UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re: INNKEEPERS USA TRUST, eta!., I Debtors.

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

DECLARATION OF LAWRENCE J. RUISI IN SUPPORT OF DEBTORS' MOTION FOR ENTRY OF AN ORDER (I) AUTHORIZING THE DEBTORS TO ENTER INTO THE COMMITMENT LETTER WITH FIVE MILE II POOLING REIT LLC, LEHMAN ALI INC., AND MIDLAND LOAN SERVICES, (II) APPROVING THE NEW PARTY/MIDLAND COMMITMENT BETWEEN THE DEBTORS AND MIDLAND LOAN SERVICES, (III) APPROVING BIDDING PROCEDURES, (IV) APPROVING BID PROTECTIONS, (V) AUTHORIZING AN EXPENSE REIMBURSEMENT TO "BIDDER D," AND (VI) MODIFYING CASH COLLATERAL ORDER TO INCREASE EXPENSE RESERVE

I, Lawrence J. Ruisi, declare as follows:

1.

I am over the age of 18 and competent to testify. I am a member of the Board of Trustees of Innkeepers USA Trust (the "Board"),

2.

where I also serve as Chairman of the Audit Committee. I have held these positions since 2007. I am also chair of the Committee of Independent Trustees of the Board of Trustees of Innkeepers USA Trust (the "Independent Committee"). 3. I submit this declaration (the "Declaration") in accordance with Rule 1007-2 of

the Local Bankruptcy Rules for the Southern District of New York in support of the Motion for

Entry of an Order (I) Authorizing the Debtors to Enter into the Commitment Letter with Five

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

Mile Capital II Pooling REIT LLC, Lehman ALI Inc., and Midland Loan Services, (II) Approving the New Party/Midland Commitment Between the Debtors and Midland Loan Services, (III) Approving Bidding Procedures, (IV) Approving Bid Protections, (V) Authorizing an Expense Reimbursement to "Bidder D, " and (VI) Modifying Cash Collateral Order to Increase Expense Reserve (the "Motion") [Docket No. 821].2
4. The facts set forth in this Declaration are based upon my personal knowledge. If

called and sworn as a witness, I could and would testify competently to the matters set forth herein.
A.
Background and Experience.

5.

I am an active corporate director and consultant and currently sit on public and

private equity-owned boards. My background includes the media/entertainment, real estate, technology, consumer packaged goods, broker/dealers, manufacturing, and mining sectors. In addition to leading strategy and operations, my experience includes mergers and acquisitions, real estate, capital markets, joint ventures, and e-commerce. I have led and advised companies growing organically and through mergers and acquisitions, as well as numerous turnaround and work out situations. 6. In addition to servmg on the Board of Directors of Innkeepers USA Trust

("Innkeepers"), I am also a member of the Board of Hughes Communications Inc., where I

serve as Chairman of the Audit Committee and as the Board's Designated Financial Expert. Hughes is a $1 billion company that provides satellite broadband services to corporate, government, and home users around the world. I have served on the Hughes Board since 2006. I

Capitalized terms used herein but not otherwise defmed shall have the meanings ascribed to such terms in the Motion.

am also a Director and Audit Committee member of ADPT Corp. I have served in this capacity since 2008. 7. From 2007 to 2009, I served on the Board and the Audit and Compensation

Committees ofUST, Inc., the world's leading producer of moist smokeless tobacco and premium wines. UST was acquired by Altria in January, 2009. From 2004 to 2005, I was a Director and member of the Audit Committee for Wyndham International, Inc. As Chairman of a special committee, I played an integral role in the sale of Wyndham to the Blackstone Group, which privatized the former AMEX-listed Wyndham in August, 2005. 8. From 1998 to 2002, I was President and CEO ofLoews Cineplex, a movie theatre

operator with assets of $1.9 billion, 14,000 employees, and 400+ locations worldwide. In this role I designed, negotiated, and executed the 1998 merger between Loews Theatres and Cineplex Odeon, and brought together the ownership stakes of Universal Pictures, Sony Pictures and Sony Corporation of Japan, among others. I led the company's industry leadership in revenue, cash flow, and attendance per screen. I also formed new international joint ventures in Spain and South Korea, and led eight theatre operators in sponsoring the creation of Fandango, a venturebacked online ticketing company. 9. From 1990 to 1998, I served as Executive Vice President of Sony Pictures

Entertainment, and I was President of Sony Retail Entertainment from 1994 to 1998. From 1987 to 1990, I was Senior Vice President and Chief Financial Officer of Columbia Pictures. In this role, I managed over 1,000 employees in finance and accounting, and all other non-operating groups with the exception of legal. I also supervised all financial aspects of the merger and integration of Columbia and Tri-Star Pictures. I began my entertainment career in 1983, where I became one of the original executives of the start-up motion picture studio Tri-Star Pictures.

10.

I received a BS in Accounting and an MBA from St. John's University in 1970 I am also a certified public accountant and worked as senior audit

and 1974 respectively.

manager for Price Waterhouse & Co. 11. I am an active participant in community and alumni boards, having served on the

Board of Governors of Sound Shore Medical Center since 1995 and as its Chairman from 2002 to 2006. In addition, I have served on the Board of Advisors of St. John's University School of Business since 1991. I also serve on the budget and finance advisory committee for the town of North Castle, New York. B. 12. 13. Formation of the Independent Committee. In October 2010, Innkeepers created the Independent Committee. The Independent Committee is made up of myself, Mr. Fred J. Kleisner, and Mr.

Bernard L. Zuroff. Mr. Kleisner has served as a director of Innkeepers since 2007 and has fortyseven years of experience in the hotel industry as an executive and director. Among other

positions, he has served as: President, CEO and Director, and Chairman of the Audit Committee of Morgans Hotel Group Co.; Chairman, President, and CEO of Wyndham International, Inc.; President and COO, the Americas, Starwood Hotels and Resorts; President and COO of Westin Hotels and Resorts Worldwide, and Group President, Operations of Interstate Hotels Corporation. He spent 20 years as general manager in all segments of hotels and resorts - from 106-room Holiday Inns to the Hilton Hawaiian Village, The Waldorf Astoria, and Waldorf Towers. Mr. Zuroff has served as a director of Innkeepers since 2010 and is an executive level attorney with twenty-eight years of experience. He has served as Group Vice President, General Counsel, and Secretary of McLeod USA Inc., as well as Executive Vice President, General Counsel, and Secretary ofiCG Communications, Inc.

14.

Shortly after its formation, the Independent Committee engaged the law firm of

Fried, Frank, Harris, Shriver & Jacobson LLP to represent and assist the Independent Committee in carrying out its duties. 15. Upon its formation, the Independent Committee was tasked with reviewing and

evaluating information about Innkeepers' restructuring alternatives and, as appropriate, meeting separately from the full Board, as well as addressing any conflicts of interest appropriately. 16. The Independent Committee (with help from the company's management and its

advisors), was also tasked with: (i) conducting a preliminary analysis of all indications of interest or proposals received relating to, among other things, sponsorship of a chapter 11 plan, a potential recapitalization, or other financial/strategic alternatives related to a chapter 11 plan; and (ii) making a recommendation with respect thereto to the full Board. 17. The above responsibilities of the Independent Committee were formalized in

resolutions of the Board, adopted October 19, 2010, and a Plan Process Protocol, both of which were filed with the Court on November 9, 2010, and both of which were the end result of extensive discussion among the Board, the Independent Committee, and the company's advisors.
C. The Independent Committee's and Board's Involvement in the Stalking Horse Selection Process.

18.

Although the Independent Committee was formally constituted by resolution of

the Board adopted on October 19, 2010, the Independent Committee began to meet in September 2010. 19. On September 20, 2010, the Independent Committee met with the company's

management and advisors who updated the Independent Committee on their meetings and communications with the company's key stakeholders, including the concerns expressed by

those stakeholders and the impact those concerns would have on the company's restructuring process. On September 21, 2010, the Board was provided with a similar update. 20. In the weeks following the September 20 and 21 meetings, the company's

management and advisors began to discuss and develop a more detailed restructuring process and timeline to maximize the value of the Debtors' estates. 21. On October 18, 2010, the Independent Committee held another meeting at which I

updated Mr. Zuroff regarding the status of certain of the company's key stakeholders, including Five Mile Capital Partners ("Five Mile") and Lehman ALI Inc. ("Lehman"). 22. 19, 2010. The Board, including the Independent Committee, met the following day, October At this meeting, Mr. Derrough presented to the Board a number of possible

restructuring alternatives available to the company. The alternatives presented by Mr. Derrough were: (i) an equity investment in a recapitalized enterprise; (ii) sale of the enterprise as a whole; (iii) sale of each pool of collateral separately; (iv) sale of group assets by brand, geography, age or market segment; and (v) property by property sale. Mr. Derrough explained all five alternatives and considerations for each after which the Board, management and the company's advisors discussed the relative merits of the different alternatives. At the conclusion of the meeting, the Board requested that the company's advisors consider and propose a process to explore an enterprise level restructuring and report back to the Board. 23. It was (and is) my view that seeking an enterprise level bid was the best way to

proceed for a number of reasons. First, receiving and implementing bids for more than 70 assets may create logistical problems for the company's management and advisors. Second, based on my experience and advice I received from the company's management and advisors, I believe there is value in the enterprise as a whole, including infrastructure, management, systems, and

cash protection procedures, and that the overall infrastructure that is in place enhances the value of the enterprise as a whole. Finally, proceeding on an enterprise basis would not-and did not-diminish the ability of the company to receive or execute non-enterprise bids. 24. Notwithstanding this fact, the Board and the Independent Committee has always

been willing to entertain non-enterprise level proposals that may come in whether before or after the bid procedures hearing. I am not aware of any non-enterprise level bids that have not been

shared with the Independent Committee or the Board. 25. On October 26, 2010, the company's management and advisors presented the

Board with proposed timelines for selecting a stalking horse bidder and engaging in a process to achieve that result. That timeline included selecting a stalking horse for plan sponsorship for an enterprise level restructuring within four weeks and selecting the winning bidder within approximately fourteen weeks. The company's advisors identified Five Mile and four other candidates as potential stalking horses. 26. Given certain time constraints on the company's restructuring efforts, I agreed

that the best approach was to contact a smaller group of bidders who were familiar with the company's properties, the company's business, and the hotel business generally, and had the ability to complete due diligence and make a bid within the necessary time period. Such a bid would serve as a baseline for all other bids, either before or after approval of any bid procedures. 27. Between October 26, 2010 and November 23, 2010, the company's management

and advisors worked to implement the stalking horse process, including meeting with potential bidders and facilitating due diligence. During this period, the Independent Committee met to receive updates on and discuss the company's progress in the stalking horse selection process. The Independent Committee met on November 4, 2010 and again on November 23,2010.

28.

In addition, a meeting of the full Board was convened on November 9, 2010. At

this meeting, Mr. Beilinson and Mr. Derrough updated the Board on the progress made by the company in its plan process and the company's efforts to identify a stalking horse candidate for plan sponsorship of an enterprise level restructuring, including that confidentiality agreements had been executed and that the company and Moelis were continuing to facilitate due diligence and the development of proposals and indications of interest. The Board also discussed the timeline of when the company expected to receive proposals or other initial indications of interest. 29. In addition to formal meetings of the Independent Committee and the full Board, I

also had many informal conversations with the company's advisors during this time period, particularly Mr. Derrough, in order to keep up-to-date on the process. For example, on or around November 5, 2010 and November 22, 2010, I spoke to Mr. Derrough and received updates on the stalking horse selection process. I also communicated regularly with the other members of the Independent Committee regarding the company's progress.

D.
30.

The Initial Stalking Horse Proposals.

Between November 24, 2010 and November 29, 2010, four out of the five All four

stalking horse candidates that had been identified by Moelis submitted proposals. proposals contemplated an enterprise-level restructuring of the company.

The Independent

Committee was provided with all four proposals, as well as a presentation by Moelis summarizing the terms of each proposal and the contemplated recoveries under each. I closely reviewed and analyzed these materials. I also had several discussions with Mr. Derrough to make sure that I fully understood the terms of each proposal. 31. On December 2, 2010, the Independent Committee met to evaluate the four

proposals that had been submitted. At this meeting, Moelis provided a side-by-side analysis 8

comparing the terms of the four proposals. The Independent Committee, its counsel, and the company's management and advisors discussed the terms of each of the proposals received and the presentation materials prepared by Moelis. The company's management then left the room and the Independent Committee and the company's advisors continued to discuss the terms of the proposals. The company's management then returned for further discussion. 32. After analyzing the proposals, it was the Independent Committee's view that

Bidder D's proposal had the best economic terms for the company. It also had a lower break-up fee and allowed constituencies to co-invest new equity with Bidder D. In addition, Bidder D's proposal was a firm offer from an established company that had performed due diligence and was not subject to financing. Based on these facts, the Independent Committee, after lengthy discussion with the company's management and advisors, using its business judgment, voted to recommend to the entire Board that the Board proceed with Bidder D's proposal. 33. The full Board met the following day. At that meeting, Mr. Derrough provided

the Board with a summary of the restructuring process that resulted in the four bids the company received. This included a summary of the relevant decisions made at prior meetings of the Independent Committee and the full Board, the selection of stalking horse candidates, discussion with such candidates, and discussions with constituencies ofthe company. 34. I, along with counsel for the Independent Committee, then provided a summary of

the previous day's meeting of the Independent Committee and informed the Board that after a presentation by Mr. Derrough comparing the four stalking horse proposals, the Independent Committee concluded that a recommendation be made to the entire Board that the Bidder D proposal represented the best of the four proposals. I also explained to the Board the reasons for this recommendation, including higher total enterprise value, the completion of due diligence by

Bidder D, the ability of constituencies to co-invest with Bidder D, and the lack of additional necessary approvals by Bidder D. The full Board then discussed the relative merits of the four proposals and ways in which Bidder D's proposal could be improved, including revising certain of the bidding procedures and increasing the recovery to certain constituents. 35. At the conclusion of the December 3, 2010 meeting of the full Board, the Board

selected Bidder D as the stalking horse bidder and directed the company's management and advisors to continue efforts to negotiate certain modifications with Bidder D that would make its proposal even more favorable to the Debtors' estates. The Board also directed the company's management and advisors to meet with the company's constituents to keep them apprised of the results of the stalking horse process and to solicit feedback on Bidder D's proposal. Finally, the Board determined not to shop Bidder D's proposal to the other stalking horse candidates. The Board made this determination based on a number of reasons, including that there was a sense of urgency to finalize a stalking horse proposal and the Board was concerned that it might lose Bidder D if it shopped Bidder D's proposal. 36. The full Board met again on December 9, 2010. At this meeting Mr. Derrough

provided the Board with an update on discussions and activities that had occurred related to the stalking horse process since the last meeting of the Board. Specifically, Mr. Derrough reported that at the Board's direction, Moelis had reached out to Bidder D regarding its proposal in an effort to improve certain terms. As a result of those efforts, Bidder D did in fact revise its proposal in ways that were beneficial for the company and its constituents. At the conclusion of the meeting, the Board directed management and the company's advisors to pursue finalizing Bidder D's proposal.

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to remove the provision in the Commitment Letter requiring competing bidders to provide cash to Lehman on account of its claim. 46. The Independent Committee met again on December 21, 2010. At this meeting,

the company's management and advisors provided an update on the status of the plan sponsor stalking horse negotiations with Five Mile and Lehman. The Independent Committee, its

counsel, and the company's management and advisors also discussed a presentation prepared by Moelis regarding the revised Five Mile/Lehman proposal (as compared to the original Five Mile/Lehman proposal) and a recent proposal received from the Ad Hoc Committee of Preferred Shareholders. The Board discussed the improvements in the Five Mile/Lehman proposal,

including the payment to unsecured creditors, the recovery provided to preferred shareholders, the increase in the marketing period, and the deposit provided by Five Mile/Lehman. 47. We also discussed our concerns about the revised Five Mile/Lehman proposal in

comparison to the benefits of having a stalking horse bidder in place as well as the specific benefits of the revised Five Mile/Lehman proposal, including that it had support from the Debtors' two largest secured creditors, provided the portability of Midland's "stapled financing" to qualified overbids, offered baseline recoveries for other constituents, and contained a broad "Fiduciary Out." After considering these issues, the Independent Committee recommended that the company's management and advisors should continue their efforts to negotiate certain modifications to the proposal, including removal of the provision requiring competing bidders to provide cash to Lehman on account of its claim. 48. The full Board met later that same day. I, along with counsel for the Independent

Committee, provided a summary of that day's Independent Committee meeting. We informed the Board that after a presentation by Mr. Derrough highlighting the benefits and drawbacks of

14

the revised Five Mile/Lehman proposal, for the reasons stated above, the Independent Committee concluded that a recommendation be made to the entire Board that the revised Five Mile/Lehman proposal represented the best proposal received to date. After review and consideration, the Board determined that proceeding with a commitment agreement with Five Mile/Lehman was appropriate and in the best interests of the estates but directed the company's advisors to continue their efforts to negotiate certain modifications to the commitment agreement, including removal of the provision requiring competing bidders to provide cash to Lehman on account of its claim. Although the Apollo-affiliated Board members concurred with and supported the Independent Committee's recommendation to prosecute an agreement with Five Mile/Lehman, they abstained from voting. 49. On December 23, 2010, the full Board met again with the company's

management and advisors who provided an update on the status of the negotiations with Five Mile/Lehman. This included informing the Board of Five Mile/Lehman's continued insistence on the requirement that competing bidders provide cash to Lehman on account of its claim and a discussion of the proposal received from the Ad Hoc Committee. In addition, the company's management and advisors provided a summary of all the releases that were provided for under the Five Mile/Lehman proposal, including Midland's release of the Apollo guaranty. After receiving this update, the Board concluded that the Five Mile/Lehman proposal represented the proposal with the most favorable economics for the company that the company had received to date, and voted unanimously to move forward with that proposal and finalize the agreement with Five Mile/Lehman and Midland. abstained from voting. The Apollo-affiliated Board members and Mr. Beilinson

15

50.

On January 14, 2011, the Debtors finalized their agreement with Five

Mile/Lehman and Midland. G. 51. Subsequent Amendments to the Five Mile/Lehman Proposal It has always been the intention that the company and its advisors will use the

period oftime between the filing of the Motion and the hearing on the Motion (over 50 days) to continue the marketing process. I believe the company has conducted an exhaustive marketing process during this time. The company and its advisors have continued to engage in discussions with interested parties to facilitate due diligence, solicit bids, and explore potential interest in offering proposals (on an enterprise, pool or individual asset level) during the more than seven weeks between the Motion and the hearing on the Motion. They have also continued to engage with constituencies (and their respective financial advisors) that have objected to the Motion, including the Ad Hoc Committee of Preferred Shareholders and LNR, and work with parties advocated by these constituencies to build consensus around potential reorganization structures. 52. In addition, the Board has continued to hold regular meetings after the January 14,

2011 filing of the Motion to receive updates from the company's management and advisors on their continued efforts to market the company and its assets. 53. On February 1, 2011, the Board held a meeting to discuss the ongoing marketing

process. The company's management and advisors provided an update to the Board on the ongoing marketing process, discussed the marketing teaser sent by Moelis to over one-hundred potential financial, strategic, and other buyers, and informed the Board of the status of discussions with potential buyers. 54. On February 18, 2011, the company's management and advisors provided an

update to the Board on the status of the ongoing marketing process, including a discussion of a letter received from Lehman on February 15, 2011, proposing certain amendments to the
16

Commitment Letter. Although the Board encouraged modifications to the Five Mile/Lehman proposal that may increase value or consensus, the Board determined that it would not be desirable to eliminate hard-fought concessions obtained for the benefit of constituencies in exchange for an agreement to separate the seven hotel properties secured by individual mortgages (the "Seven Sisters") from the Commitment Letter. The Board was also advised on the status of litigation and discovery related to the Motion. In addition, the company's advisors provided the Board an update on the company's 2010 financial results, as well as discussed the 2011 budget and the 2011-2015 forecast. 55. On February 22, 2011, Lehman sent another letter to the Debtors with a further

revised proposal to amend the Commitment Letter. 56. On March 2, 2011, the company's management and advisors provided a further

update to the Board on the status of the ongoing marketing process, including that since the filing of the Motion, Moelis had identified and contacted approximately 200 potential buyers, sent marketing materials to approximately 120 of those parties, and executed non-disclosure agreements with approximately 30 potential bidders. Moelis also provided an update on the nonenterprise bids received from bidders. 57. The Board also reviewed Lehman's most recent proposed amendments to the

Commitment Letter and discussed the potential strategy of carving out the Seven Sisters from the Five Mile/Lehman proposal. After reviewing such proposed amendments, the Board and the Independent Committee directed the company and its advisors to work to finalize an agreement with Five Mile/Lehman to modify the Five Mile/Lehman proposal. 58. On March 3, 2011, the Independent Committee met with the company's

management and advisors who informed the Independent Committee that the Debtors were

17

continuing to negotiate with Five Mile/Lehman regarding revisions to Five Mile/Lehman proposal. The company's management and advisors outlined the proposed changes to the Five Mile/Lehman proposal. After reviewing such proposed changes, the Independent Committee directed the company and its advisors to work to finalize an agreement with Five Mile/Lehman to modify the Five Mile/Lehman proposal. 59. On March 4, 2011, the Independent Committee met two times with the company's

management and advisors and discussed the ongoing negotiations between the company and Five Mile/Lehman. 60. On March 5, 2011, the company's management and advisors provided an update

to the Independent Committee and the Board with regard to negotiations with Five Mile/Lehman. The company's management and advisors advised the Independent Committee and the Board that through the negotiations, the company was able to reach an agreement to modify the Five Mile/Lehman proposal. The Independent Committee considered the revised Five Mile/Lehman proposal and, after discussions with the company's management and advisors and the Independent Committee's counsel, approved the revised Five Mile/Lehman proposal.

H.
61.

The Five Mile/Lehman Proposal Is The Best Deal For The Debtors At This Time.
The Board and the Independent Committee have been intimately involved

throughout the stalking horse selection process. There were at least twenty meetings of the full Board or Independent Committee between September 20, 2010 and March 4, 2011. This does not include the many informal conversations between the Board and Independent Committee and the company's management and advisors. 62. In connection with these meetings and conversations, the Board and Independent

Committee were provided with extensive information and detail regarding the stalking horse

18

proposals received by the company and performed their own analyses based on the information received. 63. Based on this involvement and my experience, it is my business judgment that the

revised Five Mile/Lehman proposal represents the best deal available to the Debtors at this time, and that it will serve as a baseline bid that the company can move forward with to maximize value to the company's constituencies. 64. This is my view notwithstanding the fact that the company was unable to remove

the provision requiring competing bidders to provide cash to Lehman on account of its claim, which was unanimously opposed by the Board. Each time the Debtors went back to Five

Mile/Lehman to request that this term be removed, however, Five Mile/Lehman would improve the terms of its bid in some other respect, including providing consideration to unsecured creditors and preferred shareholders and increasing the marketing period. 65. Notwithstanding any provision that the company would have preferred to exclude

from the revised Five Mile/Lehman proposal, when viewed as a whole and in the aggregate, the revised Five Mile/Lehman proposal is the best deal for the Debtors and their estates. 66. The Board and the Independent Committee will continue to evaluate proposals as

they are received up to the date of the hearing on the Motion. 67. Moreover, even assuming the Motion is approved, the company has a broad

"Fiduciary Out" that allows it to examine and accept other offers if the company thinks those offers maximize value to the estates.

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Pursuant to 28 U .S.C. 1746, I declare under penalty of perjury that the foregoing is true and correct.

Dated: March 3, 2011