shl Doc 13 Filed 02/23/12 Entered 02/23/12 13:50:33 Main Document Pg 1 of 8

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1 Pg 1 of 8 HERRICK, FEINSTEIN LLP Proposed Attorneys for the Debtors and Debtors in Possession Andrew C. Gold Hanh V. Huynh Justin B. Singer 2 Park Avenue New York, New York (212) (212) (fax) agold@herrick.com hhuynh@herrick.com jsinger@herrick.com Hearing Date: February 27, 2012 at 9:00 a.m. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re THE FULLER BRUSH COMPANY, INC., et al., Debtors x Chapter 11 Case No (SHL) (Motion for Joint Administration Pending) MOTION FOR ORDER AUTHORIZING MAINTENANCE OF PRE-PETITION BANK ACCOUNTS AND CONTINUED USE OF EXISTING BUSINESS FORMS, AND GRANTING RELATED RELIEF The Fuller Brush Company, Inc. ( Fuller Brush ) and CPAC, Inc. ( CPAC ) (collectively, the Debtors ), the debtors and debtors in possession herein, by their proposed counsel, Herrick, Feinstein LLP, as and for their motion (the Motion ) for entry of an order substantially in the form annexed hereto as Exhibit A, authorizing (i) continued maintenance of their existing bank accounts, (ii) continued use of their existing cash management system, (iii) continued use of their existing business forms, and (iv) waiver of certain investment and deposit guidelines, respectfully represent as follows: HF v.3 #15514/0001

2 Pg 2 of 8 INTRODUCTION 1. On February 21, 2012 (the Petition Date ), the Debtors filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ) in this Court, and orders for relief under section 301 of the Bankruptcy Code were entered in these cases (the Chapter 11 Cases ). A motion directing the joint administration of the Chapter 11 Cases is pending. 2. The Debtors have been authorized to remain in possession of their property and to continue in the operation and management of their businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code. 3. No official committee of unsecured creditors has yet been appointed by the Office of the United States Trustee for the Southern District of New York (the U.S. Trustee ) in the Chapter 11 Cases. BACKGROUND 4. Fuller Brush is a leading provider and producer of cleaning solutions and commercial and consumer hard-goods products, with over 100 years of experience in the consumer and commercial cleaning industry. These products are sold under various trademarked brands, including Fuller Brush, Stanley Home Products, Fuller Commercial, Franklin, and Masury lines of cleaning products. Since its founding in 1906, Fuller Brush has grown from traditional door-to-door sales of custom-made brushes to a full collection of home and business cleaning and personal care products, the majority of which are manufactured at Fuller Brush s manufacturing facility in Great Bend, Kansas. 2

3 Pg 3 of 8 5. Additional information about the Debtors business and the events leading up to the Petition Date can be found in the Affidavit of the Debtors Chief Restructuring Officer, Lawrence R. Perkins, pursuant to Local Bankruptcy Rule (the Perkins Affidavit ) filed on the Petition Date, and incorporated herein by reference. JURISDICTION 6. Pursuant to 28 U.S.C. 1334, the Court has jurisdiction over this Motion, which is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). Venue is proper under 28 U.S.C and The statutory predicates for the relief sought herein are sections 105(a), 345, 363, 364, and 503(b)(1) of the Bankruptcy Code. RELIEF REQUESTED 7. The Debtors move the Court for the entry or an order, pursuant to sections 105(a), 345, 363, 364, and 503(b)(1) of the Bankruptcy Code, authorizing but not directing the Debtors to (a) continue using their current cash management system, as such system may be modified pursuant to any debtor-in-possession financing and/or cash collateral order of the Court, (b) continue using and maintaining existing bank accounts (as well as authorizing the Debtors to open and close bank accounts), and (c) continue using existing business forms. 8. The U.S. Trustee has established certain operating guidelines for a debtor in possession in order to supervise the administration of chapter 11 cases. These guidelines require a chapter 11 debtor to, among other things, close all existing bank accounts and open new debtor-in-possession bank accounts, establish debtor-in-possession accounts for all estate monies required for the payment of taxes, including payroll taxes, maintain a separate debtor-inpossession account for cash collateral, and obtain checks for all debtor-in-possession accounts 3

4 Pg 4 of 8 which bear the designation debtor in possession, the bankruptcy case number, and the type of account. 9. As of the Petition Date, Fuller Brush and CPAC maintained certain accounts (the Accounts ) with the banking institutions (the Banks ) set forth on Exhibit B annexed hereto. With the exception of payroll and one Fuller Brush outlet store, Fuller Brush maintains all their accounts at Bank of America. All credit card receipts from direct sales are deposited into a primary depository account (the Primary Depository Account ), a blocked account under the control of Victory Park Management, LLC ( Victory Park ), the agent for the Debtors senior secured lender. Payments from customer accounts receivable are received into the Primary Depository Account. Check deposits received by Fuller Brush are remote deposited to the Primary Depository Account, as well. Cash deposits, along with local company store deposits are deposited at Fuller Brush s local Bank of America branch. All outlet store Bank of America deposits sweep to the local Bank of America account daily. The local Bank of America and Citizens National Bank accounts are swept to the Fuller Brush disbursement account (the Disbursement Account ) weekly. As deposits in the Primary Depository Account clear and become available, they are automatically transferred to Fuller Brush s Disbursement Account. All necessary disbursements for Fuller Brush s operations and other obligations are paid from the Disbursement Account. 10. CPAC maintains one payroll checking account which must be maintained at a local bank, and one general disbursements checking account with Bank of America in Chicago. All general expenses of the company are paid by check, wire or ACH from the Bank of America account, except for payroll and related tax deposits which are cleared through the local bank. 4

5 Pg 5 of Moreover, simultaneously herewith, the Debtors have sought for approval of debtor-in-possession financing to be provided by Victory Park. Under the terms of that financing, the Debtors are required to maintain a cash management system substantially the same as the current system. 12. The Debtors seek a waiver of the requirement that new accounts be opened in replacement of the Debtors existing above-described Accounts. If enforced in these Chapter 11 Cases, such a requirement would unnecessarily disrupt the administration of the payroll and other operations of the Debtors and would have adverse economic and operational consequences on the Debtors relations with vendors and the timely meeting of the Debtors obligations to those suppliers, as well as other creditors. BASIS FOR RELIEF 13. The Debtors believe that it is appropriate and beneficial that they be permitted to continue using the Accounts in order to avoid the above-noted results. No checks issued from the Accounts prior to the commencement of these Chapter 11 Cases will be honored, unless authorized by separate order of this Court, and the Debtors will immediately advise the Banks not to honor pre-petition checks absent an order of the Court. 14. In other chapter 11 cases, bankruptcy courts have recognized that strict enforcement of bank account closing requirements does not serve the rehabilitative process of chapter 11. Bankruptcy courts in this district routinely have waived such requirements and replaced them with alternative procedures on a case-by-case basis. A similar authorization is appropriate in these Chapter 11 Cases with respect to the Accounts. 5

6 Pg 6 of Bankruptcy courts routinely permit chapter 11 debtors to continue using their existing cash management systems, generally treating requests for such relief as a relatively simple matter. In re Baldwin-United Corp., 79 B.R. 321, 327 (Bankr. S.D. Ohio 1987); see also Official Comm. of Unsecured Creditors v. Columbia Gas Sys. Inc. (In re Columbia Gas Sys. Inc.), 997 F.2d 1039, 1061 (3d Cir. 1993) (noting with approval the bankruptcy court s finding that a requirement to maintain all accounts separately would be a huge administrative burden and economically inefficient ); Charter Co. v. Prudential Ins. Co. of Am. (In re Charter Co.), 778 F.2d 617, 621 (11th Cir. 1985) (holding that the debtors post-petition use of their pre-petition routine cash management system was entirely consistent with applicable provisions of the Bankruptcy Code) Further, the continued post-petition use of cash management systems also has been approved as a routine matter in other bankruptcy cases in this district. See, e.g., In re Dana Corp., No (BRL) (Bankr. S.D.N.Y. Mar. 29, 2006); In re Calpine Corp., No (BRL) (Bankr. S.D.N.Y. Jan. 26, 2006); Musicland Holding Corp., No (SMB) (Bankr. S.D.N.Y. Jan. 17, 2006); In re Delphi Corp., No (RDD) (Bankr. S.D.N.Y. Nov. 4, 2005); In re Delta Air Lines, Inc., No (PCB) (Bankr. S.D.N.Y. Sept. 16, 2005); In re Northwest Airlines Corp., No (ALG). 17. The Debtors, in the ordinary course of maintaining payroll and operational accounts, utilize check stock custom set with microcoding and related business forms, along with 1 Because orders approving the continued use of pre-existing cash management systems generally are entered at the time of or shortly after the commencement of a bankruptcy case, and because the benefits to affiliated debtors of such systems are widely recognized, few, if any, requests for the entry of such orders are ever contested. In fact, references to court orders authorizing the continued use of centralized cash management systems generally are found in opinions regarding collateral proceedings, rather than in reported decisions approving or disapproving the use of a particular system. See, e.g., In re FRG, Inc., 107 B.R. 461, 465 (Bankr. S.D.N.Y. 1989) (involving motion to transfer venue, but referring to an order authorizing the debtors to continue to utilize their pre-petition cash management system). 6

7 Pg 7 of 8 pre-set ACH and wire templates. The Debtors need to be permitted to continue to use their existing checks and business forms for the Accounts without alteration or change so as to maintain continuity and minimize administrative costs. Accordingly, the Debtors also are requesting that they be authorized to continue to use their existing check stock and business forms for the Accounts. The Debtors believes that the absence of any prejudice to any party coupled with the doctrine of necessity amply justifies such continued use. 18. Finally, the Debtors request that the Court grant the Debtors forty-five (45) days from the Petition Date to comply with section 345 of the Bankruptcy Code, to the extent the Accounts and any new debtor-in-possession Accounts they may open do not already comply, or to seek further relief therefrom. The extended period will afford the Debtors an opportunity to conduct a review of their ongoing operations and determine whether action is required to meet the requirements of section The Debtors submit that the granting of the relief requested herein will facilitate a smooth and orderly transition of the Debtors operations into chapter 11 and minimize the disruption of their business affairs, without undermining either the policies of chapter 11 or the rules of this Court. 20. The guidelines authorize a debtor to seek variations of any requirements by written request to the U.S. Trustee. The Debtors have delivered a copy of this Motion to the U.S. Trustee and hereby request that the U.S. Trustee enter the subjoined non-objection to the proposed order affixed hereto. In light of the circumstances and the nature of the relief requested, and as there is no prescription for notice and hearing on such relief under the 7

8 Pg 8 of 8 Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, or the Local Rules of this Court, the Debtors respectfully submit that no further notice need be given. this or any other court. 21. No previous application for the relief requested herein has been made to WHEREFORE, the Debtors respectfully request entry of the order annexed hereto as Exhibit A and for such other and further relief as is just and proper. Dated: New York, New York February 23, 2012 HERRICK, FEINSTEIN LLP Proposed Attorneys for the Debtors and Debtors in Possession By: /s/ Andrew C. Gold Andrew C. Gold Hanh V. Huynh Justin B. Singer 2 Park Avenue New York, New York (212) (212) (fax) agold@herrick.com hhuynh@herrick.com jsinger@herrick.com 8

9 shl Doc 13-1 Filed 02/23/12 Entered 02/23/12 13:50:33 Exhibit A- Proposed Order Pg 1 of 4 EXHIBIT A PROPOSED ORDER

10 shl Doc 13-1 Filed 02/23/12 Entered 02/23/12 13:50:33 Exhibit A- Proposed Order Pg 2 of 4 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK x In re THE FULLER BRUSH COMPANY, INC., et al., Debtors x Chapter 11 Case No (SHL) (Motion of Joint Administration Pending) ORDER AUTHORIZING MAINTENANCE OF PRE-PETITION BANK ACCOUNTS AND CONTINUED USE OF EXISTING BUSINESS FORMS, AND GRANTING RELATED RELIEF Upon the annexed motion (the Motion ) 2 of The Fuller Brush Company, Inc. ( Fuller Brush ) and CPAC, Inc. ( CPAC ) (collectively, the Debtors ), debtors and debtors in possession, by their counsel, Herrick, Feinstein LLP, and it appearing that proper and sufficient notice of the relief sought in the Motion has been given; and it further appearing that the requested relief is reasonable and proper; and sufficient cause appearing to me therefor and due consideration having been given; it is ORDERED, that the Debtors, be, and they hereby are, authorized and empowered to (i) designate, maintain and continue to use, with the same account numbers, all existing bank accounts for operational expenses, payroll and tax withholding deposits in existence as of the date of the filing of their chapter 11 petition (the Petition Date ), as identified in the Motion (the Accounts ), (ii) treat the Accounts for all purposes as accounts of the Debtors as debtor in possession (that is, to cause, as soon as practicable, such bank account names to reflect the Debtors status as debtors in possession), and (iii) use, in present form, checks and other forms and documents related to the Accounts provided, however that the 2 All capitalized terms not defined herein shall have the meaning ascribed to them in the Motion.

11 shl Doc 13-1 Filed 02/23/12 Entered 02/23/12 13:50:33 Exhibit A- Proposed Order Pg 3 of 4 Debtors shall use their best efforts to include the designation Debtor in Possession or DIP on the face of such checks as soon as is practicable; and it is further ORDERED, that the banks identified in the Motion, at which the Accounts are maintained (the Banks ), be, and they hereby are, authorized and directed to continue to service and administer the Accounts as accounts of the Debtors, as debtors in possession, without interruption and in the usual and ordinary course, and to receive, process, honor and pay any and all checks and drafts drawn on the Accounts; provided, however, that no checks or drafts issued on the Accounts prior to the Petition Date shall be honored by the Banks, except as otherwise ordered by this Court, including, but not limited to, any order or orders of the Court authorizing the Debtors to pay pre-petition Date salaries and wages and employee benefits; and it is further ORDERED, that the Banks are enjoined from offsetting, freezing or otherwise impeding the use or transfer of, or access to, any funds deposited by the Debtors in the Accounts by reason of any claim, as defined in 11 U.S.C. 101(5), of the Banks against the Debtors that arose prior to the Petition Date, and any and all checks drawn or issued by the Debtors on the Accounts after the Petition Date shall be timely honored by the Banks notwithstanding any such claims they may hold against the Debtors to the extent that this order does not violate the holding of Citizens Bank of Maryland v. Strumpf, 516 U.S. 16 (1995); and it is further ORDERED, that the Debtors continued use of the Accounts and the existing checks and other forms and documents for the Accounts as authorized hereinabove is subject to the Debtors making appropriate notations in their books and records related to the Accounts to reflect the commencement of the Chapter 11 Cases and all checks issued by the Debtors shall 2

12 shl Doc 13-1 Filed 02/23/12 Entered 02/23/12 13:50:33 Exhibit A- Proposed Order Pg 4 of 4 include the designation Debtor in Possession or DIP on the face of such checks as soon as is practicable; and it is further ORDERED, that nothing contained herein shall prevent the Debtors from opening new bank accounts at an authorized depository, or closing the Accounts as they may deem necessary and appropriate; and it is further ORDERED, that the time for the Debtors to come into compliance with 11 U.S.C. 345 is hereby extended forty-five (45) days from the Petition Date, without prejudice to the Debtors right to request further extensions; and it is further ORDERED, that such extension shall be without prejudice to the right of the Debtors to seek further extensions or other relief from the requirements of 11 U.S.C Dated: New York, New York February, 2012 United States Bankruptcy Judge NO OBJECTION: Office of the United States Trustee 3

13 shl Doc 13-2 Filed 02/23/12 Entered 02/23/12 13:50:33 Errata to Exhibit B (Correct PDF) Pg 1 of 2 EXHIBIT "B" LIST OF BANKS AND ACCOUNTS

14 shl Doc 13-2 Filed 02/23/12 Entered 02/23/12 13:50:33 Errata to Exhibit B (Correct PDF) Pg 2 of 2 The Fuller Brush Company - Bank Accounts GL U Bank Account # Bank Name Account Purpose #1001 xxxxxxxx3112 Bank of America Great Bend, KS - Local Deposits P0 Box 227 Great Bend, KS *Contact: Monica Towns BOA Wichita Branch KS , P0 Box 4 Wichita, KS P: #1003 xxxxxx0607 Bank of America Blocked Funding Account 135 S LaSalle St Chicago, IL *Contact: Monica Towns BOA Wichita Branch #1004 xxxxxx9965 Bank of America Disbursements 135S LaSalle St Chicago, IL *Contact: Monica Towns BOA Wichita Branch #1005 xx2202 Farmers Bank & Trust Payroll 1017 Harrison St. Great Bend, KS Contact: Jennifer Kieweno P: #1006 xxx6579 Citizens National Bank Pigeon Forge, TN - Factory Store Deposits P0 Box 4610 Sevierville, TN Contact: Debbie Hansard P: #1012 xxxxxxxx8029 Bank of America Kittery, ME - Factory Store Deposits P0 Box 183 Kittery, ME *Contact: Monica Towns BOA Wichita Branch #1014 xxxxxxxx3616 Bank of America Myrtle Beach, SC - Factory Store Deposits 3735 Renee Drive Myrtle Beach, SC *Contact: Monica Towns BOA Wichita Branch CPAC. Inc. - Bank Accounts xxxxx7351 Five-Star Bank Payroll Route 408 Mt Morris, NY xxxxx9981 Bank of America Operating 135S LaSalle Chicago, IL 60603