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

Marines KIRKLAND & ELLIS LLP 60 1 Lexington A venue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. (admitted pro hac vice) Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 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, eta!./ Debtors.

Chapter 11 Case No. 10-13800 (SCC) Jointly Administered

__________________________________ )

DEBTORS' OMNIBUS REPLY TO OBJECTIONS FILED BY MIDLAND LOAN SERVICES, INC. (AND JOINDERS) TO MOTIONS AND APPLICATIONS TO BE HEARD AT THE AUGUST 12,2010 HEARING
The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtor's federal tax identification number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (Rl) 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 Comers) 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 Bulfmch LLC (3639); Grand Prix Campbell I 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 I 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 (continued on next page)

Innkeepers USA Trust and certain of its affiliates, as debtors and debtors in possession (collectively, the "Debtors"), hereby submit this omnibus reply to the objections of Midland Loan Services, Inc. ("Midland"), as joined, in certain instances, by Wells Fargo Bank, N.A. ("Wells Fargo") 2 and, in one instance, by TriMont Real Estate Advisors, Inc.
("TriMont").3 In support of this reply, and in further support of their motions and applications,

the Debtors respectfully state as follows:

Preliminary Statement

Perhaps not surprisingly given Midland's desire to thwart the Debtors' efforts, the Debtors are forced to expend considerable time, energy, and resources responding to baseless or otherwise premature objections to standard relief sought at the Debtors' hearing scheduled on
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 Comer 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

Wells Fargo and U.S. Bank National Association (defined in the filed joinders as either "Certain Prepetition Lenders" or "Property Level Lenders") are Trustees for the registered holders of certain of the prepetition secured debt. TriMont is special servicer under the Debtors' prepetition floating rate mezzanine loan and Anaheim mezzanine loan.

August 12, 2010-time that would more appropriately be spent focusing on ensuring a smooth transition into bankruptcy. Midland's strategy is to construct roadblocks with overly aggressive litigation and tactics to advance issues that are simply not before the Court. To somehow further its agenda, Midland has filed five objections to relief sought by the Debtors, including to the Debtors' (i) motion for authority to continue honoring certain obligations to their critical property managers, (ii) motion to establish procedures for interim compensation, and (iii) applications to retain their advisors. 4 The Bankruptcy Code does not bestow upon Midland (or any creditor for that matter) the right to play "creditor in possession," nor to prevent the Debtors from preserving their vital relationship with their property managers, prevent the Debtors from accessing the necessary input from qualified advisors, or, perhaps most obviously, dictate the terms of interim compensation procedures. The only logical explanation for the premature, spurious nature of these objections is that Midland is determined to derail the Debtors' progress and distract the Court from the task at hand, which is to consider the Debtors' requests for approval of customary and, in certain respects, purely procedural relief. While it is clear that nothing in the relief sought in these motions and applications is intended to abrogate Midland's rights as they pertain to the Debtors' use of cash collateral, Midland's objections attempt to recharacterize the Debtors' pleadings to bring these cash collateral matters before the Court prematurely. The Debtors do not dispute that the Bankruptcy Code requires lender consent or, alternatively, Court authorization to use cash collateral upon a showing of adequate protection. However, the Debtors' authorization to use cash collateral has

The Debtors reached out to counsel to Midland and the parties filing joinders after the objections were filed and are hopeful to reach consensus wherever possible.

been set to be heard by the Court at the September 1, 2010 hearing. Accordingly, Midland's objections as they relate to the Debtors' use of cash collateral are premature and not appropriate in connection with, or are simply unrelated to, the Debtors' requests to honor their property management obligations, set compensation procedures, and retain estate professionals. In

response to Midland's objection to the use of its cash collateral included in each of its five objections, the Debtors will add language to the proposed orders approving the objected-to motions and applications that makes clear such orders neither authorize the Debtors' use of cash collateral nor prejudice any entities' rights with respect to any request by the Debtors to use cash collateral.5 Therefore, the Debtors do not address this concern below with respect to specific responses to each objection. As discussed herein and with respect to each of the motions and applications to be heard at the August 12 hearing, the Debtors submit that approval of the relief sought is amply justified in the context of these chapter 11 cases (the "Chapter 11 Cases") and respectfully request that the Court overrule the objections and authorize such relief.

The proposed language is as follows: "This Order shall neither authorize the Debtors to use any cash collateral (as defined in section 363(a) of the Bankruptcy Code) nor prejudice any entities' rights with respect to any request by the Debtors to use cash collateral. Nothing in this Order shall affect in any way the Interim Order (A) 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. 36I, 362, and 363, and (B) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 (b) [Docket No. 54] or any subsequent order entered granting the relief requested in the Debtors' Motion for the Entry of Interim and Final Orders (A) 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, (B) to the Extent Approved in the Final Order, Granting Senior Secured, Priming Liens on Certain Postpetition Intercompany Claims, (C) to the Extent Approved in the Final Order, Granting Administrative Priority Status to Certain Postpetition Intercompany Claims, and (D) Scheduling a Final Hearing Pursuant to Bankruptcy Rule 4001 (b) [Docket No. 13]."

I.

Property Management Motion

On the Petition Date, to effectuate a seamless and successful transition into chapter 11, the Debtors filed the Property Management Motion6 seeking the authority, but not the direction, to continue performing under various hotel management agreements (the "Hotel
Management Agreements") between the Debtors and their property managers (the "Property Managers").? The Property Managers' services are critical to the Debtors' reorganization, and

the Property Managers cannot be replaced without increased cost, significant delay, and the approval of certain of the Debtors' franchisors. As a result, as part of the relief requested in the Property Management Motion on a final basis, the Debtors seek the authority to honor, in their discretion, certain prepetition amounts owed to the Property Managers, including amounts owed on account of the Debtors' obligation to indemnify the Property Managers for liabilities arising out of the Property Managers' performance under the Hotel Management Agreements. The Debtors are not seeking authority under the Property Management Motion to satisfy prepetition claims directly and solely against the Debtors. And the Debtors have

explained to the Property Managers that the Bankruptcy Code prohibits the payment of prepetition claims against the Debtors (unless the Court has entered an order authorizing such payments). As such, the Debtors have directed the Property Managers not to pay such

obligations. At the same time, the automatic stay-that prevents third parties from seeking to recover from the Debtors on account of prepetition claims-does not extend to actions brought directly against the Property Managers.
6

See 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 Agreement [Docket No. 12] (the "Property Management Motion"). Island Hospitality, Inc. ("Island") manages all but one of the Debtors' 72 hotels. Dimension Development Company, Inc. ("Dimension") manages the Debtors' hotel located in Ft. Walton Beach, Florida.

Under the Hotel Management Agreements, the Debtors are obligated to defend and indemnify the Property Managers. The performance of these obligations by the Debtors includes paying the costs of defending the Property Managers if a third party threatens litigation or sues the Property Managers as a result of the Property Managers acting as the Debtors' agents. Additionally, these obligations include indemnifying the Property Managers for judgments against the Property Managers that result from the Property Managers being found liable to third parties resulting from the Property Managers honoring their obligations under Hotel Management Agreements. These obligations are important to the Property Managers because they act as agents for the Debtors and may become liable to third parties in fulfilling their obligations under the Property Management Agreements. Consequently, the Property

Management Motion requests the authority, but not the direction, for the Debtors to honor their obligations to the Property Managers that arise from the need to defend the Property Managers against litigation (including actions to collect amounts from the Property Managers that were incurred before the commencement of the Chapter 11 Cases or to enforce remedies on account of any breaches of contract), indemnify the Property Managers for judgments on account of such actions, and reimburse the Property Managers if the Debtors determine that resolving threatened litigation or attempts by third parties to exercise remedies is an exercise of their reasonable business judgment in light of, among other factors, the cost of potential litigation and the potential disruption to their business from such litigation or exercise of remedies by the third parties.

Despite Midland's indication to the Debtors that it intended to withdraw the objection to the Property Management Motion8 that it filed before the first day hearing, Midland later filed an amended objection to the Debtors' Property Management Motion. 9 Through the Property Management Objection, Midland contests the Debtors' request to reimburse Island on account of certain obligations arising under the Hotel Management Agreements. Midland's

contention in the Property Management Objection that the relief requested in the Property Management Motion constituted a request for a "comfort order" misconstrues the Property Management Motion and ignores the Debtors' express requests for relief in the Property Management Motion.!O The Debtors explicitly acknowledged in the Property Management

Motion and in front of the Court at the first day hearing that the Debtors sought entry of a final order (but not as part of the interim order) authorizing the Debtors to honor, in their discretion, prepetition obligations under the Hotel Management Agreements. 11 This relief is necessary

See Midland Loan Services, Inc. 's Objection to Debtors' Motion for the Entry of Interim and Final Orders Authorizing, but not Directing, the Debtors to Continue to Honor Certain Prepetition Obligations Incurred Pursuant to Hotel Management and Shared Services Agreements [Docket No. 38]. Midland communicated to the Debtors that it was withdrawing its original objection to the Property Management Motion. Based on this, the Debtors believed that Midland was not intending to object to the Property Management Motion. But given the filing of the amended Property Management Objection (as defined herein) and subsequent discussions, the Debtors are responding to what appears to be a new objection from Midland. See Midland Loan Services, Inc. 's Amended Objection to Debtors' Motion for the Entry of Interim and Final Orders Authorizing, but not Directing, the Debtors to Continue to Honor Certain ?repetition Obligations Incurred Pursuant to Hotel Management and Shared Services Agreements [Docket No. 137] (the "Property Management Objection"). The Property Management Objection was joined by Wells Fargo [Docket No. 143] and TriMont [Docket No. 146].

10 11

Property Management Objection, at~ 6. Property Management Motion, at ~ 10 (" ... the Debtors are requesting the authority ... on a final basis, to honor, in its discretion, any outstanding prepetition amounts owed on account of the Hotel Manager Obligations or the Shared Services Obligations in accordance with the order granting the relief requested in the Cash Collateral Motion and consistent with their prepetition practices as described in the Cash Management Motion."); 7/20/10 Hr'g Tr. at 43:20-44:1 ("So we would agree to revise the order to say that Island Management and Dimension would not receive any payments during the period between the interim and the fmal, and we'll be before Your Honor on the final basis to approve not only the payments of all postpetition amounts, but also the payments on the prepetition amounts, as well as honoring our other obligations").

because of the critical services the Property Managers provide for the Debtors and the substantial harm that may befall the Debtors (as well as Midland) if the relief is not granted. In Midland's haste to impede the progress of the Debtors' restructuring (no matter the cost), Midland fails to consider the adverse consequences of the Debtors not being able to perform under the Hotel Management Agreements. Absent the relief requested in the Property Management Motion, the Debtors may have no alternative but to find replacement property managers (under duress), which could result in significant damage to the value of the Debtors' hotels and cause significant financial and reputational damage in the process (including putting the Debtors' franchise agreements at risk), to the irreversible detriment of the Debtors and their stakeholders.
It cannot credibly be denied that a sound business justification would support the

Debtors' decision to assume and continue performing under the Hotel Management Agreements if such an assumption motion were before the Court.I 2 As explained in the Property

Management Motion and the First Day Declaration, 13 the Property Managers provide indispensible services to the Debtors' enterprise and have acquired a unique understanding of the Debtors' operations that cannot be obtained elsewhere. Among other services critical to running

12

Courts defer to a debtor's business judgment in determining whether to assume or reject an executory contract or unexpired lease and, upon finding that a debtor has exercised its sound business judgment, courts will approve the assumption or rejection under section 365(a) of the Bankruptcy Code. See, e.g., Bildisco & Bildisco, 465 U.S. at 523 (recognizing the "business judgment" standard used to approve rejection of executory contracts); Nostas Assocs. v. Costich (In re Klein Sleep Products, Inc.), 78 F.3d 18, 25 (2d Cir. 1996) (recognizing the "business judgment" standard used to approve rejection of executory contracts); In re Orion Pictures Corp., 4 F.3d 1095, 1099 (2d Cir. 1993) (holding that the business judgment test applies to a bankruptcy court's review of a debtor's decision to assume or reject executory contract); In re Gucci, 193 B.R. 411 (S.D.N.Y. 1996) (approving assumption of an executory contract because, inter alia, it met the business judgment standard); In re Child World, Inc., 142 B.R. 87, 89 (Bankr. S.D.N.Y. 1992) (stating that a debtor may assume or reject an unexpired lease under section 365(a) in the exercise of its "business judgment"). See Amended Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, in Support of First-Day Pleadings [Docket No. 33].

13

the Debtors' hotels, Island employs and manages 2,600 employees stationed at the Debtors' hotels, acquires the various goods and services used in the operation of the hotels, and performs the invoice processing, vendor payment, and financial accounting functions that the Debtors lack the resources to perform themselves. (Dimension provides similar services for the Debtors' Ft. Walton Beach, Florida hotel.) In addition, because of the nature of the Property Managers' operations and their financial resources, if the Property Managers were forced to continue performing under the Hotel Management Agreements without the Debtors being authorized to reimburse the Property Managers for prepetition obligations, the Property Managers could face short-term liquidity restraints and their commercial viability may be threatened. Ensuring the Property Managers' performance, and thus the continued smooth operation of the Debtors' hotels, by reimbursing the Property Managers in accordance with the Hotel Management Agreements, is therefore a valid exercise of the Debtors' business judgment and the starting point to any effort to maximize the value ofthe Debtors' estates. Ample authority exists to support the payment of these prepetition obligations pursuant to sections 363(b) and 105(a) of the Bankruptcy Code where, as here, a sound business purposes exists for doing so and such payment is necessary to preserve the Debtors' ability to reorganize. 14 Moreover, courts in this district have granted similar relief authorizing debtors to

14

Courts have authorized payment ofprepetition obligations under section 363(b) ofthe Bankruptcy Code where, as here, a sound business purpose exists for doing so. See, e.g., In reI onosphere 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 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); In re Tropical Sportswear Int 'l 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"). In addition, numerous courts have used their section 105(a) powers under the "necessity of payment" doctrine to authorize payments of a debtor's prepetition obligations where, as in the case here, such payment was necessary to effectuate the "paramount purpose" of chapter 11 reorganization-to preserve the debtor's ability for (continued on next page)

satisfy prepetition obligations owed to service providers or vendors that are essential to maintaining the debtors' day-to-day operations and preserving the value of the debtors' business as a going-concern. IS Importantly, the Debtors have structured the relief requested in the Property Management Motion in a manner that maximizes the preservation of their key service relationships with the Property Managers while limiting the potential exposure to their estates. First, instead of assuming the Hotel Management Agreements, the Debtors are pursuing the less burdensome alternative of requesting the authority to honor obligations under the Hotel Management Agreements in the Debtors' discretion. The assumption of the Hotel Management Agreements would require the Debtors to honor all obligations and would result in administrative expense priority status for all liabilities arising from the Hotel Management Agreements in the event that the Debtors subsequently were forced to cease performing under the agreements. 16 Second, because the requested relief only provides the authority (but not the

rehabilitation. See Ionosphere Clubs, 98 B.R. at 176; see also In re Chateaugay Corp., 80 B.R. 279 (S.D.N.Y. 1987); In re Boston & Me. Corp., 634 F.2d 1359, 1382 (1st Cir. 1980) (recognizing the existence ofajudicial power to authorize trustees to pay claims for goods and services that are indispensably necessary to the debtors' continued operations).
15

See, e.g., In re Citadel Broad. Corp., Case No. 09-17442 (Bankr. S.D.N.Y. Feb. 3, 2010) [Docket No. 101] (authorizing, but not directing, debtor to satisfy up to $10 million of prepetition claims of on-air talent and station affiliates); In re Extended Stay Inc., Case No. 09-13764 (Bankr. S.D.N.Y. July 20, 2009) [Docket No. 188] (authorizing debtor to reimburse hotel manager for critical operating expenses incurred prepetition on the debtor's behalf); In re Gen. Growth Properties, Inc. Case No 09-11977 (Bankr. S.D.N.Y. May 11, 2009) [Docket No. 466] (authorizing debtor to pay up to $13.3 million of prepetition claims of critical service providers on a final basis); In re Lyondell Chern. Co., Case No. 09-10023 (Bankr. S.D.N.Y. Jan. 23, 2009) [Docket No. 360] (authorizing debtor to pay up to $30 million of claims ofprepetition vendors). Because of the voluminous nature of the orders cited herein, they are not attached to this reply. Copies of these orders are available upon request of the Debtors' counsel. See Covington v. Covington Land L.P., 71 F.3d 1221, 1226 (6th Cir. 1995) ("When a debtor assumes the lease or contract under section 365, it must assume both the benefits and the burdens of the contract. Neither the debtor nor the bankruptcy court may excise material obligations owing to the non-debtor contracting party."); In re Frontier Properties, Inc., 979 F.2d 1358, 1367 (9th Cir. 1992) ("When a trustee assumes and then rejects an executory contract, however, all of the liabilities flowing from that rejection are entitled to priority as administrative expenses of the estate").

16

10

direction) to honor prepetition claims of the Property Managers, the Debtors will be able to use their reasonable judgment and only honor obligations necessary to avoid a disruption to their operations. Third, instead of requesting that the Court approve a specific amount of money to be used to satisfy prepetition obligations, thereby encouraging various vendors and creditors to come forward and seek payment (distracting the Debtors from more pressing matters related to their restructuring and the Property Managers from operating the hotels), the relief requested is applicable only to the Property Managers, and, even then, the Debtors are not required to satisfy the entirety ofthe Property Managers' prepetition obligations. Finally, while Midland feigns ignorance in the Property Management Objection as to the nature and amount of obligations arising under the Hotel Management Agreements, it is well aware of the Debtors' obligations that may come due. As the Court knows, the Debtors have provided and will continue to provide detailed information about their disbursements, including to the prepetition lenders. Although the Debtors cannot predict the exact amount of the obligations that will arise based on the indemnification provisions in the Hotel Management Agreements, which is unknowable, the universe of such claims that may arise is finite. Further, any concern about the Debtors using funds other than for the benefit of the Debtors' estates is misplaced in light of the Debtors' record of performance under the prepetition arrangement with Midland and the increased monitoring and disclosure obligations imposed by the Bankruptcy Code and cash collateral order. Finally, any disbursements from the Debtors using cash

collateral are subject to a budget over which the lenders have oversight.

11

II.

Interim Compensation Procedures The Interim Compensation Motion 17 proposes procedures to govern the payment

of compensation and reimbursement of expenses of the Debtors' retained professionals. Such procedures are commonplace and consistent with procedures approved-without objection-in virtually every significant chapter 11 case. Nevertheless, Midland filed an objection to these procedures. 18 Other than a general objection to the use of its cash collateral to fund certain expenses of the Debtors' restructuring, which will be resolved in due course at the September 1 hearing on the cash collateral motion, the Interim Compensation Objection requests (a) that Midland be entitled to receive, review, and object to monthly and interim fee requests (which the Debtors have agreed to for Midland and the Property Level Lenders), (b) the implementation of specific monthly deadlines for monthly fee requests to be served and for objections to such monthly fee requests (which the Debtors have agreed to as set forth below), and (c) clarification regarding the proper subject matter of objections to fee applications (which is a mere recitation of a provision set forth in the applicable General Order ofthe Court as described below). The Debtors address Midland's concerns regarding the deadline to object to monthly fee requests by agreeing to revise the proposed interim fee procedures to state the following:

17

See Debtors' Motion for the Entry of an Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses for Professionals and Official Committee Members [Docket No. 18] (the "Interim Compensation Motion"). See Midland Loan Services, Inc. 's Limited Objection to Debtors' Motion for the Entry of an Order Establishing Procedures for Interim Compensation and Reimbursement of Expenses for Professionals and Official Committee Members [Docket No. 135] (the "Interim Compensation Objection"). The Interim Compensation Objection was joined by the "Property Level Lenders" [Docket No. 144].

18

12

Each Notice Party will have until 4:00 p.m. prevailing Eastern Time on the 20th day or 5th day of the next month (or the next business day if such day is not a business day) following service of the Monthly Application, provided that such date is no less than 20 days after the Monthly Application is served (the "Objection Deadline"). Finally, the language in paragraph 8 of the Debtors' proposed order is substantially the same as the fifth ordered paragraph in General Order M-388 and does not limit objections to only those items listed in such paragraph, but rather clarifies that the interim compensation procedures provide that any party can object to requests for payment on the grounds listed therein. 19 III. Moelis Retention As described m the Debtors' application to retain Moelis, 20 to effectively restructure their business and effectuate a successful plan of reorganization, the Debtors believe they require the services of a capable and experienced financial advisor and investment banking firm such as Moelis. Indeed, Moelis' resources and capabilities, together with its prepetition knowledge and experience gained from advising the Debtors, complements the services offered by the Debtors' other restructuring advisors. Moelis' retention is integral to the Debtors' success in these Chapter 11 Cases. Further, the terms and conditions of Moelis' retention satisfy the standards set forth in section 328(a) ofthe Bankruptcy Code.

19

See General Order M-388 ("Ordered, that any party may object to requests for payments made pursuant to the
Order on the grounds that the Debtors have not timely filed monthly operating reports, remained current with their administrative expenses and 28 U.S.C. 1930 fees, or a manifest exigency exists by seeking a further order of this Court, otherwise, this Order shall continue and shall remain in effect during the pendency ofthis case.").

20

See Debtors' Application for the Entry of an Order Authorizing the Retention and Employment of Moe/is & Company LLC as Financial Advisor and Investment Banker to the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date, filed on July 19, 2010 [Docket No. 21] (the "Moelis Application"); see also Supplemental Declaration of Williams Q. Derrough in Support of the Debtors' Application for the Entry of an Order Authorizing the Retention and Employment of Moe/is & Company as Financial Advisor and Investment Banker to the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date [Docket No. 148].

13

Midland's objection21 to the Moelis Application is completely misguided and irrelevant to the Debtors' retention of a financial advisor and investment bank in these Chapter
11 Cases.

First, Moelis' retention is necessary and appropriate. Second, Moelis' proposed

compensation structure is reasonable. Third, the Moelis Application is not premature and should not wait to be considered by the Court until after the September 1, 201 0 hearing when the Court considers the Debtors' requested assumption of their plan support agreement (the "Plan Support

Agreement"). 22 Fourth, Moelis' involvement in the negotiations of the PSA does not preclude
Moelis' participation in these Chapter 11 Cases. Midland further requests certain clarifications to language contained in the Moelis Application and again reiterates its premature cash collateral objection.

A.

Moelis' Retention Is Necessary and Appropriate.

Moelis has been actively engaged with the Debtors since before the filing ofthese

Chapter 11 Cases. Despite what Midland argues in the Moelis Objection, the status of the PSA is not relevant to the retention of Moelis. The scope of Moelis' duties extends far beyond issues relating to the PSA. For example, since being engaged by the Debtors, Moelis has provided the following services: interacting with various creditor constituencies and parties m interest including Lehman ALI Inc. ("Lehman"), the Debtors' second largest prepetition secured lender and the party that has agreed to support the Debtors' restructuring in accordance with the PSA;

21

See Objection to the Application for the Entry of an Order Authorizing the Retention and Employment of Moe/is & Company LLC as Financial Advisor and Investment Banker to the Debtors Nunc Pro Tunc to the Petition Date [Docket No. 134] (the "Moelis Objection"). The Moelis Objection was joined by the Property Level Lenders [Docket No. 146]. Debtors' Motion for an Order (A) Authorizing the Debtors to Assume the Plan Support Agreement and (B) Granting Related Relief[Docket No. 15] is scheduled to be heard at the September I hearing.

22

14

interacting with Jefferies & Co. ("Jefferies"), proposed financial advisors to the Official Committee ofUnsecured Creditors (the "Committee"); assisting the Debtors' management in modeling future cash flows of the Debtors' business; developing materials related to the Debtors' assets, financial models, historical data, and future projections for the Debtors' board and management; assisting the Debtors with supporting analysis for debtor in possession financing ("DIP Financing"); discussing with numerous potential DIP lenders to market test proposed DIP Financings; conducting due diligence with respect to the Debtors; assisting the Debtors in preparing detailed financial models that set forth the projections developed by management; meeting and negotiating with numerous parties in interest, including Midland, Lehman, Marriott International, Inc., and Five Mile Capital Partners; assisting the Debtors with developing various strategies for effectuating a restructuring; meeting with the Debtors' board and management to compare potential restructuring proposals; and assisting the Debtors with preliminary financial analyses on the Debtors' business.

Further, the decision as to which professionals to retain falls quite clearly within the Debtors' discretion, subject, of course, to judicial review of the terms of the engagement. In
re Cenargo Int'l, PLC, 294 B.R. 571, 601 n.37 (Bankr. S.D.N.Y. 2003) (holding that one of a

debtor in possession's "rights is to retain its chosen professionals ... .");In re Huntco Inc., 288 N.R. 229, 232 (Bankr. E.D. Mo. 2002) (holding that a bankruptcy court should give debtor "significant deference" in selection of attorney under section 327(a)) (citing In re Marvel Ent't
Group, Inc., 140 F.3d 463, 477-78 (3d Cir. 1998)); Matter of Federated Dept. Stores, Inc., 114

B.R. 501, 504 (Bankr. S.D. Ohio 1990) ("[T]he debtor in possession may select its own 15

professional people without interference," subject to disinterestedness requirements.); In re

Microwave Prods. of Am., Inc., 94 B.R. 971, 972 (Bankr. W.D. Tenn. 1989) ("As a general rule,

a trustee may select his own attorney, or other professional person without interference from creditors."). Additionally, substantially all (if not all) of the Debtors' significant constituents have retained investment bankers and/or financial advisors (Midland, for example, has retained FTI Consulting and Carl Marks). For the Debtors to not receive that same necessary professional assistance would leave the Debtors at a distinct disadvantage when engaged in discussions and/or negotiations with these entities. Nor surprisingly, Midland cites no authority from significant chapter 11 cases where a request for a financial advisor and/or investment banker was denied. In fact, the retention of a financial advisor and/or investment banker by similar debtors is (nearly) universal, even in chapter 11 cases involving prepackaged and prenegotiated plans. The fact that Midland would prefer that the Debtors not be advised by a competent financial advisor in connection with disputes over value is obviously not a reason to deny Moelis' retention.
B. Moelis' Compensation Structure Is Reasonable and Consistent with Relief Granted in Similar Situations.

Sections 327 and 328(a) of the Bankruptcy Code permit debtors to retain professionals so long as the proposed terms and conditions of employment are "reasonable." More specifically, section 328(a) provides in relevant part: The [debtor] . . . , with the court's approval, may employ or authorize the employment of a professional person under section 327 of this title, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis.
See 11 U.S.C. 328(a).

16

Courts have consistently held that the "reasonableness" of the terms of a professional's retention is determined by market practices. See, e.g., In re Ames Dep 't Stores
Inc., 76 F.3d 66, 71 (2d Cir. 1996) (citing approval of cases holding that compensation in

bankruptcy cases should be commensurate with compensation in similar services outside of bankruptcy); In re Joan and David Halpern Inc., 248 B.R. 43, 44 (Bankr. S.D.N.Y. 2000), aff'd 2000 WL 1800690 No. 00-3601 (S.D.N.Y.); see also In reUnited Artists Theatre Co., 315 F.3d 217 (3d Cir. 2003); Zolfo, Cooper & Co.v. Sunbeam-Oster Co., Inc., 50 F.3d 253, 258 (3d Cir. 1995); In re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833, 855 (3d Cir. 1994); In re UNR Indus.,
Inc., 986 F.2d 207,209 (7th Cir. 1993).

Moelis' proposed compensation in these Chapter 11 Cases is both typical and reasonable for chapter 11 cases of this size and complexity. Notwithstanding this, Midland objects to the reasonableness ofMoelis' proposed compensation structure. 23 For Midland to state that the restructuring transaction fee (the "Restructuring
Fee") is inappropriate is to fly in the face of precedent, not only for Moelis, but also for other

investment banks and financial advisors retained in large, complex chapter 11 cases. Attached as
Exhibit A to this reply is a table showing similar fee structures that have been approved by

bankruptcy courts in similar chapter 11 cases. That Midland may not support the Debtors' PSA at this time is by no means the measure of whether the Restructuring Fee provided for in Moelis' engagement letter is reasonable under section 328 of the Bankruptcy Code. The Restructuring Fee provided for in the engagement letter seeks to compensate Moelis reasonably for its contributions to a successful reorganization, which is the goal of chapter 11. See Nat 'l Labor Relations Bd. v. Bildisco and
23

See Moelis Objection, at~~ 1-2; Joinder of Property Level Lenders, at~ 5.

17

Bildisco, 465 U.S. 513, 528 (1984) ("[t]he fundamental purpose of reorganization ... to prevent

a debtor from going into liquidation, with an attendant loss of jobs and possible misuse of economic resources."); see also In re Global Serv. Group, LLC, 316 B.R. 451, 460 (Bankr. S.D.N.Y. 2004) ("chapter 11 is based on the accepted notion that a business is worth more to everyone alive than dead"); In re Ionosphere Clubs, Inc., 98 B.R. 174, 177 (Bankr. S.D.N.Y. 1989) ("the paramount policy and goal of [c]hapter 11 ... is the rehabilitation of the debtor"). C. Approval of Moelis' Retention Should Not Be Delayed Until the September 1 Hearing. Approval of the Moelis Application cannot wait until the September 1 hearing. Midland's contention that the approval of the PSA would leave little "compensable work for Moelis to undertake on behalf of the Debtors" ignores the reality of the plan process in complex chapter 11 cases such as the one at hand. Whether or not the PSA is approved, Moelis will provide necessary and invaluable assistance to the Debtors during the course of these Chapter 11 Cases, including: providing a going concern valuation for the proposed plan of reorganization; assisting the Debtors in valuing the collateral securing the various debt financings; providing testimony and analysis on the terms of proposed exit funding (including the amounts and forms of debt and/or equity) as well as replacement debt facilities and other plan distributions for various creditor constituencies; interacting with the various creditor constituencies and their financial advisors, including Lehman and its financial advisor Lazard Freres and Co., Midland and its financial advisors FTI Consulting and Carl Marks, and the Committee and its proposed financial advisor Jefferies; assisting the Debtors in effectuating the proposed restructuring by preparing necessary financial analyses and advice; and continuing to meet with and advise the Debtors' board and management as needed. 18

Midland's objection implies (incorrectly) that approval of the PSA leads directly to a confirmed plan of reorganization. In reality, approval of the PSA is merely the first of many steps toward the restructuring process, as the plan contemplated in the PSA must still be effectuated with Moelis' considerable assistance, assuming that is the path the Debtors ultimately pursue. The PSA merely sets forth an agreement that, if the Debtors propose a plan of reorganization consistent with the attached term sheet and honor their obligations in the PSA, Lehman has committed to support such a plan. While the Debtors believe that the PSA will no doubt

facilitate the plan process, it in no way relieves the Debtors of any of their responsibilities and duties as debtors in possession. Furthermore, Moelis' retention 1s absolutely necessary in the event that circumstances change or new information arises, which would require the Debtors to have an experienced, knowledgeable advisor such as Moelis ready to advise the Debtors, so that the Debtors may be able to respond effectively and immediately. D. Midland Misunderstands the Scope of the PSA and Moelis' Role in Its Development. Moelis' role in supporting the Debtors in negotiating the PSA on behalf of the Debtors was entirely above-board and appropriate. Notwithstanding this, Midland requests that Moelis disclose its role in participating in the negotiation of a PSA that, according to Midland, purports to provide Apollo Investment Corporation ("Apollo") with 50% of the equity in the reorganized Debtors. Moelis Objection at ~3. Moelis played no role in negotiations surrounding a potential sale of equity from Lehman to Apollo. Any such transaction would be between Lehman and Apollo and does not involve the Debtors nor require Moelis' services. Midland further argues that the "Fiduciary Duties" section in the PSA is "illusory." Moelis Objection, at
~1 0.

In so doing, Midland misconstrues the import of the

19

Fiduciary Duties provision. More to the point, though, Moelis will be invaluable in assisting the Debtors' board and management in discharging their duties. In any event, Midland will have ample opportunity to prosecute any objection to the PSA in connection with the September 1 hearing, but Midland's objections to the PSA have no place in an objection to Moelis' retention and should by no means stand in the way of the approval of Moelis' retention. To address two additional questions raised in the Moelis Objection: 24 (i) the Restructuring Fee will be earned by Moelis if the transaction contemplated in the PSA is consummated; and (ii) Moelis' monthly fee after the fifth month of their engagement will be reduced from $200,000 to $150,000 (not to $175,000) as stated in their engagement letter attached as Exhibit C to the Moelis Application. Given the work performed by Moelis to date, Moelis has gained an enormous amount of knowledge and familiarity with the Debtors' business operations. If Moelis' retention were to be denied, finding a suitable replacement and instilling them with knowledge equivalent to that which Moelis has already gained would also take an inordinate amount of time and would prejudice the Debtors greatly. The Debtors would be unable to communicate or negotiate with other key parties in interest in an effective, let alone, timely manner. The Debtors submit that the relief requested in the Moelis Application is proper under the Bankruptcy Code, appropriate based on the Debtors' needs, and consistent with that granted in (nearly all) similar chapter 11 cases.

24

Moelis Objection, at~ 2, 12.

20
K&E 17498810

IV.

AP Services Retention The Debtors' application25 for the retention of AP Services, LLC ("AP Services")

under section 363 of the Bankruptcy Code is proper and consistent with common practice in the Southern District of New York. As noted in the AP Services Application, AP Services and Nathan Cook (collectively, the "AP Parties") are providing crisis management services as temporary employees and as an interim corporate officer, respectively, under an engagement by the Debtors' board. The AP Parties act under the direction, control, and supervision of the board and serve at the board's request. The AP Parties are not acting as outside professional

consultants, such as attorneys or financial advisors, whom the Debtors would retain under section 327 of the Bankruptcy Code. Consequently, the proposed authority to employ and

compensate the AP Parties under section 363, rather than section 327, is appropriate and commonplace in this district. Midland filed an objection26 requesting that AP Services seek compensation as though the Debtors were requesting the authorization to retain AP Services under section 327 rather than section 363 of the Bankruptcy Code. In addition, the AP Services Objection seeks to modify the engagement terms between AP Services and the Debtors regarding the provisions relating to arbitration and limitations of liability.

25 See Debtors' Application for the Entry of an Order Authorizing and Approving the Retention and Employment
of AP Services, LLC and Designating Nathan J. Cook as Interim Chief Financial Officer to the Debtors Nunc Pro Tunc to the Petition Date [Docket No. 22] (the "AP Services Application").
26

See Limited Objection to Debtors' Application for the Entry of an Order Authorizing and Approving the Retention and Employment of AP Services, LLC and Designating Nathan J. Cook as Interim Chief Financial Officer to the Debtors Nunc Pro Tunc to the Petition Date [Docket No. 138] (the "AP Services Objection"). The AP Services Objection was joined by the Property Level Lenders [Docket No. 142].

21

The terms of the proposed retention and employment of the AP Parties are consistent with the Jay Alix Protocol.27 The Jay Alix Protocol, which has been employed by the Office of the United States Trustee in this region and is generally accepted in the Southern District of New York, establishes, among other things, terms for the engagement of firms like AP Services under section 363 of the Bankruptcy Code. The Jay Alix Protocol specifically

contemplates AP Services (a successor to Jay Alix & Associates) being "retained under Sec. 363" and directs that AP Services "shall seek retention under section 363 of the Bankruptcy Code." See Jay Alix Protocol at 1. In addition, the Jay Alix Protocol permits parties in interest to review quarterly compensation reports and provides them with sufficient opportunity to object and be heard. See id. at 3. As a result, the Debtors submit that the relief requested in the AP Services Application is proper under the Bankruptcy Code, appropriate based on the Debtors' needs, and consistent with that granted in (nearly all) similar chapter 11 cases. With respect to Midland's concern regarding arbitration of disputes under the engagement terms, AP Services agrees that the Court shall hear all disputes regarding the terms of AP Services' engagement, including compensation disputes. With respect to Midland's concern regarding the limitation of AP Services' liability, AP Services agrees to revise the language in section 11 of the terms and conditions in its engagement letter attached as Exhibit C to the AP Services Application, which should resolve Midland's concerns. The terms, as originally proposed, exculpated AP Services for all incidental or consequential damages, as well as placed a cap on AP Services' maximum liability.
27

See Protocol for Engagement of Jay Alix & Associates and Affiliates, available at http://www.justice.gov/ust/r02/docs/chapterll/manhattan_retention/jay_alix _protocol. doc (the "Jay Alix Protocol"). Among other things, the protocol establishes the propriety of retaining a crisis management firm under section 363 of the Bankruptcy Code. !d. See also Adam J. Levitin, The Problematic Case for Incentive Compensation in Bankruptcy, 156 U. PA. L. REV. 88, 95 (2007) ("The Jay Alix Protocol is not binding, but it has become a de facto shibboleth for management compensation in bankruptcy.").

22

The proposed revised terms provide that AP Services is liable for damages under appropriate circumstances and is not subject to a cap. The proposed revised terms are: Limit of Liability. Neither AlixPartners nor its subsidiary affiliates nor their respective managing directors, officers or employees shall be liable to the Debtors or any party asserting claims on behalf of the Debtors except for actual or punitive damages found in a final judicial determination to be the direct result of the gross negligence, bad faith, self-dealing or intentional misconduct of AlixPartners. As discussed herein, courts have consistently held that the "reasonableness" of the provisions of a professional's retention is to be determined by market practices. See 11 U.S.C. 328(a); In re Halpern 248 B.R. at 47 (citing reasonableness as the standard for evaluating retention terms); In re United Artists, 315 F.3d at 229 (appropriateness of retention terms should be driven by market). And again, the proposed revised terms of AP Services' liability limitations are comparable to those of professionals retained in comparable chapter 11 cases in this district. V. K&E Retention The Debtors' application28 for the retention of Kirkland & Ellis LLP ("K&E") under sections 327 and 330 of the Bankruptcy Code is proper and consistent with common practice in the Southern District of New York. To the best of the Debtors' knowledge, and as disclosed herein and in the Basta Declarations: (a) K&E is a "disinterested person" within the meaning of section 101(14) of the Bankruptcy Code, as required by section 327(a) of the Bankruptcy Code and does not hold or represent an interest adverse to the Debtor's estates; and

28

See Debtors' Application for the Entry of an Order Authorizing the Retention and Employment of Kirkland & Ellis LLP as Attorneys for the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date [Docket No. 20] (the "K&E Application"); see also Supplemental Declaration of Paul M Basta in Support of the Debtors' Application for the Entry of an Order Authorizing the Retention and Employment of Kirkland & Ellis LLP as Attorneys for the Debtors and Debtors in Possession Nunc Pro Tunc to the Petition Date [Docket No. 126] (the "Supplemental Basta Declaration" and, together with the Basta Declaration attached as Exhibit B to the K&E Application, the "Basta Declarations").

23

(b) K&E has no connection to the Debtors, their creditors, or related parties (except as may be disclosed in declarations filed in support of the K&E Application). Consequently, the proposed authority to employ K&E under sections 327 and 330 of the Bankruptcy Code is appropriate. Midland filed a limited objection29 to the retention application of K&E. K&E Objection
at~

1. Importantly, Midland does not oppose K&E's employment as counsel for the

Debtors, nor does the Office of the United States Trustee, whose questions were addressed and satisfied by the Supplemental Basta Disclosure. As to Midland's request for additional

disclosures, K&E respectfully asserts that its disclosures made in the Basta Declarations satisfy the disinterestedness standard required by section 327(a) of the Bankruptcy Code. As to the inapplicable cash collateral objection, the Debtors reiterate that Midland will have ample opportunity to make such arguments in connection with and at the September 1, 2010 hearing. As such, the Debtors respectfully request approval of the K&E Application.

29 See Midland Loan Services, Inc.

's Limited Objection to Debtors' Application for the Entry of an Order Authorizing the Retention and Employment of Kirkland & Ellis LLP as Attorneys for the Debtors and Debtors in Possession [Docket No. 136] (the "K&E Objection"). Neither Wells Fargo nor TriMont joined in the K&E Objection.

24

Conclusion For the reasons set forth herein, the Debtors respectfully request that the Court overrule any pending objections and grant the relief requested in the motions and applications to be heard at the August 12 hearing.

New York, New York Dated: August 11, 2010

Is/ Paul M Basta James H.M. Sprayregen, P.C. Paul M. Basta Jennifer L. Marines KIRKLAND & ELLIS LLP 60 1 Lexington A venue New York, New York 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. (admitted pro hac vice) Marc J. Carmel (admitted pro hac vice) KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, Illinois 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Proposed Counsel to the Debtors and Debtors in Possession

25

EXHIBIT A Selected Financial Advisor and Investment Banker Compensation Data

SELECTED FINANCIAL ADVISOR AND INVESTMENT BANKER COMPENSATION 1

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% ofTotal Debt4

In re JON Media Networks Inc., Case No. 09-13125 (Bankr. S.D.N.Y. July 13, 2009) [Docket No. 154] In re TCI 2 Holdings, LLC, Case No. 09-13654 (Bankr. D.N.J. May 5, 2009) [Docket No. 275]

Moelis & Company LLC

$1.9 billion

$175,000

50% of all monthly fees

$5.9 million

.3%

$6.95 million

.4%

Lazard Freres &Co., LLC

$1.8 billion

$200,000

50% of all monthly fees

Up to $8.0 million

.4%

Up to $9.2 million

.5%

Data contained herein is limited to chapter 11 restructurings within the last five years for financial advisors and investment bankers retained in chapter 11 cases with estimated funded debt greater than $700 million and less than $2 billion.
2

Some of the engagements listed in this table may have included additional or alternative restructuring fee structures depending on the transactions contemplated in each chapter 11 case; however, because Moelis' restructuring fee only contemplates one type of transaction, we have only included similar transaction-based restructuring fees. Estimate based on a chapter 11 case lasting twelve months. The Debtors make no representation as to the duration of these Chapter 11 Cases, but rather use twelve months simply to estimate potential fmal compensation (monthly fees and restructuring fee) only for illustrative purposes. Estimate based on a chapter 11 case lasting twelve months. The Debtors make no representation as to the duration of these Chapter 11 Cases, but rather use twelve months simply to estimate potential fmal compensation (monthly fees and restructuring fee) only for illustrative purposes.

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% of Total Debt4

In re Collins & Aikman Corp., Case No. 05-55927 (Bankr. E.D. Mich. Jul. 18, 2005) [Docket No. 731] In re Pilgrim's Pride Corp., Case No. 08-45664 (Bankr. N.D. Tex. Jan 13, 2009) [Docket No. 528]

Lazard Freres & Co., LLC

$1.8 billion

$150,000

50% of aggregate total of monthly fees

$8.0 million

.4%

$8.9 million

.5%

Lazard Freres & Co., LLC

$1.5 billion

$250,000

50% of monthly fees following fourth month

$6.5 million

.4%

$8.5 million

.6%

In re Innkeepers USA Trust, Case No. 1013800 (Bankr. S.D.N.Y. 2010)5

In re Source Interlink Cos., Inc., Case No. 09-11424 (Bankr. D. Del. May 21, 2009) [Docket No. 177] In re Sea Launch Co., L.L.C., Case No. 0912153 (Bankr. D. Del. Aug. 20, 2009) [Docket No. 210]

Moelis & Company LLC

$1.4 billion

$200,000 for first five months/ $150,000 thereafter

50% of all monthly fees

$6.0 million

.4%

$7.025 million

.5%

Moelis & Company LLC

$1.4 billion

$250,000

N/A

$4.0 to $5.0 million

.28%-.3%

$7.0 to $8.0 million

.5%-.6%

Jefferies & Company, Inc.

$1.212 billion

$175,000

50% of all monthly fees

Up to $3.75 million

.3%

Up to $4.8 million

.4%

Information is based on relief requested in Moe lis Application.

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee 2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% ofTotal Debt 4

In re LandSource Communities Dev. LLC, Case No. 08-11111 (Bankr. D. Del. Aug. 7, 2008) [Docket No. 500] In re Zante Inc., Case No. 09-50746 (Bankr. D. Nev. May 7, 2009) [Docket No. 288] Inre Mark IV Industries, Inc., Case No. 09-12795 (Bankr. S.D.N.Y. May 27, 2009) [Docket No. 167] In re Simmons Bedding Co., Case No. 09-14037 (Bankr. D. Del. Dec. 10, 2009) [Docket No. 140] In re Tarragon Corp., Case No. 09-10555 (Bankr. D.N.J. May 5, 2009) [Docket No. 299] In re Young Broadcasting Inc., Case No. 09-10645 (Bankr. S.D.N.Y. Apr. 16, 2009) [Docket No. 253]

Lazard Freres & Co., LLC

$1.2 billion

$150,000

All monthly fees in the first 12 months

$6.0 million

.5%

$6 million

.5%

Goldman, Sachs & Co.

$1.2 billion

N/A

N/A

$4.5 million

.4%

N/A

.4%

Houlihan Lokey Howard & Zukin Capital

$1.1 billion

$200,000

50% of monthly fees, commencing with the ninth month

$6.8 million

.6%

$8.8 million

.8%

Miller Buckfire & Co., LLC

$1.033 billion

$250,000

50% of all monthly fees

$6.5 million

.6%

$8 million

.8%

Lazard Freres & Co., LLC

$1.0 billion

$225,000 for first six months/ $175,000 thereafter

50% of monthly fees paid after the second month 50% of all monthly fees following the third month

$3.25 million

.3%

$4.675 million

.5%

UBS Securities LLC

$980 million

$150,000

$2.5 million

.3%

$3.625 million

.4%

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee 100% of monthly fees in the first 11 months, then percentage of debt of raised.

Restructuring Fee 2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation 3

Hypothetical Estimated Aggregate Compensation as% of Total Debt 4

In re Penton Business Media Holdings, Inc., Case No. 10-10689 (Bankr. S.D.N.Y. Mar. 5, 2010) [Docket No. 83] In re Primus Telecommnc 's Group Inc., Case No. 09-10867 (Bankr. D. Del. Apr. 27, 2009) [Docket No. 130] In re Hawkeye Renewables, LLC, Case No. 09-14461 (Bankr. D. Del. Mar. 16, 2010) [Docket No. 248] In re Stallion Oilfield Servs. Ltd., Case No. 09-13562 (Bankr. D. Del. Dec. 10, 2009) [Docket No. 230] In re Milacron Inc., Case No. 09-11235 (Bankr. S.D. Ohio Apr. 6, 2009) [Docket No. 236]

Rothschild Inc.

$938 million

$200,000

$3.5 to $4 million

.37% to .42%

$3.5 to $4 million

.37% to .42%

CRT Investment BankingLLC

$827 million

$125,000

50% of total monthly fees

$1.5 million

.2%

$2.25 million

.3%

Blackstone Advisory Partners, L.P.

$761 million

$200,000 (+$25,000 advance) for the first six months/ $150,000 thereafter

N/A

Up to $4.6 million

.6%

Up to $5.825 million

.8%

Miller Buckfrre & Co., LLC

$755 million

$175,000

50% of monthly fees after fifth month

$3.0 million

.4%

$4.488 million

.6%

Rothschild, Inc.

$752 million

$175,000

50% of monthly fees in excess of $1.05 million

$3.0 million

.4%

$4.575 million

.6%

EXHIBIT A Selected Financial Advisor and Investment Banker Compensation Data

SELECTED FINANCIAL ADVISOR AND INVESTMENT BANKER COMPENSATION 1

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% of Total Debt 4

In re ION Media Networks Inc., Case No. 09-I3I25 (Bankr. S.D.N.Y. July I3, 2009) [Docket No. I54] In re TCI 2 Holdings, LLC, Case No. 09-I3654 (Bankr. D.N.J. May 5, 2009) [Docket No. 275]

Moelis & Company LLC

$1.9 billion

$I75,000

50% of all monthly fees

$5.9 million

.3%

$6.95 million

.4%

Lazard Freres & Co., LLC

$1.8 billion

$200,000

50% of all monthly fees

Up to $8.0 million

.4%
-

Up to $9.2 million

.5%

Data contained herein is limited to chapter II restructurings within the last five years for fmancial advisors and investment bankers retained in chapter II cases with estimated funded debt greater than $700 million and less than $2 billion.
2

Some of the engagements listed in this table may have included additional or alternative restructuring fee structures depending on the transactions contemplated in each chapter II case; however, because Moelis' restructuring fee only contemplates one type of transaction, we have only included similar transaction-based restructuring fees. Estimate based on a chapter II case lasting twelve months. The Debtors make no representation as to the duration of these Chapter II Cases, but rather use twelve months simply to estimate potential fmal compensation (monthly fees and restructuring fee) only for illustrative purposes. Estimate based on a chapter II case lasting twelve months. The Debtors make no representation as to the duration of these Chapter II Cases, but rather use twelve months simply to estimate potential final compensation (monthly fees and restructuring fee) only for illustrative purposes.

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% of Total Debt 4

In re Collins & Aikman Corp., Case No. 05-55927 (Bankr. E.D. Mich. Jul. 18, 2005) [Docket No. 731] In re Pilgrim's Pride Corp., Case No. 08-45664 (Bankr. N.D. Tex. Jan 13, 2009) [Docket No. 528] In re Innkeepers USA Trust, Case No. 1013800 (Bankr. S.D.N.Y. 2010)5 In reSource Interlink Cos., Inc., Case No. 09-11424 (Bankr. D. Del. May 21, 2009) [Docket No. 177] In re Sea Launch Co.,
L.L.C., Case No. 09-

Lazard Freres & Co., LLC

$1.8 billion

$150,000

50% of aggregate total of monthly fees

$8.0 million

.4%

$8.9 million

.5%

Lazard Freres & Co., LLC

$1.5 billion

$250,000

50% of monthly fees following fourth month

$6.5 million

.4%

$8.5 million

.6%

Moelis & Company LLC

$1.4 billion

$200,000 for first five months/ $150,000 thereafter

50% of all monthly fees

$6.0 million

.4%

$7.025 million

.5%

Moelis & Company LLC

$1.4 billion

$250,000

N/A

$4.0 to $5.0 million

.28%-.3%

$7.0 to $8.0 million

.5%-.6%

12153 (Bankr. D. Del. Aug. 20, 2009) [Docket No. 210]

Jefferies & Company, Inc.

$1.212 billion

$175,000

50% of all monthly fees

Up to $3.75 million

.3%

Up to $4.8 million

.4%

Information is based on relief requested in Moe lis Application.

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% of Total Debt4

In re LandSource Communities Dev. LLC, Case No. 08-11111 (Bankr. D. Del. Aug. 7, 2008) [Docket No. 500] In re Zante Inc., Case No. 09-50746 (Bankr. D. Nev. May 7, 2009) [Docket No. 288] In reMark IV Industries, Inc., Case No. 09-12795 (Bankr. S.D.N.Y. May 27, 2009) [Docket No. 167] In re Simmons Bedding Co., Case No. 09-14037 (Bankr. D. Del. Dec. 10, 2009) [Docket No. 140] In re Tarragon Corp., Case No. 09-10555 (Bankr. D.N.J. May 5, 2009) [Docket No. 299] In re Young Broadcasting Inc., Case No. 09-10645 (Bankr. S.D.N.Y. Apr. 16, 2009) [Docket No. 253]

Lazard Freres &Co.,LLC

$1.2 billion

$150,000

All monthly fees in the first 12 months

$6.0 million

.5%

$6 million

.5%

Goldman, Sachs & Co.

$1.2 billion

N/A

N/A

$4.5 million

.4%

N/A

.4%

Houlihan Lokey Howard &Zukin Capital

$1.1 billion

$200,000

50% of monthly fees, commencing with the ninth month

$6.8 million

.6%

$8.8 million

.8%

Miller Buckfire & Co., LLC

$1.033 billion

$250,000

50% of all monthly fees

$6.5 million

.6%

$8 million

.8%

Lazard Freres &Co., LLC

$1.0 billion

$225,000 for first six months/ $175,000 thereafter

50% of monthly fees paid after the second month 50% of all monthly fees following the third month

$3.25 million

.3%

$4.675 million

.5%

UBS Securities LLC

$980 million

$150,000

$2.5 million

.3%

$3.625 million

.4%

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee

Restructuring Fee 2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as % of Total Debt4

In re Penton Business Media Holdings, Inc., Case No. 10-10689 (Bankr. S.D.N.Y. Mar. 5, 2010) [Docket No. 83] In re Primus Telecommnc 's Group Inc., Case No. 09-10867 (Bankr. D. Del. Apr. 27, 2009) [Docket No. 130] In re Hawkeye Renewables, LLC, Case No. 09-14461 (Bankr. D. Del. Mar. 16, 2010) [Docket No. 248] In re Stallion Oilfield Servs. Ltd., Case No. 09-13562 (Bankr. D. Del. Dec. 10, 2009) [Docket No. 230] In re Milacron Inc., Case No. 09-11235 (Bankr. S.D. Ohio Apr. 6, 2009) [Docket No. 236]

Rothschild Inc.

$938 million

$200,000

100% of monthly fees in the first II months, then percentage of debt of raised.

$3.5 to $4 million

.37% to .42%

$3.5to$4 million

.37% to .42%

CRT Investment BankingLLC

$827 million

$125,000

50% of total monthly fees

$1.5 million

.2%

$2.25 million

.3%

Blackstone Advisory Partners, L.P.

$761 million

$200,000 (+$25,000 advance) for the first six months/ $150,000 thereafter

N/A

Up to $4.6 million

.6%

Up to $5.825 million

.8%

Miller Buckftre & Co., LLC

$755 million

$175,000

50% of monthly fees after fifth month

$3.0 million

.4%

$4.488 million

.6%

Rothschild, Inc.

$752 million

$175,000

50% of monthly fees in excess of $1.05 million

$3.0 million

.4%

$4.575 million

.6%

Debtor

Financial Advisor and Investment Banker

Estimated Total Debt

Monthly Fee

Amount Credited Towards Restructuring Fee 100% of monthly fees in the first 11 months. 50% of all monthly fees following sixth month

Restructuring Fee2

Restructuring Fee as% of Total Debt

Hypothetical Aggregate Compensation3

Hypothetical Estimated Aggregate Compensation as% of Total Debt 4

In re Natural Prods. Group, Case No. 1010239 (Bankr. D. Del. Feb.24,2010) [Docket No. 115] In re Magna Entm 't Corp., Case No. 09-10720 (Bankr. D. Del. Mar. 25, 2009) [Docket No. 165] In re Energy Partners Ltd., Case No. 09-32957 (Bankr. S.D. Tex. May 27, 2009) [Docket No. 176] In re Journal Register Co., Case No. 09-10769 (Bankr. S.D.N.Y. Apr. 20, 2009) [Docket No. 246]
- - -

Blackstone Advisory Partners L.P.

$748 million

$150,000

$1.5 million

.2%

$1.65 million

.2%

Miller Buckfire & Co., LLC

$725 million

$150,000

$5.0 million

.7%

$6.35 million

.9%

Parkman Whaling LLC

$708 million

$75,000

N/A

$2.0 million

.3%

$2.9 million

.4%

Lazard Freres & Co., LLC

-

$706 million
.

$125,000

N/A

$1.5 million

.2%

$3 million

.4%

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