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: November 25, 2008 at 10:00 AM Objection Deadline: November 18, 2008 at 4:00 PM Related Docket No.: 954

OBJECTION TO DEBTORS' AMENDED MOTION PURSUANT TO 11 U.S.C. 105 AND 363 FOR ENTRY OF AN ORDER ESTABLISHING PROCEDURES GOVERNING MISCELLANEOUS ASSETS SALES The Fifth Third Leasing Company ("Fifth Third"), Key Equipment Finance Inc. ("Key") and IDB Leasing, Inc. ("IDB", and together with Fifth Third and Key, collectively, the "Objectors") hereby file their Objection to the Debtors' Amended Motion Pursuant to 11 U.S.C. 105 and 363 For Entry of An Order Establishing Procedures Governing Miscellaneous Assets Sales ("Miscellaneous Motion"), and respectfully submit as follows: SUMMARY OF RELEVANT FACTUAL BACKGROUND 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

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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 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.

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

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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. 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' stores locations and offices. 12. On or about August 26, 2008, the Court entered into an order approving GOB

sales at 26 of the Debtors' locations (the "26 Sale Order"). The GOB sales at these 26 locations have already been conducted. The 26 Sale Order was subject to certain representations made on the record at the hearing held on August 26, 2008 with respect to the GOB sales at 26 of the Debtors locations. Specifically, the Debtors, through their counsel, represented that, among other things, none of the Objectors' Collateral will be sold, subject to any further agreement between the Objectors and the Agent (as that term is defined in the 26 Sale Order).

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

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Thereafter, 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, (1) none of the Leased Equipment, the Key Collateral (as those terms are defined in Docket Entry No. 641) shall be sold (either to a third party or to the Agent (for a lump sum or otherwise)) without the prior written consent to all of the sales terms thereof by the respective party that either owns or has a properly perfected first priority security interest in said item(s) of Objectors' Collateral (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 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 (9) the Objectors shall not be liable to the Debtors for any amounts incurred by the Debtors for removal of any of the Objectors' Collateral from their existing locations; 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 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.

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On or about November 12, 2008, the Debtors filed the Miscellaneous Motion,

which seeks the entry of an order (the "Proposed Order") as follows: (a) establishing procedures permitting Debtors to sell certain Miscellaneous

Assets (as that term is defined in the Miscellaneous Motion); and (b) authority to sell the DeMinimus Assets (as that term is defined in the

Miscellaneous Motion) in the ordinary course of business without further notice. 17. It is unclear from the Motion whether the Miscellaneous Assets include any of the

Objectors' Collateral. To the extent that the term Miscellaneous Assets includes any of the Objectors' Collateral, the Objectors object to the Miscellaneous Motion. The Objectors also object to the Miscellaneous Motion to the extent that any of the Objectors' Collateral is located at the Debtors' "headquarters and distribution center" and are deemed to be DeMinimus Assets. OBJECTION 18. Primarily, the Objectors object to the sale of any of their respective Objectors'

Collateral without their consent or without satisfying any element of 363(f) of the Bankruptcy Code. Here, the Objectors do not consent to the sale of their respective Objectors' Collateral and the Debtors have not satisfied 363(f) of the Bankruptcy Code. 19. Furthermore, the Objectors object to the Miscellaneous Motion to the extent it is

inconsistent with the 26 Sale Order or the Remaining GOB Order (collectively, the Prior Sale Orders). (a) 20. The Relief Sought By Miscellaneous Motion Is Inconsistent With The Prior Sale Orders As To The Objectors As set forth above, the Prior Sale Orders provide, among other things, that the

Debtors shall not sell any of the Objectors' Collateral without their consent. Here, the Objectors do not consent to the sale of the respective Objectors Collateral. As such, none of the

Objectors Collateral can be sold, irrespective of whether it is classified as Miscellaneous Assets or DeMinimus Assets. 21. Accordingly, the Objectors object to the Miscellaneous Motion and /or the

Proposed Order to the extent that any provision therein is inconsistent with the Prior Sale Orders. (b) 22. The Debtors Have Not Satisfied 363(f) Of The Bankruptcy Code Furthermore, and in addition to the above, to the extent that the Miscellaneous

Motion seeks to sell any of the Objectors Collateral, the Objectors object on the basis that the Debtors have not satisfied any of the requirements of 363(f) of the Bankruptcy Code. 23. 11 U.S.C. 363(f) states, in relevant part, as follows: The trustee may sell property only if (a) (b) (c) applicable non-bankruptcy law permits sale of such property; such entity consents; such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property; such interest is in bona fide dispute; or such entity could be compelled in a legal or equitable proceeding to accept a money satisfaction of such interest.

(d) (e) 24.

Here, the Debtors have failed to establish any of the factors set forth in 363(f) of

the Bankruptcy Code with respect to the rights, liens and claims of the Objectors. Accordingly, the Debtors cannot be permitted to include any of the Objectors' Collateral as part of the Miscellaneous Assets or DeMinimus Assets, absent the Objectors' express consent. 25. First, non-bankruptcy law does not permit the sale of the Objectors' Collateral

without payment in full to the Objectors. 26. Second, the Objectors have not consented to the sale of the Objectors' Collateral.
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Third, the Debtors have not established that the amount received from the sale of

the Miscellaneous Assets or the DeMinimus Assets will be greater than the aggregate value of all liens on the Objectors' Collateral. 28. Fourth, the Objectors' respective interests in the Objectors' Collateral are not in

bona fide dispute. 29. Finally, there is no legal or equitable justification for accepting a money

satisfaction of less than the amount owed to the Objectors. 30. Thus, the Miscellaneous Motion should be denied to the extent that the Debtors

intend to include any of the Objectors' Collateral as part of the Miscellaneous Assets or the DeMinimus Assets, until the Debtors can establish one of the requirements of 363(f) of the Bankruptcy Code or the Objectors consent to such sale. (c) 31. Other Objections To The Miscellaneous Motion The Objectors object to the Miscellaneous Motion to the extent that it does not

provide that, with respect to the sale of any Miscellaneous Assets or the DeMinimus Assets, all liens, claims and encumbrances shall attach to the proceeds of such sale to the same extent and with the same validity and priority as existed upon such property prior to the sale. 32. The Debtors should not be allowed to sell any of the Objectors Collateral without

the consent of the respective Objector that has a lien against said collateral.

CONCLUSION WHEREFORE, the Objectors respectfully request that any Order relating to the Miscellaneous Motion provide the relief requested hereinabove and for such other and further relief as the Court deems proper.

Dated: November 18, 2008 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 -andAmish R. Doshi (AD5996) 7 Times Square New York, New York 10036 Telephone: (212) 297-5800 Facsimile: (212) 916-2940 E-mail: adoshi@daypitney.com Counsel to Fifth Third Leasing Company, Key Equipment Finance Inc. and IDB Leasing, Inc.

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

CERTIFICATE OF SERVICE I, James E. Huggett, Esquire, hereby certify that on November 18, 2008, I served a copy of the OBJECTION TO DEBTORS' AMENDED MOTION PURSUANT TO 11 U.S.C. 105 AND 363 FOR ENTRY OF AN ORDER ESTABLISHING PROCEDURES GOVERNING MISCELLANEOUS ASSETS SALES on the parties listed on the attached service list via first class pre-paid U.S. mail.

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

Mark D. Collins Richards Layton & Finger One Rodney Square PO Box 551 Wilmington, DE 19899 Howard S. Beltzer Wendy S. Walker Morgan Lewis & Bockius LLP 101 Park Avenue New York, NY 10178-0060 United States Trustee 844 King Street, Room 2207 Lockbox #35 Wilmington, DE 19899-0035 David M. Fournier Pepper Hamilton LLP Hercules Plaza, Suite 5100 1313 N. Market Street Wilmington, DE 19801 Jay R. Indyke Cooley Goodward Kronish LLP The Grace Building 1114 Avenue of the Americas New York, NY 10036-7798 Karen B. Skomorucha Ashby & Geddes, P.A. 500 Delaware Avenue, 8th Floor P.O. Box 1150 Wilmington, DE 19899 Neil B. Glassman Bayard, P.A. 222 Delaware Avenue, Ste 900 Wilmington, DE 19801 Michael G. Busenkell Womble Carlyle Sandridge & Rice, PLLC 222 Delaware Avenue Suite 1501 Wilmington, DE 19801