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LATHAM & WATKINS LLP Michael J. Riela (MR-7829) Adam S. Ravin (AR-4452) 885 Third Avenue, Suite 1000 New York, New York 10022-4834 Telephone: (212) 906-1200 Facsimile: (212) 751-4864 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: INNKEEPERS USA TRUST, et al.1 Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

RESPONSE OF MOELIS & COMPANY LLC, THE FINANCIAL ADVISOR AND INVESTMENT BANKER TO THE DEBTORS, TO THE LIMITED OBJECTION FILED BY FIVE MILE CAPITAL REAL ESTATE ADVISORS LLC TO ITS FINAL FEE APPLICATION Moelis & Company LLC (Moelis), by and through its counsel, hereby files this response (this Response) to the limited objection (the Objection) [Docket No. 2241] filed by Five Mile Capital Real Estate Advisors LLC, as special servicer of the New Fixed Rate Mortgage Loan (Five Mile), to the Final Application of Moelis & Company LLC For Compensation For Professional Services Rendered And Reimbursement Of Actual And Necessary Expenses Incurred As Financial Advisor And Investment Banker To The Debtors And The Debtors-In-Possession For The Period From July 19, 2010 Through October 27, 2011 that

The list of Debtors in these Chapter 11 Cases along with the last four digits of each Debtors federal tax identification number can be found by visiting the Debtors restructuring website at www.omnimgt.com/innkeepers or by contacting Omni Management Group, LLC at Innkeepers USA Trust c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California 91436. The location of the Debtors corporate headquarters and the service address for their affiliates is: c/o Innkeepers USA, 340 Royal Poinciana Way, Suite 306, Palm Beach, Florida 33480.

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was filed on November 21, 2011 (Docket No. 2225) (the Final Fee Application). Moelis respectfully states as follows: PRELIMINARY STATEMENT 1. Moelis understands that Five Mile succeeded Midland Loan Services, Inc.

(Midland) as special servicer on or about October 27, 2011, and also understands that Five Mile or its affiliates were active during these chapter 11 cases in different capacities. 2. This dispute involves fees in the amount of $273,387, to which Moelis is entitled

under the plain terms of its Court-approved engagement letter (the Engagement Letter) with the above-captioned debtors (collectively, the Debtors).2 In its tardy Objection,3 Five Mile argues that Moelis engagement concluded on July 7, 2011, when the Ontario Plan (which involves only two of the 92 Debtors and affects only about 2.6% of the amount of the Debtors pre-petition funded secured debt) became effective. 3. Despite not being a party to the Engagement Letter, Five Mile seeks to impose its

own erroneous interpretation of the Engagement Letter upon the actual parties to that agreement. In doing so, it invites this Court to adopt an interpretation of a portion of a single sentence of the Engagement Letter that (a) neither of the parties to the Engagement Letter adopts; (b) is not consistent with the entire sentence of that Engagement Letter, or with the Engagement Letter as a whole; (c) ignores that the vast majority of the Debtors liabilities were restructured by

In the Objection, Five Mile asserts that Moelis is not entitled to $546,774 of Monthly Fees. See Objection at 5. Because 50% of Moelis Monthly Fees are credited against the Restructuring Fee, the actual amount of the fees in dispute is $273,387. The deadline for parties to file with this Court and serve any objection or other response to the Final Fee Application was December 5, 2011 at 4:00 p.m. prevailing Eastern Time (fourteen days after the Final Fee Application was filed and served on November 21, 2011). See Notice of Hearing Regarding Final Applications For Compensation For Fees And Reimbursement Of Expenses Of Professionals [Docket No. 2237]. Five Mile did not request, and was not granted, an extension of that deadline. The Objection was not filed until December 6, 2011. Accordingly, this Court may strike the Objection as untimely.
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transactions that were consummated on October 27, 2011 (not July 7); and (d) ignores the over 900 hours of recorded work Moelis performed for the Debtors between July 8, 2011 and October 27, 2011.4 4. The absurdity of Five Miles argument is apparent when one considers a principal

purpose for the Debtors retention of Moelis, which was to assist the Debtors in restructuring all or a material portion of their liabilities. The Ontario Plan that became effective on July 7, 2011 provides for the turnover of a single hotel to the holders of secured mortgage claims, and affects approximately $36.9 million (or about 2.6%) of the Debtors approximately $1.42 billion of prepetition funded secured debt. After the Ontario Plan became effective, 90 Debtors still remained in bankruptcy. No party contends that all or a material portion of the Debtors liabilities were restructured when the Ontario Plan became effective on July 7, and indeed Five Mile does not even try to make that argument in its Objection. 5. Five Miles assertion that Moelis engagement concluded on July 7, 2011 makes

even less sense when one considers that if Moelis engagement really had concluded on that date, Moelis could have stopped work right then. The Debtors then would have either had to consummate the remaining chapter 11 plans without an investment banker, or the Debtors would have had to hire (and pay) another investment banker to complete the job. Then, as of October 27 Moelis still would have been entitled to its $6 million Restructuring Fee pursuant to either Section 3(a) or Section 8(b) of the Engagement Letter (Section 8(b) is a tail fee provision that

Both parties to the Engagement Letter agree that it provides for Moelis engagement to run through October 27, 2011, which is the date that the chapter 11 plans involving 78 of the Debtors became effective and the date by which all of the Debtors had exited bankruptcy protection. In reliance on that interpretation of the Engagement Letter, Moelis performed (and the Debtors accepted) approximately 909 hours of recorded services between July 8, 2011 and October 27, 2011.

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is customary in investment bank engagement letters). Five Miles position breeds inefficiencies and does not comport with commercial reality. 6. Even if this Court were to accept Five Miles invitation to focus solely on the first

sentence of Section 8(a) of the Engagement Letter (on page 6 thereof), it is apparent that the sentence itself provides that the term of Moelis engagement ran through October 27, 2011. The first sentence of Section 8(a) of the Engagement Letter provides, in part, that Moelis engagement extends until the earliest of (i) the effective date of a chapter 11 plan of reorganization or liquidation confirmed in the Bankruptcy Cases, Five Miles argument is premised on phantom language that does not actually appear in that sentence. To wit, clause (i) of the first sentence of Section 8(a) does not say that Moelis engagement extends until the earliest of the first effective date of any chapter 11 plan. Rather, it simply says the effective date of a chapter 11 plan. Indeed, two plans of reorganization involving 78 of the 92 Debtors, the Fixed/Floating Plan and the Remaining Debtor Plan as to certain Debtors, became effective on October 27, 2011. 7. Moreover, when the entire first sentence of Section 8(a) and the unambiguous

intent of the parties evidenced therein are considered, it is clear that this sentence provides that Moelis engagement extended through October 27. Specifically, clauses (ii) through (v) of that sentence make it clear that the parties intended for Moelis engagement to continue until the occurrence of a major event in the Debtors cases (e.g., conversion to chapter 7, the appointment of a trustee or examiner with expanded powers, dismissal of the cases, and the consummation of the last Restructuring Transaction), unless a party wished to terminate the engagement sooner or the parties agreed to extend the engagement. The effective date of the Ontario Plan was not a major event in these cases.

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8.

It is noteworthy that no party informed Moelis or the Debtors that it believed the

Engagement Letter expired or terminated on July 7, 2011, until well after October 27, 2011. Indeed, Five Mile, Midland (the special servicer that preceded Five Mile) and Haynes & Boone all attended a meeting with the Debtors and Moelis on September 27, 2011 at Moelis offices to discuss case-related issues. During that meeting, no party informed Moelis or the Debtors that it took this position. Rather, Five Mile simply asserted this position after Moelis completed its work and filed the Final Fee Application. This demonstrates either that (a) Five Mile or its counsel concocted this half-baked argument after the fact in an effort to deny Moelis a portion of the fees it rightfully earned, or (b) Five Mile decided to lie in wait until after Moelis finished performing its over 900 recorded hours of work after July 7. If the former, then the Objection is nothing more than a post hoc, too-clever-by-half ruse that should be rejected out-of-hand. If the latter, then Five Mile is engaged in gamesmanship that should not be rewarded, and the Objection should be overruled as having been asserted either untimely or in bad faith. 9. Even if this Court does not strike the Objection as being untimely or as having

been filed in bad faith, Moelis respectfully submits that the Objection is meritless and that Moelis is entitled to allowance and payment of fees in the amount of $6,760,067.50 and reimbursement of expenses in the amount of $114,196.68.

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FACTS I. The Commencement of These Chapter 11 Cases and Moelis Retention 10. As of approximately March 24, 2010, the Debtors engaged Moelis to provide

general investment banking and financial advice in connection with the Debtors attempts to complete a strategic restructuring, reorganization, and/or recapitalization of all or a significant portion of their outstanding indebtedness, as well as to prepare for the potential commencement of chapter 11 cases. 11. On July 19, 2010 (the Petition Date), each of the 92 Debtors filed a voluntary

petition for relief under chapter 11 of the Bankruptcy Code. 12. On the Petition Date, the Debtors Application For The Entry Of An Order

Authorizing The Retention And Employment Of Moelis & Company LLC As Financial Advisor And Investment Banker To The Debtors Nunc Pro Tunc To The Petition Date [Docket No. 21] (the Retention Application) was filed with the Court. In the Retention Application, the Debtors requested authority to retain and employ Moelis as their financial advisor and investment banker pursuant to the Engagement Letter. Among other things, the Engagement Letter provides that Moelis would be paid (a) a Monthly Fee (as defined in the Engagement Letter) of $200,000 per month for the first five months and $150,000 per month during the remainder of the term of the Engagement Letter, plus (b) a Restructuring Fee (as defined in the Engagement Letter) of $6 million upon the consummation of a Restructuring Transaction. Fifty percent of the Monthly Fees would be credited against the Restructuring Fee. 13. Midland filed an objection to the Retention Application [Docket No. 134], and

Wells Fargo Bank, N.A. filed a joinder to that objection [Docket No. 145]. Moelis filed a supplemental declaration to respond to the arguments made in Midlands objection and the

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joinder [Docket No. 170]. This Court overruled Midlands objection and the joinder, finding that the Debtors decision to retain Moelis was within their business judgment and that the fees requested by Moelis were within the range of fees that have been approved in comparable transactions. See Transcript of August 12, 2010 Hearing at 31:21-24 & 48:24 49:10 [Docket No. 227]. 14. On August 12, 2010, this Court entered an order approving the Retention

Application [Docket No. 193] (the Retention Order). In the Retention Order, this Court approved Moelis retention as financial advisor and investment banker to the Debtors pursuant to the terms of the Engagement Letter. The Retention Order provides that Moelis compensation and expense reimbursement requests (including, without limitation, the Monthly Fee, the Restructuring Fee, and the indemnification, contribution and reimbursement provisions of the Engagement Letter) would be subject to review under the standards set forth in section 328(a) of the Bankruptcy Code, and provides that the Office of the United States Trustee alone is entitled to challenge the reasonableness of Moelis compensation and expense requests on all grounds, including reasonableness under section 330 of the Bankruptcy Code. II. The Debtors Plans of Reorganization 15. On June 29, 2011, this Court entered the Findings Of Fact, Conclusions Of Law,

And Order Confirming Debtors Plans Of Reorganization Pursuant To Chapter 11 Of The Bankruptcy Code [Docket No. 1804] (the Confirmation Order). The Confirmation Order confirmed four separate chapter 11 plans that were set forth in Debtors Plans Of Reorganization Pursuant To Chapter 11 Of The Bankruptcy Code [Docket No. 1799] (collectively, the Plans). The four Plans consisted of (a) the Fixed/Floating Plan (involving seventy-one debtors), (b) the

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Anaheim Plan (involving three debtors), (c) the Ontario Plan (involving only two debtors), and the Remaining Debtor Plan (involving sixteen debtors). 16. The Ontario Plan principally provides for the turnover of the Hilton Hotel in

Ontario, California (the Ontario Hotel) to the holders of claims arising out of the Ontario Hotels mortgage loan in satisfaction of such claims. See Disclosure Statement For Debtors Plans Of Reorganization Pursuant To Chapter 11 Of The Bankruptcy Code [Docket No. 1444] (the Disclosure Statement) at 10. The Ontario Plan affects approximately $36.9 million of the Debtors pre-petition funded secured debt. See Disclosure Statement at 15. That amount is only about 2.6% of the $1.42 billion of total funded secured debt of the Debtors enterprise as of the Petition Date. See Declaration of Dennis Craven, Chief Financial Officer Of Innkeepers USA Trust, In Support Of First-Day Pleadings, 17. The Ontario Plan became effective on July 7, 2011 [Docket No. 1859], and Five Mile now asserts that Moelis engagement concluded at that time. 17. The effective date of the Remaining Debtor Plan for nine of the sixteen Debtors

under that Plan was July 15, 2011 [Docket No. 1911]. The Anaheim Plan became effective on July 28, 2011 [Docket No. 1965]. 18. On October 21, 2011, this Court entered an order modifying the Fixed/Floating

Plan [Docket No. 2181]. A modified Fixed/Floating Plan was attached to that order. The effective date of the Fixed/Floating Plan and the Remaining Debtor Plan for the last seven of the Debtors under that Plan was October 27, 2011 [Docket No. 2190]. Thus, on October 27, seventy-eight Debtors (which had approximately $1.18 billion of pre-petition funded secured debt in the aggregate) emerged from chapter 11.

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19.

The Final Fee Application reflects that Moelis professionals recorded

approximately 909 hours providing services to the Debtors between July 8, 2011 and October 27, 2011. See Final Fee Application, Exhibit B at 37-40, 177-207. Among other things, Moelis provided the following professional services during that period: Moelis worked tirelessly toward closing the transaction with Cerberus Series Four Holdings, LLC (Cerberus) and Chatham Lodging Trust (Chatham) through July 2011. The transaction was ready to be completed by August 5, 2011. As the Debtors stated in their amended adversary proceeding complaint against Cerberus and Chatham: On August 5, the parties stood at the goal line to consummate the transaction and close the deal. All closing documents were finalized, including loan assumption documents, franchise agreements, and a detailed funds flow memorandum. The Debtors had authorized wire transfers and the parties were preparing to initiate payments. Amended Complaint at 4. (Adv. Pro. No. 11-02557, Docket No. 45). After Cerberus and Chatham declined to close the transaction in August, Moelis prepared to testify in the adversary proceeding the Debtors commenced against Cerberus, Chatham, INK Acquisition LLC, and INK Acquisition II LLC. Moelis begin formulating a new marketing process in the event a transaction with Cerberus and Chatham ultimately could not be consummated. Marketing materials were shared with Midland, and Midland never objected to Moelis preparation of such materials on the grounds that Moelis engagement was already complete. After the Debtors, Cerberus and Chatham agreed to revised terms, Moelis assisted the Debtors in consummating that transaction. Moelis met with various parties-in-interest in these cases, including Five Mile and Midland, to address case-related issues such as the consummation of a new transaction after August 2011. In its Objection, Five Mile does not dispute that Moelis services during the

20.

period from July 8, 2011 through October 27, 2011 were necessary and appropriate. Indeed,

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Five Mile did not inform Moelis of its position that the engagement was concluded as of July 7, until well after the Final Fee Application was filed. III. Moelis Final Fee Application and Five Miles Tardy Objection 21. Moelis filed the Final Fee Application on November 21, 2011 [Docket No. 2225],

requesting allowance of $6,760,067.50 of compensation and reimbursement of $114,196.68 of expenses, on a final basis. The Final Fee Application was served on November 21, 2011 on numerous parties, including attorneys at Haynes & Boone, LLP (by email service). See Affidavit of Service [Docket No. 2226]. 22. Pursuant to the Notice of Hearing Regarding Final Applications For Compensation

For Fees And Reimbursement Of Expenses Of Professionals filed on November 23, 2011 [Docket No. 2237], objections and other responses to the Final Fee Application were due to be filed and served by 4:00 p.m. prevailing Eastern Time fourteen days from the date of filing and service thereof (i.e., December 5, 2011 at 4:00 p.m. prevailing Eastern Time) (the Objection Deadline). No party filed and served an objection or other response to the Final Fee Application by the Objection Deadline, and no party asked Moelis for an extension of the Objection Deadline. 23. On December 6, 2011, Five Mile filed its tardy Objection. RESPONSE I. The Engagement Letter Unambiguously Entitles Moelis to All of the Fees it Requests in the Final Fee Application 24. For the reasons described below, the Engagement Letter unambiguously entitles

Moelis to all of the fees it requests in the Final Fee Application, including all of its Monthly Fees. The inaccurate interpretation of the Engagement Letter that non-party Five Mile seeks to foist upon Moelis and the Debtors should be rejected.

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A. 25.

Contract Interpretation Under New York Law The Engagement Letter is governed by New York law. See Engagement Letter

10. Under New York law, the fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties intent. See, e.g., Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 569, 780 N.E.2d 166, 170 (N.Y. 2002); Welsbach Elec. Corp. v. MasTec North America, Inc., 7 N.Y.3d 624, 629, 859 N.E.2d 498, 500 (N.Y. 2006). In interpreting a contract, the goal should be a practical construction of the language used so that the reasonable expectations of the parties are realized. See, e.g., Currier, McCabe & Assocs., Inc. v. Maher, 906 N.Y.S.2d 129, 132, 75 A.D. 889, 891-92 (App. Div. 3d Dept 2010). 26. If the court determines that a contract is unambiguous, it may consider only the

contract itself in interpreting the parties intent. See, e.g., CV Holdings, LLC v. Artisan Advisors, LLC, 780 N.Y.S.2d 425, 427, 9 A.D.3d 654, 656 (App. Div. 3d Dept 2004). On the other hand, if the court concludes that the agreement is ambiguous, extrinsic evidence may be used to discern its meaning. See, e.g., Greenfield, 98 N.Y.2d at 569. The determination of whether a contracts terms are ambiguous is a question of law decided by the court. See id. Provisions in a contract are not ambiguous merely because the parties interpret them differently. See, e.g., Currier, 906 N.Y.S.2d at 132, 75 A.D. at 891. 27. In determining whether a contract is ambiguous, courts must review the contract

as a whole, and consider the relation of the parties and the circumstances under which it was executed. Particular words should be considered, not as if isolated from the context, but in light of the obligation as a whole and the intention of the parties as manifested thereby. Form should not prevail over substance and a sensible meaning of words should be sought. See id., 906

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N.Y.S.2d at 131, citing William C. Atwater Co. v. Panama Railroad Co., 246 N.Y. 519, 524 (N.Y. 1927). 28. Where a literal construction of a contract would defeat and contravene the

purpose of the agreement, it should not be so construed. See id., citing Tougher Heating & Plumbing Co. v. State of New York, N.Y.S.2d 289, 73 A.D.2d 732 (App. Div. 3d Dept 1979). Instead, not merely literal language, but whatever may be reasonably implied therefrom, may be taken into account. See id. B. 29. Section 8(a) of the Engagement Letter Does Not Support Five Miles Argument The sentence in the Engagement Letter upon which Five Mile relies is

unambiguous, and it does not support its argument. The first sentence of Section 8(a) of the Engagement Letter (on page 6) provides as follows: Our engagement hereunder shall extend until the earliest of (i) the effective date of a chapter 11 plan of reorganization or liquidation confirmed in the Bankruptcy Cases, (ii) the conversion of the Bankruptcy Cases to chapter 7 of the Bankruptcy Code, (iii) appointment of a chapter 11 trustee or an examiner with expanded powers in the Bankruptcy Cases, (iv) dismissal of the Bankruptcy Cases, and (v) the consummation of the last Restructuring Transaction, as agreed upon by Moelis and the Company; provided, however, that our engagement may be (x) terminated earlier, with or without cause, either by us or by you upon 15 days prior written notice thereof to the other party, (y) terminated earlier as provided elsewhere herein or (z) extended, in writing, but the Company and us. Engagement Letter 8(a). 30. Five Miles entire argument is premised on phantom language that does not

actually appear in clause (i) of that sentence. In particular, clause (i) does not say that Moelis engagement extends only until the earliest of the first effective date of any chapter 11 plan. Rather, it simply says the effective date of a chapter 11 plan. Indeed, two plans of reorganization, the centerpiece Fixed/Floating Plan and the Remaining Debtor Plan as to certain

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Debtors, became effective on October 27, 2011. As noted above, 78 Debtors emerged from chapter 11, and approximately $1.18 billion of pre-petition funded secured debt was restructured, through transactions that closed that day. 31. Consideration of clauses (ii) through (v) of the first sentence of Section 8(a) of the

Engagement Letter reinforces that Moelis engagement ran through October 27. Those clauses make clear that Moelis engagement was intended to continue until the occurrence of a major event in the Debtors cases (e.g., conversion to chapter 7, the appointment of a trustee or examiner with expanded powers, dismissal of the cases, and the consummation of the last Restructuring Transaction), unless a party wished to terminate the engagement sooner or the parties agreed to extend the engagement. The effective date of the Ontario Plan was not a major event in these cases, and neither the Debtors nor Moelis notified the other of their intent to terminate the engagement before October 27. Accordingly, when the entire first sentence of Section 8(a) of the Engagement Letter is taken into account, it is clear that the parties did not intend for Moelis engagement to end on the effective date of the Ontario Plan. 32. In light of the language that is actually employed in the first sentence of Section

8(a) of the Engagement Letter and the intent of the parties clearly evidenced therein, the only rational interpretation is that the effective date of a chapter 11 plan of reorganization or liquidation confirmed in the Bankruptcy Cases occurred on October 27, 2011. The Objection must be overruled on that basis. C. 33. Other Key Considerations Refute Five Miles Position As noted above, when interpreting contracts under New York law, courts must (a)

consider the intent of the parties to the contract (which is the fundamental consideration of contract interpretation under New York law), (b) interpret the contract as an integrated whole,

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and (c) consider the purposes of the contract. See supra. When these premises are considered, it is readily apparent that the term of Moelis engagement extended through October 27, 2011. Consequently, Moelis is entitled to all of the fees it requests in the Final Fee Application. 34. First, both the Debtors and Moelis intended for the engagement to run through

the date upon which all the Plans became effective. Powerful evidence of the parties mutuallyshared intent was that Moelis provided (and the Debtors accepted) over 900 recorded hours of services between July 8, 2011 and October 27, 2011. See Final Fee Application, Exhibit B at 37-40, 177-207. In its Objection, Five Mile does not dispute that Moelis services during that period were necessary and appropriate. 35. Second, as stated above, under New York law, the first sentence of Section 8(a)

of the Engagement Letter must be construed in light of the agreement as a whole and in light of the intent of the parties as manifested thereby. See, e.g., Tougher Heating & Plumbing Co. v. State of New York, N.Y.S.2d 289, 290-91, 73 A.D.2d 732, 733 (App. Div. 3d Dept 1979) (stating that it is a fundamental principle that the intention of the parties must be gleaned from all corners of the document, rather than from sentences or clauses viewed in isolation.) (internal citation omitted). Read as a whole, the Engagement Letter clearly provides that the Debtors agreed to engage Moelis to perform financial advisory and investment banking services, with the goal of restructuring all or a material portion of the Debtors liabilities in one or a series of transactions. The Engagement Letter defines Restructuring Transaction as follows: As used herein, the term Restructuring Transaction shall mean and include any restructuring, reorganization, rescheduling, or recapitalization of all or any material portion of the Companys liabilities, however such result is achieved, including without limitation through any one or more of the following means, whether in one or a series of transactions: a plan of reorganization or going concern liquidation (a Plan) confirmed in connection with any case or cases commenced by or against the Company or any of its subsidiaries or affiliates, whether individually or on a consolidated basis (a Bankruptcy Case) under title 11 of the United States Code (the Bankruptcy Code),

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exchange offer, consent solicitation, covenant relief, rescheduling of debt maturities, change in interest rates, settlement or forgiveness of debt, conversion of debt into equity, other amendments to the terms of the Companys debt instruments, issuance of new securities (other than to Apollo Investment Corporation or its affiliates (Apollo)), sale or other transfer of equity, assets or other interests of the Company other than to Apollo. Engagement Letter preamble (emphasis added). 36. The parties to the Engagement Letter contemplated that a Restructuring

Transaction (a) would involve all or any material portion of the Debtors liabilities, and (b) may take place in a series of transactions. Certainly, the Engagement Letter did not contemplate that Moelis engagement would abruptly end after the completion of the first step of a restructuring, which involved a tiny fraction of the Debtors total debt. The Engagement Letter also provides that Moelis would be entitled to its Monthly Fee during each month of its engagement. See Engagement Letter 3(a). Thus, taking the entire Engagement Letter into account, it would make no sense for the engagement to abruptly end after the completion of the first step of the Debtors restructuring, when only about 2.6% of the Debtors pre-petition funded secured debt was restructured under a plan involving only two of 92 Debtor entities. 37. Third, a principal purpose for Moelis engagement was to achieve a restructuring

of all or a material portion of the Debtors liabilities, whether in one transaction or a series of transactions. Five Miles construction of a portion of the first sentence in Section 8(a) of the Engagement Letter would certainly defeat and contravene that purpose. Accordingly, the Engagement Letter cannot be construed in the manner advocated by Five Mile. See, e.g., Currier, McCabe & Assocs., Inc. v. Maher, 906 N.Y.S.2d at 132, 75 A.D. at 892, citing Tougher, N.Y.S.2d at 291, 73 A.D.2d at 733 (stating that every part of the contract should be interpreted to give effect to its general purpose. Where, as here, a literal construction defeats and contravenes the purpose of the agreement, it should not be so construed.).

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II.

If This Court Determines That the Engagement Letter Does Not Unambiguously Entitle Moelis to All the Fees It Requests in the Final Fee Application, Then This Court May Rule that the Engagement Letter is Ambiguous and Admit Extrinsic Evidence 38. If this Court does not hold that the Engagement Letter unambiguously provides

that the term of Moelis engagement ran through October 27, 2011, this Court may rule that the first sentence of Section 8(a) of the Engagement Letter is ambiguous and admit extrinsic evidence to interpret that sentence. 39. When extrinsic evidence such as the following are considered, it is apparent that

Five Miles interpretation of the Engagement Letter is erroneous: Ninety-two Debtors commenced chapter 11 cases, and they had approximately $1.42 billion of funded secured debt as of the Petition Date. The Ontario Plan involved only two Debtors and restructured only approximately $36.9 million of the Debtors pre-petition funded secured debt. Between July 8, 2011 and October 27, 2011, Moelis recorded over 900 hours of work performed for the Debtors. Due in part to Moelis efforts, the Debtors were able to consummate chapter 11 plans for each entity by October 27, 2011. On October 27, 2011, seventy-eight Debtors emerged from chapter 11 when the Fixed/Floating Plan and the Remaining Debtor Plan as to certain Debtors became effective. Approximately $1.18 billion of pre-petition funded secured debt was restructured through the transactions that closed that day. If Moelis engagement really had concluded on July 7, Moelis could have stopped work right then. The Debtors then would have either had to complete their restructuring without an investment banker, or the Debtors would have had to hire (and pay) another investment banker to complete the job. Then, as of October 27 Moelis still would have been entitled to its $6 million Restructuring Fee pursuant to either Section 3(a) or Section 8(b) of the Engagement Letter. No party informed either Moelis or the Debtors that it believed the Engagement Letter expired or terminated on July 7, 2011, until well after October 27, 2011. Rather, Five Mile did not assert this position until after all of Moelis work was done and after Moelis filed the Final Fee Application.

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WHEREFORE, Moelis respectfully requests that this Court (a) overrule the Objection; (b) approve the Final Fee Application in full and on a final basis; and (c) grant Moelis such other and further relief as is just and proper. Dated: December 9, 2011 LATHAM & WATKINS LLP

By: /s/ Michael J. Riela Michael J. Riela (MR-7829) Adam S. Ravin (AR-4452) 885 Third Avenue, Suite 1000 New York, New York 10022-4834 Telephone: (212) 906-1200 Facsimile: (212) 751-4864 Attorneys for Moelis & Company LLC

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