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

:
:

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

Hearing Date: August 26, 2008 at 10 a.m. Objections Deadline: August 22, 2008 at 6 p.m. Related to D.I. 209

------------------------------------------------------x OBJECTION OF GENERAL GROWTH MANAGEMENT, INC. TO DEBTORS MOTION FOR AN ORDER APPROVING AUCTION PROCEDURES, AGENCY AGREEMENT, STORE CLOSING SALES AND GRANTING RELATED RELIEF TO THE HONORABLE KEVIN GROSS, UNITED STATES BANKRUPTCY JUDGE: General Growth Management (GGM) by its undersigned attorneys, makes this Objection to Debtors Motion for an Order Approving Auction Procedures, Agency Agreement, Store Closing Sales and Granting Related Relief (the Motion) and in support thereof avers: 1. GGM is the owner or agent for the owners of various shopping centers in

which Debtors operate retail stores pursuant to written leases (the Leases) which are affected by the relief sought by the Motion. 2. All of GGMs premises are premises located in shopping centers, as that

term is used in 11 U.S.C. 365(b)(3). See, In Re: Joshua Slocum, Ltd., 922 F.2d 1081 (3d Cir. 1990). The premises affected by the Motion are: LOCATION Boise Towne Center North Star Mall CITY/STATE Boise, ID San Antonio, TX STORE # 220 272

1
DMEAST #10101874 v1

0q/v((6

0811586080822000000000016

0)

3.

By the Motion, Debtors seek, inter alia, approval of the right to conduct

store closing (GOB) sales at twenty-six (26) of their retail locations.

GOB Sales - Generally 4. The Debtors propose to conduct GOB Sales through the employment of a

professional liquidator. If such sales are permitted they must be subject to reasonable guidelines and protections for third parties. 5. Any GOB sales will contravene the provisions of GGMs Leases not only

with regard to the conduct of the GOB sales in general but also insofar as Debtors seek to limit a landlords rights to enforce the provisions of the Leases, including, but not limited to, the right to control signage. 6. While GGM understands Debtors desire to maximize the value of the

inventory in the stores, and that historically courts have granted debtors the right to conduct such sales, notwithstanding the seemingly contrary provisions of Section 365(d)(3), the sales must not be allowed to have a detrimental effect on GGM and the other tenants of its shopping centers, and must not be allowed to subvert the requirements of 365(d)(3) which specifically requires compliance with all of the terms of each of the leases. 7. This Court should neither engraft upon Section 363(b) an unfettered

right to conduct GOB sales where that section of the statute pertains generally to the use, sale or lease of property of the estate other than in the ordinary course of business, nor invoke the provisions of Section 105(a) of the Bankruptcy Code, to effectively excise portions of the Leases where Section 365 specifically requires compliance with all lease provisions. Section 105(a) was never intended to allow courts to dispense with specific statutory mandates. 2
DMEAST #10101874 v1

8.

In the event that the Court does allow Debtors to conduct store closing

sales, such sales must be of limited duration, subject to reasonable guidelines and balance the rights and interests of both GGM, whose leases Debtors seek to breach, and GGMs other nondebtor tenants, who must compete for the consumers retail dollars without the benefit of being allowed to breach signage and other restrictions in such tenants leases or are otherwise affected by the proposed activities. 9. Debtors cite to In re: Ames Dept Stores, 136 B.R., 357 (Bankr. S.D.N.Y.

1992) for the proposition that going out of business sales are regularly approved by courts. However, Debtors, as with most other debtors who cite to Ames, fail to mention a further significant holding of that case wherein the Court stated that 363(e) reserves for Bankruptcy Courts the discretion to condition the time, place and manner of store closing sales thereby providing adequate safeguards to protect shopping center landlords and their other tenants, . [Emphasis added] Sale Guidelines and Procedures 10. GGM appreciates that Debtors and the liquidator have submitted proposed

Sale Guidelines (the Guidelines, and each a Guideline), which cover many of the issues which are important to GGM when GOB sales are permitted at its shopping centers. Nevertheless, there remain a number of issues which must be resolved. 11. GGM objects to the use of any exterior signage and/or banners at any of

its locations. While the Guidelines appear to preclude the use of exterior banners at enclosed malls (which is the case for both GGM locations) certain language in the Motion is less than clear on this issue. No exterior banners must be allowed for stores located at enclosed malls.

3
DMEAST #10101874 v1

12.

Guideline #1 indicates that stores will remain open no longer than normal

hours of operation. That language implies that the store hours may be shorter than might be required by GGMs Leases. All stores must be operated in accordance with the operating hours of the Leases. Such operation would be consistent with Section 8.1(a) of the Agency Agreement. 13. Debtors request that sign walkers and street signage be permitted despite

any state or local laws to the contrary. [See, Guideline #3]. Such advertising is particularly offensive and gives the area a cluttered look not in keeping with the look GGM has attempted to preserve for its properties. No signage or sign walkers may be allowed on GGMs property. Moreover, such signage should not be permitted without giving notice to each affected governmental unit and affording said unit an opportunity to be heard. Governmental officials have complained that sign walkers in particular cause traffic hazards. 14. The Guidelines place no limits on the size or number of signs. Guideline

#3 should be amended to limit the number of window and interior signs, and the size thereof, to be used in the stores and store windows. Window signs should be limited to one per window, not to exceed 60 inches by 36 inches. No more than six (6) signs per 1000 square feet and no larger than 30 x 36 each may be employed within the stores themselves. Interior banners should be limited to no more than 2 per store, no larger than 3x10 and set back at least 1/3 of the way from the front of the Premises. 15. Guideline #5 would permit distribution of handbills, leaflets and other

written materials if distribution is customary in the shopping center in which the Closing Store is located. No such distribution should be permitted unless permitted by Debtors particular Lease(s). What may or may not be customary in a particular shopping center is a matter for interpretation and may very well be permitted in some leases and forbidden by others. 4
DMEAST #10101874 v1

16.

Guideline #9 states that there shall be no alterations to the interior or

exterior lighting of the store. Neither the agent nor the Debtors may make any alterations whatsoever to the premises except strictly in accordance with the terms of the lease. It is agreed, however, that the hanging of signs consistent with the terms of the approved Guidelines is not to be considered an alterations. 17. GGM also requests the inclusion in the Guidelines of a provision which

provides for the indemnification of GGM by the Debtors and any liquidation agents in the event that GGM receives citations from local authorities as a result of the conduct of GOB sales in general, and the signage employed with regard thereto in particular. In the past certain landlords have received citations because the signage employed by the agent violates local ordinances. Since the ordinances may be applicable to the landowner, local authorities have issued the citations notwithstanding the orders of the Bankruptcy Courts which purport to allow these sales to be conducted without interference from such local authorities. Accordingly, in the event that an GGM does receive any such citations, GGM requests that this Court order the Debtors and any agent to indemnify and hold GGM harmless from any and all costs, fines, and attorneys fees which GGM is required to pay or expend in defense of such citations in the event that Debtors and the Agent are unable to have the local authorities withdraw such citation or citations. Further, any provision of a sale order exempting Debtors and the liquidator from action by various governmental authorities should also extend to GGM. 18. The Guidelines should provide that in the event that a landlord enters into

a side letter with the liquidator, amending the Guidelines, that that side letter should take precedence over the Guidelines.

5
DMEAST #10101874 v1

19.

Debtors propose that the liquidator be permitted to augment the

Merchandise in the stores with goods of like kind and quality as is customarily sold in the stores. (See Motion at 21, last bullet point and Agency Agreement at Section 8.10). GGM objects to any augmentation of inventory and merchandise with non-Debtor goods. The purpose of allowing GOB sales contrary to the provisions of GGMs Leases is to provide for the orderly liquidation of the Debtors property, not to allow the parties to violate the Leases and bring in non-Debtor property. 20. Moreover, as currently structured the GOB sales are scheduled to end on

or before November 30, 20081. Having department stores in shopping centers close three weeks (or even four to six weeks) before Christmas puts the shopping center in a very precarious position. Leaving a department store dark, and therefore significantly decreasing traffic in that section of the shopping center, at the height of the holiday selling season will cause the landlords, and the tenants who rely upon the anchor department stores to draw customers, untold damages. Since the ability to augment merchandise will undoubtedly cause the GOB sales to run longer than would otherwise be the case, the authority to augment merchandise should be tied to the Debtors and the liquidators agreement to operate the Closing Stores through December 24, 2008. Without such agreement, the request to augment inventory should be denied. Inasmuch as the time for Debtors to assume or reject their leases will expire prior to December 24, 2008, unless an extension is granted by the Court, GGM would agree to the inclusion of a provision in the Approval Order extending the deadline to assume or reject its two leases through and including December 31, 2008.

While the APA indicates a sale termination date of no later than November 30, 2008, and that date is confirmed in the 8th bullet point of paragraph 21 of the Motion, paragraph 25 of the Proposed Order appears to contemplate an October 31, 2008 termination date for the GOB sales.

6
DMEAST #10101874 v1

Objections to Order 21. Decretal paragraphs 4 and 20 of the Proposed Order should be amended

consistent with the issues raised above concerning the store guidelines and the employment of exterior banners and sign walkers. 22. In paragraph 25, Debtors indicate that within three (3) business days after

the receipt of notice of the Sale Termination Date they will electronically file a notice of sale termination and serve a copy of the notice on the affected landlords. However, in the second part of the same sentence, the Debtors state that they will have no obligation to serve the notice on the affected landlords. The sale termination notice must be served on the affected landlords at least five (5) days prior to the proposed Sale Termination Date. Joinder in Other Landlord Objections 23. GGM hereby joins in the objections filed by Debtors other landlords to

the extent that such objections are not inconsistent with the provisions hereof. WHEREFORE, GGM prays for relief consistent with the foregoing objections; and WHEREFORE, GGM prays that any allowed GOB Sales, the Guidelines and the Sale Order with reference thereto, be modified as set forth above; and

7
DMEAST #10101874 v1

WHEREFORE, GGM prays for such other and further relief as may be just and required under all of the circumstances.

Dated: August 22, 2008 Wilmington, Delaware

Respectfully submitted, /s/ Tobey M. Daluz Tobey M. Daluz, Esquire (No. 3939) Leslie Heilman, Esquire (No. 4716) BALLARD SPAHR ANDREWS & INGERSOLL, LLP 919 N. Market Street, 12th Floor Wilmington, DE 19801 Telephone: (302) 252-4465 Facsimile: (302) 252-4466 E-mail: daluzt@ballardspahr.com heilmanl@ballardspahr.com and David L. Pollack, Esquire Jeffrey Meyers, Esquire BALLARD SPAHR ANDREWS & INGERSOLL, LLP 51ST Fl - Mellon Bank Center 1735 Market Street Philadelphia, Pennsylvania 19103 Telephone: (215) 864-8325 Facsimile: (215) 864-9473 Email: pollack@ballardspahr.com meyers@ballardspahr.com Counsel for General Growth Management, Inc.

8
DMEAST #10101874 v1

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

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

------------------------------------------------------x CERTIFICATE OF SERVICE I certify that a copy of the enclosed Objection of General Growth Management, Inc. to Debtors Motion for an Order Approving Auction Procedures, Agency Agreement, Store Closing Sales and Granting Related Relief has been served upon the following persons via email or telecopier unless otherwise noted. Patrick J. Nash, Jr., Esq. Skadden Arps, Slate, Meagher & Flom LLP 333 West Wacker Drive Chicago, IL 60606 FAX: 312-407-0411 Mr. Eric W. Kaup Hilco Merchant Resources, LLC 5 Revere Drive Northbrook, IL 60062 FAX: 847-897-0766 Mark Collins, Esq. Daniel DeFranceschi, Esq. Richards Layton & Finger, P.A. One Rodney Square 920 North King Street Wilmington, DE 19801 FAX: 302-651-7701

DMEAST #10101910 v1

Howard S. Beltzer, Esq. Neil E. Herman, Esquire Morgan, Lewis & Bockius LLP 101 Park Avenue New York, NY 10178 FAX: 212-309-6001 Office of the U.S. Trustee 844 King Street, Suite 2207 Wilmington, DE 19801 FAX: 302-573-6497

Dated: August 22, 2008 /s/ David L. Pollack David L. Pollack, Esquire Jeffrey Meyers, Esquire BALLARD SPAHR ANDREWS & INGERSOLL, LLP 51ST Fl - Mellon Bank Center 1735 Market Street Philadelphia, Pennsylvania 19103 Telephone: (215) 864-8325 Facsimile: (215) 864-9473 Email: pollack@ballardspahr.com meyers@ballardspahr.com Counsel for General Growth Management, Inc.

DMEAST #10101910 v1