors ([t]he Releasing Parties reserve all of their respective rights, claims, and interests with respect to the Excluded Debtors and all assets of the Excluded Debtors). This clear and express language demonstrates the agreement of the parties to reserve

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claims against Holdings. Further, the Debtors agreed to an unambiguous integration clause thereby foreclosing parol evidence on the agreement. As such, there is no basis to determine that a waiver of the Guaranty Claim occurred. Midlands Guaranty Claim should be allowed in full and in all respects for both voting and distribution. Local Rule 9013-1(a) 39. This Motion includes citations to the applicable rules and statutory authorities as

support and a discussion of their application to this Motion. Accordingly, Midland submits that this Motion satisfies Rule 9013-1(a) of the Local Rules for the Southern District of New York and respectfully requests the waiver of the need to file a supporting memorandum of law.

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WHEREFORE, Midland requests that the Court enter an order (i) approving the Motion; (ii) allowing Midlands Guaranty Claim in full and all respects, (iii) ordering the Claims Agent to provide Midland with a Ballot to vote on the Remaining Debtor Plan and (iv) granting Midland such other and further relief to which it is entitled. Dated: May 24, 2011 New York, New York HAYNES AND BOONE, LLP

/s/ John D. Penn Lenard M. Parkins (NY Bar #4579124) Mark Elmore (admitted pro hac vice) 30 Rockefeller Plaza, 26th Floor New York, New York 10112 Telephone No.: (212) 659-7300 Facsimile No.: (212) 884-8211 - and John D. Penn (NY Bar # 4847208) Haynes and Boone, LLP 201 Main Street, Suite 2200 Fort Worth, Texas 76102 Telephone No.: (817) 347-6610 Facsimile No.: (817) 348-2300

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CERTIFICATE OF CONFERENCE The undersigned counsel for Midland attempted to confer with opposing counsel concerning the matters raised in this Motion on this 24th day of May, 2011. The parties could not agree as to the disposition of this matter; therefore, Midland expects that the Motion will be opposed.

/s/ John D. Penn ______________________ John D. Penn

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EXHIBIT A

INNKEEPERS USA TRUST Remaining Debtor Plan of Reorganization Proposed Distribution of Surplus Value
Creditors (1) Apollo (Equity)

OR

Grand Prix Holdings

Preferred A Shares Innkeepers USA Trust

Preferred C Shares Innkeepers USA Trust (Ad Hoc Committee)

Preferred D Shares Innkeepers USA Trust (Plan Proposes No Distribution)

Surplus Value in the Estates

(1) Grand

Prix Holdings guaranteed the Fixed Rate Loan.