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)

Hearing Date: November 25, 2008 at 10 am Objection Deadline: November 20, 2008

MOTION OF PANDIGITAL FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM PURSUANT TO 11 U.S.C. 503(b) AND 507(a)(2) Pandigital, by and through its undersigned counsel, Whiteford Taylor Preston LLC, hereby files this motion (Motion) seeking allowance and payment of its administrative expense claim and, in support hereof, states as follows: JURISDICTION 1. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. 157

and 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). 2. 3. Venue of this Motion is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory predicates for relief requested herein are 105(a), 503(b) and

507(a)(2) of the United States Bankruptcy Code. BACKGROUND 4. On July 29, 2008 (the Petition Date), the Debtors each filed voluntary petitions

for relief pursuant to Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code). 5. Pursuant to 1107 and 1108 of the Bankruptcy Code, the Debtors are continuing

to operate their businesses and manage their properties as debtors-in-possession.

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0811586081104000000000036

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6.

Mervyns (the Debtor) is a mid price-point department store that provides

fashion and home goods to consumers. 7. Pandigital is the industry leader in the manufacture of digital photo frames and has

been conducting business with the Debtor since 2007, including right up until and after the Petition Date. 8. On October 2, 2008, Pandigital supplied $203,562.80 worth of goods to the

Debtor. Attached as Exhibit A are copies of the invoices evidencing these goods. 9. At no time did the Debtor ever indicate to Pandigital that it would not accept the

goods or that it would not recognize the post-petition invoices. In fact, on October 20, 2008, the Debtor sent a check for payment to Pandigital to cover the cost of the goods. However, shortly thereafter Pandigital was notified that the Debtor had stopped payment on the check and does not intend to reissue payment. RELIEF REQUESTED AND BASIS THEREFORE 10. Pandigital respectfully requests that this Court allow Pandigital and administrative

claim in the amount of $203,562.80 and compel immediate payment thereof. 11. Section 503(b)(1)(A)(i) of the Bankruptcy Code provides for the allowance and

payment of administrative expenses including the actual, necessary costs and expenses of preserving the estate11 U.S.C. 503(b)(1)(A)(i). A two-part test applies in deciding whether a creditor is entitled to an administrative claim: (1) was there a post-petition transaction between creditor and debtor; and (2) did the estate receive some benefit from the transaction? In re Waste Systems Intern., Inc., 280 B.R. 824, 826 (Bankr. D. Del. 2002); In re Unidigital Inc., 262 B.R. 283, 288 (Bankr. D. Del. 2001). See also In re Continental Airlines, Inc., 146 B.R. -2-

520, 526 (Bankr. D. Del. 1992) (stating that a claim qualifies as an administrative expense under 503(b) where it confers a benefit that run(s) to the debtor in possession and it is typically fundamental to the conduction of the business). The above mentioned transactions meet this test. 12. First, the above mentioned orders were post-petition transactions between

Pandigital and the Debtor. Collier on Bankruptcy accurately summarizes the applicable rule: The principle that an administrative expense can arise only from a transaction with the trustee of the estate is derived from the reference in section 503(b)(1)(A) to the estate. The earliest a bankruptcy estate exists is on the petition date. Accordingly, for a claim to be allowed as an administrative expense, goods or services must be delivered or provided pursuant to a post-petition transaction; it is not enough that payment become due after the petition if the transaction was entered into with the debtor prepetition. In re Sheehan Memorial Hospital, 377 B.R. 63, 66 (Bankr. W.D.N.Y. 2007) quoting COLLIER ON BANKRUPTCY, 503.06[3][a] (Alan N. Resnick & Henry J. Sommer, eds., 15th ed. rev. 2007). An expense is administrative only if it arises out of a transaction between the creditor

and the bankrupts trustee or debtor in possession, and only to the extent that the consideration supporting the claimants right to payment was both supplied to and beneficial to the debtor-inpossession in the operation of the business. In re Sheehan Memorial Hospital, 377 B.R. at 66 quoting In re Trustes of Amalgamated Ins. Fund v. McFarlins, 789 F. 2d 98, 101 (2d Cir. 1986) (citations omitted). Here, the consideration supporting Pandigitals right to payment was both supplied to and beneficial to the Debtor in the operation of its business post-petition. The Debtor ordered the products post-petition, the products were delivered post-petition and, accordingly, Pandigitals right to payment arose post-petition.

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13.

Second, the transactions were actual and necessary and substantially benefitted the

estate pursuant to section 503(b)(1)(A) of the Bankruptcy Code. Pandigitals post-petition shipment of goods to the Debtor benefitted the Debtor and was an actual and necessary cost or expense of preserving the estate. Pandigital provided goods to the Debtor for which the Debtor was obligated to compensate Pandigital. The Debtor chose to accept the benefit of the goods and cannot now avoid payment on the same. Accordingly, Pandigital is entitled to payment of its claim as an administrative expense. 14. Furthermore, Pandigitals claim should be paid immediately. This Court

possesses the discretion to require the Debtor to make immediate payment of Pandigitals administrative expense claim. In re Barron, 73 B.R. 812, 814 (Bankr. S.D. Cal. 1987) (it is well established that bankruptcy court has wide discretion to allow payment of administrative expenses); see also IN re Verco Indus., 20 B.R. 664 (9th Cir. BAP 1982); In re Misty Touch, Inc., 31 B.R. 853 (S.D. N.Y. 1983). WHEREFORE, Pandigital respectfully requests entry of an order: (i) allowing its administrative claim in the amount of $203,562.80; (ii) directing Debtor to make immediate payment on such claim; and (iii) granting such other and further relief as this Court deems just and proper. Dated: November 6, 2008 Wilmington, DE By:/s/ Margaret M. Manning_______ Margaret Manning, Esquire (No. 4183) Thomas J. Francella, Jr., Esquire (No. 3835) Whiteford Taylor Preston LLC 1220 N. Market Street, Suite 608 Wilmington, DE 19801 (302) 353-4146 Direct -4-

(302) 258-0757 Facsimile Attorneys for Pandigital

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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)
Hearing Date: November 25, 2008 at 10 am Objection Deadline: November 20, 2008

NOTICE OF MOTION OF PANDIGITAL FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM PURSUANT TO 11 U.S.C. 503(b) AND 507(a)(2) PLEASE TAKE NOTICE that, on November 6, 2008, Pandigital filed its Motion for Allowance and Payment of Administrative Expense Claim Pursuant to 11 U.S.C. 503(b) and 507(a)(2) (the Motion). PLEASE TAKE FURTHER NOTICE that the Motion is scheduled for hearing before the Court on November 25, 2008 at 10:00 a.m. Any responses or objections to the Motion must be filed with the Court and served upon Debtors counsel to be received on or before November 20, 2008 at 4:00 p.m. PLEASE TAKE FURTHER NOTICE if you fail to file a response or objection by this date, the Court may enter the relief sought in the Motion without further notice or hearing. Dated: November 6, 2008 Wilmington, DE WHITEFORD TAYLOR PRESTON LLC /s/ Margaret M. Manning Margaret M. Manning (DE ID 4183) 1220 N. Market Street, Suite 608 Wilmington, DE 19801 Telephone: (302) 353-4144 Facsimile: (302) 661-7950 Email: mmanning@wtplaw.com

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 D.I. No. ______

ORDER ON MOTION OF PANDIGITAL FOR ALLOWANCE AND PAYMENT OF ADMINISTRATIVE EXPENSE CLAIM PURSUANT TO 11 U.S.C. 503(b) AND 507(a)(2) Upon the Motion of Pandigital for Allowance and Payment of Administrative Expense Claim Pursuant to 11 U.S.C. 503(b) and 507(a)(2) (the Motion) and any responses timely filed thereto; and due and adequate notice of the Motion having been provided; it is, by the United States Bankruptcy Court for the District of Delaware, hereby ORDERED, that the Motion is GRANTED; and it is further ORDERED, that Pandigital is hereby allowed and administrative claim in the amount of $203,562.80; and it is further ORDERED, that the Debtor pay the allowed administrative claim in full to Pandigital within ten (10) days of the entry of this Order. Dated: _______________, 2008 ______________________________ The Honorable Kevin Gross United States Bankruptcy Judge