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: December 23, 2008 at 4:00 PM Related Docket No.: 1176

LIMITED OBJECTION TO DEBTORS' NOTICE OF REJECTION OF UNEXPIRED NONRESIDENTIAL REAL PROPERTY AT VALENCIA The Fifth Third Leasing Company (Fifth Third), Key Equipment Finance Inc. ("Key")1 and IDB Leasing, Inc. (IDB, and together with Fifth Third and Key, collectively, the Objectors) hereby file their Limited Objection to that certain Notice of Rejection of Unexpired Leases of Nonresidential Real Property at Valencia (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
1

On December 22, 2008, Key filed its Limited Objection to Debtors' Notice of Rejection of Unexpired Nonresidential Real Property at Valencia under Docket Entry No. 1259 (the Key Objection). The Key Objection relates to Keys interests in and to certain electrical lighting equipment and fixtures. The Key

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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 three (3)

separate equipment schedules with each of the Objectors. 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 (3) equipment schedules, the equipment subject thereto (collectively, the "Leased Equipment")2 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 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.

Objection is hereby supplemented by this objection to also include Keys interests in and to certain pointof-sale equipment. The Leased Equipment can generally be described as point-of-sale equipment. 2

7.

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. 8. 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 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. 9. On or about December 15, 2008, the Debtors filed the Rejection Notice, pursuant

to which, (i) the Debtors seek to reject that certain lease for non-residential real property (the Valencia Lease) located at 24235 Magic Mountain Parkway, Valencia, CA ("Store 185") by and between the landlord for said location (the Landlord) and Mervyn's, as tenant, and (ii) the Debtors seek to abandon the personal property remaining at Store 185 (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, "POS Equipment. As set forth above, the Leased Equipment includes point-of-sale equipment.

10.

It appears that the Abandoned Property includes some of the Leased Equipment.

As such, the respective Objector objects to the disposal of any of the Leased Equipment by any party. Rather, the Abandoned Property, that includes any of the Leased Equipment, should be turned over to the respective Objector. 11. Equipment. The Objectors have not consented to the sale or any disposition of the Leased In fact, there have been various orders entered in this case and various

representations made by the Debtors counsel that none of the Leased Equipment will be sold without the prior written consent of the respective Objector. 12. As set forth above and in the previous objections filed by the Objectors, the

Objectors are either the owners of or have properly perfected first priority security interests in the Leased Equipment. As such, the Objectors are authorized to repossess the Leased Equipment upon default by the Debtors. 13. 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 Leased Equipment that is proposed to be abandoned by the Debtors. The Objectors should be given a reasonable opportunity to make arrangements for and removal of any of the Leased Equipment from Store 185. 14. Finally, the Objectors reserve all of their rights with respect to the Leased

Equipment 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 Leased Equipment.

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: December 23, 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.