James H.M. Sprayregen, P.C. Paul M. Basta Jennifer L.

Marines KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. (pro hac vice pending) Marc J. Carmel (pro hac vice pending) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, IL 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Proposed Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-__________(___) Joint Administration Requested

DEBTORS MOTION FOR THE ENTRY OF AN ORDER AUTHORIZING, BUT NOT DIRECTING, THE DEBTORS TO (A) MAINTAIN PREPETITION INSURANCE POLICIES AND PREMIUM FINANCING AGREEMENTS AND (B) PAY ALL PREPETITION OBLIGATIONS IN RESPECT THEREOF1

The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS) LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Corners) LLC (3650); Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix Bulfinch LLC (3639); Grand Prix Campbell / San Jose LLC (3638); Grand Prix Cherry Hill LLC (3634); Grand Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East
(continued on next page)

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Innkeepers USA Trust and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors), file this motion (this Motion) for the entry of an order, substantially in the form attached hereto as Exhibit A, (a) authorizing, but not directing, the Debtors to continue the Debtors insurance programs and to pay all prepetition obligations in respect thereof, including maintaining the financing of insurance premiums, and (b) granting such other relief as is just and proper. In support of this Motion, the Debtors respectfully state as follows:2

Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood / Denver South LLC (3701); Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC (4290); Grand Prix Fremont LLC (3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704); Grand Prix Gaithersburg LLC (3709); Grand Prix General Lessee LLC (9182); Grand Prix Germantown LLC (3711); Grand Prix Grand Rapids LLC (3713); Grand Prix Harrisburg LLC (3716); Grand Prix Holdings LLC (9317); Grand Prix Horsham LLC (3728); Grand Prix IHM, Inc. (7254); Grand Prix Indianapolis LLC (3719); Grand Prix Islandia LLC (3720); Grand Prix Las Colinas LLC (3722); Grand Prix Lexington LLC (3725); Grand Prix Livonia LLC (3730); Grand Prix Lombard LLC (3696); Grand Prix Louisville (RI) LLC (3700); Grand Prix Lynnwood LLC (3702); Grand Prix Mezz Borrower Fixed, LLC (0252); Grand Prix Mezz Borrower Floating, LLC (5924); Grand Prix Mezz Borrower Floating 2, LLC (9972); Grand Prix Mezz Borrower Term LLC (4285); Grand Prix Montvale LLC (3706); Grand Prix Morristown LLC (3738); Grand Prix Mountain View LLC (3737); Grand Prix Mt. Laurel LLC (3735); Grand Prix Naples LLC (3734); Grand Prix Ontario Lessee LLC (9976); Grand Prix Ontario LLC (3733); Grand Prix Portland LLC (3732); Grand Prix Richmond (Northwest) LLC (3731); Grand Prix Richmond LLC (3729); Grand Prix RIGG Lessee LLC (4960); Grand Prix RIMV Lessee LLC (4287); Grand Prix Rockville LLC (2496); Grand Prix Saddle River LLC (3726); Grand Prix San Jose LLC (3724); Grand Prix San Mateo LLC (3723); Grand Prix Schaumburg LLC (3721); Grand Prix Shelton LLC (3718); Grand Prix Sili I LLC (3714); Grand Prix Sili II LLC (3712); Grand Prix Term Lessee LLC (9180); Grand Prix Troy (Central) LLC (9061); Grand Prix Troy (SE) LLC (9062); Grand Prix Tukwila LLC (9063); Grand Prix West Palm Beach LLC (9065); Grand Prix Westchester LLC (3694); Grand Prix Willow Grove LLC (3697); Grand Prix Windsor LLC (3698); Grand Prix Woburn LLC (3699); Innkeepers Financial Corporation (0715); Innkeepers USA Limited Partnership (3956); Innkeepers USA Trust (3554); KPA HI Ontario LLC (6939); KPA HS Anaheim, LLC (0302); KPA Leaseco Holding Inc. (2887); KPA Leaseco, Inc. (7426); KPA RIGG, LLC (6706); KPA RIMV, LLC (6804); KPA San Antonio, LLC (1251); KPA Tysons Corner RI, LLC (1327); KPA Washington DC, LLC (1164); KPA/GP Ft. Walton LLC (3743); KPA/GP Louisville (HI) LLC (3744); KPA/GP Valencia LLC (9816). The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480.
2

Information regarding the Debtors business, the background of these Chapter 11 Cases (as defined herein), and further facts and circumstances supporting this Motion are set forth in the Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of First-Day Pleadings (the First Day Declaration), filed contemporaneously herewith.

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

(the Court) has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334. This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. 3. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory bases for the relief requested herein are sections 105(a), 363(b),

364, and 503(b) of title 11 of the United States Code (the Bankruptcy Code). Relief Requested 4. By this Motion, the Debtors seek entry of an order: (a) authorizing the Debtors to

(i) continue insurance coverage currently in effect, (ii) maintain the existing PFAs (as defined herein) and make PFA Installment Payments (as defined herein) that currently are outstanding but not yet due, (iii) pay, to the extent that the Debtors determine in their sole discretion that such payment is necessary or appropriate, any other prepetition amounts that may be outstanding and that may come due under the Policies (as defined herein), including any deductibles, self-insured retentions, and losses related to the Policies, and (iv) enter into new insurance policies and PFAs on an as-needed basis without further Court approval; and (b) granting such other relief as is just and proper. Background 5. On the date hereof (the Petition Date), each of the Debtors filed a petition with

the Court under chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases). The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in the Chapter 11 Cases, and no committees have been

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appointed or designated. Concurrently with the filing of this Motion, the Debtors have requested procedural consolidation and joint administration of the Chapter 11 Cases. The Debtors Insurance Coverage 6. In the ordinary course of business, the Debtors maintain a number of insurance

policies, which provide coverage for, among other things, general liability, fiduciary liability, excess liability, directors and officers liability, excess directors and officers liability, property liability, automobile liability, workers compensation, employment practices liability, and total umbrella liability (collectively, the Policies).3 The Policies are financed through premium financing agreements (as discussed in further detail below). In addition, certain of the Policies require the Debtors to pay self-insured retentions and deductibles in connection with certain claims under the Policies. A schedule of the current Policies is attached hereto as Exhibit B and incorporated herein by reference (the Policy Schedule). The Policies are essential to the preservation of the value of the Debtors business, properties, and assets. Moreover, in many cases, insurance coverage such as that provided by the Policies is required by the diverse regulations, laws, and contracts that govern the Debtors commercial activities. Further, the guidelines of the Office of the United States Trustee for the Southern District of New York (the U.S. Trustee) require debtors to maintain insurance coverage throughout their chapter 11 proceedings.

The Debtors workers compensation insurance policies are discussed in further detail in the Debtors Motion for the Entry of Interim and Final Orders Authorizing, but not Directing, the Debtors to (A) Pay Certain Prepetition Wages, Salaries, and Reimbursable Employee Expenses, (B) Pay and Honor Certain Employee Medical and Other Benefits, and (C) Continue Employee Benefits Programs, filed contemporaneously herewith. In addition, as set forth in the Debtors Motion for the Entry of Interim and Final Orders Authorizing, but Not Directing, the Debtors to Continue to Honor Obligations Set Forth in the Hotel Management and Shared Services Agreements, also filed contemporaneously herewith, the Debtors are obligated to reimburse, compensate, or indemnify the Hotel Managers (as such term is defined therein) on account of various expenses incurred and services performed by their Hotel Managers.

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7.

The Debtors believe that they are current on all payment obligations under the

Policies as of the Petition Date. Going forward, however, the Debtors will need to continue to make installment payments under their existing PFAs and to pay any deductibles or self-insured retention amounts necessary to preserve the coverage provided under the Policies. I. 8. The Financed Policies In the ordinary course of the Debtors business, the Debtors finance the premium

payments for certain of the Policies (the Financed Policies). Spreading out the cost of the Policies and any related Brokers Fees (as defined herein) over the applicable coverage period with the PFAs helps the Debtors manage their cash flow with reasonable financing costs. Specifically, the Debtors maintain three premium financing agreements (collectively, the PFAs). One PFA, provided through AFCO Credit Corporation (AFCO), finances total premiums of $427,636.25 related to the Debtors directors and officers liability and related excess coverage (the D&O PFA). A second PFA through AFCO finances total premiums of approximately $1.5 million related to the Debtors commercial property liability (the Property PFA). The third PFA, provided through Bank Direct Capital Finance (Bank Direct), relates to the Debtors commercial crime, general liability, auto liability, workers compensation liability, and employers practice liability (the General Liability PFA). 9. The terms of the D&O PFA provide that the Debtors pay AFCO an initial down

payment of $36,156.89, followed by 11 monthly installments, each in the amount of $36,218.46 (bearing an annual interest rate of 3.177 percent), in exchange for AFCOs agreement to pay the insurance premiums to the respective Financed Policies insurers. As of the Petition Date, $108,844.38 in installment payments remain outstanding under the D&O PFA (the D&O PFA Installments). The Debtors are current on all of their D&O PFA Installments, and the Debtors believe that currently there are no prepetition amounts outstanding under the D&O PFA. 5
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10.

The terms of the Property PFA provide that the Debtors pay AFCO an initial

down payment of $133,912.85, followed by 11 monthly installments, each in the amount of $126,184.89 (bearing an annual interest rate of 3.15 percent), in exchange for AFCOs agreement to pay the insurance premiums to the respective Financed Policies insurers. As of the Petition Date, $504,739.96 in installment payments remain outstanding under the Property PFA (the Property PFA Installments). The Debtors are current on all of their Property PFA Installments, and the Debtors believe that currently there are no prepetition amounts outstanding under the Property PFA. 11. The terms of the General Liability PFA provide that the Debtors pay Bank Direct

an initial down payment of $345,593.04, followed by nine monthly installments, each in the amount of $168,347.82 (bearing an annual interest rate of 3.59 percent), in exchange for Bank Directs agreement to pay the insurance premiums to the respective Financed Policies insurers. As of the Petition Date, $336,695.64 in installment payments remain outstanding under the General Liability PFA (the General Liability PFA Installments). The Debtors are current on all of their General Liability PFA Installments and the Debtors believe that currently there are no prepetition amounts outstanding under the General Liability PFA. 12. Pursuant to the PFAs, the Debtors assign unearned or returned premiums,

dividends, and loss payments to AFCO and Bank Direct, as applicable, as security for the total amounts payable under the PFAs. If the Debtors fail to pay the PFA Installments, AFCO and Bank Direct have the right to request cancellation of the insurance policies upon 10-days written notice to the Debtors subject to the right of the Debtors to cure such payment or other default within such period. Additionally, upon a default, AFCO and Bank Direct, as applicable, have the right to accelerate the entire amount of unpaid PFA Installments and to assess late charges

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against the Debtors. Upon any termination of a PFA, AFCO and Bank Direct, as applicable, have the right to set off any amounts owed by the Debtors against the amount of unearned insurance premiums returned to AFCO and Bank Direct by the insurance carriers. If AFCO and Bank Direct chose to cancel the Debtors Policies under the PFAs, the Debtors would be forced to obtain replacement insurance on an expedited basis likely at a significant cost and disruption to their estates and operations. Moreover, any non-payment of the PFA Installments could have an adverse impact on the Debtors ability to finance premiums for future insurance policies. 13. In light of the importance of maintaining insurance coverage with respect to their

business activities and preserving liquidity by financing certain of their insurance premiums, the Debtors believe it is in the best interests of their estates to receive the Courts approval to honor their obligations under the PFAs. II. 14. The Debtors Surety Bonds In addition to the Policies, the Debtors insurance coverage includes surety bonds

in the aggregate amount of approximately $723,000 which guarantee certain identifiable risks related to the Debtors operations (collectively, the Surety Bonds). The Surety Bonds

guarantee the Debtors performance of obligations owing to third parties (e.g., certain of the Debtors utility providers and state and local governments). In many instances, these Surety Bonds are required by applicable law. During the current policy period, the Debtors estimate that the annual aggregate cost to maintain the Surety Bonds will be approximately $20,000. III. 15. The Debtors Insurance Brokers In connection with the Policies, the Debtors obtain services from third-party

Insurance Brokers (as defined herein) to assist the Debtors in obtaining comprehensive insurance coverage for the Debtors operations in the most cost-effective manner. In particular, the

Insurance Brokers assist the Debtors with the procurement and negotiation of the Policies from 7
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insurance carriers, enabling the Debtors to obtain insurance policies on advantageous terms and at competitive rates. 16. As of the Petition Date, the Debtors Insurance Brokers are AON Risk

Management (AON) and Arthur J. Gallagher Brokerage and Risk Management Services (A.J. Gallagher, and, together with AON, the Insurance Brokers). On account of the services they provide, the Insurance Brokers receive compensation (the Brokers Fees) from the Debtors, which are calculated as a percentage of the PFA Installments. As of the Petition Date, the Debtors do not believe there any prepetition amounts outstanding with respect to the Brokers Fees. Basis for Relief I. 17. Ample Authority Exists To Continue To Maintain Insurance Coverage. Courts have authorized payment of prepetition obligations under section 363(b) of

the Bankruptcy Code where a sound business purpose exists for doing so. See, e.g., In re Ionosphere Clubs, Inc., 98 B.R. 174, 175 (Bankr. S.D.N.Y. 1989) (finding that a sound business justification existed to justify payment of certain claims); see also In re Tropical Sportswear Intl Corp., 320 B.R. 15, 20 (Bankr. M.D. Fla. 2005) (Bankruptcy courts recognize that section 363 is a source for authority to make critical vendor payments, and section 105 is used to fill in the blanks); Armstrong World Indus., Inc. v. James A. Phillips, Inc., (In re James A. Phillips, Inc.), 29 B.R. 391, 397 (S.D.N.Y. 1983) (relying on section 363 to allow contractor to pay prepetition claims). 18. In addition, the Court may authorize payment of prepetition claims in appropriate

circumstances based on section 105(a) of the Bankruptcy Code. Section 105(a), which codifies the inherent equitable powers of the bankruptcy court, empowers a bankruptcy court to issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this 8
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title. Under section 105(a), courts may permit pre-plan payments of prepetition obligations when essential to the continued operation of a debtors businesses. See In re Just for Feet, Inc., 242 B.R. 821, 825 (D. Del. 1999). Specifically, the Court may use its power under section 105(a) to authorize payment of prepetition obligations pursuant to the necessity of payment rule (also referred to as the doctrine of necessity). See Ionosphere Clubs, 98 B.R. at 176 (Bankr. S.D.N.Y. 1989). A bankruptcy courts use of its equitable powers to authorize the payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor is not a novel concept. Id. at 175-176 (citing Miltenberger v. Logansport, C. & S.W. Ry. Co., 106 U.S. 286 (1882)). 19. The doctrine of necessity or the necessity of payment rule has long been

recognized as precedent within the Second Circuit. See In re Ionosphere Clubs, 98 B.R. at 175-176. Today, the rationale for the necessity of payment rulethe rehabilitation of a debtors reorganization casesis the paramount policy and goal of Chapter 11. Id.; see also In re Just For Feet, 242 B.R. 821, 826 (Bankr. D. Del. 1999) (finding that payment of prepetition claims to certain trade vendors was essential to the survival of the debtor during the chapter 11 reorganization); Mich. Bureau of Workers Disability Comp. v. Chateaugay Corp. (In re Chateaugay Corp.), 80 B.R. 279, 287 (S.D.N.Y. 1987) (authorizing payment of prepetition workers compensation claims on grounds that the fundamental purpose of reorganization and equity powers of bankruptcy courts is to create a flexible mechanism that will permit the greatest likelihood of survival of the debtor and payment of creditors in full or at least proportionately); 2 Collier on Bankruptcy, 105.02[4][a] (16th ed. rev. 2009) (discussing cases in which courts have relied on the doctrine of necessity or the necessity of payment rule to pay prepetition claims immediately).

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20.

This flexible approach is particularly critical where a prepetition creditorhere,

the holders of the PFAs and the Insurance Brokersprovides vital goods or services to a debtor that would be unavailable if the debtor did not satisfy its prepetition obligations. In In re Structurlite Plastics Corp., 86 B.R. 922, 931 (Bankr. S.D. Ohio 1988), the bankruptcy court stated that a bankruptcy court may exercise its equity powers under 105(a) [of the Bankruptcy Code] to authorize payment of prepetition claims where such payment is necessary to permit the greatest likelihood of survival of the debtors and payment of creditors in full or at least proportionately. Id. The court explained that a per se rule proscribing the payment of prepetition indebtedness may well be too inflexible to permit the effectuation of the rehabilitative purposes of the [Bankruptcy] Code. Id. at 932. 21. The Debtors submit that it is in the best interests of the estates to continue

maintaining the Policies and to pay any outstanding prepetition insurance premiums necessary to do so, as well as to revise, extend, supplement, or change insurance coverage, as necessary, pursuant to section 363(b)(1) of the Bankruptcy Code. 22. Courts in this jurisdiction and others have approved relief similar to the relief

requested in this Motion with respect to the maintenance of insurance coverage. See, e.g., Uno Restaurant Holdings Corp., Case No. 10-10209 (Bankr. S.D.N.Y. Feb. 17, 2010); In re Citadel Broad. Corp., Case No. 09-17442 (Bankr. S.D.N.Y. Feb. 3, 2010); In re Mesa Air Group, Inc., Case No. 10-10018 (Bankr. S.D.N.Y. Jan. 26, 2010); In re The Readers Digest Assn Inc., Case No. 09-23529 (Bankr. S.D.N.Y. Sept. 17, 2009); In re Lear Corp., Case No. 09-14326 (Bankr. S.D.N.Y. July 31, 2009); In re ION Media Networks, Inc., Case No. 09-13125 (Bankr. S.D.N.Y. June 23, 2009); In re Charter Commcns, Inc., Case No. 09-11435 (Bankr. S.D.N.Y. Apr. 15, 2009); In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. Apr. 13, 2009); In re

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BearingPoint Inc., Case No. 09-10691 (Bankr. S.D.N.Y. Mar. 13, 2009); In re Lyondell Chemical Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 23, 2009).4 II. 23. Sufficient Cause Exists for the Court To Authorize the Debtors To Maintain Financing Agreements. Section 364 provides, in relevant part, [i]f the [debtor] is unable to obtain

unsecured credit . . . , the court, after notice and a hearing, may authorize the obtaining of [secured] credit or the incurring of [secured] debt . . . 11 U.S.C. 364(c). In short, section 364 authorizes a debtor, in the exercise of its business judgment, to incur secured debt if the debtor has been unable to obtain unsecured credit and the borrowing is in the best interests of the estates. See, e.g., In re Mastercraft Interiors, Ltd., Case Nos. 06-12769, 06-12770, 2006 WL 4595946, at *4 (Bankr. D. Md. Aug. 10, 2006) (authorizing the debtors incurrence of secured financing because the debtors financing needs were immediate and critical to the success of the proceedings and the debtor was unable to obtain unsecured credit); In re Budget Group, Inc., Case No. 02-12152, 2002 Bankr. LEXIS 1050 (Bankr. D. Del. Aug. 1, 2002) (court authorized funding of acquisition of property on a secured basis where acquired property was necessary to maintain operations and debtors could not obtain such funding on an unsecured basis); In re Ames Dept. Stores, 115 B.R. 34, 38 (Bankr. S.D.N.Y. 1990) (with respect to postpetition credit, courts permit debtors-in-possession to exercise their basic business judgment consistent with their fiduciary duties); see also 3 Collier on Bankruptcy 364.03, at 364-7 (15th ed. Rev. 1999). Further, section 364(c) does not impose a duty on the debtor to request unsecured credit from every potential lender before seeking secured credit. See In re Snowshoe Co., Inc., 789 F.2d 1085, 1088 (4th Cir. 1986).
4

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

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24.

Generally, lenders are unwilling to finance insurance premiums on an unsecured

basis. Here, the PFAs provide financing at an interest rate that is considerably less than the Debtors other financing sources and, therefore, is justified under section 364(c). 25. Moreover, the ability to finance the Policies helps the Debtors to manage their

cash flow. If the Debtors are unable to continue making payments on the PFAs, under the terms of the PFAs, the premium financer may be permitted to terminate the applicable Policies. The Debtors then would be required to obtain replacement insurance on an expedited basis. If the Debtors were required to obtain replacement insurance and to pay a lump sum premium for such policy in advance, this payment likely would be greater than what the Debtors currently pay. Even if the premium financer were not permitted to terminate the insurance policies, any interruption of payment would have a severe and adverse effect on the Debtors ability to finance premiums for future policies. Accordingly, the Debtors believe that there are valid business justifications for maintaining the PFAs. 26. Courts in this and other jurisdictions have approved relief similar to the relief

requested in this Motion with respect to premium financing agreements. See, e.g., Mark IV Indus., Inc., Case No. 09-12795 (Bankr. S.D.N.Y. May 27, 2009); In re Charter Commcns, Inc., Case No. 09-11435 (Bankr. S.D.N.Y. Apr. 15, 2009); In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. Apr. 13, 2009); In re Tronox Inc., Case No. 09-10156 (Bankr. S.D.N.Y. Feb. 6, 2009); In re Lyondell Chemical Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 8, 2009); In re Lenox Sales, Inc., Case No. 08-14679 (Bankr. S.D.N.Y. Dec. 16, 2008); In re Wellman, Inc., Case No. 08-10595 (Bankr. S.D.N.Y. Feb. 26, 2008); In re Musicland Holding Corp., Case No. 06-10064 (Bankr. S.D.N.Y. Feb. 1, 2006); In re Calpine Corp., No. 05-60200 (Bankr. S.D.N.Y. Jan. 4, 2006).

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III. 27.

Cause Exists To Authorize the Debtors Financial Institutions To Honor Checks and Electronic Fund Transfers. The Debtors have sufficient funds to pay the amounts described herein in the

ordinary course of business by virtue of expected cash flows from ongoing business operations and anticipated access to cash collateral. Also, under the Debtors existing cash management system, the Debtors can readily identify checks or wire transfer requests as relating to an authorized payment made with respect to the Policies. Accordingly, the Debtors believe that checks or wire transfer requests, other than those relating to authorized payments, will not be honored inadvertently. Therefore, the Debtors respectfully request that the Court authorize all applicable financial institutions, when requested by the Debtors, to receive, process, honor, and pay any and all checks or wire transfer requests in respect of the relief requested herein. Motion Practice 28. This Motion includes citations to the applicable rules and statutory authorities

upon which the relief requested herein is predicated and a discussion of their application to this Motion. Accordingly, the Debtors submit that this Motion satisfies Rule 9013-1(a) of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules). Waiver of Bankruptcy Rule 6004(a) and 6004(h) 29. To implement the foregoing successfully, the Debtors seek a waiver of the notice

requirements under Rule 6004(a) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) and the 14 day stay of an order authorizing the use, sale, or lease of a property under Bankruptcy Rule 6004(h). The Debtors Reservation of Rights 30. Nothing contained herein is intended or should be construed as an admission of

the validity of any claim against the Debtors, a waiver of the Debtors rights to dispute any

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claim, or an approval or assumption of any agreement, contract, or lease under section 365 of the Bankruptcy Code. The Debtors expressly reserve their right to contest any invoice or claim related to the relief requested herein in accordance with applicable non-bankruptcy law. Notice 31. The Debtors have provided notice of this Motion to: (a) the Office of the United

States Trustee for the Southern District of New York; (b) the entities listed on the Consolidated List of Creditors Holding the 50 Largest Unsecured Claims; (c) the Debtors prepetition secured lenders or, if known, their counsel; (d) counsel to the agent for the Debtors proposed postpetition secured lenders; (e) counsel to Apollo Investment Corporation; (f) the parties to the Debtors franchise agreements or, if known, their counsel; (g) the attorneys general for each of the States in which any of the Debtors conduct a substantial amount of its business operations; (h) the Debtors insurance carriers under the Policies; (i) the Internal Revenue Service; and (j) those parties who have formally filed a request for notice in the Chapter 11 Cases pursuant to Bankruptcy Rule 2002. No Prior Request 32. other court. No prior request for the relief sought in this Motion has been made to this or any

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

New York, New York Dated: July 19, 2010

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

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EXHIBIT A Proposed Order

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.,1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-__________(___) Joint Administration Requested

ORDER AUTHORIZING, BUT NOT DIRECTING THE DEBTORS TO (A) MAINTAIN PREPETITION INSURANCE POLICIES AND PREMIUM FINANCING AGREEMENTS AND (B) PAY ALL PREPETITION OBLIGATIONS IN RESPECT THEREOF1
1

The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS) LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Corners) LLC (3650); Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix Bulfinch LLC (3639); Grand Prix Campbell / San Jose LLC (3638); Grand Prix Cherry Hill LLC (3634); Grand Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood / Denver South LLC (3701); Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC (4290); Grand Prix Fremont LLC (3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704); Grand Prix Gaithersburg LLC (3709); Grand Prix General Lessee LLC (9182); Grand Prix Germantown LLC (3711); Grand Prix Grand Rapids LLC (3713); Grand Prix Harrisburg LLC (3716); Grand Prix Holdings LLC (9317); Grand Prix Horsham LLC (3728); Grand Prix IHM, Inc. (7254); Grand Prix Indianapolis LLC (3719); Grand Prix Islandia LLC (3720); Grand Prix Las Colinas LLC (3722); Grand Prix Lexington LLC (3725); Grand Prix Livonia LLC (3730); Grand Prix Lombard LLC (3696); Grand Prix Louisville (RI) LLC (3700); Grand Prix Lynnwood LLC (3702); Grand Prix Mezz Borrower Fixed, LLC (0252); Grand Prix Mezz Borrower Floating, LLC (5924); Grand Prix Mezz Borrower Floating 2, LLC (9972); Grand Prix Mezz Borrower Term LLC (4285); Grand Prix Montvale LLC (3706); Grand Prix Morristown LLC (3738); Grand Prix Mountain View LLC (3737); Grand Prix Mt. Laurel LLC (3735); Grand Prix Naples LLC (3734); Grand Prix Ontario Lessee LLC (9976); Grand Prix Ontario LLC (3733); Grand Prix Portland LLC (3732); Grand Prix Richmond (Northwest) LLC (3731); Grand Prix Richmond LLC (3729); Grand Prix RIGG Lessee LLC (4960); Grand Prix RIMV Lessee LLC (4287); Grand Prix Rockville LLC (2496); Grand Prix Saddle River LLC (3726); Grand Prix San Jose LLC (3724); Grand Prix San Mateo LLC (3723); Grand Prix Schaumburg LLC (3721); Grand Prix Shelton LLC (3718); Grand Prix Sili I LLC (3714); Grand Prix Sili II LLC (3712); Grand Prix Term Lessee LLC (9180); Grand Prix Troy (Central) LLC (9061); Grand Prix Troy (SE) LLC (9062); Grand Prix Tukwila LLC (9063); Grand Prix West Palm Beach LLC (9065); Grand Prix Westchester LLC (3694); Grand Prix Willow Grove LLC (3697); Grand Prix Windsor LLC (3698); Grand Prix Woburn LLC (3699); Innkeepers Financial Corporation (0715); Innkeepers USA Limited Partnership (3956); Innkeepers USA Trust (3554); KPA HI Ontario LLC (6939); KPA HS Anaheim, LLC (0302); KPA Leaseco Holding Inc. (2887); KPA Leaseco, Inc. (7426); KPA RIGG, LLC (6706); KPA RIMV, LLC (6804); KPA San Antonio, LLC (1251); KPA Tysons Corner RI, LLC (1327); KPA Washington DC, LLC (1164); KPA/GP Ft. Walton LLC (3743); KPA/GP Louisville (HI) LLC (3744); KPA/GP Valencia LLC (9816). The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480.

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Upon the motion (the Motion)2 of the Debtors, as debtors and debtors in possession (collectively, the Debtors), for the entry of an order (this Order) authorizing the Debtors to (i) continue insurance coverage currently in effect, (ii) maintain the existing PFAs and make PFA Installment payments, and (iii) pay any other prepetition amounts that may be outstanding and that may come due under the Policies, including any amounts due under in connection with deductibles and self-insured retentions related to the Policies, all as more fully set forth in the Motion; and upon the First Day Declaration; and the Court having found that the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and the Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C. 1408 and 1409; and the Court having found that the relief requested in the Motion is in the best interests of the Debtors estates, their creditors, and other parties in interest; and the Debtors having provided appropriate notice of the Motion and the opportunity for a hearing on the Motion under the circumstances; and the Court having reviewed the Motion and having heard the statements in support of the relief requested therein before the Court (the Hearing); and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. 2. The Motion is granted to the extent provided herein. The Debtors are authorized, but not directed, to continue the Policies

uninterrupted, and to pay, to the extent that the Debtors determine that such payment is necessary
2

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

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or appropriate, any prepetition amounts that may be outstanding and that may come due under the Policies. 3. The Debtors are authorized, but not directed, to maintain the existing PFAs and

make PFA Installment Payments. 4. The Debtors are authorized, but not directed, to enter into new policies and PFAs

on an as-needed basis during the postpetition period without further Court approval. 5. The banks and financial institutions on which checks were drawn or electronic

payment requests made in payment of the prepetition obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment, and that all such banks and financial institutions are authorized to rely on the Debtors designation of any particular check or electronic payment request as approved by this Order. 6. Notice of the Motion as provided therein shall be deemed good and sufficient

notice, and the requirements of Bankruptcy Rule 6004(a) and the Local Bankruptcy Rules are satisfied by such notice. 7. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Order

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

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

granted pursuant to this Order in accordance with the Motion.

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10.

The Court retains jurisdiction with respect to all matters arising from or related to

the implementation of this Order. New York, New York Date: __________ 2010

United States Bankruptcy Judge

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EXHIBIT B Policy Schedule

K&E 16724442

Type of Policy

Carrier

Policy Number

Term

Annual Premium

Directors and Officers Liability

Zurich American Insurance Company

DOC - 594265701

11/01/2009 11/01/2010

$175,000

Deductible/SelfInsured Retention $250,000 deductible per claim or $650,000 deductible per claim for securities claims brought by owners of 8% Series C Cumulative Preferred Shares n/a

Coverage Limits

Broker

$10 million per occurrence/ aggregate

AON

Directors and Officers Liability - Excess (Layer 1) Directors and Officers Liability - Excess (Layer 2)

Ace American Insurance Company Chartis/ National Union Fire Insurance Company of Pittsburgh, Pa

DOX - G236 46195 - 002

11/01/2009 11/01/2010

$131,250

$10 million per occurrence/ aggregate $10 million per occurrence/ aggregate $1 million Employee Dishonesty; $1 million Forgery/ Alteration; $25,000 Money & SecuritiesInside/ Outside; $50,000 Computer Fraud; $50,000 Money Orders & Counterfeit Paper Currency; $50,000 Safe Box Liability; $10,000 Per Guest/ $50,000 Per Occurrence Guest Property Inside the Premises

AON

01- 357-32-79

11/01/2009 11/01/2010

$107,267

n/a

AON

Crime

Fidelity & Deposit Co. of Maryland

CCP00491541

11/01/2009 11/01/2010

$60,048

$1,000 deductible per claim; except $2,500 Per Guest for Guest Property Inside the Premises

A. J. Gallagher

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Type of Policy

Carrier

Policy Number

Term

Annual Premium

Deductible/SelfInsured Retention

Crime (Excess)

Crum & Forster Insurance

6260328369

11/01/2009 11/01/2010

$11,250

n/a

General Liability

New Hampshire Insurance Co.

GL 4572777 GL 4572778

11/01/2009 11/01/2010

$468,968.00

$25,000 self-insured retention per claim

Liquor Liability

AIG/Chartis New Hampshire Insurance Co. Commerce & Industry Insurance Co. National Union Fire Insurance Co Illinois National Insurance Co. Insurance Company of the State of Pennsylvania Commerce & Industry Insurance Co Insurance Company of the State of Pennsylvania Commerce and Industry Insurance Co.

GL 4572778 CA - 4576369 CA - 4576371 WC - 004883814

11/01/2009 11/01/2010 11/01/2009 11/01/2010

$9,940.00

$25,000 self-insured retention per claim n/a

Auto Liability

$93,959.00

Coverage Limits Deposit $1 million excess of $1 million Employee Dishonesty $1 million per occurrence/$2 million aggregate $1 million per occurrence/$2 million aggregate $1 million per occurrence

Broker

A. J. Gallagher

A. J. Gallagher

A. J. Gallagher

A. J. Gallagher

WC - 004883815 WC - 004883816 11/01/2009 11/01/2010 $357,351 $250,000 self insured retention per accident, person or disease $1 million per accident, employee, disease A. J. Gallagher

Workers Compensation

WC - 004883817

WC - 004883819

WC - 004883820 $50 million per occurrence/ aggregate

Umbrella

14227895

11/01/2009 11/01/2010

$226,513

$10,000 Self-Insured Retention

A. J. Gallagher

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Type of Policy Excess Liability Employers Practice Liability

Carrier Firemans Fund Insurance Co. Underwriters Lloyds London (IL) Empire Indemnity Insurance Company Princeton Excess and Surplus Lines Insurance Co. Lexington Insurance Company

Policy Number SHX 00071659577 7448242

Term 11/01/2009 11/01/2010 11/01/2009 11/01/2010

Annual Premium $52,994

Deductible/SelfInsured Retention n/a $25,000 self-insured retention per claim For earthquake in CA 5% of the value of loss/location subject to $100,000 minimum For earthquake in CA 5% of the value of loss/location subject to $100,000 minimum $25,000 deductible per occurrence For earthquake in Pac NW or named storm 5% of the value of loss/location subject to $100,000 minimum

Coverage Limits $50 million per occurrence/aggr egate $1 million per accident $75 million for CA earthquake between this policy and Princeton $75 million for CA earthquake between this policy and Princeton $200 million per occurrence and aggregate/ $75 million per building $200 million per occurrence and aggregate/ $55 million per building for earthquake

Broker A. J. Gallagher

$195,000

A. J. Gallagher

Property (Excess)

311113XQ-1

12/01/2009 12/01/2010

$115,173

AON

Property (Excess)

B2A3IM0000068-02

12/01/2009 12/01/2010

$28,793

AON

Commercial Property

025031377

12/01/2009 12/01/2010

$1,200,000

AON

Property (Excess)

Landmark Insurance Co.

LHT364934

12/01/2009 12/01/2010

$117,334

AON

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