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

Related Docket No. 2428

KEY EQUIPMENT FINANCE INC.'S ADMINISTRATIVE EXPENSE CLAIM AND REQUEST FOR PAYMENT OF SAME Key Equipment Finance Inc. ("Key"), hereby files its request for allowance of an administrative expense claim and requests payment of same, and in support thereof respectfully submits as follows: 1. 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 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. 2. On or after the entry into the Master Agreement, Mervyn's entered into an

Equipment Schedule with Key (the "Schedule"). 3. Concurrent with the entry into the Master Agreement, GECC assigned all of its

right, title and interest in and to the Schedule, the equipment subject thereto (the "Leased

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Equipment")1 and the Master Agreement as it relates to the Schedule (collectively, the "Lease") to Key. 4. On or about May 4, 2007, Wachovia Capital Finance Corporation (Western)

("Wachovia") entered into a Subordination Agreement with Key, whereby Wachovia and Key set forth their respective priorities with respect to the Leased Equipment. Specifically, Wachovia agreed that Key shall have priority over Wachovia with respect to the Schedule and the Leased Equipment. 5. 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. 6. 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. 7. 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 "Collateral 1")2, to Key. 8. Concurrent with the entry into the MSA, GECC assigned all of its right, title and

interest in and to the Key Schedules, the Collateral 1 and the MSA as it relates to the Key Schedules, to Key.

The Leased Equipment can generally be described as point-of-sale equipment. The Collateral 1 can generally be described as electric lighting equipment and fixtures. 2

9.

The Leased Equipment and the Collateral 1 (collectively, the "Key Collateral")

was located at many of the Debtors' store locations and the Debtors' headquarters. 10. 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. 11. Through various representations by the Debtors at the various hearings in this

case and by certain court orders, including, but not limited to the Order dated October 30, 2008, which approved GOB sales at all of the remaining Debtors' locations (the "Remaining GOB Order"), the rights of Key were preserved with respect to the Key Collateral. 12. The Remaining GOB Order provides, in relevant part, that "the parties' rights with

regard to any claims relating to any of the [Key Collateral] which is damaged, destroyed or missing shall be preserved." 13. Pursuant to an Order of this Court, on February 2, 2009, the Lease was rejected by

the Debtors (the "Rejection Order"). The Rejection Order provides, in relevant part, that the Lease is deemed rejected on the later of (i) December 26, 2008 or (ii) the date that the Leased Equipment is surrendered to Key or made available for pick-up by Key (the "Rejection Date"). Further, the Rejection Order provides, in relevant part, that "[Key] reserves [its] rights to assert administrative claims for the use of the [Leased Equipment]. All parties' rights are reserved with respect to any of the [Leased Equipment] that is either lost, missing or damaged." 14. Most of the Leased Equipment has been recovered by Key. At this juncture, Key

is not aware whether any of the Leased Equipment is lost, missing or damaged.

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With respect to the Leased Equipment that has been recovered, the evaluation as

to whether any of the same is damaged or inoperable has not been completed. 16. In an abundance of caution, and as the bar date for administrative expense claims

is February 18, 2009, Key asserts an administrative claim, in an amount to be determined, for any Leased Equipment that is lost, missing, damaged or inoperable. Similarly, Key asserts an administrative expense claim, in an amount to be determined, for any Collateral 1 that is lost, missing, damaged or inoperable. 17. Furthermore, the Debtors had been using the Leased Equipment since the Petition

Date through the Rejection Date, including the interim period in which the Debtors had conducted their GOB sales at the various Debtors' stores. Key has not received any of the monthly payments due under the Lease from the Petition Date to the Rejection Date. As such, Key asserts an administrative expense claim, in an amount to be determined, for any unpaid monthly lease payments due to Key from the Petition Date to the Rejection Date.3 18. Furthermore, the Debtors had been using Collateral 1 since the Petition Date.

Key has not received any adequate protection for the usage of Collateral 1 or to compensate Key for the diminution in value of Collateral 1. As such, Key asserts an administrative claim, in an amount to be determined, for adequate protection payments with respect to Collateral 1. 19. Key reserves its right to amend and/or supplement any of the above categories of

administrative expense claim at a later date.

It should be noted that the Debtors and Key have reached an agreement, in principle, with respect to the unpaid post-petition lease payments due to Key under the Lease. The parties are negotiating, but have not executed a Settlement Agreement with respect to the same. The portion of this Administrative Expense claims relating to post-petition rents due under the Lease will be deemed withdrawn upon entry of a final order approving the Settlement Agreement. 4

WHEREFORE, Key respectfully requests an administrative expense claim, in an amount to be determined, and requests that the Debtors pay such administrative expense claim for (i) any of the Leased Equipment that is lost, missing or destroyed; (ii) any of the Leased Equipment that is damaged or inoperable; (iii) any unpaid post-petition lease payments from the Petition Date to the Rejection Date for the Leased Equipment; (iv) any of Collateral 1 that is lost, missing or destroyed; (v) any of Collateral 1 that is damaged or inoperable; (vi) for adequate protection payments with respect to Collateral 1; and (vii) for such other and further amounts as the Court deems proper. Dated: February 17, 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 Key Equipment Finance Inc.