UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In re: MERVYN'S HOLDINGS, LLC, et al., Debtors.

Chapter 11 Case No. 08-11586 (KG) Jointly Administered

Hearing Date: TBD Objection Deadline: January 12, 2009 at 4:00 PM Related Docket No.: 1332

LIMITED OBJECTION TO DEBTORS' NOTICE OF REJECTION OF UNEXPIRED LEASE OF NON-RESIDENTIAL REAL PROPERTY AT COTTONWOOD, IN ALBUQUERQUE, NM The Fifth Third Leasing Company (Fifth Third), Key Equipment Finance Inc. ("Key") and IDB Leasing, Inc. (IDB, and collectively with Fifth Third and Key, the Objectors) hereby file their Limited Objection to that certain Notice of Rejection of Unexpired Lease of Nonresidential Real Property At Cottonwood, In Albuquerque, NM (the "Rejection Notice"), and respectfully submit as follows: 1. On August 22, 2008, the Objectors filed that certain Objection To Motion Of

Debtors And Debtors-In-Possession For An Order Approving Auction Procedures, Agency Agreement, Store Closing Sales And Related Relief. See Docket Entry No. 293. The Court (defined herein) is respectfully referred to the Factual Background section in that pleading for a compete recitation of the facts and said section is incorporated herein by reference. A brief summary of the relevant facts is set forth below. 2. On May 8, 2007, Mervyn's LLC ("Mervyn's") entered into a Master Lease

Agreement (as at any time amended, the "Master Agreement") with General Electric Capital Corporation ("GECC"). Pursuant to the terms of the Master Agreement, Mervyn's leased from GECC certain equipment more particularly described in and on certain Equipment Schedules

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subject to the Master Agreement. In addition, Mervyn's granted a security interest to GECC in and to the equipment referenced in those certain Equipment Schedules subject to the Master Agreement, to secure the due and punctual payment of any and all of the present and future obligations of Mervyn's to GECC. 3. On or after the entry into the Master Agreement, Mervyns entered into a separate

equipment schedule with each of Fifth Third, Key and IDB. 4. Concurrent with the entry into the Master Agreement, GECC assigned all of its

rights, title and interest in and to each of these three equipment schedules, the equipment subject thereto (collectively, the "Leased Equipment")1 and the Master Agreement as it relates to these equipment schedules (collectively, the "Lease") to each of the respective parties. 5. On or about May 4, 2007, Wachovia Capital Finance Corporation (Western)

("Wachovia") entered into Subordination Agreements with each of the Objectors, whereby Wachovia and each of the Objectors set forth their respective priorities with respect to certain collateral. Specifically, Wachovia agreed that each of the Objectors shall have priority over Wachovia with respect to each of their equipment schedules and the equipment subject thereto. 6. On or about May 10, 2007, GECC and Mervyn's entered into a Master Security

Agreement (as at any time amended, the "MSA"), pursuant to which Mervyn's granted to GECC a security interest in and to certain equipment more particularly described in and on certain Collateral Schedules subject to the MSA. 7. On various dates in 2007, Mervyn's executed three (3) separate Promissory Notes

(collectively, the "Notes") in favor of Key, whereby Mervyn's promised to repay the principal sum of each of the Notes, with interest, to Key upon terms and amounts as set forth therein.

The Leased Equipment can generally be described as point-of-sale equipment. 2

8.

Concurrent with the entry into each of the Notes, Mervyn's and Key executed

three Collateral Schedules (collectively, the "Key Schedules"), pursuant to which Mervyn's granted a security interest in certain equipment, more particularly described therein (collectively, the "Key Collateral")2, to Key. 9. Concurrent with the entry into the MSA, GECC assigned all of its rights, title and

interest in and to the Key Schedules, the Key Collateral and the MSA as it relates to the Key Schedules, to Key. 10. The Leased Equipment and the Key Collateral are collectively referred to as

the "Objectors' Collateral". 11. The Leased Equipment is located at many of the Debtors store locations. The

Key Collateral is located at many of the Debtors' store locations and offices. 12. On or about July 29, 2008 (the "Petition Date"), Mervyn's Holdings, LLC,

Mervyn's and Mervyn's Brands, LLC (collectively, the "Debtors") filed Voluntary Petitions for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Court") and Orders for Relief were entered on that date. 13. On or about October 30, 2008, the Bankruptcy Court entered an Order approving

GOB sales at all of the remaining Debtors' locations (the "Remaining GOB Order"). These GOB sales are expected to run through the end of the year, and possibly up to January 31, 2009. 14. The Remaining GOB Order provides, in relevant part, that: [n]otwithstanding anything to the contrary in this Order or in the Agency Agreement (3) neither the Debtors nor the Agent shall remove from a Store any of the Objectors' Collateral from their existing locations without the prior written consent of the respective party that either owns or has a properly perfected first priority security interest in the Objectors' Collateral that is
2

The Key Collateral can generally be described as electric lighting equipment and fixtures. 3

proposed to be removed (5) in the event that the Debtors intend to abandon any of the Objectors' Collateral, such abandonment shall be upon notice to the respective Objectors and their counsel of at least ten (10) days; (6) the Objectors shall have a reasonable opportunity to make arrangements for and remove or otherwise sell any Objectors' Collateral proposed to be abandoned by the Debtors and (10) the parties' rights with regard to any claims relating to any of the Objectors' Collateral which is damaged, destroyed or missing shall be preserved. 15. On or about January 2, 2009, the Debtors filed the Rejection Notice, pursuant to

which, (i) the Debtors seek to reject the non-residential real property lease (the Lease) by and between Mervyns, as tenant, and Macerich Cottonwood Holdings, LLC (the Landlord) for the premises located at 10000 Coors Byp Nw, in Albuquerque, NM (Store 313) and (ii) the Debtors seek to abandon the personal property remaining at Store 313 (collectively, the "Abandoned Property") and authorizing the Landlord to dispose of the Abandoned Property without further notice or order and without such liability for such disposal. Attached to the Rejection Notice is a listing of the Abandoned Property, which lists, among other things, "Light Fixtures, Light Boxes and POS Equipment. As set forth above, the Objectors Collateral includes electrical lighting equipment and fixtures and point-of-sale equipment. 16. It appears that the Abandoned Property includes some of the Objectors

Collateral. As such, the respective Objector objects to the disposal of any of the Objectors Collateral by any party. Rather, the Abandoned Property, that includes any of the Objectors Collateral, should be turned over to the respective Objector.

17. Collateral.

The Objectors have not consented to the sale or any disposition of the Objectors In fact, there have been various orders entered in this case and various

representations made by the Debtors counsel that none of the Objectors Collateral will be sold without the prior written consent of the respective Objector, except for the locations that were assumed and assigned to Kohls, Inc. and Forever 21, Inc. by two orders of this Court3. 18. As set forth above and in the previous objections filed by Objectors, the

respective Objector either owns the Objectors Collateral or has a properly perfected first priority security interest in the Objectors Collateral. As such, the respective Objector is authorized to repossess the Objectors Collateral upon default by the Debtors. 19. In addition, pursuant to the Remaining GOB Order, the Debtors are required to

give the Objectors a reasonable opportunity to make arrangements for and remove or otherwise sell any of the Objectors Collateral that is proposed to be abandoned by the Debtors. As such, the Objectors should be given a reasonable opportunity to make arrangements for and removal of any of the Objectors Collateral from the Locations. 20. Finally, the Objectors reserves all of its rights with respect to the Objectors

Collateral to the extent that some or all of it is damaged, destroyed or missing. The Objectors also reserve the right to assert any administrative claims for the use of any of the Objectors Collateral.

On December 23, 2009, Key had consented to the sell of some of the Key Collateral, which consisted of the electrical lighting equipment and fixtures existing at the locations that were being assumed and assigned to Kohls Inc. and Forever 21, Inc. only, with Keys lien attaching to the sales proceeds to the same extent, validity and priority as it existed on said equipment as of that date. See, Docket Entry No. 1290 and 1291, in conjunction with the representations made at the hearing held on December 23, 2008. Although Store 313 was originally included as one of the locations being assumed and assigned to Forever 21, Inc., it appears, based on the Rejection Notice, that the lease for Store 313 is now being rejected. In addition to the objections and reservation of rights set forth herein and in light of the rejection, Key specifically reserves its rights with respect to the electrical lighting equipment and fixtures existing at Store 313. 5

CONCLUSION WHEREFORE, the Objectors respectfully request that any Order relating to the Rejection Notice provide the relief requested hereinabove and for such other and further relief as the Court deems proper. Dated: January 9, 2009 Wilmington, Delaware Respectfully submitted, MARGOLIS EDELSTEIN

/s/James E. Huggett James E. Huggett, Esq. (#3956) 750 Shipyard Drive, Suite 102 Wilmington, DE 19801 Telephone: (302) 888-1112 Facsimile: (302) 888-1119 E-mail: jhuggett@margolisedelstein.com -andDAY PITNEY LLP Ronald S. Beacher (NY - RB8837) Amish R. Doshi (NY - AD5996) (Admitted pro hac vice) 7 Times Square New York, New York 10036 Telephone: (212) 297-5800 Facsimile: (212) 916-2940 Counsel to Fifth Third Leasing Company, Key Equipment Finance Inc. and IDB Leasing, Inc.

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re: MERVYN'S HOLDINGS, LLC, et al., Debtors.

Chapter 11 Case No. 08-11586 (KG) Jointly Administered

CERTIFICATE OF SERVICE I, James E. Huggett, Esquire, hereby certify that on January 9, 2009, I served a copy of the following on the parties listed on the attached service list via first class pre-paid U.S. mail: 1. LIMITED OBJECTION TO DEBTORS' NOTICE OF REJECTION OF UNEXPIRED LEASE OF NON-RESIDENTIAL REAL PROPERTY AT COTTONWOOD, IN ALBUQUERQUE, NM (Related Docket No. 1332)

___ /s/James E. Huggett James E. Huggett (#3956)

Daniel J. DeFranceschi Richards Layton & Finger One Rodney Square PO Box 551 Wilmington, DE 19899 Howard S. Beltzer Neil Herman Wendy S. Walker Morgan Lewis & Bockius LLP 101 Park Avenue New York, NY 10178-0060 Office of the United States Trustee 844 King Street, Room 2207 Lockbox #35 Wilmington, DE 19899-0035 Jay R. Indyke Cathy Hershcopf Cooley Goodward Kronish LLP The Grace Building 1114 Avenue of the Americas New York, NY 10036-7798 William P. Bowden Ashby & Geddes, P.A. 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Daniel Fiorilla Otterbourg Steindler Houston & Rosen, PC 230 Park Avenue New York, NY 10169 Paul M. Basta Kirland and Ellis Citigroup Center 153 East 53rd Street New York, NY 10022 Dustin Branch Katten Muchin Rosenman

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