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

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

DEBTORS MOTION FOR THE ENTRY OF INTERIM AND FINAL ORDERS AUTHORIZING, BUT NOT DIRECTING, THE PAYMENT OF PREPETITION TAXES AND FEES1

The Debtors in these Chapter 11 Cases, along with the last four digits of each Debtors federal tax identification number, are: GP AC Sublessee LLC (5992); Grand Prix Addison (RI) LLC (3740); Grand Prix Addison (SS) LLC (3656); Grand Prix Albany LLC (3654); Grand Prix Altamonte LLC (3653); Grand Prix Anaheim Orange Lessee LLC (5925); Grand Prix Arlington LLC (3651); Grand Prix Atlanta (Peachtree Corners) LLC (3650); Grand Prix Atlanta LLC (3649); Grand Prix Atlantic City LLC (3648); Grand Prix Bellevue LLC (3645); Grand Prix Belmont LLC (3643); Grand Prix Binghamton LLC (3642); Grand Prix Bothell LLC (3641); Grand Prix Bulfinch LLC (3639); Grand Prix Campbell / San Jose LLC (3638); Grand Prix Cherry Hill LLC (3634); Grand Prix Chicago LLC (3633); Grand Prix Columbia LLC (3631); Grand Prix Denver LLC (3630); Grand Prix East Lansing LLC (3741); Grand Prix El Segundo LLC (3707); Grand Prix Englewood / Denver South LLC (3701); Grand Prix Fixed Lessee LLC (9979); Grand Prix Floating Lessee LLC (4290); Grand Prix Fremont LLC (3703); Grand Prix Ft. Lauderdale LLC (3705); Grand Prix Ft. Wayne LLC (3704); Grand Prix Gaithersburg
(continued on next page)

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Innkeepers USA Trust and certain of its affiliates, as debtors and debtors in possession (collectively, the Debtors), file this motion (this Motion) for the entry of interim and final orders, substantially in the forms attached hereto as Exhibit A and Exhibit B, (a) authorizing, but not directing, the Debtors and the Hotel Managers (as defined herein) to remit and pay sales, occupancy, use, and franchise taxes, as well as business license and similar fees and (b) granting such other relief as is just and proper. In support of this Motion, the Debtors respectfully state as follows:

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

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

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

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

507(a)(8), and 541(d) of title 11 of the United States Code (the Bankruptcy Code) and Rule 6003 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). Relief Requested 4. By this Motion, the Debtors seek the entry of interim and final orders

(a) authorizing, but not directing, the payment of Taxes and Fees (both as defined herein) by the Debtors in the ordinary course of business, without regard to whether such obligations accrued or arose before or after the Petition Date (as defined herein) and (b) granting such other relief as is just and proper. Background 5. On the date hereof (the Petition Date), each of the Debtors filed a petition with

the Court under chapter 11 of the Bankruptcy Code (collectively, the Chapter 11 Cases). The Debtors are operating their business and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner has been made in the Chapter 11 Cases, and no committees have been appointed or designated. Concurrently with the filing of this Motion, the Debtors have requested procedural consolidation and joint administration of the Chapter 11 Cases. The Debtors Taxes and Fees 6. In the ordinary course of operating their business, the Debtors, or where 3
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appropriate, their Hotel Managers,3 collect and/or incur income, sales, occupancy, use, franchise, and other taxes, assessments, fees, and similar charges (collectively, the Taxes and Fees). The Debtors remit the Taxes and Fees to various federal, state, and local taxing, licensing, and other governmental authorities (collectively, the Authorities). The Debtors pay the Taxes and Fees monthly, quarterly, annually, or biennially to the respective Authorities in accordance with applicable laws and regulations.4 I. 7. Sales, Occupancy, and Use Taxes The Debtors collect and remit sales taxes on a monthly, quarterly, and annual

basis (based on jurisdiction) to the Authorities in connection with the sale of their goods and services (the Sales Taxes). Such goods and services include, without limitation, food and beverages, internet access, and video and telephone services. Sales Taxes essentially are general consumption taxes charged at the point of purchase for goods and services, which are usually set by the applicable taxing Authority as a percentage of the retail price of the good or service purchased.

Certain of the Debtors are parties to various hotel management agreements with two hotel management companies (together, the Hotel Managers) who manage the Debtors hotel properties. These Debtors are obligated to reimburse and/or compensate the Hotel Managers for various expenses and services, including Taxes and Fees (as defined herein) incurred in the operation of the Debtors business. Contemporaneously herewith, the Debtors filed the Debtors Motion for the Entry of Interim and Final Orders Authorizing, But Not Directing, the Debtors to Continue to Honor Obligations Set Forth in the Hotel Management and Shared Services Agreements (the Hotel Management Agreement Motion). The Hotel Management Agreement Motion provides additional information regarding the Debtors obligations to the Hotel Managers pursuant to certain hotel management agreements (the Hotel Management Agreements). To the extent that any of the obligations described herein with respect to the Taxes and Fees are satisfied by the Hotel Managers pursuant to the Hotel Management Agreements, the Debtors request that the Hotel Managers be authorized to remit and pay Taxes and Fees in a manner consistent with the relief requested herein and that the Debtors be permitted to reimburse the Hotel Managers for such payments as provided for in the Hotel Management Agreement Motion. In certain states, the Debtors must estimate the total amount of Taxes and Fees owed to the Authorities prior to the scheduled date of payment. As a result, the Debtors often seek prompt refund of overpaid taxes once a final accounting has been made by the Authorities and, if applicable, may challenge the final accounting of such Taxes and Fees. As of the Petition Date, the Debtors believe that they are owed approximately $400,000 from various Authorities on account of overpaid Taxes and Fees.

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8.

Additionally, in the ordinary course of business, the Debtors are required to

collect taxes from customers who pay for rooms or space in the Debtors hotels (the Occupancy Taxes). The Debtors file the majority of their returns for Occupancy Taxes on a monthly basis and generally remit the Occupancy Taxes one month in arrears. However, in some jurisdictions, advance estimate payments are made during the month in which the tax is collected. 9. While the Debtors believe they are current with respect to their payment of Sales

Taxes and Occupancy Taxes, the Debtors estimate that, as of the Petition Date, they owe $3.3 million in prepetition Sales Taxes and Occupancy Taxes, which are recorded together, that have accrued but have not yet become due and payable, with approximately $2.95 million of which becoming due and owing within 21 days following the Petition Date. 10. The Debtors are also responsible for remitting use taxes on a monthly, quarterly,

and annual basis on account of the purchase of various inventory, supplies, or other goods used in the Debtors business (the Use Taxes). Use Taxes typically arise if a supplier does not have business operations in the state in which it is supplying goods and, therefore, does not charge sales tax, but the goods are otherwise taxable to the purchaser. As a result, the Debtors remit approximately $50,000 in Use Taxes per year to certain of the Authoritiesan amount equal to the Sales Taxes that would otherwise be owing had the goods been purchased in-state. The Debtors believe they are current with respect to their payment of Use Taxes and the Debtors estimate that, as of the Petition Date, there are no prepetition Use Taxes that have accrued but have not yet become due and payable. II. 11. Franchise Taxes The Debtors are required to pay taxes to certain Authorities for the privilege of

doing business within a particular jurisdiction (the Franchise Taxes). The Franchise Taxes 5
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are invoiced and paid in arrears and may be based on a flat fee, net operating income, or capital employed. The Debtors pay the Franchise Taxes in most jurisdictions on an annual basis, with the requirement to remit quarterly estimated tax payments in some cases. 12. The Debtors historically have remitted approximately $675,000 in Franchise

Taxes per year to the Authorities. The Debtors estimate that, as of the Petition Date, they may owe approximately $325,000 to the Authorities on account of prepetition Franchise Taxes. Additionally, the Debtors estimate that there are no Franchise Taxes which will become due and owing within 21 days following the Petition Date. III. 13. License and Permit Fees The Debtors also are required to obtain various business licenses and permits and

pay corresponding fees in the majority of jurisdictions in which they operate (the Business License Fees). For example, several states require the Debtors to pay annual reporting fees to remain in good standing for purposes of conducting business within the state. Other states require the Debtors to pay miscellaneous business taxes simply to operate their business. In 2009, the total amount owed in connection with the Debtors obligations for Business License Fees was approximately $375,000. The Debtors estimate that approximately $200,000 in

Business License Fees are due for the remainder of 2010, approximately $40,000 of which will become due and owing within 21 days following the Petition Date. Basis for Relief I. 14. Certain of the Taxes and Fees May Not Be Property of the Debtors Estates. Section 541(d) of the Bankruptcy Code provides, in relevant part, that [p]roperty

in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest . . . becomes property of the estate under subsection (a)(1) or (2) of this section only to the extent of the debtors legal title to such property, but not to the extent of any equitable 6
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interest in such property that the debtor does not hold. 11 U.S.C. 541(d). 15. Many of the Taxes and Fees constitute trust fund taxes, which the Debtors are

required to collect from their customers and hold in trust for payment to the Authorities. Courts have held that such taxes are not part of a debtors estate. See, e.g., Begier v. Internal Revenue Serv., 496 U.S. 53, 57-60 (1990) (holding that any prepetition payment of trust fund taxes is not a transfer subject to avoidance because such funds are not the debtors property); Shank v. Wash. State Dept. of Revenue (In re Shank), 792 F.2d 829, 833 (9th Cir. 1986) (sales tax required by state law to be collected by sellers from their customers is a trust fund tax and not released by bankruptcy discharge); DeChiaro v. N.Y. State Tax Commn, 760 F.2d 432, 435-36 (2d Cir. 1985) (same). If these trust fund taxes are collected, they are not property of the Debtors estates under section 541(d). See, e.g., Dameron v. Tylre (In re Dameron), 155 F.3d 718, 721-22 (4th Cir. 1998) (funds from various lenders held by closing agent in trust for designated third parties not property of debtors estate); In re Am. Intl Airways, Inc., 70 B.R. 102, 104-5 (Bankr. E.D. Pa. 1987). The Debtors, therefore, generally do not have an equitable interest in funds held on account of such trust fund taxes, and the Debtors should be permitted to pay those funds to the Authorities as they become due. 16. Additionally, a constructive trust may be imposed on collected taxes where there

exists a reasonable nexus between the funds and the taxes in question. See Integrated Health Servs., Inc., 344 B.R. 262, 270 (Bankr. D. Del. 2006). The Debtors, therefore, may not have a legally cognizable interest in funds held on account of such trust fund taxes, and, accordingly, such taxes, which generally consist of sales taxes, would not constitute property of the [Debtors] estate[s] as such term is defined in section 541 of the Bankruptcy Code. As such, the Debtors should be permitted to pay such funds to the Authorities as they become due.

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II. 17.

Certain of the Taxes and Fees May Constitute Secured or Priority Claims Entitled to Special Treatment. Payment of certain of the Taxes and Fees likely will give the Authorities no more

than that to which they otherwise would be entitled under a chapter 11 plan and will save the Debtors potential interest expense, legal expense, and penalties that otherwise might accrue on account of the Taxes and Fees during these Chapter 11 Cases. 18. Claims for some or all of the Taxes and Fees, including the Sales Taxes,

Occupancy Taxes, Use Taxes, and Franchise Taxes owed by the Debtors are, or may be entitled, to administrative priority status under section 507(a)(8) of the Bankruptcy Code. Section

507(a)(8) provides that claims entitled to priority status include unsecured claims of governmental units for: (a) taxes on or measured by income or gross receipts for a taxable year ending on or before the Petition Date, for which a return, if required, is last due after three years prior to the Petition Date, and which is assessed within 240 days before the Petition Date and (b) taxes required to be collected or withheld and for which the Debtors are liable in whatever capacity. See 11 U.S.C. 507(a)(8). Moreover, to the extent that the Taxes and Fees are entitled to administrative priority treatment under section 507(a)(8)(B), a governmental unit also may attempt to assess penalties. See 11 U.S.C. 507(a)(8)(G) (granting eighth priority status to a penalty related to a claim of a kind specified in [section 507(a)(8)] and in compensation for actual pecuniary loss). 19. In addition, certain of the Taxes and Fees may be the subject of tax liens.

Arguably, the relation back of a tax lien to the assessment or tax status date generally does not affect the enforceability of the tax lien against a debtor or violate the automatic stay imposed by section 362(a) of the Bankruptcy Code. See 11 U.S.C. 362(b)(3). In fact, the creation and perfection of such a lien may not violate the automatic stayeven if the lien arises under 8
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applicable law for taxes due after the Petition Date. See 11 U.S.C. 362(b)(18) (automatic stay does not apply to the creation or perfection of a statutory lien for an ad valorem property tax, or a special tax or special assessment on real property whether or not ad valorem, imposed by a governmental unit, if such tax or assessment comes due after the date of the filing of the petition.); see also In re Gifaldi, 207 B.R. 54, 56 n.1 (Bankr. W.D.N.Y. 1997) (noting that section 362(b)(18) reversed case law that had held that the creation of a statutory lien for ad valorem property taxes violated the automatic stay). Thus, the Debtors failure to pay certain taxes may inadvertently increase the amount of administrative priority claims held against the Debtors estates. 20. Indeed, absent the granting of the relief requested herein, many of the Authorities

may hold oversecured claims against the Debtors estates related to the Taxes and Fees. The Bankruptcy Code provides that oversecured claims accrue interest during the pendency of a chapter 11 case. See 11 U.S.C. 506(b); U.S. v. Ron Pair Enters., Inc., 489 U.S. 235, 241-43 (1989) (nonconsensual lienholders may receive interest on their claims under section 506(b) of the Bankruptcy Code); see also Lincoln Sav. Bank v. Suffolk County Treasurer (In re Parr Meadows Racing Assn, Inc.), 880 F.2d 1540, 1549 (2d Cir. 1989) (citing Ron Pair and holding that oversecured liens entitled a tax authority to postpetition interest). If the Debtors are required to pay interest on such tax claims, section 511 of the Bankruptcy Code provides that the rate of interest shall be the rate determined under applicable nonbankruptcy law, which may exceed prevailing market interest rates by a considerable degree. See 11 U.S.C. 511(a). Accordingly, prompt payment of the Taxes and Fees may eliminate claims for interest at these high rates for any secured claims. 21. In addition, claims entitled to administrative priority status pursuant to section

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507(a)(8) must be paid in full pursuant to a confirmable chapter 11 plan under section 1129(a)(9)(C) of the Bankruptcy Code. Thus, payment of the Taxes and Fees at this time only affects the timing of the payment for the vast majority of the amounts at issue and, therefore, should not unduly prejudice the rights of other creditors. III. 22. Payment of the Taxes and Fees May Eliminate Unnecessary Distractions to Reorganization Efforts. If the Debtors fail to pay the Taxes and Fees in a timely manner, the Authorities

may assert that the Debtors directors and officers personally are liable for payment of the Taxes and Fees. This is the case even if such a failure to pay such Taxes and Fees was not a result of malfeasance on their part. Any litigation related to the failure to pay Taxes and Fees would prove distracting for the Debtors, their named directors and officers, as well as the Court, which may be asked to entertain various motions seeking injunctions relating to potential court actions. As such, it is in the best interest of the Debtors estates to eliminate the possibility of these distractions and to enable the Debtors to continue operating without interruption. IV. 23. Ample Authority Exists to Support Payment of the Taxes and Fees at This Time. The Court may rely on its general equitable powers to grant the relief requested in

this Motion as codified in section 105(a) of the Bankruptcy Code. Section 105(a) empowers the Court to issue any order, process or judgment that is necessary to carry out the provisions of [the Bankruptcy Code]. A bankruptcy courts use of its equitable powers to authorize the payment of prepetition debt when such payment is needed to facilitate the rehabilitation of the debtor is not a novel concept. In re Ionosphere Clubs, Inc., 98 B.R. 174, 175-176 (Bankr. S.D.N.Y. 1989) (citing Miltenberger v. Logansport, C. & S.W. Ry. Co., 106 U.S. 286 (1882)). Section 105(a) authorizes a court to permit pre-plan payment of a prepetition obligation when

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essential to the continued operation of the debtor. In re NVR L.P., 147 B.R. 126, 127 (Bankr. E.D. Va. 1992); see also In re Just for Feet, Inc., 242 B.R. 821, 825 (D. Del. 1999). 24. The application of section 105(a) in the context of this Motion is appropriate

because the relief requested herein is consistent with the rehabilitative policy of chapter 11 of the Bankruptcy Code. A debtor in possession is a fiduciary with a duty to protect and preserve the estate, including the value of the business as a going concern. In re CoServ, L.L.C., 273 B.R. 487, 497 (Bankr. N.D. Tex. 2002) (There are occasions when this [fiduciary] duty can only be fulfilled by the preplan satisfaction of a prepetition claim.). Granting the relief requested in this Motion will enhance the likelihood of the Debtors successful rehabilitation, maximize the value of the estates assets, and, thus, benefit the estates creditors. 25. Additionally, the Court also may authorize payment of prepetition obligations

such as the Taxes and Fees pursuant to section 363 of the Bankruptcy Code. Section 363(b) provides, in relevant part, that [t]he [debtor], after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate. Under this section, a court may authorize a debtor to pay certain prepetition claims. See, e.g., Ionosphere Clubs, 98 B.R. at 175 (affirming lower court order authorizing payment of prepetition wages pursuant to section 363(b)). To do so, the debtor must articulate some business justification, other than mere appeasement of major creditors. Id. at 175. 26. Absent the relief requested herein, the Debtors business could be significantly

disrupted. As discussed herein, the Debtors could incur penalties, interest, and liens arising from their failure to pay the Taxes and Fees, thereby increasing unnecessarily both the amount and priority of claims against their estatesall to the detriment of the Debtors and their creditors. The Debtors key personnel could also be exposed to personal liability and needlessly distracted

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from the present reorganization. Thus, granting the relief requested in this Motion will enhance the likelihood of the Debtors successful rehabilitation, maximize the value of the estates assets, and, thus, benefit the estates creditors. 27. Courts in this and other jurisdictions have approved relief similar to the relief

requested in this Motion for debtors seeking to pay prepetition taxes and fees. See, e.g., Uno Restaurant Holdings Corp., Case No. 10-10209 (Bankr. S.D.N.Y. Feb. 17, 2010); In re Mesa Air Group, Inc., Case No. 10-10018 (Bankr. S.D.N.Y. Jan. 26, 2010); In re Citadel Broad. Corp., Case No. 09-17442 (Bankr. S.D.N.Y. Feb. 3, 2010); In re The Readers Digest Assn Inc., Case No. 09-23529 (Bankr. S.D.N.Y. Sept. 17, 2009); In re Lear Corp., Case No. 09-14326 (Bankr. S.D.N.Y. Jul. 7, 2009); In re Ion Media Networks, Inc., Case No. 09-13125 (Bankr. S.D.N.Y. May 21, 2009); In re Charter Commcns, Inc., Case No. 09-11435 (Bankr. S.D.N.Y. Apr. 15, 2009); In re Chemtura Corp., Case No. 09-11233 (Bankr. S.D.N.Y. Apr. 13, 2009); In re Tronox Inc., Case No. 09-10156 (Bankr. S.D.N.Y. Feb. 6, 2009).5 V. 28. Cause Exists To Authorize the Debtors Financial Institutions To Honor Checks and Electronic Fund Transfers. The Debtors have sufficient funds to pay the amounts described herein in the

ordinary course of business by virtue of expected cash flows from ongoing business operations and anticipated access to cash collateral. Also, under the Debtors existing cash management system, the Debtors can readily identify checks or wire transfer requests as relating to an authorized payment in respect of the Taxes and Fees. Accordingly, the Debtors believe that checks or wire transfer requests, other than those relating to authorized payments, will not be honored inadvertently. Therefore, the Debtors respectfully request that the Court authorize all
5

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

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applicable financial institutions, when requested by the Debtors, to receive, process, honor, and pay any and all checks or wire transfer requests in respect of the relief requested herein. Motion Practice 29. This Motion includes citations to the applicable rules and statutory authorities

upon which the relief requested herein is predicated and a discussion of their application to this Motion. Accordingly, the Debtors submit that this Motion satisfies Rule 9013-1(a) of the Local Bankruptcy Rules for the Southern District of New York (the Local Bankruptcy Rules). The Requirements of Bankruptcy Rule 6003 Are Satisfied 30. Bankruptcy Rule 6003 empowers a court to grant relief within the first 21 days

after the Petition Date to the extent that relief is necessary to avoid immediate and irreparable harm. Absent the relief requested herein, the Debtors would suffer immediate and irreparable harm because a failure to continue paying the Taxes and Fees as they come due, as well as any outstanding prepetition amounts, would expose the Debtors to significant potential liabilities and losses to the detriment of all parties in interest. For example, failure to pay the Taxes and Fees may result in penalties, interest, and liens, thereby increasing the amount and priority of claims against the Debtors estates. Moreover, failure to obtain the immediate relief requested herein could lead to distracting litigation bought by the Authorities against the Debtors and their officers and directors. The reorganization process will require the full attention of the Debtors and their management. Thus, it is imperative that the Debtors have the authority to continue to make any past due prepetition payments with respect to the Taxes and Fees. Accordingly, the Debtors submit that they have satisfied the immediate and irreparable harm standard of Bankruptcy Rule 6003 to support payment of prepetition Taxes and Fees. Waiver of Bankruptcy Rule 6004(a) and 6004(h) 31. To implement the foregoing successfully, the Debtors seek a waiver of the notice 13
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requirements under Bankruptcy Rule 6004(a) and the 14-day stay of an order authorizing the use, sale, or lease of a property under Bankruptcy Rule 6004(h). The Debtors Reservation of Rights 32. Nothing contained herein is intended or should be construed as an admission of

the validity of any claim against the Debtors, a waiver of the Debtors rights to dispute any claim, or an approval or assumption of any agreement, contract, or lease under section 365 of the Bankruptcy Code. The Debtors expressly reserve their right to contest any invoice or claim related to the relief requested herein in accordance with applicable non-bankruptcy law. Notice 33. The Debtors have provided notice of this Motion to: (a) the Office of the United

States Trustee for the Southern District of New York; (b) the entities listed on the Consolidated List of Creditors Holding the 50 Largest Unsecured Claims; (c) the Debtors prepetition secured lenders or, if known, their counsel; (d) counsel to the agent for the Debtors proposed postpetition secured lenders; (e) counsel to Apollo Investment Corporation; (f) the parties to the Debtors franchise agreements or, if known, their counsel; (g) the attorneys general for each of the States in which any of the Debtors conduct a substantial amount of its business operations; (h) the Internal Revenue Service; and (i) those parties who have formally filed a request for notice in the Chapter 11 Cases pursuant to Bankruptcy Rule 2002. No Prior Request 34. other court. No prior request for the relief sought in this Motion has been made to this or any

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WHEREFORE, the Debtors respectfully request that the Court enter orders, substantially in the forms attached hereto as Exhibit A and Exhibit B, granting the relief requested herein and granting such other relief as is just and proper. New York, New York Dated: July 19, 2010 /s/ Paul M. Basta James H.M. Sprayregen, P.C. Paul M. Basta Jennifer L. Marines KIRKLAND & ELLIS LLP 601 Lexington Avenue New York, NY 10022-4611 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 and Anup Sathy, P.C. Marc J. Carmel KIRKLAND & ELLIS LLP 300 North LaSalle Chicago, IL 60654-3406 Telephone: (312) 862-2000 Facsimile: (312) 862-2200 Proposed Counsel to the Debtors and Debtors in Possession

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EXHIBIT A Proposed Interim Order

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

INTERIM ORDER AUTHORIZING, BUT NOT DIRECTING, THE PAYMENT OF PREPETITION TAXES AND FEES1

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

K&E 16724424

Upon the motion (the Motion)2 of the Debtors, as debtors and debtors in possession (collectively, the Debtors), for the entry of an interim order (this Order) and a final order authorizing the Debtors to remit and pay Sales Taxes, Occupancy Taxes, Use Taxes, Franchise Taxes, and Business License Fees, all as more fully set forth in the Motion; and upon the First Day Declaration; and the Court having found that the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and the Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C. 1408 and 1409; and the Court having found that the relief requested in the Motion is in the best interests of the Debtors estates, their creditors, and other parties in interest; and the Debtors having provided appropriate notice of the Motion and the opportunity for a hearing on the Motion under the circumstances; and the Court having reviewed the Motion and having heard the statements in support of the relief requested therein before the Court (the Hearing); and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. 2. The Motion is granted on an interim basis to the extent provided herein. The final hearing (the Final Hearing) on the Motion shall be held on [___],

2010 at [___] prevailing Eastern Time. Any objections or responses to entry of the final order shall be filed seven (7) calendar days before the Final Hearing on [___] at [___] prevailing Eastern Time and served on the following parties: (a) the Debtors counsel at the address set forth in the Motion, (b) the Office of the United States Trustee for the Southern District of New
2

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

2
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York, and (c) those parties who have formally filed a request for notice in the Chapter 11 Cases pursuant to Bankruptcy Rule 2002, all of whose addresses are available at

http://www.omnimgt.com/innkeepers or by contacting the Debtors notice and claims agent at Innkeepers Hospitality c/o Omni Management Group, LLC, 16161 Ventura Boulevard, Suite C, PMB 606, Encino, California, 91436. 3. The Debtors and the Hotel Managers are authorized, but not directed, to pay

certain Taxes and Fees in the ordinary course of business, without regard to whether such obligations accrued or arose before or after the Petition Date. 4. Nothing in the Motion or this Order, nor as a result of the payment of Taxes and

Fees pursuant to this Order, shall be deemed or construed as an admission as to the validity or priority of any claim against the Debtors or an approval or assumption of any contract pursuant to section 365 of the Bankruptcy Code. 5. The banks and financial institutions on which checks were drawn or electronic

payment requests made in payment of the prepetition obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment, and all such banks and financial institutions are authorized to rely on the Debtors designation of any particular check or electronic payment request as approved by this Order. 6. The requirements set forth in Bankruptcy Rule 6003(b) are satisfied by the

contents of the Motion or otherwise deemed waived. 7. Notice of the Motion as provided therein shall be deemed good and sufficient

notice, and the requirements of Bankruptcy Rule 6004(a) and the Local Bankruptcy Rules are satisfied by such notice.

3
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8.

Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Order

shall be immediately effective and enforceable upon its entry. 9. All time periods set forth in this Order shall be calculated in accordance with

Bankruptcy Rule 9006(a). 10. The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 11. The Court retains jurisdiction with respect to all matters arising from or related to

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

United States Bankruptcy Judge

4
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EXHIBIT B Proposed Final Order

K&E 16724424

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

FINAL ORDER AUTHORIZING, BUT NOT DIRECTING, THE PAYMENT OF PREPETITION TAXES AND FEES1

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

K&E 16724424

Upon the motion (the Motion)2 of the Debtors, as debtors and debtors in possession (collectively, the Debtors), for the entry of an interim order and a final order (this Order) authorizing the Debtors to remit and pay Sales Taxes, Occupancy Taxes, Use Taxes, Franchise Taxes, and Business License Fees, all as more fully set forth in the Motion; and upon the First Day Declaration; and the Court having found that the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; and the Court having found that this is a core proceeding pursuant to 28 U.S.C. 157(b)(2); and the Court having found that venue of this proceeding and the Motion in this district is proper pursuant to 28 U.S.C. 1408 and 1409; and the Court having found that the relief requested in the Motion is in the best interests of the Debtors estates, their creditors, and other parties in interest; and the Debtors having provided appropriate notice of the Motion and the opportunity for a hearing on the Motion under the circumstances; and the Court having reviewed the Motion and having heard the statements in support of the relief requested therein before the Court (the Hearing); and the Court having determined that the legal and factual bases set forth in the Motion and at the Hearing establish just cause for the relief granted herein; and upon all of the proceedings had before the Court; and after due deliberation and sufficient cause appearing therefor, it is HEREBY ORDERED THAT: 1. 2. The Motion is granted on a final basis to the extent provided herein. The Debtors and the Hotel Managers are authorized, but not directed, in the

Debtors sole discretion to pay certain Taxes and Fees in the ordinary course of business, without regard to whether such obligations accrued or arose before or after the Petition Date. 3. Nothing in the Motion or this Order, nor as a result of the payment of Taxes and

Fees pursuant to this Order, shall be deemed or construed as an admission as to the validity or
2

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

2
K&E 16724424

priority of any claim against the Debtors or an approval or assumption of any contract pursuant to section 365 of the Bankruptcy Code. 4. The banks and financial institutions on which checks were drawn or electronic

payment requests made in payment of the prepetition obligations approved herein are authorized and directed to receive, process, honor, and pay all such checks and electronic payment requests when presented for payment, and all such banks and financial institutions are authorized to rely on the Debtors designation of any particular check or electronic payment request as approved by this Order. 5. Notice of the Motion as provided therein shall be deemed good and sufficient

notice, and the requirements of Bankruptcy Rule 6004(a) and the Local Bankruptcy Rules are satisfied by such notice. 6. Notwithstanding Bankruptcy Rule 6004(h), the terms and conditions of this Order

shall be immediately effective and enforceable upon its entry. 7. All time periods set forth in this Order shall be calculated in accordance with

Bankruptcy Rule 9006(a). 8. The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 9. This Court retains jurisdiction with respect to all matters arising from or related to

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

United States Bankruptcy Judge

3
K&E 16724424