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THE HONORABLE KAREN A. OVERSTREET

Hearing Date: Friday, October 26, 2012 Hearing Time: 9:30 A.M. Hearing Location: Seattle, Courtroom 7206 Response Deadline: At time of hearing

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE Case No. 12-20253 KAO In re TC GLOBAL, INC., Debtor. PRELIMINARY RESPONSE OF HEARTLAND PAYMENT SYSTEMS, INC. TO DEBTOR'S EMERGENCY MOTION FOR ORDER (i) APPROVING INTERIM BRIDGE FINANCING AGREEMENT, (ii) GRANTING FIRST-POSITION LIENS AND SUPERPRIORITY CLAIMS; AND (iii) SCHEDULING FINAL HEARING

Heartland Payment Systems, Inc. (Heartland) hereby responds in preliminary fashion to the above-captioned debtor in possessions (the Debtor) Emergency Motion for Order (i) Approving Interim Bridge Financing Agreement; (ii) Granting First-Position Liens and Superpriority Claims; and (iii) Scheduling Final Hearing (the Emergency Financing Motion) [Dkt. No. 61]: BACKGROUND 1. Heartland, as successor in interest to Chockstone, Inc., as processor and the

Debtor as merchant are parties to certain agreements (hereafter, as such may have been or

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may be amended, supplemented, extended, or otherwise modified, the Agreements) relating to the processing of credit card transactions and transactions relating to gift cards issued by the Debtor. 2. Under the Agreements, Heartland provided to the Debtor on a prepetition

daily basis and, to date, continues to provide on a postpetition daily basis, various credit card and gift card processing and related services. Upon information and belief, Heartland has been and currently is the Debtors sole or primary processor of credit card transactions. 3. If the Debtor lacks sufficient funds to honor all of its obligations owed to

Heartland, Heartland may bear the financial risk for potential residual liability relating to credit card and gift card transactions. This risk is for items such as chargebacks and the like, as more particularly described in the Agreements. This risk for potential residual liability may extend for several months after the Debtor terminates the Agreements or ceases operations. 4. Heartland is one of the largest creditors in this bankruptcy case. The Debtor

has listed Heartland (as Chockstone) as a creditor in the amount of $219,828. Heartland reserves and asserts all rights and claims under the Agreements or otherwise. 5. By the Emergency Financing Motion, the Debtor requests authority to borrow

the sum of $300,000 (the Loan Amount) on an immediate, emergency basis from Gibraltar Business Capital ("GBC"). In exchange therefore, the Debtor proposes to grant GBC a super-priority administrative expense claim and first-position security interest in all of the Debtors assets to secure advances under the Bridge Financing Agreement (as defined in the

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Emergency Financing Motion), with certain limited exceptions as detailed herein. (Emergency Financing Motion at pages 1 (lines 21-22) -2 (lines 1-2).1 6. The Debtor proposes to repay the Loan Amount via a daily payment of

$5,250 until the Loan Payoff amount was fully satisfied. (Id. at page 6, lines 10-11). 7. The Debtor alleges that without Court approval of the proposed bridge

financing, and given its precarious cash position, the Debtor might be forced to cease operations rather than accrue expenses without the assurances that they will be paid. (Id. at page 5, lines 19-20). 8. In support of the Emergency Financing Motion, the Debtor has attached a

proposed budget to the Farrell Declaration. It is unclear which line item(s) in the Budget, if any, include the amounts that are due and will be due to Heartland on a postpetition basis under the Agreements. 9. To date, the Debtor has not agreed to provide Heartland with any form of

adequate protection or adequate assurance of payment to cover Heartlands postpetition services and Heartlands significant postpetition risks in the event of termination of the Agreements and/or cessation of the Debtors business operations.

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Emergency Financing Motion.

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10.

The Debtor did not file a proposed interim financing order along with the

Emergency Financing Motion. Upon request, the Debtor has furnished a form of order, but such order does not address the concerns of Heartland. ARGUMENT AND RESERVATION OF RIGHTS 11. Contrary to what the Emergency Financing Motion may suggest, Heartland is

a secured creditor under the Agreements and under all applicable law, at least to the extent Heartland possesses funds of the Debtor on a daily basis. (See e.g. Agreement Terms and Conditions at 8.3; N.J. Stat. 12A:9-312 (a security interest in money may be perfected only by the secured partys taking possession under 12A:9-313); 11 U.S.C. 506(a), 553. Moreover, Heartland has and retains all of its rights of recoupment and setoff. Nothing in the proposed interim order should adversely affect the validity, priority, and extent of Heartland's rights as a secured creditor or Heartland's rights of recoupment. 12. Based upon the statements contained in the various filings by the Debtor in

support of the Emergency Financing Motion, sections 361 and 364(d) of the Bankruptcy Code, and any applicable nonbankruptcy law, Heartland is entitled to and hereby demands adequate protection and/or adequate assurance of payment. If negotiations with the Debtor do not result in a prompt, go forward arrangement acceptable to Heartland, Heartland reserves all rights and is prepared to seek relief from this Court on an emergency basis. 13. The Budget should be revised to clarify what the Debtor proposes to pay to

Heartland on a going forward basis in this bankruptcy case. The Debtor should consult with Heartland in this regard.

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14.

Heartland does not oppose entry of an interim order approving the proposed

financing, provided that all of Heartland's rights and claims under the Agreements and under applicable law are fully preserved and not impacted in any adverse manner whatsoever by the terms of the interim order. Any proposed interim order should contain the following language, at a minimum: "Notwithstanding anything to the contrary contained herein, the relief granted by this Order shall not impact or prejudice in any manner whatsoever the rights of Heartland as a secured creditor (including without limitation rights of setoff), the rights of Heartland to adequate protection and adequate assurance of payment, and the rights of Heartland to recoupment, all of which are expressly preserved in full and subject to further proceedings in this Court." 15. Heartland reserves the right to assert any further responses at the interim

hearing, particularly upon receiving an adequate opportunity to review and respond to any proposed interim financing order. WHEREFORE, Heartland respectfully requests that entry of any interim financing order be consistent with the foregoing and Heartland requests such other and further relief as this Court deems just and proper.

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DATED: October 25, 2012

PERKINS COIE LLP By: /s/ John S. Kaplan John S. Kaplan, WSBA No. 23788 JKaplan@perkinscoie.com 1201 Third Avenue, Suite 4900 Seattle, WA 98101-3099 Telephone: 206.359.8000 Facsimile: 206.359.9000 Attorneys for Heartland Payment Systems, Inc. Of Counsel: BLANK ROME LLP Michael D. DeBaecke 1201 Market Street Suite 800 Wilmington, DE 19801 Phone: 302.425.6412 Fax: 302.428.5107 Email: Debaecke@BlankRome.com

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