Page 1 of 16

10/08/2010
Dear Honorable Shelley C. Chapman :
I was looking over Innkeeper's letter to the shareholders that I folmd on the United States Securites and
Exchange Commission web page. The special meeting was held on June 26, 2007 and the shareholders
approved the DEFINITIVE PROXY STATEMENT relating to merger and acquistion, effective 05/29/2007.
What I found was more information that supports my earlier two Documents 324 and 414 and missing first
letter ( 414 asking for Honorable Shelley C. Chapman to make a ruling on 324 ) that Innkeepers Prefened C
should not be in the Innkeepers Bankruptcy court and that Apollo Investment Corporation (AINV) is
responsible for the assumption of Innkeepers indebtedness. (stated in many PRs, SEC filings and merger agreement.)
Apollo did not replace all their assume debt for Innkeepers by paying or refinance the debt. One of the
debt which Apollo did not refinance is Innkeepers Preferred Shares C now symbol INKPQ
*** (this is important:) SEE PAGES : 4, 5, 6, 7 and 8
*** about Preferreds being a Debt. ***
Next: Distinction between mergers and acquisitions. Please read merger and acquisitions to determine if
Innkeepers was really a acquisition and not a merger with Apollo. As I read the SEC filing even though
everything is stated is a meger, the repeated actions of Apollo shows acquisition. See PAGE 9
Here are some of the high-lights that they agreed on and went over in the meeting That are important to me
that were in the Securities and Exchange Commision definitive proxy statement effectiveness date 05/29/2007 are:
( lthru 6 below are from page 3 ) Everything points to Apollo
1. On March 17, 2007, Apollo delivered a letter to Lehman Brothers proposing to acquire the Company for
$17.7 5 per share in cash,
2. Apollo has agreed to contribute $200 million to Grand Prix Holdings,
3. Grand Prix Holding LLC is a recently formed Delaware limited liability company controlled by Apollo.
4. Grand Prix Acquisition Trust is a recently formed Maryland REIT.
note: plus per Press release I found elsewhere on the web: from Maryland State Comptroller Peter Franchot.
I read the only reason they formed these companies was for tax avoidance. See PAGE 10
on how the tax avoidance work in the State of Maryland. 7'1.,''!> .Sa):S a. II
.?
5. Section 1.1 The Merger: General. the Surving Entity shall have all the properties, rights, privileges,
purposes and powers and debts, duties and Liabilities oflnnkeepers REIT.
6. Section 8.2 Notices. All Notices, requests, claims, demands and other communications under this Agreement .....
(a) if to any of the Purchaser Parties (or to Innkeepers LP following the Closing Date), to:
c/o Apollo Investment Corporation, 9 West 57th Street, 41st Floor, New York, NY 10019
***Again: 1, 2, 3, 4, 5, and 6 above are parts that I cut out of the SEC fillings, See PAGE 3 for full
paragraphs. For complete pages from the SEC definitive proxy statement filing see notes on PAGE 3
and you can go to the SEC web page for the whole filing.
----- Next I like to show you:
*
*
*
*
*
Page2of16
SEE PAGE 11 SEC filing shows stocks went in the control of Apollo within 4 days of approval.
PLEASE NOTE :
I have proven :
Apollo proposed to acquire Innkeepers for $17.75 per share in cash and agreed
to contribute $200 Million for Innkeepers.
Innkeepers did not merge into Apollo, it was an acquisition like in Docket# 33 pages 14
of the Declaration/Amended Declaration of Dennis Craven ...
Many Press Releases and SEC filings stated that Apollo assume all debts of Innkeepers REIT.
In the Section 1.1 The Merger: General. it shows that " the Surving Entity shall have all the
properties, rights, privilieges, purposes and powers and debts, duties and Liabilities of Innkeepers REIT."
Pages 4 thru 8 shows Preferred shares also defined as Preferred stock is a debt.
I am retired citizen of the USA. I want Apollo to honor the Many Press Releases, SEC filings and
merger agreement stated that Apollo assume all debts of Innkeepers REIT. Which includes the Innkeepers
Preferred Shares C 8.0% now symbol INKPQ which I own because oftheir many Press Releases.
Gareth J. Tooly
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Page 3 of 16
: . Dod!ll;lhe wool< oi'Maroh 1.2, 200'7, JF Capi(l\IAdvi.Ms ("Jfl()apital''), Apollo's 1111d Sl<sdd<lll, Arps,
. Slate, Meagher & filum u . P ("Skadden"), Apl)llo's 101{111 advisor, submitted lllil\lllStll to Lehmaa llt'others and (
Waclttoll iutd wem access to tlto clectrol!lc 1"110!11 . .
., .
' On Mamlt 17, ?.007, Apollo delivered a letter to dmlli!l llt'9ll!ll!'S Q'!!'IP'"IY (or $17.75 per sha!'l>
. to the of due <llligcuce, wl\lJ.te$llf4 and entry l11to. .
: al'lliRg<Jments with our malmgotnoot. A IlOilo also 0xpl'I)$Sild an,lntete$t ln IQM l'<l!luoolild dio .
olli'oriuniW to to Mr. Fisher in that regard. the letter indicared that tho debt financlngfot tho fll!nsaction would bo
: pt'l!ilided by nrothom. . ...... .. .. . . .. . p.'j f iJ... .. ..
l!.qlliiJ' Fillotrclng. Grand l'rix Holdings has reetlivedan equity ()(lm,mlflrlo:nt lett!lrfh!m Apollo, pUrsUliJltk> which, and
subject w the ha$ to Ota!tdl'rlx Holdings, which will
constitute the eqUity portion of the financmg \hl' the traijtmqtinmvcontmplated by the age;ooment.
Subjer.t to certain conditions, Apollo may aportton commttmeut obllgutlon, provided that 1! remains
obligated to pe1'form to the extent not rernmned by such . 1 :3
------,1
Gl'll!ldll"rillffollllngn J,[,C ond Ganll Prb > . . . . . . .. ........ . . ' .i
Uoldlnt!S l.J..C Is al'(iCtllltly lbrmed l>olaWIIl'c lllllitedll!ll!lllty ""':ltl!i'IIY;!l!!Jilrolled . <lrand Prl11
!J.C is tho sole t.flareholdcr of <Jraad Prix Al)qul$ltlon Trust Apolfo Is 1). ln\IOstmillit tlinthlis
to 1x1 treated a bu31ncs.' ,doWI11pment company .under the InvestmcntCoJ!!pUny.J\ct ofl940. Apollo's
portfolio is principally lnnliddle.>Inatket plivato cnmpaijlflll. A poll& lnvestlJ prlmllrily Jn .loans and seniers.ecllrad , .
loans ill t\lrlheranoo of Its pion a11d also llivestslnll!e equity of portfolio Apollo Is mannged by Apollo,
Investment Mru!agcmcnl; J..J)., an aftiliate of Apollo I .. P.,a leadlns: pri:V!l(o / J.{
. Oi'!lnd PtlxAcquisltion Trust is a l'OOCUtly furtned f,fm')'ll1lld RlliT and the entity lllt.o we
tho oftllQ tuergct age:oom\lllt, wlllt Otlllld Pl'lx Acquisitlonl\ust a, the stll'VMog lll)tity, . . .
<- rtt
Seetion 8.2 Notices. All notices, requests, claims, demlll)!S an4 Oilier cOI\lmu.nii:atlons lUidctthls A8reement shall be in
writing (and also made orally if so required pursuant to any Section ofthis alid shall be deellled given if delivered
versonally,.sent by overnight courier (pl'Oviding proof ofdelivery}to tho parties h,erato or sunt by telecopy (providing
oftransmiss!on).at the ful.towingaddresscs or tolecopy nun\bers(orat such othentddress or telecopy number tor
a party hel'eto as shull be spectfied by hke notice):
{a) it'to MY of the Puroltaser Parties (or to LP full owing the Closlagl>ate), to:
c/o Apollo Investment Corporation 11 / I
9WcstS7thStroot,41stFloor . '\ [49 e ..
New York. New York 10019
Attn: Aal'On N. Sack
Fax: (212) 515 .. 3467
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distributed by the company.
Preferred equity redemption stock (PERC)
Preferred stock that converts automatically into
equity at a stated date. A limit is placed on the
value of the shares the investor receives.
Preference stock
A security that ranks junior to preferred stock but
senior to common stock in the right to receive
payments from the firm; essentially junior preferred
stock.
Preferred habitat theory
A biased expectations theory that believes the
term structure reflects the expectation of the future
path of interest rates as well as risk premium.
However, the theory rejects the assertion that the
risk premium must rise uniformly with maturity.
Instead, to the extent that the demand for and
supply of funds does not match for a given
maturity range, some participants will shift to
maturities showing the opposite imbalances. As
long as such investors are compensated by an
appropriate risk premium whose magnitude will
reflect the extent of aversion to either price or
reinvestment risk.
Preferred shares
Preferred shares give investors a fixed dividend
from the company's earnings. And more
importantly: preferred shareholders get paid
before common shareholders. See: preferred
stock.
Preferred stock
A security that shows ownership in a corporation
and gives the holder a claim, prior to the claim of
common stockholders, on earnings and also -
generally on assets in the event of liquidation.
Most preferred stock pays a fixed dividend that is
paid prior to the common stock dividend, stated in
a dollar amount or as a percentage of par value.
This stock does not usually carrv voting rights. The
stock shares characteristics of both common stock
and debt.
Preferred stock agreement
A contract for preferred stock.
Preliminary prospectus
A preliminary version of a prospectus.
Premium
(1) Amount paid for a bond above the par value.
(2) The price of an option contract; also, in futures
trading, the amount the futures price exceeds the
price of the spot commodity. Related: inverted
market premium payback period. Also called
http://www .nytimes.com/library/financial/ glossary /bfglosp.htm
PageU efbl
tfcF I ~
10/9/2010
Investing In Preferred Shares/Stock And Corporate Debt The Investment Blog
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5 of. /10
Investing In Preferred Shares/Stock And Corporate Debt
April 24, 2009 by investmentblogger
<!--[if gte mso 9]> Normal 0 MicrosoftlntemetExplorer4 <![endif]--> <!--[endit]-->In this article I
discuss items to consider when purchasing preferred shares/stock or other similar debt instruments of
a company. This is a followup to the questions from investors who were considering purchasing
preferred shares/stock of Wells Fargo (WFC) and US Bancorp (USB).
What Are Preferred Shares?
In general, preferred shares are a form of corporate debt that has some qualities of common shares as
well as that of bonds. The main characteristic of preferred shares are that they pay a fixed return to the
holder at regular specified intervals, usually in the form of a dividend. The dividend payment
typically does not fluctuate or change over time as it is determined at the time of issue, unlike
common shares. However, there are rate resetting preferred shares as well (where the payment is
calculated based on a predetermined formula). The preferred share represents partial ownership in the
company just like common shares do. Often, they are redeemable by the corporation after a specified
date.
When talking about preferred shares in general, I find it relevant to discuss other similar or related
forms of preferred securities and corporate debt instruments. Other forms include subordinated
debt/debentures/notes, senior/junior debentures, interest paying notes, preferred capital trust units,
preferred notes, etc. Subordinated debt may also be in a form that is combined with preferred stock to
create monthly income preferred stock. Such a hybrid combined form pay dividends to the investor
(lender) but is placed as interest expense on the issuing company's balance sheet.
To the average investor, all these debt instruments such as debentures or notes may seem the same as
preferred shares, but they are not. They have their own conditions & stipulations, that need to be read
http:!/investmentblog.wordpress.com/200'.)/04/24/investing-in-preferred-sharesstock-and-c... 9/29/2010
Preferred stock - Wikipedia, the free encyclopedia
Page-l ef7
0 oF I &
Preferred stock
From Wikipedia, the free encyclopedia
Preferred stock, also called_preferred shares, prefer.enceshares, or simply preferreds, is a special
equity security that has properties of both an equity and a debt instrmnent and is generally considered a
hybrid instrument. Preferreds are senior (i.e. higher ranking) to cormnon stock, but are subordinate to
bonds.!IJ
Preferred stock usually carries no voting rights, [ZJ but may carry a dividend and may have priority over
common stock in the payment of dividends and upon 'liquidation. Preferred stock may- have a
convertibilitY feature into cormnori stock. Terms ofthe preferred stock are stated in a "Certificate of
Designation".
Similar to bonds, preferred stocks are rated by the major credit rating companies. The rating for
preferreds is generally lower since preferred dividends do not carry the same guarantees as interest
payments from bonds and they are junior to all creditors. [JJ
I
!
! Contents
1 Features
2 Types of preferred stock
3 Typical usage
4 Users
5 International perspectives
5.1 Canada
5.2 Germany
5.3 United Kingdom
5.4 United States
5.5 Other countries
6Notes
7 Extemallinks
Features
I
!
I
Preferred stock is a special class of shares that may have any combination of features not possessed by
common stock.
The following features are usually associated with preferred stock[
4
J
Preference in dividends.
Preference in assets in the event of liquidation.
Convertible into cormnon stock.
Callable at the option of the corporation.
http://en. wikipedia.org/wiki!Preferred _stock
10/9/2010
oDividend Stock Glossary
Pagehf9
7o-llr>
Preferred Stock
Preferred stock is a debt instrument, something like a bond. Preferred stocks generally pay predetermined
dividends. Unlike bonds, preferred stocks trade like regular stocks. Convertible preferred shares can be
converted into common stock according to predetermined conditions.
Power Center
Shopping centers with three or more "big box" anchors such as Toys R Us, Home Depot and Target.
Real Estate investment Trust (REIT)
REITs are a special form of corpomtion that invests only in real estate. REITs do not pay corpomte income tax
as long as they pay out at least 90% of their earnings as dividends to share owners. REIT shares trade on the
major exchanges the same as any other stock.
,Dividend Stock Glossary
Harry Doma6118
ividend
etetti
If you /Ike dividends,
you'll LOVE Dividend Oeteotlve
Page 1 of9
fREE: HOM!;, BIG LIST REITS MLPS CANROYS CLOSED-END GLOSSARY
PREMIUM: LOG IN SUBSCRIPTION INFOiSUBSCRIBE
Dividend Stock Glossary
Frequently heard dividend stock terms
o----
Debt that is junior to other (senior) debt. That is, in the event of bankruptcy, the subordinated debt would have
lower priority than the more senior debt.
Tenant Improvements
Construction costs to prepare a specific tenant's space for occupancy.
Third Party Trust Preferred
A Trust Preferred issue by a third party such as an underwriter.
htto://www.dividenddetective.com/glossary.htm
9/29/2010
Preferred Stock Definition
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Home> Dictionary
Preferred Stock
What Does Preferred Stock Mean?

that has a higher claim on the assets and earnings than

stock generally has a dividend that must be paid out before dividends to
and the shares usually do not have voting rights.
The precise details as to the structure of preferred stock is specific to each corporation. However,
the best way to think of _preferred stock _is as a finanG!al instrument that has characteristics of both
debt (fixed dividends) and equity (potential appreaa on). Also- as"prlffim'ed shares".
lnvestopedia explains Preferred Stock
There are certainly pros and cons when looking. at preferred shares. Preferred shareholders have
priority over common stockholders on earnings and assets in the event of liquidation and they
have a fixed dividend (paid before common stockholdersfbut investors must weigh these
positives against the negatives, including giving up their voting rights and less potential for
appreciation.
Filed Under: Dividend, Stocks
Related Terms
Callable Preferred Stock
Common Stock
Contingent Voting Povier
Convertible Preferred Stock
Cumulative Preferred Stock
Distribution Waterfall
Junior Equitv
Particioatinq Preferred Stock
Preferred Dividend
Prior Preferred Stock
More Related Terms
Related Links
+
1
TRADE WTIH SCHWAB ll
ROLLOvER TO SEE RESOURCf:S

dwr!e.rsetJWAB
Stock Basics: Different Types Of Stocks - Not all shares are created equal. Learn about the different types
here.
A Primer On Preferred Stocks- Offering both income and relative secwity, these uncommon shares may
work for you.
Introduction To Convertible Preferred Shares- These securities offer an answer for investors who want
the profit potential of stocks but not the
MAl
Prn
httt>://www.investopedia.com/terrns/p/preferredstock.asp
10/9/2010
Mergers and acquisitions - Wikipedia, the free encyclopedia
Page2ef7
<"fof-j(o
The buyer buys the shares, and therefore control, of the target company being purchased.- Ownership control of the company
in tum conveys effective control over the assets of the company, but since the company is acquired intact as a going
concern, this form of transaction carries with it all of the liabilities accrued by that business over its past and all of the risks
that company faces in its commercial environment. .
, The buyer buys the assets of the target company. The cash the target receives from the sell-off is paid back to its
'shareholders by dividend or through liquidation. This type of transaction leaves the target company as an empty shell, if the
buyer buys out the entire assets. A buyer often structures the transaction as an asset purchase to "cherry-pick" the assets that
it wants and leave out the assets and liabilities that it does not. This can be particularly important where fureseeable
liabilities may include future, unquantified damage awards such as those that could arise from litigation over defective
products, employee benefits or terminations; or environmental damage. A disadvantage of this structure is the tax that many
jurisdictions, particularly outside the United States, impose on transfers of the individual assets, whereas stock transactions
can frequently be structured as like-kind exchanges or other arrangements that are tax-free or tax-neutral, both to the buyer
and to the seller's shareholders.
The terms
11
demerger
11
, "spin-off" and "spin-out" are sometimes used to indicate a situation where one company splits into two,
generating a second company separately listed on a stock exchange.
Distinction betwc:en mergers and acquisitions
Although often used synonymously, the terms merger and acquisition mean slightly different things. 121
[This paragraph does not make a clear distinction between the legal Concept of a merger (with the resulting corporate mechanics-
statutory merger or statutory consolidation, which have nothing to do with the resulting power.grab as between the management of
the target and the acquirer) and the business point of view of a "merger", which can be achieved independently of the corporate
mechanics through various means such as "triangular merger", statutory merger, acquisition, etc.]
When one company takes over another and clearly establishes itself as the new owner, the purchase is called an acquisition. From
a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be
traded.
In the pure sense of the term, a merger happens when two firms agree to go forward as a single ~ e w company rather than remain
separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". The firms areoften of
about the same size. Both companies' stocks are surrendered and new company stock is issued in its place. For example, in the
1999 merger ofGlaxo Wellcome and SmithKline Beecham, both firms ceased to exist when they merged, and a new company,
GlaxoSmithKline, was created.
In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the
deal's terms, simply allowilte acquired firm to proclaim that the action is a n\erger of equals, even if it is technically an
acquisition. Being bought out.often carries negative connotations, therefore, by describing the deal euphemistically as a merger,
deal makers and top managers try to make the takeover more palatable. An example of this would be the takeover of Chrysler by
Daimler-Benz in 1999 which was wiqely referred to in the time.
A purchase deal will also be called a merger when both CEOs agree that joining together is in the best interest of both of their
companies. But when the deal is unfriendly, that is, when the target company does not want to be_ purchased- it is always
regarded as an acquisition.
Business valuation
The five most common ways to valuate a business are
assei valuation,.
historical earnings valuation,
future maintainable earnings valuation,
relative valuation (comparable cpmpany & comparable transactions),
discounted cash flow (DC F) valuation
Professionals who valuate businesses generally do not use just one of these methods but a combination of some of them, as well as
possibly others that are not mentioned above, in order to obtain a more accurate value. The information in the balance sheet or
income statement is obtained by one of three accounting measures: a Notice to Reader, a ReviewEngagement or an Audit.
Accurate business valuation is one of the most important aspects ofM&A as valuations like these will have a major impact on the
price that a business will be sold for. Most often this information is expressed in a Letter of Opinion of Value (LOV} when the
business is being valuated for interest's sake. There are other, more detailed ways of expressing the value of a business. While
http://en.\\'il.ci.pedia.org/wiki!Merger
10/8/2010
Maryland closes corporate tax 'loophole'
Page2of3
/0
Maryland closes corporate tax 'loophole'
AN\'!Al'OLIS, Mareb 12, 2007- Comptroller Peter Franchot has annoUIIQed that Marylartd wlll no longer
allow payments to "captive" Real Estate Investment Trusts (RErtS) to tx; deduQted from state corporate lnoome tax
returns.
Franchot said the state will begin auditing companies using this tax "loophole" and seek to collect the taxes it is owed. It
is estimated that Maryland could bring in millions of dollars annually in additional revenue due to tltis change in policy.
,A REIT is defined as a corporation or trust whose activity is limited to real estate operations. REITS are required by law
to pay all their income to who then pay tlte appropriate tax; tlterefure, a REIT is normally tax exempt at the
federal and state level. Over the years, large, multi-state companies have formed "captive" RElTS to lower the taxes
they pay in the states they do business. According to Franchot, It works ln the fullowlng manner:
A company with stores in Maryland creates aREIT and has all of its stores pay "rent" to the REIT. The parent company
tlten creates another subsidia1'y to be the "shareholders" of the REIT and receives all the dividends ftom the rent
payments. In essence, tlte company is paying rent to itself, getting tlte money through a taxfree RBIT and then
dl:ducting tlte rent payments ftorn its Maryland corporate inconte .taX. According to the Wall Street Journal, the state of
North Carolina sent a bill to one company for $30 million to cover back taxes. Several other companies and financial
institutions have been cited in other states fur this practice. In New York, it is estimated that the state is losing out on
$83 million annually thanks to this practice.
"The cost savings and added profit give comparties an unfair advarttage over local competition artd make it harder
to compete with the giant stores," states the Maryland Comptroller's Office. "The vast majority of Maryland businesses
are paying theif fair share and Comptroller Franchot is determined to do what it takes to level the playing field. The add
back provisions of the 2004 Delaware Holding Campany statute gives tlte state tlte right to add back intlingible expenses
and costs paid to related entities fur a tax avoidance purpnse. The law also gives the Comptroller the artthority to
reallocate deductions, expenses and transactions among related entities to clearly reflect income. Captive REITS fall
under this law as they are transactions among related entities and have no purpose otlter titan state tax avoidance."
Maryland has long been a leading center for REITS. In 2006, 326 REITS paid the state's $300 AIUIIllll Report fee for
total Oeneral Fund Revenue of$97 ,800. This makes Maryland home to more than SO oftlte nation's REITS,
according to the National Association ofReal Estate Investment Trusts. The genesis of this can oo traced back to 1963,
when Maryland became the first state to pass a REIT statute called tlte Maryland REIT Law. In addition, several factors
have contributed to keeping Maryland a REIT magnet, including the following:
has no franchise tax.
M!lryland has a statotory staadard of conduct requiring REIT directors to perforin duties in good faith.
Maryland does not re<fuire any REIT trustees to be a resident oftlte state.
Maryland allows the board of directors to have exclusive powers to adopt amend or repeal REIT bylaws.
It is important to note that the typical investment REIT, corporate REIT and trust Rl;>IT will not be effected by this
action. The accounting practices targeted by the comptroller are used solely by tlte captive RElTS artd are solely fur the
purpose of tax avoidance.
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MARYLAND ASSOCIATION OF CPAs
'.101 DULANEY VALLEY ROAD
SUITE 710 TOWSON, MD 21204-2683
800-7822036
t. ..... JJ .. IUIUI mRcna.om/Content/23190.aspx
1017/2010
Form 10-Q
Pagel2 ef42
Table of Contents
APOLLO INVESTMENT CORPORATION
SCHEDULE OF INVESTM-ENTS (mlauditod) (contl!mod)
June 30, 2007
(in thousands, except shares)
2nd Lien Bank Debt/Senior Secured Loans (5)-
(continued)
Summit Business Media Intermediate Holding Company, Inc.,
1114/13
TransFirst Holdings, Inc., 6115/15
Total 2nd Lien Bank Debt/Senior Secured Loans
Total Investments in Non-Controlled/Non-Affiliated
Portfolio Companies- 135.1%
Investments in Controlled Portfolio Companies
Preferred Equity - 3.8%
Grand Prix Holdings, LLC Series A, 12.00% (Innkeepers
USA)
Common Equity- 6.7%
Grand Prix Holdings, LLC (Innkeepers USA)
Total Investments in Controlled Portfolio Companies-
10.5%
Total Investments
Cash Equivalents- 37.4%
U.S. Treasury Bill, 4.68%, 9/27/07
Total Investments & Cash Equivalents -183.0% (6)
Liabilities in Excess of Other Assets- (83.0%)
Net Assets -100.0%
Industry
Media
Financial
Services
Hotels, Motels,
Inns & Gaming
Hotels, Motels,
Inns & Gaming
Government
ParAmount*
$ 15,000
25,000
Shares
2,989,431
13,326,423
Par Amount*
$ 750,000
Cost
$ 15,000
25,000
$ 652,796
$2,426,379
74,736
133,264
$ 208,000
$2,634,379
$ 741,518
$3,375,897
(I) Fair value is determined by or under the direction of the Board of Directors of the Company (see Note 2).
(2) Denominated in Euro ().
(3) The Company is the sole Limited Partner in GS Prysmian Co-Invest L.P.
(4) Denominated in Canadian dollars.
II of I i,
Fair Value (1)
$ 15,169
24937
$ 636,487
$ 2,680,884
74,736
133,264
$ 208,000
$2,888,884
$ 741,517
$3,630,401
(1,647,086)
$ 1,983,315
(5) Includes floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the
LIBOR (London Inter-bank Offered Rate), EURIBOR (Euro Inter-bank Offered Rate), GBP LIBOR (London Inter-bank
Offered Rate for British Pounds), or the prime rate. At June 30, 2007, the range of interest rates on floating rate bank
debt was 10.36%- 14.11%.
(6) Aggregate gross unrealized appreciation for federal income tax purposes is $273,082; aggregate gross unrealized
depreciation for federal income tax purposes is $28,975. Net unrealized appreciation is $244,107 based on a tax cost of
$3,386,294.
These securities are exempt from registration under Rule 144A ofthe Securities Act of 1933. These securities may be
-;:esold in transactions that are exempt from registration, normally to qualified institutional buyers.
* Denominated in USD unless otherwise noted.
** Non-income producing security
Seenotes to f'mancial statements.
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in cash. Our board of trustees met on February 8, 2007 to discuss such proposal and, with its authorization, Wachtell sent a
draft of a merger agreement to this party on February 9, 2007. During the following two weeks, the bidder's counsel and
Wachtell periodically engaged in discussions regarding the structure of a possible acquisition. On February 23, 2007, the party
returned a mark-up of the draft merger agreement. However, following further diligence and discussions the bidder did not
submit a final bid.
In February 2007, as part of the renewed exploration process authorized by our board of trustees, Lelnuan Brothers
approached Apollo Investment Management, L.P. to gauge its interest in a potential transaction with the Company. Lehman
Brothers decided to contact Apollo Investment Management, L.P. regarding its interest in acquiring the Company after
learning that Apollo Investment Management, L.P. was interested in investing in the extended stay sector of the lodging
industry. Apollo Investment Management, L.P. executed a confidentiality agreement with the Company on March 9, 2007, and
Apollo and its advisors were granted data room access later that day.
During the week of March 12, 2007, JF Capital Advisors ("JF Capital"), Apollo's financial advisor, and Skadden, Arps,
Slate, Meagher & Floro LLP ("Skadden"), Apollo's legal advisor, submitted due diligence requests to Lehman Brothers and
Wachtell and were granted access to the electronic data room.
On March 17, 2007, Apollo delivered a letter to Lehman Brothers proposing to acquire the Company for $17.75 per share
in cash, subject to the completion of dne diligence, negotiations with regard to definitive documentation and entry into
customary ammgements with our management. Apollo also expressed an interest in acquiring IHM and requested the
opportunity to speak to Mr. Fisher in that regard. The letter indicated that the debt financing for the transaction would be
provided by Lehman Brothers.
From March 18 through April 6, 2007, Apollo and JF Capital conducted further due diligence regarding, among other
things, litigation and regulatory matters, the Company's franchise agreements, employee benefits matters and indebtedness.
On AprilS, 2007, our board of trustees held a meeting at which Wachtel! and Lehman Brothers updated our board of
trustees regarding the potential transaction with affiliates of Apollo. Lehman Brothers also informed the board of trustees that
Apollo had asked Lehman Brothers whether it would be willing to provide Apollo with debt financing for a potential
transaction, and that Lehman Brothers had indicated that it would be willing to do so. After.discussion and in light of Lehman
Brothers' role in providing fmancing to affiliates of Apollo and other bidders, our board of trustees authorized and directed
management to retain UBS to serve as the Company's co-fmancial advisor on the possible sale of the Company.
On the morning of April 6, 2007, Skadden sent Wachtel! a draft merger agreement. Over the next several days, Skadden
and Wachtel! discussed issues concerning the draft merger agreement.
On the morning of AprillO, 2007, our board of trustees met with our senior management, Lehman Brothers, UBS and
Wachtel! to discuss the status of discussions with affiliates of Apollo. Wachtell presented our board.oftrnstees with an
overview of the draft merger agreement, and Lehman Brothers and UBS made a presentation regarding the fmancial terms of
the proposed transaction. Following questions and discussion, our board oftrnstees directed Wachtell to continue negotiations
with Apollo and work towards fmalizing a defmitive merger agreement.
Throughout the rest of the week, through April 16, 2007, Skadden and Wachtell worked to finalize the terms of the
merger agreement and the related transaction documents, including discussions relating to the termination fees, limited
guarantees and related provisions.
On the afternoon of Aprilll, 2007, our board of trustees met with Lehman Brothers, UBS and W a c h ~ e l l to discuss the
status of a potential transaction with affiliates of Apollo. Lehman Brothers updated our board of trustees generally on its
discussions with other potential bidders which had recently executed confidentiality
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The !mancial infonnation included in .this proxy .statement has prepared by, and is the responsibility ot:
our management. PncewaterhouseCoopers LLP has neither exammed nor compiled the accompanying prospective !mancial
infonnation and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other fonn of assurance with
respect thereto.
These projections were developed in a manner consistent with our management's internal budgeting and forecasting
process, and are generally consistent with our existing accounting policies and were based upon certain assmuptions that our
management believes are reasonable under the circmustances. These projections assmue that we continue as a separate public
company and would make independent decisions. The assumptions underlying these projections were based on such factors as
historical trends and performance, industty expectations, and significant input from our operations management. No assurance
can be given that such projected results will actually be achieved.
Neither we on the one hand nor Grand Prix Holdings on the other hand intend to update or otherwise revise the
prospective !mancial information to reflect circmustances existing since its preparation or to reflect the occurrence of
unanticipated events, even in the event that any or all of the underlying assmuptions are shown to be in error. Furthermore,
neither we on the one hand nor Grand Prix Holdings on the other hand intend to update or revise the prospective fmancial
information to reflect changes in general economic or industty conditions. These projections are not included in this document
in order to induce any common shareholder to vote in favor of the approval of the merger agreement or to acquire our
securities.
Financing of the Merger
Grand Prix Holdings has represented to us in the merger agreement that subject to the conditions of the fmancing
commitments, and subject to the terms and conditions of the merger agreement, the aggregate proceeds contemplated by the
financing commitments will be sufficient for Grand Prix Holdings and Merger Entity to consmumate the merger and the other
transactions contemplated by the merger agreement upon the terms contemplated thereby, and to pay all related fees and
expenses for which Grand Prix Holdings and Merger Entity will responsible in connection therewith.
These payments are expected to be funded by Grand Prix Holdings and Merger Entity in a combination of an equity
contribution by Apollo and debt financing from the Lender. Grand Prix Holdings has obtained equity financing commitments
and Grand Prix Holdings or its subsidiaries and Apollo have obtained debt financing commitments described below in
connection with the merger and the other transactions contemplated by the merger agreement.
Equity Financing. Grsnd Prix Holdings has received an equity commitment letter from Apollo, pursuant to which, and
subject to the conditions contained therein, Apollo has agreed to contribute $200 million to Grand Prix Holdings, which will
constitute the equity portion of the financing for the merger and the other transactions contemplated by the merger agreement.
Subject to certain conditions, Apollo may assign a portion of its equity commitment obligation, provided that it remains
obligated to perfonn to the extent not performed by such assignee.
The equity commitment is genemlly subject to the satisfaction or waiver of all of the conditions to Grand Prix Holdings'
and Merger Entity's obligations to effect the closing of the merger under the merger agreement in accordance with its terms.
The equity commitment letter will terminate upon the earlier to occur of (i) the termination of the merger agreement in
accordance with its terms or (ii) the assertion, if any, by any of us, the Partoership or Innkeepers Financial or any of our or
their respective affiliates of any claim under the limited guarantee or otherwise against Apollo or any of its related parties in
connection with the merger agreement or any of the transactions contemplated by the merger agreement or by the equity
commitment letter.
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PROPOSAL NO. 1:
APPROVAL OF THE MERGER, TH_E MERGER AGREEMENT AND
THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT
THE PARTIES
Innkeepers USA Trust
We are a self-administered and self-managed REIT organized under Maryland law in 1994. At December 31, 2006, we
owned 75 hotels with an aggregate of9,904 rooms/suites through its partnership interests in Innkeepers USA Limited
Partnership, and a 49% interest in one hotel with 355 rooms in an unconsolidated entity. We have a series of indirect, wholly-
owned taxable REIT subsidiaries that lease the hotels from the Partnership. Our primary focus is acquiring or developing
premium-branded upscale extended-stay, mid-priced limited service, and select-service hotels, the core of our portfolio;
selected all-suite, or full-service hotels; and tum-around opportunities for hotels that operate under or can be converted to the
industry's leading brands. We are listed on the NYSE under the symbol "KP A." Our headquarters is located at 340 Royal
Poinciana Way, Suite 306, Palm Beach, Florida 33480, and our telephone number is (561) 835-1800.
Innkeepers USA Limited Partnership and Innkeepers Financial Corporation
Innkeepers USA Limited Partnership is the entity through which we conduct substantially all of our business and own,
either directly or indirectly through subsidiaries, substantially all of our assets. As of the date of this proxy statement, our
wholly-owned subsidiary, Innkeepers Financial Corporation, is the general partner of, and owns an approximate 98.6%
partnership interest in, the Partnership.
Innkeepers Financial Corporation is the entity through which we own a 98.6% interest in the Partnership.
Grand Prix Holdings LLC and Grand Prix Acquisltion T.rust
Grand Prix Holdings LLC is a recently formed Delaware limited liability company controlled by Apollo. Grand Prix
Holdings LLC is the sole shareholder of Grand Prix Acquisition Trust Apollo is a closed-end investment company that has
elected to be treated as a business development company under the Investment Company Act of 1940. Apollo's investment
portfolio is principally in middle-market private companies. Apollo invests primarily in mezzanine loans and senior secured
loans in furtherance of its business plan and also invests in the equity of portfolio companies. Apollo is managed by Apollo
Investment Management, L.P., an affiliate of Apollo Management, L.P., a leading private equity investor.
Grand Prix Acquisition Trust is a recently formed Maryland REIT and the entity into which we will merge pursuant to
the tenus of the merger agreement, with Grand Prix Acquisition Trust as the surviving entity.
The principal executive offices of Grand Prix Holdings LLC and Grand Prix Acquisition Trust-are located at 9 West 57''
Street, New York, New York 10019. Their telephone number is (212) 515-3450.
THE MERGER.
The Merger oflnnkeepers USA Trust into Grand Prix Acquisition Trust
The merger agreement provides for our merger with and into Merger Entity. Merger Entity will be the surviving entity in
the merger. The merger will close when the articles of merger have been accepted for record by the State Department of
Assessments and Taxation of the State of Maryland (the "Maryland Department") in accordance with Maryland law or at such
later time as we and Grand Prix Holdings may agree and designate in the articles of merger in accordance with Maryland law
(but not later than 30 days after such articles are accepted
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AGREEMENT
In consideration of the representations, warranties, covenants and agreements contained in this Agreement, the parties
hereto hereby agree as follows: .
ARTICLE I
THEMERG)J;R
Section 1.1 Ihe Merger: General.
(a) Upon the terms, and subject to the conditions, set forth in this Agreement, at the Merger Effective Time
Innkeepers REIT shall be merged with and into Purchaser Acquisition Entity in accordance with the Maryland RBIT
Law, tile MGCL and the Articles of Merger, and the separate existence of Innkeepers REIT shall cease and Purchaser
Acquisition Entity shall continue as the surviving entity (in such capacity, the "Surviying Entitv"). The Merger shall have
the effects set forth in the Maryland REIT Law and the MGCL. Accordingly;. from and after the Merger Effective Time,
the Surviving Entity shall have all the properties, rights, privileges, purposes and powers and debts, duties and Liabilities
oftnnkeepers RBIT.
(b) Subject to the terms and conditions of this Agreement, at the Merger Effective Time, Purchaser Acquisition
Entity shall purchase one hundred (1 00) LP Units for a cash purchase price of one hundred dollars ($1 00.00) and
Purchaser Acquisition Entity shall become a limited partner oflnnkeepers LP.
Section 1.2 Closing. Upon the terms, and subject to the conditions, of this Agreement, the closing of the Merger and the
other transactions contemplated hereby (the "Closing") shall take place at 10:00 a.m., local time, as promptly as practicable
but in no event later than the third Business Day after the satisfaction or waiver (by the party hereto entitled to grant such
waiver) of the conditions (other than those conditions that by their nature are to he satisfied at the Closing, but subject to the
fulfilhnent or waiver of such conditions) set furth in Article VI, or at such other time and on a date as agreed to by the parties
hereio (such date, the "Closing Dateu) at the offices of Skadden, Arps, Slate, Meagher & Flom; LLP, 4 Times Square, New
York, New York; provided, however, that notwithstanding the satisfaction or waiver of the conditions set furth in Article VI as
.of any date, the Purchaser Patties shall not be required to effect the Closing until June 29, 2007 (subJect ln each case to the
satisfaction or waiver (by the party hereto entitled to grant such waiver) of all of the conditions (othet than those conditions
that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of such con!litions) set forth in
Article VI).
Section 1.3 j:lffootiye Time.
(a) On the Closing Date, Innkeepers REIT and Purchaser Acquisition Entity shall exooute and t'ile the Articles of
Merger in accordance with, and shall make all other filings or recordings and take_ all such ~ r action required with
respoot to the Merger, under the Maryland REIT Law and the MGCL. Unless Innkeepers REIT and Purchaser agree
otherwise, the Merger shall become effective when the Articles of Merger have been acceptedfor record by the Maryland
Department (the "Merger Effective Time").
Section 1.4 Merger Consideration.
(a) At the Merger Effective Time, by virtue of the Merger and without any further action on the part of PW"chaser
Acquisition Entity, Innkeepers RElT or the Innkeepers REIT Common Shareholders, each Innkeepers REIT Common
Share issued and outstanding immediately prior to the Merger Effective Time .that is owned by any Innkeepers Party or
by any wholly-owned Subsidiary oflnnkeepers REIT (other than, in each case, shares in trust accoullts, managed
accounts, custodial accounts and the like that are beneficially owned by third parties) shall automatically be cancelled and
retired and shall cease to exist, and no payment shall be made with respect thereto.
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. Would either constitute Qualicying Income or would be excluded from gross income within the meaning of Sections 856
(c)(2) and (3) of !he Code (or alternatively, Innkeepers RElT's outside counsel has rendered a legal opinion 10 the effect
that the receipt by Innkeepers REIT of the Financing-Related Reverse Break-Up Fee, Non-Financing-Related Reverse
. Break-Up .Fee and/or costs and expenses, as applicable, would either constitute Qualitylng Income or would be excluded
from gross income within the meaning of Sections 856( c)(2) and (3) of the Code); in which case the Escrow Agreement
shall provide that the escrow agent shall release !0 Innkeepers RBIT the lesser of such maximum amount stated in the
accountant's letter referred to in clause (I) and the remainder of the Financing-Related Reverse Break-Up Fee, Non-
Financing-Related Reverse Break-Up Fee and/or costs and expenses, as applicable. Purchaser agrees to amend this
Section 7. 7 at the reasonable request oflnnkeepers REIT in order to (x) maximize the portion of the FinancingRelated
Reverse Break-Up Fee, Non-Financing-Related Reverse Break-Up Fee and/or costs and expenses, as applicable, that may
be distributed to Innkeepers REIT hereunder without causing Innkeepers REIT to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, (y) improve Innkeepers REIT's chances of securing a favorable ruling described
lti this Section 7. 7(b) or (z) assist Innkeepers RBIT in obtaining a favorable legal opinion from its outside counsel as
described in this Section 7. 7(b ). The Escrow Agreement shall also provide that any portion of the Financing-Related
Reverse Break-Up Fee, Non-Financing"Related Reverse Break-Up Fee and/or costs and expenses, as applicable, held In
escrow for five (5) years shall be released by the escrow agent !0 Purchaser, Purchaser shall not be a party to such Escrow
Agreement and shall not bear any cost of or have liability resulting from the Escrow Agreemeut.
(c) In the event that Innkeepers REIT is required !0 pay Purchaser the Break-Up Fee or Expenses, in each case, such
amount shall be paid by Innkeepers REIT by wire transfer of cash in immediately available funds to a bank account of
P u r c h ~ e r or its deslgnee(s) as directed by Purchaser in writing to Innkeepers REIT at least two (2) Business Days prior
10 the relevant date of such payment.
ARTICLEVID
GENERALPROYIMQNs
' Section 8.1 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement
or in any instroment delivered pursuant to this Agreement shall survive the Merger Effective Tlme. This Section 8.1 shall not
limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Merger Effective
Time.
Section 8.2 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in
writing (and also made orally if so required pursuant !0 any Section of this Agreement) and shall be deemed given if delivered
persol!lllly, sent by overnight courier (providing proof of delivery) to the parties here!O or sent by telecopy (providing
confirmation of transmission) at the following addresses or telecopy numbers (or at such other address or telecopy number for
a party hereto as shall be specified by like notice):
(a, if to any of the Purchaser Parties (or to Innkeepers. LP following the Closing Date), to:'
c/o Apollo Investment Corporation
9 West 57th Street, 41st Floor
New York, New York 10019
Attu: Aaron N. Sack
Fax: (212) 515-3467
with a copy (which shall not constitute notice), to:
Skadden, Arps, Slate, Meagher & Flom LLP
4 Times Square
New York, New York 10036
Attu.: Mark C. Smith, Esq.
Daniel Wolf, Esq.
Fax: (212) 735-3000
A-55
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