Docket #4607 Date Filed: 2/18/2010

EXHIBIT

(Proposed Order)

IN THE UNITED STATES BANKRUPTCY COIIRT FOR THE DISTRICT OF DELAWARE

In re: MERVYN'S HOLDINGS, LLC,

et

etr

Chapter

11

Case No.08-11586

(KG)

Debtors.

Jointly Administered
Rerated Doc. No.

4ff(

ORDER APPROYING STIPULATION WITH RESPECT TO THE APPLICATION BY DFS SERYICES LLC FOR ALLOWAI\CE AI{D IMMEDIATE PAYMENT OF ADMINISTRATIYE CLAIM Upon consideration of the Stipulation with Respect to the Application by DFS Serryices

LLCfor Allowance

and Immediate Payment of Administrative claim (the "sttpulation"), attached

hereto as Exhibit A, and this matter being submitted on consent, it is hereby

ORDERED, that the Stipulation is hereby approved in accordance with its terms and is
incorporated herein by this reference.

ORDERED, that this Court retains jurisdiction with respect to all matters arising from or
related toilte implementation of this Order. Dated:

Wihnington, Dela'uri[re

fizorc

LE

The Debtors ! $ese cases, along with the last four digits of their federal tax identification ntrmbers, are Mervyn's Holdings, LLc (3405), Mervyn's LLc (4456) and Merfon's Brands, LLc (gs50).
RLFI 3537796v.1

0q/v*"2 &- 0811586100218000000000006

EXHIBIT A
(Stipulation)

RLFI 3537796v.1

FEVLS-a?.!A A4.5?

DISCOUER

FIN

SUCS LLC

6142831?18

P.6L

IN THE UMTED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

x
In re: MERVYN'S HOLDINGS, LLC, gtgLt
Chapter 1l

Debtors.

(KG) Jointly Administered Related Cace No. 0&1f 587

Case No.0&11586

STIPULATION WITII RESPECT TO THE APPLICATION BY DFS SERVICES LLC FOR ALLOWANTCE AND IMMEDIATE PAY. MENT.OF N)MINISTRATIVE CLAIM
TO THE HONORABLE KEVIN GROSS UNITED STATES BANKRUPTCY JUDGE:
The above-captioned debtors and debtors in possession (the "Debtors") and DFS Services, LLC

("DEg"

and togettrer witb tbe Debtors, the "Partigg") do hereby stipulate and

agree as follows:

RECITALS:

A'

On July 29,2W8 (the "Commencement Date'), the Debtors filed a petition under

Chapter I I of Title I

I of the United

States Code (the "Eggknlptgy_egdg') in the United States

Bankruptcy Court for the District of Delaware (the "BggksrBlgv CoUrt"), Case No. 08-11i86

(KG)(the'@). B.
Prior to the commencement Date, Debtor Mervyn's LLC

('ldesod[)

entered

into that certain Merchant Services Agreement (Form #33722 Revised 06/06) and certrain
Operating Regulations (collectively, the "Agr.eement"). Pursuant to the Agreement, the Debtors

Mervyn's Holdings, LLc (3/to5), Merqnr's

The Debtors in thcsc cases, along with the last four digis of their federal tax identification numbers, are Llr g4s6) and Mcrv)rn's Brands, LLc (8850).

Rlfl

3533759v.2

FEB-LA-aALA A4.57

DISCOUER

FIN

SUCS LLC

6L4"A3L7IA

P.Az

accePted Cards2 for the purchase of goods and services (the

'!ald-Sa!gG)") by certaiu of

Debtors' customers (collectively, "Cardho-Eers'). Following each Card Sale, Debtors forwarded the transaction data documenting the Card Sale to DFS. After DFS received the
transacfion data conesponding to the Card Sale, and within the period provided in ttre

Agreement, DFS remitted to Debtors the amount of the purchase less any discount and/or
transaction fees, and/or less any chargebacks,' retums, processing fees, submission error fees,

adjustmene, and other withholdings.

C.

DFS is currently holding the amount of 514,967.70 arising from Card Sales that

occured prior to the Commencement Date (the "Prepetition HoldbacP). DFS and the Deb0ors
agree that DFS has an allowed, secured non-priority elaim (the "Bfepetitign

Claim') in the

amount of $9,523.30 resulting from chargebacks and fees that occurredprior to the Commencement Date. Accordingly, the parties wish to set these amounts offagainst one another.

D.

DFS is also holding $45,7U.09 arising from Card Sales that occurred following

the Commencsnent Date (the '?ostpetition Holdbacks"). Although Debtors no longer accept Cards as a result of ceasing business operations on or about December 30, 2008, DFS continued to bear the risk of nonpayment for items purchased with the Card prior to December 30, 2008.

DFS' exposure to chargebacks terrninated on Juty 28,2W9 because, by that date, Cardholders

Capitalizcdtffrrs not othcrwisc defined herein have the mcanings ascribcd to thcm in thc Agrcemcnt. Thc Agreement defines a'ard" as (i) a valid payment card bearing a Discover Network Acceptance Mark, Othcr Accqrtance Mark, or such other mark as DFS may desigratc frrom timc to time, including in thc Operating Rcgulations and/or on our website, (ii) an access devic{ including a Contactless Paymerit Device, approved by us to access a Card Account, or (iii) thc Card Account for a Card Not Prcscnt transaction. 'A chargcback occurs when Cardholden refirse to pay for items on their Card bitl after asserting claims or dcfcnses to payment under applicable law, including, rvlrcrc thc Dcbtor failed to delivcr conforming good" ot scrviccs as agreed upon at the timc of the Card Sale. After the Card Sale, DFS madc contingent payments to the Debtor for the amount of thc purchasc, subjcct to thc futurc right to collcct such paymena whcre-the Cardholdcr asscrtod claims or defenses to poyment,

RLFI 3533759v.2

FEB-LA-?@!A a,4.57

DISCOUER

FIN

SUCS LLC

6t4?A3t7LA

P.@3

had likely exhausted their right to dispute amounts billed to their Card Accounts by Debtors (the "Chargeback Termination Date').

E.

Following the Commencement Date, DFS incurred $17,278.10 in chargebacks

and returns with respect to Card Sales after the Petition

Date. DFS seeks immediate payment of

this amount from Debtors as an administrative expens. Debtors do not dispute that DFS is entitled to $17,278.10, but disputes that DFS should receive immediate payment from the estate

ofthe Debtors. To efli:ctuate the rehrm to Debtors of the portion of the Postpetition Holdbacks
that are not necessary to protect DFS from exposure to chargebacks, Debtors have agreed to

allow DFS to setoffits administrative claim against the Postpetition Holdbacks due back to
Debtors, so long as DFS releases the remainder of the Postpetition Holdbacks.

F.
follows:

To effectuate the aforernentioned setoffs in an expeditious nunner and resolve the

disputes relating to the timing of payment of DFS'administrative clairq the Parties agree as

AGREEMENTS:

1. 2.

The Recitals fonn an integral part of this stipulation (the

"Sli@tion")

and are

incorporated fully herein.

DFS has a Prepetition Claim in the anount of $9,523.30 resulting from

chargebacks and fees that occurred pnor to the Commencement Date. DFS also trrs $14,967.70

in Prepetition Holdbacks arising from Card Sales that occurred prior to the Commencement

Date. The Prepetition Claim shall be paid by applying the Prepetition Holdbacks of $14,967.70
to the Prepetition Claim of $9,523.30. Thereafter, DFS shall remit the amount of $5,444.40 to
the Debtor.

RLFI 3533759v.2

FEB-LA-2A1,6 64:59

DISCBUER

FIN

SUCS LLC

6t42B3L?Le

P.A4

3.

DFS has an allowed administrative claim in the amount of $17,278.10 (the

"Administrative Claim"). In full and final satisfaction of the Adminishative Claim, DFS is
authorized to offset the Administrative Claim against the Postpetition Holdbacks of $45,764.09.

Within l0 days of entry of a final nonappealable order approving this Stiputation, DFS will
remit, by check or wire transfer, to Debtors $28,485.99.

4.

All applicable stays or injunctions, including

the automatic stay rurder 9362 of the

Bankrupky Code, and any other applicable stays or iqiunctions are terminated, vacated and
annulled to permit DFS to take any actions necessary to effectuate the setoffs authorized by this Stipulation.

5.

Except to the extent of the duties, obligations and allowed claims dessribed

herein, as and when this Stipulation is approved by the Court Debtors and DFS expressly

mutually release and forever discharge one another, and their respective affiliates, subsidiaries,
shareholders, directors, officem, employees, agents, attome)rs, and their heirs, personal representatives, successors and assigns, from any and all liability from any claims (including but

not limited to claims arising under 11 U.S.C. $$ 542 - 553), defenses, demands, liabilities and obligations, darnagqs, actions, causes of action, setoffs, rccoupments, costs and expenses (including, without limitation, attomey's fees), known or unknown, past or present, fixed or

contingen! liquidated or untiquidated arising in connection with or related to the Agreernent.

6.

This Stipulation is binding upon the Parties, their successors and assigns and any

trustee appointed in this or any converted case. In the event that Debtors' Chapter I

case is

converted to a case under Chapter 7 and a tustee is appointed, this Stipulation shall remain in

full force and effect.

4
RLFI 3533759v.2

FEB-1.@-agL@ A4:58

DISCOUER

FIN s\rcS

LLC

6I42B3I?'LA

P.AS

7. 8. 9.
Court.

This Stipulation shall be subject to approval by the Bankruptcy Court in the

Debtors' Bankruptcy Case.

This Stipulation shall be immediately effective and enforceable upon its approval

by the Bankruptcy Court.

This Stipulation may not be modified other than by a signed writing executed by

the Parties hereto, or their authorized representatives, or by further order of the Bankruptry

lb.
I

Each person who executes this Stipulation represents that he or she has the

authority to execute this document on behalf of his or her respective clien(s).

l.

This Stipulation may be executed in counterparts, each of which shall be deemed

an original but all of which together shall constitute one and the same instnrment, and it shall

constihrte suffrcient proof of this Stipulation to present any copy, copies or facsimiles signed by the party hereto to be charged

12.

The Bankruptcy Court retains jurisdiction with respect to all matters arising from

or related to the implementation of this Stipulation. Stipulated and Agreed to this 3rd day of February,z}lD.

DFS SERVICES LLC

Suzanfre Smits

8k"-*BChristopher

}f.

Samis

Vice President, Network Services 2500 Lake Cook Road Riverwoods,IL 60015 Telephone: (224) 4054421 Facsimile: (224) 405-497 5

Telephone: (302) 65 l-7845 Facsimile: (302) 651 -77 0l Attorney for Debtors and Debtors in Possession

RLFI 3533759v.2