IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE. Chapter 11. Jointly Administered

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1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CD LIQUIDATION CO., LLC, f/ka CYNERGY DATA, LLC, et al., 1 Debtors. Chapter 11 Case No (KG) Jointly Administered Hearing Date: September 13, 2010 at 2:30 p.m. (ET) Objection Deadline: August 31, 2010 at 4:00 p.m. (ET) Related Docket Nos.: 13, 204, 207, 238, 490, 498, 633, 584 and 773 MOTION FOR ENTRY OF AN ORDER APPROVING, PURSUANT TO SECTION 105(A) OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019, THE STIPULATION AND ORDER BETWEEN AND AMONG THE DEBTORS, HARRIS N.A., MONERIS SOLUTIONS, INC., TERM B PARTIES AND SECOND LIEN PARTIES, TERM A PARTIES, CYNERGY HOLDINGS, LLC AND CYNERGY DATA, LLC REGARDING RECONCILIATION OF AMOUNTS RELATED TO THE ROLLING RESERVE FUNDS AND FOR CERTAIN RELATED RELIEF The above-captioned debtors and debtors-in-possession (the Debtors ), by and through their undersigned counsel, hereby move this Court (the Motion ), for entry of an order approving, pursuant to section 105(a) of title 11 of the United States Code (the Bankruptcy Code ) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), the terms and conditions of that certain Settlement Term Sheet attached hereto as Exhibit A, as modified, supplemented and amended by the Proposed Order attached hereto (the Settlement Term Sheet ), 2 by and among (I) the Debtor (ii) Harris N.A. ( Harris ) and Moneris Solutions, Inc., in its capacity and as agent for Harris (and with each of their successors and assigns, Moneris ), (iii) Dymas Funding Company LLC, individually and as agent for the Term B 1 The Debtors are the following entities (with the last four digits of their federal tax identification numbers in parentheses): CD Liquidation Co., LLC f/k/a Cynergy Data, LLC (8677); Cynergy Data Holdings, Inc. (8208); CD Liquidation Co. Plus, LLC f/k/a Cynergy Prosperity Plus, LLC (4265). The mailing address for the Debtors is th Avenue, 9th Floor, Long Island City, New York Terms not defined herein shall have the meanings ascribed to them in the Settlement Term Sheet

2 Lenders and as agent for the Second Lien Lenders ( Dymas ) and Abelco Finance LLC and A3 Funding LLC, each as Term B Lender and Second Lien Lender and Garrison Credit Investments I LLC, as Term B Lender (collectively and with each of their successors and assigns, the Term B Parties ), (iv) Comerica Bank, as Term A Lender and as Agent for the Term A Lenders, Wells Fargo Capital Finance, LLC, f/k/a Wells Fargo Foothill, LLC, as Term A Lender, and Comerica Bank as lender to Cynergy Liquidation Co. Plus, LLC, f/k/a Cynergy Prosperity Plus, LLC and as agent (collectively and with each of their successors and assigns, the Term A Parties ), and (v) Cynergy Holdings, LLC and Cynergy Data, LLC (jointly and with each of their successors and assigns,, the Purchaser, and together with the Debtors, Harris, Moneris, the Term A Parties, the Term B Parties and each of their successors and assigns, the Settling Parties ). In support of this Motion, the Debtors respectfully represent as follows: JURISDICTION AND VENUE 1. The Court has jurisdiction over these matters pursuant to 28 U.S.C. 157 and These are core proceedings pursuant to 28 U.S.C. 157(b)(2). Venue is proper before this Court pursuant to 28 U.S.C and The relief requested herein is predicated on Bankruptcy Rule 9019 as well as section 105(a) of the Bankruptcy Code. BACKGROUND 2. On September 1, 2009 (the Petition Date ), the Debtors filed their voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, in the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court ). 3. On the Petition Date, the Debtors filed Debtors Motion for an Order Pursuant to Sections 105, 363, 365, 503 and 507 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 6006, 9007 and 9014 (I)(a) Authorizing and Scheduling an Auction at Which the -2-

3 Debtors will Solicit Higher and Better Offers in Connection with the Sale of Certain Assets, (b) Approving the Bid Procedures for Such Assets, (c) Approving Break-Up Fee and Expense Reimbursement and (d) Approving the Form and Scope of Notice of the Bid Procedures and Auction; (II) Approving the Sale of the Assets Free and Clear of All Liens, Claims, and Encumbrances; (III) Approving Procedures for Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (IV) Granting Related Relief as Requested Herein (the Sale Motion ) (Docket No. 13). 4. As part of the sales process proposed in the Sale Motion, and specifically in connection with the proposed assumption by the Debtors and assignment to the Purchaser of all of their merchant processing agreements and the BIN Sponsor Agreement between the Debtors and Harris, the Debtors served upon all of their merchants with whom they had maintained an unfunded merchant reserve, commonly referred to by the Debtors as the Rolling Reserve, a Cure Notice that listed by merchant the amount of the unfunded merchant reserve as of the Petition Date. Merchants without unfunded merchant reserves had their merchant processing agreements assigned to the Purchaser pursuant to the terms of the merchant processing agreements with no default and, therefore, no cure required. The amount of the unfunded merchant reserve for each merchant was subject to change on a daily basis as a result of ongoing transactions during the Debtors continued business operations. The cure amount the Debtors proposed to pay over to Harris, to hold in the merchant reserves at Harris pursuant to the BIN Sponsor Agreement, was the amount of the unfunded merchant reserve as of the closing of the sale proposed by the Sale Motion. 5. Each merchant with an unfunded merchant reserve was given notice of the proposed assumption and assignment of its merchant processing agreement along with the cure -3-

4 amount and given the opportunity to file an objection to the proposed sale or to the cure amounts set forth by the Debtors. Numerous merchants filed objections and the amount stated in those objections, as well as the cure amounts as to which no objections were filed, were reserved by the Debtors out of the sale proceeds (the Cure Escrow ). Moneris filed a separate objection 3 raising the need to cure defaults of the assumed Bin Sponsor Agreement and merchant processing agreements, and fund and turn over to Harris, for the account of the affected merchant, the then unfunded Rolling Reserves as well as to pay any legal fees and costs incurred by Harris or Moneris in connection with the BIN Sponsor Agreement as provided for in the Bin Sponsor Agreement. 6. In response to the Sale Motion, the Term B Parties also filed an objection 4 in which the Term B Parties argued that there was no basis for the proposed cure of the Rolling Reserves as part of the assumption and assignment of the applicable merchant processing agreement and that any claims by merchants on account of the unfunded reserves were general unsecured claims. 7. Purchaser also filed a response to the Term B Parties objection asserting that the Debtors must cure the defaults under the Bin Sponsor Agreement and merchant processing agreements by paying the unfunded reserve amounts to Harris. 5 3 Objection by Moneris Solutions, Inc. to the Proposed Assumption and Assignment of Assumed Contracts and Proposed Cure Amounts, dated October 6, 2010 [Docket No. 207] 4 Objection of Term B Parties And Second Lien Parties to the Debtor Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts, dated as of October 6, 2009 [Docket No. 204]. 5 Response of Cynergy Holdings, LLC to (I) Objection of Term B Parties and Second Lien Parties to Debtors Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts [Docket No. 204]; and (II) Debtors Motion for an Order Pursuant to Sections 105, 363, 365, 503 and 507 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 6006, 9007 and 9014 (I)(A) Authorizing and Scheduling an Auction at Which the Debtors Will Solicit Higher and Better Offers in Connection with the Sale of Certain Assets, (B) Approving the Bid Procedures for Such Assets, (C) Approving Break-Up Fee and Expense (continued...) -4-

5 8. As a result of the objections filed by Moneris and the Term B Lenders, the Debtors established the Cure Escrow pending the resolution of these objections. With the establishment of the Cure Escrow containing, inter alia, all monies asserted to be owed on account of the Rolling Reserves, the sale closed on October 26, 2009 with all merchant processing agreements including those with unfunded merchant reserves and the BIN Sponsor Agreement being assumed and assigned to the Purchaser. A list of the amounts of the Rolling Reserves, by merchant, as of October 26, 2009, the date resolved as the Closing of the Debtors sale of substantially all of their operating assets to the Purchaser, is annexed as Exhibit B and reflects the resolution of most of the previously-filed objections. The remaining unresolved objections and amounts claimed in those objections are listed in Exhibit C. It should be understood that the amounts in any Rolling Reserve account changes continually due to merchant activity, including losses incurred, charge-backs, fines, fees and the like. The amount of a merchant s unfunded merchant reserve as listed on Exhibit B is as of October 26, 2009 and does not reflect subsequent activity between the merchant, the Purchaser and Moneris. 9. Amounts in the Cure Escrow were released, subject to the potential for disgorgement, pursuant to the Order Approving the Stipulation (I) Amending the Prior Scheduling Stipulation Governing (1) the Objection of the Term B Parties and Second Lien Parties to Debtors' Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts, (2) The Objection by Moneris Solutions, Inc to (continued...) Reimbursement and (D) Approving the Form and Scope of Notice of the Bid Procedures and Auction; (II) Approving the Sale of the Assets Free and Clear of All Liens, Claims, and Encumbrances; (III) Approving Procedures for Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (IV) Granting Related Relief as Requested Herein [Docket No. 13] [Docket No. 238]. -5-

6 the Proposed Assumption and Assignment of Assumed Contracts and Proposed Cure Amounts and (3) Response of Cynergy Holdings LLC to (I) Objection of Term B Parties and Second Lien Parties to Debtors' Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts and (II) Debtors' Motion for an Order Among other things, (A) Approving the Sale of the Assets Free and Clear of all Liens, Claims and Encumbrances; (B) Approving Procedures for Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (C) Granting related Relief as Requested and (II) Providing for release of certain Funds from the Cure Reserve approving the stipulation by and among the Settling Parties dated December 18, 2009 and so ordered by the this Court on December 21, 2009, as amended from time to time including by the Amendment and Stipulation by and among the Settling Parties dated June 3, 2010 and so ordered by this Court on June 4, 2010 (collectively, the Stipulation ). 10. The Term B Parties, Moneris, and the Debtors engaged in extensive discovery, reviewed hundreds of thousands of pages of documents obtained in discovery, conducted several depositions some of which were also attended by representatives of the Official Committee of Unsecured Creditors (the Committee ), the Purchaser and other parties in interest, and prepared for additional depositions which were adjourned pending settlement discussions. At the same time, the Settling Parties engaged in protracted good faith, arm s length negotiations regarding resolution of the competing objections. As a result of such negotiations, the Settling Parties have resolved the issues relating thereto, subject to Court approval, as more fully set forth below and in the Settlement Term Sheet. The Settlement Term Sheet, as executed by the Settling Parties, includes a signature block for the Committee. The Committee did not object to the Sale Motion as it pertained to the assumption and assignment of unexpired leases -6-

7 and executory contracts nor did it file a response to the objections of the Term B Parties and Moneris concerning the same. As a result, the Committee is neither a Settling Party nor a required signatory to the Settlement Term Sheet. Based on the foregoing, the Committee did not execute the Settlement Term Sheet. THE SETTLEMENT TERM SHEET The salient terms of the Settlement Term Sheet are as follows: Establishment of Settlement Escrow Account: Funds currently in the existing Cure Escrow in the amount of $20,005, (the Settlement Escrowed Funds ) less amounts released from the Escrowed Funds prior to such date pursuant to the Stipulation will be transferred to a segregated, interest bearing (no risk), escrow account (the Settlement Escrow Account ) with an unrelated third party escrow agent. 7 Payment of Settlement Escrow Funds: The Settlement Escrow Funds shall be held in the Settlement Escrow Account to be disbursed in accordance with the Indemnification Coverage provisions in the Settlement Term Sheet and as cash collateral for (a) the secured claims of the Term A Parties, and the Term B Parties for obligations outstanding under the prepetition and postpetition financing facilities to the Debtors as disclosed and in the amounts set forth on a Schedule attached to the Settlement Term Sheet, which schedule shall be updated on and as of November 3, 2014 (the Determination Date ) respectively, including for any potential revived secured claim on account of payment by the Term A Parties or Term B Parties under the guaranty of the Indemnifying Parties obligations (described below), and (collectively, the Term A Parties Claims and collectively, the Term B Parties Claims ) (b) the secured claims of Moneris for the Indemnification set forth in the Settlement Term Sheet. 6 This section of the Motion is a summary of the salient terms of the Settlement Term Sheet and is qualified in its entirety by the terms of the Settlement Term Sheet attached hereto as Exhibit A as modified by the Proposed Order attached hereto. If there are any inconsistencies between the summary contained herein and the Settlement Term Sheet as modified, the Settlement Term Sheet as modified by the Proposed Order shall control. Parties are encouraged to read the Settlement Term Sheet attached as Exhibit A and the Proposed Order attached hereto in their entirety. 7 The definition of Settlement Escrowed Funds in the Motion and Proposed Order differs from said definition in the Settlement Term Sheet to clarify that the Settlement Escrowed Funds include and refer to all funds in the Cure Escrow in the amount of $20,005, The actual amount of Settlement Escrowed Funds that will be deposited into the Settlement Escrow Account upon authority under an order issued by this Court will be the amount set forth on Exhibit D hereto which accounts for amounts released prior thereto. -7-

8 Payment Prior to Determination Date: Prior to and including the Determination Date, the only payments to be made from the Settlement Escrow Account are (a) monthly disbursements from net accrued interest (net of expenses under the Settlement Escrow Agreement) earned on the Settlement Escrowed Funds in the Settlement Escrow Account to Comerica Bank, as Agent for the Term A Lenders, for application to the indebtedness of Debtors to the Term A Parties until paid in full, and then to Dymas Funding Company LLC, as Agent for the Term B Parties for application to the indebtedness of Debtors to the Term B Parties until paid in full ( Interest Payments ), and (b) on account of Indemnification Payments to Moneris as set forth in the Settlement Term Sheet. Payment after the Determination Date: After the Determination Date, the Term A Parties, Term B Parties, Purchaser and Moneris will determine the expected present value of the remaining Cure Amount under a methodology acceptable to the parties and distribution of the remaining Settlement Escrowed Funds, as acceptable to such parties. Indemnification Obligations: The Debtors and their estates created in the Bankruptcy Cases pursuant to section 541 of the Bankruptcy Code shall, on a limited recourse basis (recourse limited to and capped at the principal amount of the Settlement Escrowed Funds) indemnify and hold harmless each of Moneris Solutions, Inc. and Harris N.A. and the other Indemnified Parties from and against a Merchant Loss. The indemnification as set forth in the Settlement Term Sheet provides, among other things, for the release of Settlement Escrow Funds to Moneris where: (1) the applicable merchant has been identified as having an unfunded rolling reserve in an amount per merchant as set forth on the Exhibit B to the Motion, which amount has been escrowed in the Existing Escrow Account minus (i) any distributions made on account of that merchant pursuant to the Stipulation and (ii) any prior Indemnification Payments made pursuant to the Settlement Term Sheet the difference of which represents all or part of the amount sought as an Indemnification Payment for that merchant, irrespective of any ISO level reserves, sub-iso level reserves, Questionable Merchant (QM) reserves or any other reserves from the merchant to fund those losses pursuant to any agreement related to the BIN Sponsor Agreement, (2) the applicable merchant (i) has processed transactions resulting in settlement proceeds which are insufficient to cover such Merchant Loss (defined below) (to the extent of such insufficiency); (ii) was no longer processing transactions with the Debtors and/or is not currently processing transactions with the Purchaser, (iii) has closed merchant accounts with the Debtors and/or the Purchaser or (iv) has requested a return of, or Purchaser or Moneris consistent with their ordinary course of business have determined to return, part or all of such merchant s reserves in accordance with and as provided by the terms of the applicable merchant processing agreement, and -8-

9 (3) the requested payment is of the type of payment for a Merchant Loss (as defined herein) that would be sought to be recovered from a reserve account if such account was funded by the Debtors as of the Petition Date. Indemnification Payments Continuing until Definitive Agreement is Reached: Until such time as agreement is reached and definitive documentation acceptable to Moneris, Purchaser, the Term A Parties (unless paid in full), and the Term B Parties is fully executed with respect to the transaction in the foregoing sentence, the Indemnification survives and Indemnification Payments and Interest Payments shall continue to be made from the Settlement Escrow Account. So long as the Indemnification survives, no other entity besides Moneris, the Term A Parties, the Term B Parties and Purchaser to the extent of Purchaser s subrogation rights set forth in the Settlement Term Sheet, will have an interest in the Settlement Escrow Account and the Settlement Escrow Account will not be disposed of or encumbered other than as set forth in the Settlement Term Sheet. Security: The obligations of the Indemnifying Parties to indemnify the Indemnified Parties shall be secured by a perfected first priority security interest in the Settlement Escrow Account, including the execution of a Demand Account Control Agreement, reasonably satisfactory to Moneris. Guarantee of Indemnification Payments: The Term A Parties and the Term B Parties, under certain circumstances, guaranty the obligations of Indemnifying Parties as set forth in the Settlement Term Sheet. Disgorgement Notice: The Indemnified Parties are required to give notice of any request for Indemnification Payments and the Debtors, the Agent to the Term A Parties or the Agent to the Term B Parties may seek the return of Indemnification Payments if such payments are made in error. Modifications to this provision of the Settlement Term Sheet are set forth below in the Proposed Order. Legal Fees: Immediately upon Court approval of the Settlement Term Sheet, the Debtors estate shall reimburse, as part of the cure of the assumption of the Bin Sponsor Agreement, any and all attorney fees, expenses and disbursements incurred by or on behalf of Moneris in connection with Debtors bankruptcy cases after October 26, 2009 through approval of the Settlement Term Sheet, by a final, nonappealable order issued by the Bankruptcy Court, which amount shall not be deducted from the Settlement Escrowed Funds. Releases: The Settlement Term Sheet as modified in the Proposed Order provides for certain releases by and among the Settling Parties. 12. Treatment of Merchants. Notice of this Motion is being given to each merchant with unfunded rolling reserves as of October 26, 2009 to advise such merchant of the disposition of the Cure Escrow and the amounts transferred on their behalf. Upon approval of -9-

10 the settlement embodied in the Settlement Term Sheet, these merchants will have no further claim against the Settling Party relating to unfunded reserves. As the Settlement Term Sheet provides: for clarification, prior to and after a Determination Date, merchants seeking return payment, in part or in full, of a reserve which was designated as a Rolling Reserve and deposited into the Cure Reserve as defined in the Sale Order, may contact a representative at Purchaser requesting such return in accordance with the applicable merchant processing agreement. Payment of any such reserve to a merchant is subject to the terms and conditions of the applicable merchant processing agreement by and among the merchant, the Debtors, Purchaser, as assignee and Moneris. Accordingly, a merchant with unfunded rolling reserves as of October 26, 2009 may proceed in accordance with its contractual rights under an assumed merchant processing agreement to obtain payment of funds remaining in the Settlement Escrow Account. RELIEF REQUESTED 13. By this Motion, the Debtors seek entry of an order (the Proposed Order ) in the form attached approving the Settlement Term Sheet as modified by the terms of the Proposed Order, making the Settlement Term Sheet a binding agreement and granting such other and further relief as this Court deems just and proper. 14. Among other things, the Proposed Order shall: a. (i) Authorize the Debtors, Harris, Moneris, Dymas, the Term B Parties, the Term A Parties, and Purchaser, to execute, deliver and consummate all aspects of the Settlement Term Sheet, an escrow agreement governing the Settlement Escrow Account as well as all other documents intended to be executed and delivered in connection therewith and take any additional actions necessary to effectuate the Settlement Term Sheet, without the need to obtain further Court approval for such actions; -10-

11 b. Provide that the representations, warranties, agreements, terms and conditions of the Settlement Term Sheet as specifically modified under the Proposed Order are thereby incorporated into the Proposed Order, as if fully set forth herein, and deemed binding on each of the Settling Parties to the extent applicable to such Settling Parties under the terms of the Settlement Term Sheet or the Proposed Order; c. Provide that the obligations to indemnify Moneris, including the Indemnification Payments, shall be secured by, and Moneris is thereby granted (without the necessity of the execution by Debtors, Term A Parties or Term B Parties or the filing or recordation, of mortgages, security agreements, account control agreements, financing statements or otherwise), perfected first priority security interests and liens in to and under the Settlement Escrow Account and the Settlement Escrowed Funds, wherever located, and whether now existing or hereafter arising or acquired from time to time, and all and all Proceeds (as defined in the Uniform Commercial Code of New York, as amended) of the foregoing provided, that, the security interest shall not attach to payments made to the Term A Parties or Term B Parties pursuant to the terms of the Settlement Term Sheet; d. Constitute a final Disbursement Order, as that term is used in the Escrow Agreement dated October 26, 2009 between Debtor Cynergy Data, LLC (now known as CD Liquidating Co., LLC) and Wilmington Trust Company as Escrow Agent; e. Provide that, except as expressly permitted by the Settlement Term Sheet, all parties in interest in the Bankruptcy Cases are forever barred, estopped and permanently enjoined from: (a) commencing or continuing in any manner any action or other proceeding, asserting, prosecuting or otherwise pursuing any claims, rights or causes of action, (b) enforcing, attaching collecting or recovering in any manner any judgment, award, decree of -11-

12 order, (c) creating perfection or enforcing any lien or encumbrance or (d) asserting a setoff, right of subrogation or recoupment of any kind, against a Settling Party; (i) released under the Settlement Term Sheet or the Proposed Order or (ii) related to reserves identified in the Bankruptcy Cases as part of the Settlement Escrowed Funds; provided that the foregoing provisions shall exclude and not apply to (x) payments provided for under the Settlement Term Sheet or requests made by a merchant for return of a merchant reserve pursuant to and in accordance with the terms of the applicable merchant processing agreement by and among the merchant, the Debtors and Moneris and the Bankruptcy Court order approving this Settlement Term Sheet which portion of a reserve was not previously paid (and not otherwise disgorged) to Moneris and/or Purchaser as an Indemnification Payment and (y) except as specifically released in the Settlement Term Sheet by the Purchaser, any and all claims, rights and interests of Purchaser arising under the Sale Order; f. Provide that each of the Debtors on behalf of themselves and their estates created in the Bankruptcy Cases pursuant to section 541 of the Bankruptcy Code, the Term A Parties, the Term B Parties, and Garrison Opportunities, do thereby and under the Settlement Term Sheet waive and release any and all claims (to be interpreted in the broadest manner possible), obligations, suits, judgments damages, rights, causes of action, liabilities, defenses, counterclaims or offsets and/or allegations whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, against Moneris related in any way to the Settlement Term Sheet, Settlement Escrowed Funds, BIN Sponsor Agreement or the Debtors, except with respect to: (i) claims as set forth in this Settlement Term Sheet, (ii) claims for breach under the Settlement Term Sheet and (iii) claims for disgorgement by Moneris under the Stipulation and the Settlement Term Sheet, provided, however, that claims -12-

13 on account of such potential disgorgement obligations shall be included in the claims released if: (x) none of the Debtors, the Term A Parties or the Term B Parties, provide to Moneris, within thirty-five (35) Business Days after the date of this Order with respect to claims for disgorgement of funds released under the Stipulation or (y) Comerica Bank, as Agent for the Term A Lenders (or the Term B Parties Agent, if applicable after an Assumption Transaction), do not provide to Moneris, within thirty-five (35) Business Days after the date of a Payment Date with respect to claims for disgorgement of funds released pursuant to the Settlement Term Sheet on such Payment Date, a notice of request for return and recovery of all or part of any such payments of Settlement Escrowed Funds received only because such payment was paid in error and was not otherwise due and owing to Moneris or a merchant (each a Disgorgement Notice ); g. Provide that any Disgorgement Notice shall set forth (a) the amount of the funds requested to be returned in the aggregate and per merchant; (b) the basis for the allegation that an error was made; and (c) documentation which supports the position of the party which served the Disgorgement Notice. For a period of 30 days from the date of the Disgorgement Notice (the Negotiation Period ), the Parties shall confer in good faith in order to resolve the claims in the Disgorgement Notice, counterclaims and defenses thereto. Upon expiration of the Negotiation Period, if the claim is not resolved, the party which served the Disgorgement Notice may timely file a motion with a court having jurisdiction as set forth in the Settlement Term Sheet to resolve the dispute and the prevailing party shall be entitled to payment of reasonable legal fees and expenses incurred in connection with such action; h. Provide that Purchaser does thereby and under the Settlement Term Sheet waive and release any and all claims (to be interpreted in the broadest manner possible), obligations, suits, judgments damages, rights, causes of action, liabilities, defenses, -13-

14 counterclaims or offsets and/or allegations whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, against Moneris but solely to the extent relating to the Indemnification Payments received and used by Moneris to cover a Merchant Loss and not otherwise disgorged; For the avoidance of doubt, the Settlement Term Sheet does not provide for the release of claims as between the Debtors and Purchaser, and as between Purchaser and Moneris for gross negligence or fraud on the part of Moneris. i. Provide that Moneris, does thereby and under the Settlement Term Sheet waive and release any and all claims (to be interpreted in the broadest manner possible), obligations, suits, judgments damages, rights, causes of action, liabilities, defenses, counterclaims or offsets and/or allegations whatsoever, whether known or unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity or otherwise, against the Debtors, the Term A Parties, the Term B Parties, and Garrison Opportunities related in any way to the Settlement Escrowed Funds, BIN Sponsor Agreement or the Debtors, except with respect to: (i) claims as set forth in the Settlement Term Sheet, or (ii) claims for breach under the Settlement Term Sheet; For the avoidance of doubt, the Settlement Term Sheet does not provide for the release of claims by Moneris against Purchaser for liabilities of the Debtors which were assumed by Purchaser, or adversely affect, in any way any rights, claims and interests of the Purchaser under the Sale Order, provided further that nothing in this sentence or in the other provisions of the Settlement Term Sheet shall provide the Purchaser with rights or remedies which are more expansive than those that are currently held by the Purchaser under the Sale Order except to the extent that such rights or remedies are expressly provided for in the other provisions of the Settlement Term Sheet; -14-

15 j. Provide for representations and warranties by the Settling Parties of, among other things, their authority to enter into the Settlement Term Sheet; by Garrison Investments that Garrison Opportunities was never and is not a Term B Lender or Second Lien Lender and has no claim against or interest in the Debtors; and by the Debtors that, except as set forth on Exhibits B and C annexed hereto and made a part hereof which exhibits include a listing of all unfunded merchant reserves per merchant with a description of any outstanding issues or disputes associated therewith, to their knowledge and as of October 26, 2009, there are no monies owing by the Debtors related to or arising out of unfunded merchant reserves; k. Provide that the occurrence of any of the following shall constitute an event of default by a Settling Party ( Event of Default ) under the Settlement Term Sheet: (1) default by such Settling Party in payment when due of any amount to be paid under the Settlement Term Sheet or Order; (2) Breach by such Settling Party of any covenant, agreement, condition, term or obligation under the Settlement Term Sheet or Order; (3) any representation or warranty made by such Settling Party in the Settlement Term Sheet, Order or in any other document delivered in connection with the Settlement Term Sheet is found to be false or incorrect in any way so as to make it materially misleading when made or deemed to have been made; (4) Entry by a court or other governmental agency or body having jurisdiction in the matter or in the premises of an order for relief with respect to such Settling Party, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of such Settling Party under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or appointing a custodian, receiver, -15-

16 liquidator, assignee, trustee, sequestrator or other similar official of such Settling Party or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and such decree or order shall have remained in force for sixty (60) days without being dissolved or stayed; or (5) The institution by such Settling Party of a bankruptcy or insolvency proceeding, or the consent by such Settling Party to the institution of bankruptcy or insolvency proceedings against it, or the filing by such Settling Party of a petition or answer or consent seeking reorganization or relief under any applicable Federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Settling Party or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt or insolvent, or the taking of corporate action by such Settling Party in furtherance of any such action; and l. Provide that Moneris has all rights and remedies as a secured party under the New York Uniform Commercial Code and other applicable laws and that each Settling Party acknowledges upon an Event of Default each Settling Party shall have all legal and equitable rights and remedies available to it against the defaulting party, provided, however, that an aggrieved Settling Party may also include a nondefaulting party in an action against a defaulting party to the extent the nondefaulting party is a necessary party under applicable court rules. -16-

17 15. The Debtors propose that the Proposed Order (a) direct the Debtors to immediately pay Moneris, as part of its cure and as a condition to settlement, its attorney s fees and legal costs incurred in the Bankruptcy Cases through July 15, 2010 in the amount of $501,599.76, which funds shall be paid from the remaining funds in the Cure Escrow and not the Settlement Escrowed Funds, and (b) with respect to any additional claim for legal fees asserted by Moneris as provided in the Settlement Term Sheet and as cure, direct Moneris to file with this Court and serve upon the Debtors a statement of any unpaid fees and expenses owed in accordance with the BIN Sponsor Agreement (the Fee and Expense Statement ) within ten (10) business days of the entry of an order substantially in the form of the Proposed Order. Unless an objection is interposed within five (5) business days following the filing and service of the Fee and Expense Statement, the Debtors shall be authorized to pay the amount set forth in the Fee and Expense Statement to Moneris from the remaining funds in the Cure Escrow and not the Settlement Escrowed Funds. 16. Additionally, the Debtors believe that the funds remaining in the Cure Escrow after approval of this Settlement should be allocated as indicated on Exhibit D attached hereto. Doing so will facilitate the distribution of excess funds from the Cure Escrow thereby reducing the ongoing expense being incurred by the estates on account of ongoing interest charges claimed by the Term A Lenders. AUTHORITY FOR REQUESTED RELIEF 17. Section 105(a) of the Bankruptcy Code provides, in pertinent part, that the court may issue any order necessary or appropriate to carry out the provisions of [the Bankruptcy Code.] In addition, Bankruptcy Rule 9019(a) provides that on motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. -17-

18 Pursuant to Bankruptcy Rule 9019, bankruptcy courts consider the overall wisdom of compromising and settling disputes arising in bankruptcy cases. In re Marvel Entertainment Group, Inc., 222 B.R. 243, 249 (D. Del. 1998) (citing Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414 (1968)). 18. Approval of a settlement pursuant to Bankruptcy Rule 9019 is committed to the discretion of the court. Key3Media Group Inc. v. Pulver.com, Inc. (In re Key3Media Group, Inc., 336 B.R. 87, 92 (Bankr. D. Del 2005). The court must decide whether the compromise is fair, reasonable, and in the best interest of the estate. In re TSIC, Inc., 393 B.R. 71, 28 (Bankr. D. Del. 2008). 19. In considering the best interest of the estate under a Bankruptcy Rule 9019(a) motion, a court must balance the value of the claim that is being compromised against the value to the estate of the acceptance of the compromise proposal. In re Martin, 91 F.3d 389, 393 (3d Cir. 1996). In assessing this balance, the court should consider: (1) the probability of success in litigation; (2) the likely difficulties in collection; (3) the complexity of the litigation involved, and the expense, inconvenience and delay necessarily attending it; and (4) the paramount interest of the creditors. Martin, 91 F.3d at 393. The court should not determine whether the debtor is getting the best possible settlement, but rather whether the compromise is reasonable. In re Integrated Health Services, Inc., 2001 WL (Bankr. D. Del. 2001). The responsibility of the bankruptcy judge... is not to decide the numerous questions of law and fact raised... but rather to canvass the issues and see whether the settlement fall[s] below the lowest point in the range of reasonableness. Integrated Health, supra at *2 (quoting Cosoff v. Rodman (In re W.T. Grant Co.), 699 F.2d 599, 608 (2d Cir. 1983); Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972)). When determining the reasonableness of the compromise, [t]he court -18-

19 is not supposed to have a mini-trial on the merits. In re Jasmine, Ltd., 258 B.R. 119, 123 (D. N.J. 2000); In re Prudential Lines, Inc., 170 B.R. 222, 247 (S.D.N.Y. 1994) ( It is not the court s responsibility to conduct a mini-trial on the merits in order to assess the reasonableness of the settlement ); In re Edwards, 228 B.R. 552, 569 (Bankr. E.D. Pa. 1998). 20. When deciding whether to approve a compromise, a court will normally accept the judgment of a trustee as long as a legitimate business justification exists. Martin, 91 F.3d at 395; Jasmine, Ltd., 258 B.R. at 123; In re Marvel Entertainment Group, Inc., 222 B.R. 243, 250 (D. Del. 1998). The decision to enter into a settlement is left to the trustee s or debtor s business judgment. See In re Penn Central Transportation Co., 347 F. Supp. 1351, 1353 (E.D. Penn. 1972) (settlement agreement approved because it reflected exercise of business judgment). Once a trustee has articulated a valid business justification, [t]he business judgment rule is a presumption that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action was in the best interests of the company. In re Integrated Resources, Inc., 147 B.R. 650, 656 (Bankr. S.D.N.Y. 1992) (quoting Smith v. Van Gorkam, 488 A.2d 858, 872 (Del. 1985)); see also Committee of Asbestos-Related Litigants and/or Creditors v. Johns-Manville Corp. (In re Johns-Manville Corp.), 60 B.R. 612, (Bankr. S.D.N.Y. 1986) ( a presumption of reasonableness attaches to a debtor s management decisions ). 21. The Settlement Term Sheet is fair, reasonable, adequate and in the best interests of the Debtors and their creditors, because the terms and conditions of the Settlement Term Sheet, as well as the circumstances surrounding the Settlement Term Sheet, satisfy the foregoing factors. -19-

20 22. In the present case, the Debtors and each of the Settling Parties have reviewed the history of the transactions and evaluated the litigation risk with respect to the Rolling Reserve dispute. The Debtors believe that the expected utility of any potential gain, given the litigation risk, is substantially outweighed by the cost and delay that would result in continued litigation. 23. Approval of the Settlement Term Sheet will save the Debtors estate from the expense associated with continued litigation and will enable the Debtors to move forward with the filing and confirmation of a plan. The payment into the Settlement Escrow Account and ability to cover merchant losses and return merchant reserves in accordance with the assumed contracts is a benefit to the Debtors merchants. The Settlement Term Sheet is fair, equitable and the result of vigorous good faith, arm s length negotiations between and among the Parties. Accordingly, this Court should exercise its discretion and approve the Settlement Term Sheet. Notice 24. Notice of this Motion has been given to (i) the Office of the United States Trustee, (ii) counsel for each of the Parties, (iii) all merchants with unfunded rolling reserves as of October 26, 2009, (iv) all merchants who filed objections to the proposed cure amounts, (v) Mary Benfield, counsel to the Federal Trade Commission and James Mc Gee, counsel to the receiver appointed in a certain FTC Enforcement Action Case No. CV LRS in the United States District Court for the Eastern District of Washington involving certain merchants, PDM International Inc., d/b/a Priority Direct Marketing International, Inc., et al.; and (vi) all parties that have filed notices of appearance in these cases. In light of the nature of the relief requested herein, the Debtors submit that no other or further notice of this Motion is necessary or required. -20-

21 25. No previous request for the relief sought herein has been made to this or any other Court. WHEREFORE, the Debtor respectfully request the entry of an order approving the resolution of the objections filed by Moneris, the Term B Parties, the Purchaser and all other objections preserved under the Sale Order involving Rolling Reserves in accordance with the Settlement Term Sheet Settlement Term Sheet and granting such other and further relief as this Court deems just and proper. Dated: August 10, 2010 Wilmington, Delaware Respectfully submitted, PEPPER HAMILTON LLP /s/ Evelyn J. Meltzer David B. Stratton (DE No. 960) Evelyn J. Meltzer (DE No. 4581) John H. Schanne, II (DE No. 5260) Hercules Plaza, Suite Market Street P.O. Box 1709 Wilmington, DE Telephone: (302) Facsimile: (302) and- NIXON PEABODY LLP Mark N. Berman Dennis J. Drebsky Lee Harrington (DE No. 4046) 437 Madison Avenue New York, New York Telephone: (212) Facsimile: (212) Counsel for the Debtors and Debtors in Possession -21-

22 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: CD LIQUIDATION CO., LLC, f/ka CYNERGY DATA, LLC, et al., 1 Debtors. Chapter 11 Case No (KG) Jointly Administered Hearing Date: September 13, 2010 at 2:30 p.m. (ET) Objection Deadline: August 31, 2010 at 4:00 p.m. (ET) Related Docket Nos.: 13, 204, 207, 238, 490, 498, 633, 584 and 773 NOTICE OF MOTION FOR ENTRY OF AN ORDER APPROVING, PURSUANT TO SECTION 105(A) OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019, THE STIPULATION AND ORDER BETWEEN AND AMONG THE DEBTORS, HARRIS N.A., MONERIS SOLUTIONS, INC., TERM B PARTIES AND SECOND LIEN PARTIES, TERM A PARTIES, CYNERGY HOLDINGS, LLC AND CYNERGY DATA, LLC REGARDING RECONCILIATION OF AMOUNTS RELATED TO THE ROLLING RESERVE FUNDS AND FOR CERTAIN RELATED RELIEF PLEASE TAKE NOTICE that on August 10, 2010, the above-captioned debtors and debtors-in-possession (collectively, the Debtors ) filed the Motion for Entry of an Order Approving, Pursuant to Section 105(a) of the Bankruptcy Code and Federal Rule of Bankruptcy Procedure 9019, the Stipulation and Order Between and Among the Debtors, Harris N.A., Moneris Solutions, Inc., Term B Parties and Second Lien Parties, Term A Parties, Cynergy Holdings, LLC and Cynergy Data, LLC Regarding Reconciliation of Amounts Related to the Rolling Reserve Funds and for Certain Related Relief (the Motion ). PLEASE TAKE FURTHER NOTICE that a hearing on the Motion will be held on September 13, 2010 at 2:30 p.m. Prevailing Eastern Time before the Honorable Kevin Gross, United States Bankruptcy Court for the District of Delaware, 6 th Floor, Courtroom No. 3, Wilmington, Delaware PLEASE TAKE FURTHER NOTICE that objections, if any, to the Motion must be made in writing, filed with the filed with the Clerk of the United States Bankruptcy Court for the District of Delaware, 824 Market Street, 6th Floor, Wilmington, Delaware 19801, on or before August 31, 2010 at 4:00 p.m. (ET) and (ii) served so as to be actually received by the undersigned counsel to the Debtors on or before the Objection Deadline. 1 The Debtors are the following entities (with the last four digits of their federal tax identification numbers in parentheses): CD Liquidation Co., LLC f/k/a Cynergy Data, LLC (8677); Cynergy Data Holdings, Inc. (8208); CD Liquidation Co. Plus, LLC f/k/a Cynergy Prosperity Plus, LLC (4265). The mailing address for the Debtors is th Avenue, 9th Floor, Long Island City, New York # v1

23 IF YOU FAIL TO RESPOND TO THE MOTION IN ACCORDANCE WITH THIS NOTICE, THE COURT MAY GRANT THE RELIEF REQUESTED IN THE MOTION WITHOUT FURTHER NOTICE OR OPPORTUNITY FOR A HEARING. Dated: August 10, 2010 Wilmington, Delaware Respectfully submitted, PEPPER HAMILTON LLP /s/ Evelyn J. Meltzer David B. Stratton (DE No. 960) Evelyn J. Meltzer (DE No. 4581) John H. Schanne, II (DE No. 5260) Hercules Plaza, Suite Market Street P.O. Box 1709 Wilmington, DE Telephone: (302) Facsimile: (302) and- NIXON PEABODY LLP Mark N. Berman Dennis J. Drebsky Lee Harrington (DE No. 4046) 437 Madison Avenue New York, New York Telephone: (212) Facsimile: (212) Counsel for the Debtors and Debtors in Possession # v1

24 EXHIBIT A

25 SETTLEMENT TERM SHEET SUMMARY OFPROPOSED TERMS AND CONDITIONS JUNE 2, 2010 This summary of the principal terms and conditions ( Summary ) of a proposed settlement has been prepared exclusively for consideration by those parties listed as Settling Parties below (each a Settling Party and, collectively, the Settling Parties ). The proposed settlement described in this Summary does not constitute a binding offer or agreement by any Settling Party or any of their respective affiliates or subsidiaries, and the obligations of any of these parties shall be only those obligations set forth in the definitive agreement approved, executed and delivered by the Settling Parties (the Settlement Agreement ) except that each Settling Party agrees that (i) it will negotiate in good faith to consummate the Settlement Agreement and all other documents contemplated thereby, and (ii) each Settling Party will seek approval of the Settlement Agreement by the United States Bankruptcy Court for the District of Delaware (the Bankruptcy Court ). Reference is made to that certain stipulation by and among the Settling Parties dated December 18, 2009 and so ordered by the Bankruptcy Court on December 21, 2009 and any subsequent stipulations and orders of the Bankruptcy Court related thereto (the Stipulation ) and to that certain Escrow Agreement dated October 26, 2009, between Cynergy Data, LLC (now known as CD Liquidating Co., LLC) and Wilmington Trust Company as Escrow Agent (the Existing Escrow Agreement ). Reference is also made to (1) the Objection of the Term B Parties and Second Lien Parties to Debtors Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts, (2) the Objection by Moneris Solutions, Inc. to the Proposed Assumption and Assignment of Assumed Contracts and Proposed Cure Amounts and (3) the Response of Cynergy Holdings LLC to (i) Objection of Term B Parties and Second Lien Parties to Debtors Notice of Intent to Assume and Assign Certain Unexpired Leases and Executory Contracts and Setting Cure Amounts and (ii) Debtors Motion for an Order Pursuant to Sections 105, 363, 365, 503 and 507 of the Bankruptcy Code and Bankruptcy Rules 2002, 6004, 6006, 9007 and 9014, Among Other Things, (a) Approving the Sale of the Assets Free and Clear of All Liens, Claims and Encumbrances; (b) Approving Procedures for Assumption and Assignment of Certain Executory Contracts and Unexpired Leases; and (c) Granting Related Relief as Requested (each an Objection and, collectively, the Objections )

26 Summary of Settlement Terms Settling Parties: Harris/Moneris Harris N.A. and Moneris Solutions, Inc., in its capacity and as agent for Harris N.A. or their successors or assigns as BIN Sponsor to Purchaser (collectively, Moneris ) Term B Parties and Second Lien Parties (collectively, Term B Parties ) Dymas Funding Company LLC, individually and as agent for the Term B Lenders and as agent for the Second Lien Lenders ( Dymas ) Ableco Finance LLC, as Term B Lender and as Second Lien Lender A3 Funding LLC, as Term B Lender and as Second Lien Lender Garrison Credit Investments I LLC, as Term B Lender Term A Parties Comerica Bank, as a Term A Lender and as agent for the Term A Lenders Wells Fargo Capital Finance, LLC, formerly known as Wells Fargo Foothill, LLC, as a Term A Lender Comerica Bank, as lender to Cynergy Liquidation Co. Plus, LLC, f/k/a Cynergy Prosperity Plus, LLC and as agent Debtors CD Liquidation Co., LLC, f/k/a Cynergy Data, LLC Cynergy Data Holdings, Inc