UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE -----------------------------------------------------------: In re: : : MERVYNS HOLDINGS, LLC, et al.

, : : : -----------------------------------------------------------:

Chapter 11 08-11586 (KG) Jointly Administered

Objection Deadline: 11/24/08, at Noon EST Hearing Date: 11/25/08, 10:00 a.m. EST Related to Docket No. 973

OBJECTION OF JAMES CAMPBELL COMPANY LLC TO DEBTORS MOTION FOR AN ORDER (1) ESTABLISHING AUCTION AND BID PROCEDURES FOR THE SALE OF DEBTORS INTERESTS IN THEIR REMAINING REAL PROPERTY LEASES, ETC., [DOCKET NO. 973] AND JOINDER IN OTHER LANDLORD OBJECTIONS James Campbell Company, LLC, as landlord of Puente Hills East in City of Industry, California (Landlord) objects to Debtors Motion for an Order Establishing Auction and Bid Procedures for the Sale of Debtors Interests in their Remaining Real Property Leases, etc., and for Related Relief [Docket No. 973, the Motion], and joins in other landlord objections thereto, as follows: 1. On July 29, 2008, debtors filed voluntary petitions for relief under Chapter 11 of

the Bankruptcy Code, and continue to operate as debtors-in-possession. 2. Landlord owns the land of Blocks A and C of Puente Hills East commercial

center in City of Industry, California, which is a shopping center as that term is used in Bankruptcy Code 365(b)(3). Landlord is the ground lessor of property at Puente Hills East with Mervyns Holdings, LLC, as ground lessee, at which debtor continues to do business under an unexpired lease. 3. On November 14, 2008, debtors filed the Motion, seeking to approve procedures

to auction and sell their remaining leases, include their lease with Landlord. The proposed procedures, however, fail to provide Landlord with fair notice and an opportunity to be heard concerning adequate assurances of any proposed buyers future performance of the Lease, and also unfairly restrict Landlords ability to bid on its own lease.

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THE AUCTION PROCEDURES SHOULD BE MODIFIED TO ENSURE LANDLORDS GET TIMELY INFORMATION ABOUT ANY PROSPECTIVE ASSIGNEE 4. The timeline proposed in the Motion does not adequately protect Landlords

rights. While debtors propose a bid deadline of December 5, there is no specific requirement that any information about prospective bidders ever be provided to landlords whose leases may be the object of such bids. While the auction is proposed to occur on December 10, with objections due by December 19, there is no requirement that debtors promptly provide landlords with notice of the winning bidder, nor any deadline for providing adequate assurance information to landlords when a proposed assignee is selected. 5. The only apparent reference in the Motion to giving landlords some notice of

what is being proposed is at paragraph 27 and refers landlords to the previously approved expedited procedures for setting cure amounts. While debtors correctly note that such procedures allow them to give a notice to landlords of a proposed assignment, and provide the landlords with 10 days to respond (see Motion 28 and docket no. 544), they fail to explain how such procedures can be used in the context of the auction timetable they have proposed. Obviously, if the auction is December 10 and the objection deadline is December 19, it is not possible to give landlords a 10 day notice of the winning bidder and an opportunity to object. 6. Adequate assurance of future performance is an express requirement of the

assumption process. 11 U.S.C. 365(b)(1)(C). As noted in In re Sun TV and Appliances, Inc. 234 B.R. 356, 370 (Bankr. D. DEl. 1999), an unexpired nonresidential lease can only be assigned if adequate assurance of future performance by the assignee of such contract or lease is provided, regardless of whether the lease is in default. Moreover, where as here, the lease is in a shopping center, adequate assurance is specifically defined to mean: (a) the source of rent and financial condition of the proposed assignee and its guarantors, if any, shall be similar to the financial condition and operating performance of the debtor and its guarantors, if any, when the debtor became the lessee; (b) the percentage rent due under the lease will not substantially decline; (c) assumption or assignment is subject to all the terms of the lease, including radius, use, location, and exclusivity provisions, and will not breach any such provisions;

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(d) assumption of assignment will not disrupt the tenant mix or balance in the shopping center. 11 USC 365(b)(3). 7. Against these stringent statutory requirements, the proposed procedures are

deficient. They do not require that debtors provide Landlord with timely notice of the specific results of the auction, the identity of the proposed assignee, and financial information to allow fair assessment of a winning bidder. These issues are especially important to Landlord, because debtors premises at Puente Hills East are encumbered by numerous restrictions under master agreements related to the property. 8. Plainly, the procedures should be modified to require debtors (1) to provide

Landlord with all adequate assurance information about any prospective bidder on its lease within one day of the bid deadline, by email to Landlords counsel, and (2) to provide Landlord with written notice of the winning bidder or any proposed assignee, the proposed cure amount, and any additional information about such party not previously provided, within one day of the auction, by email to Landlords counsel. 9. Debtors will not be prejudiced by these common-sense modifications. After all,

there is no magic to the dates and deadlines debtors have chosen, and there is no benefit to the estate from rushing through a potential assignee that that is not qualified to take the assignment under the requirements of Bankruptcy Code 365(b)(3). Thus, the modest modifications requested to the proposed procedures are in all parties interests. II. THE LANDLORD BID PROCEDURES ARE UNFAIR AND SHOULD BE MODIFIED 10. Because landlords do not need to establish adequate assurance of their own

performance, the bid requirements for these preferred bidders should be modified to at least give landlords a fair chance to bid. For example, it makes no sense to require landlords to sign an onerous assignment agreement as debtors propose at 16(v). A landlord should be deemed qualified to bid on its own lease simply by submitting its bid on its own letterhead, along with a

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deposit in the required portion of any cash component of the bid (if any), and a statement of the terms upon which it proposes to purchase the leasehold interest. 11. Similarly, a landlord should not be required to waive all claims in order to bid.

Notably, no other bidders are subject to this requirement, and such a requirement is grossly overbroad and unfair to landlords, requiring a waiver of potential administrative claims, indemnity claims, environmental claims, and claims that might be covered by insurance, as well as rejection damages claims. As a matter of basic fairness, a landlord should be free to specify which, if any, claims it is prepared to waive, so that such information can be considered as part of the total value provided by its bid. 12. Finally, a landlord should be exempt from any requirement that its bid remain

open for 14 business days after the auction. While a landlord could specify such a term as part of the value it might provide, a landlord should not be required to hamstring its position as landlord of the premises, in the event that auction produces no viable bidders. 13. Thus, to ensure integrity in the process, and also facilitate viable and beneficial

bids from landlords, the procedures should be modified to address these issues. III. DEBTORS REQUEST FOR UNFETTERED DISCRETION TO REVISE THE BID PROCEDURES IS UNFAIR AND SHOULD NOT BE ALLOWED 14. Despite all the ostensible terms and conditions of the proposed procedures,

debtors have unfairly reserved to themselves the unilateral right to revise the procedures however they wish, without notice to interested parties. In the final bullet point of 15 of the Motion, page 9, debtors coyly request unfettered discretion to adopt new rules or revise the procedures for the auction, without notice to landlords, nor any opportunity for due process or court approval The sole requirement is that debtors simply consult with certain other parties, but there is no requirement of agreement with them, let alone providing any due process to interested parties or obtaining court approval. This renders all the proposed protections illusory. 15. Landlords and potential bidders are entitled to know the rules of the game in

advance, and allowing debtors to change them on a whim makes a mockery of this process. To

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maintain the basic integrity of this process, the proposed term allowing such unilateral revisions should be stricken from any order allowing the auction process to proceed. IV. THE 10 DAY STAY SHOULD NOT BE WAIVED 16. Bankruptcy Rule 6004(g) automatically stays any order authorizing the sale of

property pursuant to 363 for ten days, unless the Court orders otherwise. Rule 6000(d) likewise provides a 10 day stay for orders allowing assignment of executory contracts and leases. These rules confirm the propriety of allowing 10 days to appeal when property of the estate is being sold. 17. Debtors desire to close quickly is the same in virtually all cases. Because the

procedural safeguards serve a useful purpose in this context, they should not be waived. JOINDER 18. Landlord joins in any and all objections to the Motion filed by other landlords to

the extent that such objections are consistent with this objection. WHEREFORE, Landlord respectfully submits that the Motion be denied, or any relief be modified as set forth above, and for such further relief as the Court deems proper. DATED: November 24, 2008 COOCH and TAYLOR LLP /s/ Susan E. Kaufman Susan E. Kaufman (DSB # 3381) The Brandywine Building 1000 West Street, 10th Floor Wilmington, DE 19801 Ph: (302) 984-3800 (main) Fax: (302) 984-3939 (fax) Email: skaufman@coochtaylor.com HANSON BRIDGETT LLP Nancy J. Newman 425 Market Street, 26th Floor San Francisco, CA 94105 Ph: (415) 777-3200 Fax: (415) 995-3450 Email: Nnewman@hansonbridgett.com

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IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: MERVYNS HOLDINGS, LLC, et al. Debtors. ) ) ) ) ) )

Chapter 11 Bk. No. 08-11586 KG

CERTIFICATE OF SERVICE I, Susan E. Kaufman, Esquire certify that I caused one true and correct copy of the within OBJECTION OF JAMES CAMPBELL COMPANY LLC TO DEBTORS MOTION FOR AN ORDER (1) ESTABLISHING AUCTION AND BID PROCEDURES FOR THE SALE OF DEBTORS INTERESTS IN THEIR REMAINING REAL PROPERTY LEASES, ETC., AND JOINDER IN OTHER LANDLORD OBJECTIONS to be sent on November 24, 2008 in the manner indicated to the following: Via E-File & Hand Delivery Mark D. Collins, Esquire Richards Layton & Finger One Rodney Square Wilmington, DE 19801 Via Fax Howard S. Beltzer, Esq. Wendy S. Walker, Esq. Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178-0060 212-309-6001 Cathy Hershcopf, Esq. Cooley Godward Kronish LLP 1114 Avenue of the Americas New York, NY 10036 212-479-6275 Cooch and Taylor, P.A. /s/ Susan E. Kaufman Susan E. Kaufman, (DSB#3381) 1000 West Street, 10th Floor The Brandywine Building Wilmington, DE 19899 (302) 984-3893 / (302) 984-3939 Fax Skaufman@coochtaylor.com

Dated: November 24, 2008