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Vincent P. Slusher, State Bar No. 00785480 vince.slusher@dlapiper.com DLA PIPER LLP (US) 1717 Main Street, Suite 4600 Dallas, Texas 75201 Telephone: (214) 743-4572 Facsimile: (972) 813-6267 Gregg M. Galardi, NY Bar No. 4535506 gregg.galardi@dlapiper.com Gabriella L. Zborovsky, NY Bar No. 4851614 gabriella.zborovsky@dlapiper.com Sarah E. Castle, NY Bar No. 4932240 sarah.castle@dlapiper.com DLA PIPER LLP (US) 1251 Avenue of the Americas New York, New York 10020 Telephone: (212) 335-4500 Facsimile: (212) 335-4501 Proposed Attorneys for Reddy Ice Holdings, Inc. and Reddy Ice Corporation, Debtors and Debtors in Possession

IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: REDDY ICE HOLDINGS, INC. and REDDY ICE CORPORATION, Debtors.

Case Nos.: 12-_______ and 12-_________ Chapter 11 Joint Administration Pending

DECLARATION IN SUPPORT OF CHAPTER 11 PETITIONS AND VARIOUS FIRST DAY APPLICATIONS AND MOTIONS I, Steven J. Janusek, declare as follows under penalty of perjury: 1. I am the Executive Vice President, Chief Financial Officer and Treasurer of

Reddy Ice Holdings, Inc. (Reddy Holdings), a corporation organized under the laws of the state of Delaware and the parent of Reddy Ice Corporation (Reddy Corp), the other debtor and debtor in possession in the above-captioned chapter 11 cases (collectively, the Debtors)1.

Reddy Ice Holdings, Inc. is located at 8750 N. Central Expressway, Suite 1800, Dallas, Texas 75231. Its tax identification number is 56-xxx1368. In addition to Reddy Ice Holdings, Inc., Reddy Ice Corporation, Case No.

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During my tenure, I have developed a great deal of institutional knowledge regarding the Debtors operations, finances and systems. I submit this declaration (the Declaration) in support of the Debtors (a) voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code) and (b) first day motions and applications, including with respect to the Debtors Joint Plan of Reorganization of Reddy Ice Holdings, Inc. and Reddy Ice Corporation (the Plan) and the Disclosure Statement Soliciting Acceptances of a Joint Plan of Reorganization of Reddy Ice Holdings, Inc. and Reddy Ice Corporation (the Disclosure Statement), which are all being filed with the Court concurrently herewith (collectively, the First Day Pleadings). I am authorized by each of the Debtors to submit this Declaration in support of the Debtors chapter 11 petitions and the First Day Pleadings described herein.2 2. In my capacity as the Debtors Chief Financial Officer, I am familiar with the

Debtors day-to-day operations, financial conditions, business affairs, and books and records. Except as otherwise indicated, all statements in this Declaration are based upon my personal knowledge; information supplied or verified by the Debtors personnel in departments within the various business units of the Debtors; my review of the Debtors books and records as well as other relevant documents; my discussions with other members of the Debtors management team; or my opinion based upon experience, expertise, and knowledge of the Debtors operations and financial condition. In making my statements based on my review of the Debtors books and records, relevant documents, and other information prepared or collected by the Debtors employees, I have relied upon these employees accurately recording, preparing, collecting, or

12-_____, is a debtor in these related cases. Reddy Ice Corporation is located at 8750 N. Central Expressway, Suite 1800, Dallas, Texas 75231. Its tax identification number is 75-xxx4985.
2

Unless otherwise defined, capitalized terms used herein shall have the meaning ascribed to them in each relevant First Day Pleading.

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verifying any such documentation and other information. If I were called to testify as a witness in this matter, I would testify competently to the facts set forth herein. 3. Section I of this Declaration provides an overview of the Debtors businesses and

operations. Section II of the Declaration describes the Debtors corporate and capital structure. Section III describes the developments that led to the Debtors filing for relief under chapter 11 of the Bankruptcy Code. I. THE DEBTORS BUSINESS AND OPERATIONS A. 4. The Chapter 11 Cases Contemporaneously with the filing of this Declaration (the Petition Date), each

of the Debtors filed a voluntary petition commencing a case in this Court under chapter 11 of the Bankruptcy Code. The Debtors will continue to operate their businesses and manage their properties as debtors-in-possession pursuant to Bankruptcy Code sections 1107(a) and 1108. B. 5. Overview of the Debtors Businesses Reddy Holdings, operating through its wholly owned subsidiary Reddy Corp

(collectively, the Company) is the largest manufacturer and distributor of packaged ice in the United States. The Company employs approximately 1300 people on a full time basis and between 300 to 1400 additional employees on temporary basis depending on the time of the season.. None of the Companys employees are covered by collective bargaining agreements. 6. The Company serves a variety of customers in 34 states and the District of

Columbia under the Reddy Ice brand name. The principal product is ice packaged in 4 to 50 pound bags, which is sold to a highly diversified customer base, including supermarkets, mass merchants and convenience stores. For the year ended December 31, 2011, the Company sold approximately 1.7 million tons of ice. The Companys products are primarily sold throughout

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the southern United States (the Sun Belt), one of the most attractive regions in the country for packaged ice sales due to warm weather, extended peak selling seasons and historically favorable population growth patterns. For the year ended December 31, 2011, the Company had revenues of $328.5 million and a net loss of $68.6 million. Over the last three years, the Companys business and the ice industry in general has been adversely impacted by macroeconomic factors such as reduced consumer demand, fluctuating and generally higher commodity prices and the reduced availability of credit. 7. The Company markets its ice products to satisfy a broad range of customers,

primarily under the Reddy Ice brand name. The Company produces ice in cube, half-moon, cylindrical and crushed forms (collectively referred to as cubed ice) as well as block forms. The Companys primary ice product is cubed ice packaged in ten pound bags, which is principally sold to convenience stores and supermarkets. The Company also sells cubed ice in assorted bag sizes ranging from 16 to 50 pounds to restaurants, bars, sporting and other special events, airlines, vendors, caterers, and public and private disaster relief organizations and block ice in 10, 25 and 300 pound sizes to commercial, agricultural and industrial users. The majority of the Companys sales are direct to supermarket chains, convenience stores, mass merchants and other commercial customers. In addition, a portion of the Companys products is sold through distributors who deliver ice to the Companys customers on behalf of the Company and who resell ice to their own customers. The Company also contracts with ice manufacturers outside its geographic footprint to produce and deliver ice to the Companys customers on behalf of the Company. 8. The Company maintains a strong customer base by providing a high level of

service and quality at competitive prices through an extensive network of ice manufacturing

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plants, distribution centers and proprietary in-store bagging equipment (ISB) known as The Ice Factory. The Ice Factory machines are located in high volume locations and produce, package and store ice through an automated, self-contained process that significantly reduces distribution and delivery costs. The Companys customer base is diverse, with long-standing relationships across all major retail channels, evidenced by the Companys high retention rates with prominent supermarkets, mass merchants, value stores and convenience stores such as Circle-K, Dollar General, ExxonMobil, Food Lion, Kroger, Safeway, 7-Eleven, SuperValu and Wal-Mart. In addition, the Company is expanding non-retail sales channels, including sales to construction, airline, sporting and other special events and agricultural customers. In 2010 and 2011, the Companys largest customer accounted for approximately 14% of the Companys revenue. Most of the Companys major customers, including virtually all of its top twenty retail ice customers based on revenues, have purchased ice from the Company and its predecessor companies for over a decade. In its primary sales markets, the Company supplies substantially all of the packaged ice to most of its top twenty retail ice customers. As retail channels have consolidated, national and regional convenience and grocery store chains have represented an increased percentage of the Companys total revenue and volume sold. The Company has benefited from supplying national and regional retailers, as many of these customers have grown at rates in excess of industry averages. 9. As of March 30, 2012, the Company owned or operated 58 ice manufacturing

facilities, 77 distribution centers and approximately 3,500 ISB machines. As of the same date, the Company maintained an aggregate daily ice manufacturing capacity of approximately 17,000 tons.

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II.

THE DEBTORS CORPORATE AND CAPITAL STRUCTURE A. 10. Organizational Structure Reddy Ice Corporation is the wholly owned subsidiary and operating company of

Reddy Ice Holdings, Inc. Reddy Ice Holdings, Inc. is a public company (OTCQB: RDDY) and, as of March 15, 2012, had over 23.9 million outstanding shares of common stock. Reddy Ice Corporation maintains a 63% ownership interest (on a fully diluted basis) in Easy Ice, LLC, a non-debtor entity that provides commercial ice machine subscriptions B. 11. The Debtors Assets and Liabilities The Company generates revenue by the sale of its products to customers across 34

states and the District of Columbia. During the year ending December 31, 2011, the Company generated revenue of approximately $328 million. As of December 31, 2011, the Company had assets totaling approximately $434 million and total liabilities of approximately $531 million. The bulk of the liabilities were total debt outstanding of approximately $471.5 million, which is described in greater detail below. (a) 12. 11.25% Senior Secured Notes

On March 15, 2010, Reddy Corp issued $300.0 million in aggregate principal

amount of 11.25% Senior Secured Notes due 2015 (the First Lien Notes) in a private placement offering. The First Lien Notes were subsequently registered with the Securities and Exchange Commission effective August 2, 2010. Cash interest accrues on the First Lien Notes at a rate of 11.25% per annum and is payable semi-annually in arrears on March 15 and September 15. The First Lien Notes mature on March 15, 2015. The First Lien Notes are senior secured obligations of Reddy Corp and are: (i) guaranteed by Reddy Holdings; (ii) secured on a first-priority basis by liens on substantially all of the assets of Reddy Corp and Reddy Holdings;

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(iii) senior in right of payment to all of Reddy Corps and Reddy Holdings future subordinated indebtedness; and (iv) effectively senior to all of Reddy Corps and Reddy Holdings existing and future unsecured senior indebtedness. 13. The First Lien Notes include customary covenants that restrict, among other

things, Reddy Corps and its future subsidiaries ability to incur additional debt or issue certain preferred stock, pay dividends or redeem, repurchase or retire its capital stock or subordinated indebtedness, make certain investments, create liens, enter into arrangements that restrict dividends from its subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after March 15, 2013, Reddy Corp may redeem any or all of the First Lien Notes by paying a redemption premium, which is initially 5.625% of the principal amount of the First Lien Notes and declines to 0% for the period commencing on March 15, 2014 and thereafter. Prior to March 15, 2013, Reddy Corp may redeem any or all of the First Lien Notes by paying a make-whole redemption premium. If Reddy Corp

experiences a change of control, Reddy Corp will be required to make an offer to repurchase the First Lien Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of purchase. Reddy Corp may also be required to make an offer to purchase the First Lien Notes with proceeds of asset sales that are not reinvested in the Companys business or used to repay other indebtedness. Additionally, the indenture governing the First Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. (b) 14. 13.25% Senior Secured Notes.

On March 15, 2010, Reddy Corp issued $137.6 million in aggregate principal

amount of 13.25% Senior Secured Notes due 2015 (the Second Lien Notes) in the initial

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settlement of a private placement exchange offer for the outstanding Discount Notes (the Exchange Offer). On March 24, 2010, Reddy Corp issued an additional $1.8 million in

aggregate principal amount of Second Lien Notes in the final settlement of the Exchange Offer. The Second Lien Notes were subsequently registered with the SEC effective August 2, 2010. Reddy Corp received no cash proceeds from the issuance of the Second Lien Notes. Cash interest accrues on the Second Lien Notes at a rate of 13.25% per annum and is payable semiannually in arrears on May 1 and November 1, with the first payment occurring on November 1, 2010. The Second Lien Notes mature on November 1, 2015. 15. The Second Lien Notes are senior secured obligations of Reddy Corp and are: (i)

guaranteed by Reddy Holdings; (ii) secured on a second-priority basis by liens on substantially all of the assets of Reddy Corp and Reddy Holdings; (iii) senior in right of payment to all of Reddy Corps and Reddy Holdings future subordinated indebtedness; and (iv) effectively senior to all of Reddy Corps and Reddy Holdings existing and future unsecured senior indebtedness. 16. The Second Lien Notes include customary covenants that restrict, among other

things, Reddy Corps and its future subsidiaries ability to incur additional debt or issue certain preferred stock, pay dividends or redeem, repurchase or retire its capital stock or subordinated indebtedness, make certain investments, create liens, enter into arrangements that restrict dividends from its subsidiaries, merge or sell all or substantially all of its assets or enter into various transactions with affiliates. From and after March 1, 2013, Reddy Corp may redeem any or all of the Second Lien Notes by paying a redemption premium, which is initially 6.625% of the principal amount of the Second Lien Notes and declines to 0% for the period commencing on March 1, 2014 and thereafter. Prior to March 1, 2013, Reddy Corp may redeem any or all of the Second Lien Notes by paying a make-whole redemption premium. If Reddy Corp experiences

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a change of control, Reddy Corp will be required to make an offer to repurchase the Second Lien Notes at a price equal to 101% of their accreted value, plus accrued and unpaid interest, if any, to the date of purchase. Reddy Corp may also be required to make an offer to purchase the Second Lien Notes with proceeds of asset sales that are not reinvested in the Companys business or used to repay other indebtedness. Additionally, the indenture governing the Second Lien Notes restricts the amount of dividends, distributions and other restricted payments Reddy Corp may make. (c) 17. 101/2% Senior Discount Notes.

On October 27, 2004, Reddy Holdings issued $151 million in aggregate principal

amount at maturity of 101/2% Senior Discount Notes due 2012 (the Discount Notes) in a private placement offering. The Discount Notes were subsequently registered with the SEC, effective August 26, 2005. Each Discount Note had an initial accreted value of $663.33 per $1,000 principal amount at maturity. The accreted value of each Discount Note increased from the date of issuance until November 1, 2008 at a rate of 101/2% per annum such that the accreted value equaled the stated principal amount on November 1, 2008. Thereafter, cash interest began accruing November 1, 2008 and is payable semi-annually in arrears on May 1 and November 1 at a rate of 101/2% per annum. The Discount Notes mature and are payable on November 1, 2012. During the years ended December 31, 2011 and 2010, Reddy Corp paid cash dividends to Reddy Holdings in the amount of $1.2 million and $6.7 million, respectively, to fund the semiannual interest payments on the Discount Notes. 18. On February 22, 2010, Reddy Corp launched the Exchange Offer, offering $1,000

in aggregate principal amount of Second Lien Notes for each $1,000 of Discount Notes exchanged. In addition, for Discount Notes exchanged on or prior to March 5, 2010, Reddy Corp

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offered an early tender premium of $5 in aggregate principal amount of Second Lien Notes for each $1,000 of Discount Notes exchanged. In conjunction with the Exchange Offer, Reddy Corp solicited consents to eliminate substantially all of the restrictive covenants from the indenture governing the Discount Notes. At the expiration of the Exchange Offer on March 19, 2010, approximately 92.2% of the aggregate principal amount of the Discount Notes had been tendered into the Exchange Offer. Following the final settlement of the Exchange Offer, $11.7 million in aggregate principal amount of the Discount Notes remain outstanding. 19. The Discount Notes are unsecured obligations of Reddy Holdings and are: (i) not

guaranteed by Reddy Corp; (ii) senior in right of payment to all of Reddy Holdings future subordinated indebtedness; (iii) equal in right of payment with any of Reddy Holdings existing and future unsecured senior indebtedness; (iv) effectively subordinated to Reddy Holdings existing and future secured debt, including the debt under the First Lien Notes, the Second Lien Notes and the credit facility, which are guaranteed on a secured basis by Reddy Holdings; and (v) structurally subordinated to all obligations and preferred equity of Reddy Corp. As of November 1, 2010, Reddy Holdings may redeem any or all of the Discount Notes without paying any redemption premium. (d) 20. Senior Credit Facilities.

On March 15, 2010, Reddy Corp entered into a revolving credit facility with a

syndicate of banks, financial institutions and other entities as lenders, including JPMorgan Chase Bank, N.A., as Administrative Agent (the March 2010 Credit Facility). The March 2010 Credit Facility provided for a $35 million revolving credit facility. Under the March 2010 Credit Facility, Reddy Corp had the right to request the aggregate commitments to be increased to

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$50 million provided certain conditions were met.

On August 4, 2010, the aggregate

commitments under the March 2010 Credit Facility were increased to $50 million. 21. The March 2010 Credit Facility was an obligation of Reddy Corp and was

guaranteed by Reddy Holdings. The March 2010 Credit Facility was scheduled to mature on January 31, 2014. On October 22, 2010, Reddy Corp and the lenders party thereto amended and restated the March 2010 Credit Facility (the New Credit Facility). The New Credit Facility provides for a $50 million revolving credit facility. Macquarie Bank Limited (Macquarie), a lender under the March 2010 Credit Facility, is currently the sole lender under the New Credit Facility. On December 10, 2010, Macquarie became the successor administrative agent under the New Credit Facility. 22. The obligations under the New Credit Facility are fully and unconditionally

guaranteed by Reddy Holdings and will also be guaranteed by any future domestic subsidiaries of Reddy Corp, subject to certain exceptions. 23. The New Credit Facility does not require any scheduled principal payments prior

to its stated maturity date. Subject to certain conditions, mandatory repayments of the New Credit Facility (and mandatory commitment reductions of the New Credit Facility) are required to be made with portions of the proceeds from (1) asset sales, (2) the issuance of debt securities and (3) insurance and condemnation awards, subject to various exceptions. In the event of a change in control, as defined in the New Credit Facility, an event of default will occur under the New Credit Facility.

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III.

EVENTS LEADING TO THE CHAPTER 11 FILINGS A. 24. Events Leading to the Filing of the Chapter 11 Cases Due to the deterioration in the Debtors business related principally to declines in

same store sales driven by macroeconomic factors, coupled with rising commodity prices, increased competition and high interest costs resulting from their highly leveraged capital structure further described above, the Debtors experienced significant net losses in 2010 and 2011. In 2011, as the Debtors EBITDA declined, the Debtors began to explore alternatives to address their capital structure. In recent months these efforts accelerated, with an informal committee of the largest holders of the First Lien Notes and Second Lien Notes (the Ad Hoc Committee) negotiating the terms of a restructuring of the Debtors debt obligations (the Restructuring). One of the members of the informal committee is Centerbridge Capital

Partners II, L.P. and one or more of its parallel funds and related vehicles (collectively, Centerbridge). 25. In addition to addressing the Companys declining EBITDA and current debt, the

Restructuring is also intended to provide the Company with the opportunity to pursue a strategic acquisition (the Strategic Acquisition) of all or substantially all of the businesses and assets of Arctic Glacier Income Fund and its subsidiaries (Arctic). As is the case with the Companys business, Arctic has encountered financial difficulties due to adverse trends in our industry in recent years. On February 22, 2012, Arctic filed for protection under the Companies Creditors Arrangement Act in Canada and Chapter 15 of the Bankruptcy Code in the United States. Arctic has initiated a Sale and Investor Solicitation Process (SISP). The purpose of the SISP is to seek sale proposals and investment proposals from qualified bidders and to implement one or a combination of them in respect of Arctics property and business.

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26.

On March 28, 2012, the Company submitted a non-binding letter of intent to

Arctic regarding participation in the SISP. The letter of intent contemplates the Companys acquisition of substantially all of Arctics business and assets. On April 5, 2012, the Company was advised by the financial adviser to Arctic that the Company has been approved to move to phase 2 of the SISP. The successful bidder will be selected at the end of phase 2 of the SISP. The Companys interest in Arctic remains subject to, among other things, completion of due diligence, negotiation of acceptable transaction documents, and receipt of sufficient commitments for debt and equity financing for the acquisition. Centerbridge has indicated its interest in providing the entire amount of the equity financing for the Arctic acquisition. 27. In order to have the ability to acquire Arctic, the Company must restructure its

debt obligations in a manner which creates a sustainable capital structure and permits the Company to obtain additional debt and equity financing. B. 28. The Proposed Plan of Reorganization In compliance with the Investment Agreement (defined below) and in order to

consummate the Restructuring described above, including, but not limited to the re-working of the Companys capital and debt structures as well as the Strategic Acquisition, the Company, just prior to the Petition Date, commenced the solicitation of acceptances with respect to their Plan. Additionally, it is my understanding that support agreements for the Plan have been executed by holders of approximately 60% of the principal amount of the First Lien Notes, 58% of the principal amount of the Second Lien Notes and 92% of the principal amount of the Discount Notes. It is also my understanding that such support agreements require the holders of the First Lien Notes, the Second Lien Notes and the Discount Notes to, among other things, vote to accept

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the Plan. transactions. 29.

In short, the Plan proposes, among other things, the following restructuring

First Lien Notes. The Plan seeks to amend the indenture governing the First Lien

Notes to, among other things, permit (i) the incurrence of incremental pari passu first lien acquisition financing for the Arctic transaction, (ii) an amendment to the change of control provisions to prevent the occurrence of a change of control as a result of the Restructuring and (iii) an amendment to the reporting requirements to eliminate the need to continue as a reporting company under the Securities Exchange Act of 1934. The First Lien Notes will continue to be guaranteed by Reddy Holdings and will otherwise maintain the same obligations. 30. In the event that the Company fails to consummate the Strategic Acquisition,

Centerbridge has agreed to convert approximately $68.2 million in aggregate principal amount and accrued and unpaid interest of its First Lien Notes into preferred stock of Reddy Holdings with a liquidation preference of $75 million. 31. Second Lien Notes. Pursuant to the Plan, the Company seeks to have holders of

the Second Lien Notes exchange those Notes for their ratable share of (i) 6,094,327 shares of common equity of reorganized Reddy Holdings, subject to dilution in accordance with the other provisions of the Plan and a further distribution of certain of such shares upon the occurrence of certain events and (ii) new preferred stock of reorganized Reddy Holdings pursuant to the rights offering (to the extent such holder elects to participate in the rights offering). 32. Discount Notes. Under the Plan, the Discount Notes will be cancelled; however,

subject to Bankruptcy Court approval and other conditions, the holders of the Discount Notes will receive such holders ratable share of: (i) $4.68 million in cash on the consummation of the Restructuring and (ii) promissory notes in an initial amount of $1.17 million payable on

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the three month anniversary of the consummation of the Restructuring. The Discount Notes payment due under the promissory notes will accrue interest at a rate of 7% per annum from the consummation of the Restructuring to the three month anniversary of the consummation of the Restructuring. In the event that the Strategic Acquisition is consummated prior to the three month anniversary of the consummation of the Restructuring, the principal amount of the promissory notes will be increased and the holders of the Discount Notes will receive their ratable share of an additional $2.34 million, which additional amount will accrue interest at a rate of 7% per annum from the consummation of the Restructuring until the three month anniversary of the consummation of the Restructuring. In the event that the Strategic Acquisition is

consummated after the three month anniversary of the consummation of the Restructuring, the additional payment will be made within ten (10) business days following the Strategic Acquisition and will accrue interest at a rate of 7% per annum from the consummation of the Restructuring until the payment date. Such payments to the existing holders of the Discount Notes will be made from the distributions under the Plan to the holders of the Second Lien Notes. 33. Common Stock. Under the Plan, the common stock of Reddy Holdings will be

cancelled. Subject to this Courts approval and other conditions existing holders of our common stock will be entitled to receive a cash payment of approximately $0.12 per share for their shares, with an additional payment of approximately $0.05 per share made in the event the Strategic Acquisition is consummated. Holders of common stock who hold at least 25,000 shares will be entitled to elect to receive common shares of reorganized Reddy Holdings in lieu of the cash payment. Assuming all existing shares converted into stock of reorganized Reddy Holdings, following the consummation of the Restructuring, holders of the existing common stock of

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Reddy Holdings would initially hold approximately 2.0% of the equity of reorganized Reddy Holdings (inclusive of the New Preferred Stock on an as converted basis). In the event that the Debtors consummate the Strategic Acquisition, holders of the existing common stock of Reddy Holdings who elected to receive shares of common stock of reorganized Reddy Holdings will be entitled to an additional distribution of shares of common stock of reorganized Reddy Holdings. Such payments and the issuance of shares of reorganized Reddy Holdings to the existing holders of common stock will be made from the distributions made under the Plan to the holders of the Second Lien Notes. 34. Class A Common Stock. Under the Plan, Centerbridge will receive one share of

class A common stock of the reorganized Reddy Holdings. The holder of the share of the class A common stock will be entitled to vote with all voting securities of reorganized Reddy Holdings on all matters submitted to the holders of voting securities for vote. The share of class A common stock of reorganized Reddy Holdings will be entitled to 10,000,000 votes. Class A common stock of reorganized Reddy Holdings will not be entitled to the payment of any dividends or distributions and is redeemable by Reddy Holdings for $0.01 upon (x) the liquidation, dissolution or winding up of the affairs of Reddy Holdings or (y) the consummation or termination of the Strategic Acquisition. 35. Preferred Stock. Holders of Second Lien Notes who participate in the rights

offering and Centerbridge, in connection with the Investment Agreement, the equity financing of the Strategic Acquisition (if applicable) and the conversion of a portion of its First Lien Notes (if applicable), will receive new preferred stock of reorganized Reddy Holdings. The preferred stock will be perpetual, participating, cumulative preferred stock, with a 7.0% cumulative coupon payable in cash or in-kind at the option of Reddy Holdings. The preferred stock will

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mandatorily convert into common stock upon the earlier of (x) our achievement of a total net debt to EBITDA ratio of less than 3.0:1.0 for a period of four consecutive quarters or (y) completion of a qualifying initial public offering of reorganized Reddy Holdings common stock. The preferred stock may be optionally converted by the holder at any time. Holders of preferred stock will vote with the common stock on an as converted basis. 36. Investment Agreement. In order to fund costs associated with the Restructuring

and further reduce the Companys level of indebtedness upon emergence, as well as to help enable us to acquire Arctic in the event we are the successful bidder, we have entered into an investment agreement with Centerbridge (the Investment Agreement). The Investment

Agreement includes commitments of Centerbridge to (a) backstop the Rights Offering, (b) directly purchase New Preferred Stock in an amount not less than $7.5 million, (c) provide equity capital for the acquisition of Arctic and (d) in the event of the failure to acquire Arctic, exchange First Lien Notes for New Preferred Stock of Reddy Holdings, in each case subject to certain terms and conditions. 37. Rights Offering. In order to fund costs associated with the Restructuring and

further reduce the Companys level of indebtedness upon emergence, the Company will undertake and consummate a $17.5 million rights offering for preferred stock of Reddy Holdings in connection with our emergence from protection under the Bankruptcy Code. The rights offering will be open to existing holders of our Second Lien Notes on a ratable basis. I believe that the Rights Offering is an integral part of the Plan. It will (a) fund costs associated with the Restructuring, (b) reduce the Debtors level of indebtedness upon emergence, and (c) enable the Debtors to acquire Arctic in the event the Debtors are the successful bidder for those assets.

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38.

If consummated, the effect of the Plan will be to significantly deleverage the

Companys balance sheet and provide it with additional liquidity. The Company believes that, through the Plan, holders of claims will obtain a substantially greater recovery from the estates than the recovery they would receive if the Company liquidated. The Company further believes that the Plan, if consummated, will substantially enhance the Companys capital structure and liquidity position, afford the Company the opportunity and ability to continue its business as a viable going concern and enable it to acquire Arctic in the event that the Debtors are the successful bidder for those assets. C. 39. Debtor in Possession Financing and Cash Collateral As part of the Restructuring, the Debtors are seeking authority to enter into and

borrow under a debtor in possession financing facility. Specifically, Reddy Corp, in its capacity as Borrower, and Reddy Holdings, in its capacity as Guarantor, have negotiated an agreement to receive debtor-in-possession financing, the terms of which are memorialized in that certain Senior Secured Priming Debtor-in-Possession Credit Facility attached to the DIP Motion as Exhibit A, with Macquarie as DIP Agent and the other DIP Lenders, to obtain postpetition revolving loans (collectively, the DIP Facility) in an aggregate principal amount not to exceed $70,000,000, which shall consist of (i) a loan to refinance all of the amounts outstanding under the Prepetition Credit Agreement and (ii) new money loans to fund the ongoing working capital needs and general corporate purposes of the Debtors, subject to the Approved Budget, and make adequate protection payments and pay other expenses incurred during the pendency of the chapter 11 cases. 40. Prior to the Petition Date, the Debtors and the Debtors financial advisor and

investment banker, Jefferies and Company, Inc. (Jefferies), engaged in an intensive search for

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financing alternatives in which multiple bids and proposals were considered. In fact, the Debtors and Jefferies contacted several potential lending parties in connection with the search for DIP financing. The initial search universe was comprised of leading financial institutions with the capabilities to provide the Debtors with an adequate level of DIP financing at market rates and on an expedited basis. From this initial universe, the Debtors received non-binding DIP

financing proposals from approximately five parties. The Debtors and their advisors conducted multiple follow-up calls with each party in an effort to improve upon terms, and assess the likelihood of closure by the Petition Date. The Debtors and their advisors elected to move three parties into detailed due diligence. As a result of their search, the Debtors have selected

Macquaries debtor in possession financing proposal based on the reasonableness of the proposed terms in light of other proposals the Debtors received, Macquaries ability to close quickly, Macquaries advanced knowledge of the Debtors, and the lender dynamics described above. 41. The Debtors have, in their business judgment, determined that entering into the

DIP Facility will give them the financing needed to operate in chapter 11 with minimum interruption or disruption to their operations and thus preserve and maintain the going concern value of the Debtors estates. In addition, the Debtors have, in their business judgment,

determined that the DIP Facility provides the Debtors with the greatest degree of flexibility to implement the Restructuring. 42. The DIP Facility provides the Debtors estates with an additional approximately

$20 million of liquidity over and above that provided under their Prepetition Credit Agreement. The Debtors think it important to note that approximately $23.5 million of the total amounts advanced under the Prepetition Credit Agreement was advanced by the Prepetition Credit

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Agreement Lender in the ten weeks leading up to the Petition Date as an accommodation to the Debtors in order to address the Debtors immediate liquidity needs and to provide an opportunity to explore and fund restructuring discussions with the Debtors constituencies and third parties. Thus, the Debtors submit that only a portion of the Prepetition Credit Agreement (about $26.5 million) represents vintage pre-petition loans which are being rolled up. Furthermore, and importantly, the Debtors were unable to obtain any proposals for DIP financing that did not require the Prepetition Revolver Indebtedness to be taken out in full, and therefore the rollup portion of the DIP Facility is the functional equivalent to all other DIP financing proposals received by the Debtors. 43. The DIP Facility, through the repayment of the Prepetition Revolver

Indebtedness, enhances the Debtors economic position by retiring outstanding prepetition obligations under that facility and permitting the availability of the remainder of the DIP Facility. In addition to eliminating the expense and need for separate counsel to the Prepetition Agent and the DIP Agent, repaying the Prepetition Credit Agreement through the Refinancing Loan will significantly simplify and expedite the Debtors restructuring by allowing the Debtors to avoid an unnecessary and costly priming fight. The Prepetition Secured Parties, who have consented to the priming of their liens pursuant to the DIP Facility, are generally supportive of the Debtors and the Debtors believe that certain of such lenders would not consent to the priming of their liens pursuant to DIP financing other than the DIP Facility provided on the terms described herein. The dynamics surrounding the Debtors restructuring efforts have been complex enough without bringing new lenders into the process. Accordingly, the Debtors believe that any

concerted effort to enter into DIP financing other than the DIP Facility described herein, and the issues that would likely arise in the context of a third-party lenders demands for priming liens,

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would have caused insurmountable difficulties with their existing prepetition lenders and other stakeholders and thus jeopardized the Debtors proposed Restructuring. 44. Finally, entry into the DIP Facility on the terms described herein, including the

contemplated roll-up of the Prepetition Revolver Indebtedness, benefits the Debtors constituencies in that the DIP Lenders and the DIP Agent have agreed, subject to the terms described in the DIP Facility Agreement, to provide the Debtors with exit financing with reduced fees in the event the parties enter into the DIP Facility. Thus, the Debtors believe that the total costs to finance their Restructuring will be lower under the DIP Facility than under any of the other proposals received by the Debtors for DIP and exit financing, and the prearranged exit financing will save the Debtors significant search and transactional costs that would otherwise have been incurred by the Debtors separate and apart from the process associated with the DIP Facility. The prearranged exit financing, which is an integral provision of the DIP Facility, further benefits the Debtors estates by increasing certainty that the Debtors will consummate the Plan. Finally, and importantly, the prearranged exit financing contemplated by the DIP

Agreement would help pave the way for the consummation of the Companys potential acquisition of Arctic and provide adequate funding for the Companys operations after such an acquisition. The Debtors therefore believe that the DIP Facility on the terms described herein gives them the greatest degree of flexibility to pursue restructuring alternatives. 45. Additionally, the Debtors do not have sufficient available sources of working

capital or cash to continue the operation of their businesses without accessing the Cash Collateral. The ability to obtain sufficient working capital and liquidity through the DIP Facility and use of the Cash Collateral is vital to the preservation and maximization of the value of the Debtors estates. The proposed usage of the Cash Collateral requested in the DIP Motion will

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fund the Debtors operating expenses, marketing expenses, professional fees, fees due under 28 U.S.C. 1930, insurance, taxes, and other miscellaneous costs. I believe that the Debtors failure to timely pay such items will result in immediate and irreparable harm to their assets. 46. Finally, the Debtors have an immediate need for liquidity to finance their

operations during these chapter 11 cases. Without access to the Cash Collateral and the DIP Facility, the Debtors will jeopardize their ability to fulfill obligations and commitments to trade creditors, employees, lenders, and other stakeholders upon whose trust and confidence the future viability of the business depends. The Debtors thus seek immediate authority to use the Cash Collateral and enter into the DIP Facility Agreement as set forth in the DIP Motion and in the Interim Order to prevent immediate and irreparable harm to the Debtors, pending a final hearing. IV. FIRST DAY MOTIONS AND ORDERS 47. In furtherance of the Debtors restructuring objectives, and concurrently with the

filing of their chapter 11 petitions, the Debtors are seeking orders approving the First Day Pleadings (collectively, the First Day Orders). Generally, the First Day Pleadings have been designed to meet the Debtors goals of: (a) continuing their operations in chapter 11 with as little disruption and loss of productivity as possible, while ensuring preservation of value for the estates; (b) maintaining the confidence and support of their employees, customers, vendors, suppliers and service providers during the Debtors reorganization process; and (c) establishing procedures for the smooth and efficient administration of these chapter 11 cases. The Debtors request that each of the First Day Orders be entered, as each constitutes an integral element in maximizing the value of these estates for the benefit of all parties in interest. A list of the First Day Pleadings is attached hereto as Exhibit A.

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48.

In connection with the preparation of these bankruptcy cases, I have reviewed

those First Day Pleadings and First Day Orders that are described herein (including the exhibits thereto) with Debtors counsel, and the facts set forth therein are (a) true and correct to the best of my knowledge, information, and belief, and based upon the information supplied or verified by various employees of the Debtors and (b) incorporated herein by reference. Furthermore, it is my belief that the relief sought in each of the First Day Pleadings is tailored to meet the goals described above and, ultimately, will be critical to the Debtors ability to achieve a successful reorganization and preserve the value of their estates. I also believe that all of the relief requested in the First Day Pleadings on an interim basis, to the extent applicable, is necessary to prevent immediate and irreparable harm to the Debtors, pending a final hearing. A. Administrative and Procedural Matters Joint Administration of Cases 49. The Debtors seek the joint administration of their chapter 11 cases for procedural

purposes only. I believe that it would be far more practical and expedient for the administration of these chapter 11 cases if the Court were to authorize their joint administration. Many of the motions, hearings, and other matters involved in these chapter 11 cases will affect both of the Debtors. Hence, joint administration will reduce costs and facilitate the administrative process by avoiding the need for duplicative notices, applications and orders. List of Creditors and Initial Notices 50. To ease the administrative burden of these cases on the Debtors estates, the

Debtors are seeking authorization to (a) prepare a consolidated list of creditors in electronic format only, identifying their creditors in the format or formats currently maintained in the ordinary course of business in lieu of any required mailing matrix, and (b) mail initial notices.

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The Debtors are proposing that the Noticing and Claims Agent will assist the Debtors in preparing creditor lists and mailing initial notices to the consolidated mailing matrix, such as (a) a notice of filing of the chapter 11 cases, (b) a notice of a meeting of creditors under Bankruptcy Code section 341 in the event that the United States Trustee schedules such a meeting, (c) notice of the time fixed for filing objections to and the hearing to consider approval of the Debtors Disclosure Statement and to consider confirmation of the Debtors Plan and (d) any correspondence the Debtors may wish to send to creditors as part of the Debtors communication efforts to keep their creditors informed with respect to the status of these chapter 11 cases. 51. I believe that the relief requested will reduce the administrative costs of these

chapter 11 cases and is in the best interests of the Debtors estates. Time to File Schedules and Statements 52. The Debtors have requested an order (i) extending the deadline by which the

Debtors must file their schedules of assets and liabilities and statements of financial affairs (collectively, the Schedules and Statements) to thirty seven (37) days after the Petition Date, (ii) permanently waiving the requirement to file the same upon confirmation of the Debtors Plan within the extension period and (iii) waiving the requirement to file a list of all equity security holders (the Equity List) within fifteen (15) days after the Petition Date. 53. Given the substantial burdens already imposed on the Debtors management by

the commencement of these chapter 11 cases, the limited number of employees available to collect the information, the competing demands upon such employees, and the time and attention the Debtors must devote to the restructuring process, the Debtors submit that cause exists to

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extend the current deadline by thirteen (13) days until the Schedules and Statements Filing Deadline (a total of 37 days after the Petition Date). 54. The request for a final waiver of the requirement to file Schedules and Statements

is appropriate in a case such as this, where the Debtors have already commenced solicitation of a Plan. In general, a debtor is required to file the Schedules and Statements in order to permit parties in interest to understand and assess the debtors assets and liabilities and thereafter negotiate and confirm a plan of reorganization. In these chapter 11 cases, the Debtors have already negotiated a plan of reorganization and are in the process of soliciting votes from those parties entitled to vote thereon. Accordingly, one of the primary justifications for requiring the filing of Schedules and Statements does not exist in these cases. 55. In addition, much of the information that would be contained in the Schedules and

Statements is already available in the disclosure statement to the Plan. To require the Debtors to file the Schedules and Statements would be duplicative and unnecessarily burdensome to the Debtors estates. 56. The Debtors submit that preparing the Equity List and sending the Notice of

Commencement to all parties on the Equity List will be burdensome, time consuming, expensive and serve little or no beneficial purpose. The Debtors will provide the parties on the Equity List with notice of the bar date and an opportunity to assert their interests, in the event that they are required to file proofs of interest. Thus, the Debtors submit that the requested relief does not prejudice the equity security holders. B. Retention of Notice, Claims and Solicitation Agent 57. The Debtors are seeking to retain Kurtzman Carson Consultants LLC (KCC) as

its Notice, Claims and Solicitation Agent. The Debtors have thousands of potential creditors. In

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addition to these creditors, there are thousands of other parties in interest in the Debtors chapter 11 cases. Although the office of the Clerk of the United States Bankruptcy Court for the Northern District of Texas (the Clerks Office) ordinarily would serve notices on the Debtors creditors and other parties in interest and administer claims against the Debtors, the Clerks Office may not have the resources to undertake such tasks, especially in light of the sheer magnitude of the Debtors creditor body and the tight timelines that frequently arise in chapter 11 cases. 58. It is my understanding that KCC is a bankruptcy administrator that specializes in

providing comprehensive chapter 11 administrative services including noticing, claims processing, balloting and other related services critical to the effective administration of chapter 11 cases. Indeed, KCC has developed efficient and cost-effective methods to handle properly the voluminous mailings associated with the noticing, claims processing and balloting portions of chapter 11 cases to ensure the orderly and fair treatment of creditors, equity security holders and all parties in interest. Further, KCC will work with the Clerks Office to ensure that such methodology conforms with all of the Courts procedures, the Local Rules and the provisions of any orders entered by this Court. 59. I believe that KCC is well qualified to provide such services, expertise,

consultation, and assistance based on its expertise in the industry and competitive fee structure. C. Business Operations of the Debtors Cash Management and Business Forms 60. The Debtors request that this Court enter an Order authorizing the continued

maintenance and use of the Cash Management System (defined below) and the Bank Accounts (defined below). The Cash Management System is an ordinary course, customary, and essential

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business practice, and is similar to cash management systems employed by other large businesses. The Cash Management System allows the Debtors to efficiently identify their cash requirements, transfer cash as needed to respond to these requirements, and track liquidity and cash flow. 61. In the ordinary course of their businesses, the Debtors maintain a complex cash

management system (the Cash Management System), which includes lockbox, collection, operating, disbursement, checking, investment, and other accounts. Prior to the commencement of this chapter 11 case, in the ordinary course of its business, the Debtors maintained 129 active bank accounts, and several inactive bank accounts3, out of which they manage cash receipts and disbursements (the Bank Accounts). Each of the Bank Accounts are maintained at financial institutions insured by the Federal Deposit Insurance Corporation (the FDIC). 62. The Cash Management System is integral to the operation and administration of

the Debtors businesses. In this regard, the Cash Management System, in conjunction with the financial and accounting systems, allows the Debtors to efficiently (a) identify cash requirements, (b) transfer cash as needed to respond to these requirements and (c) track all interDebtor transfers, if any.4 For the reasons set forth herein, maintenance of the Debtors cash

The Debtors are in the process of closing certain of their inactive accounts. In an abundance of caution, the Debtors request authorization to complete the process of closing these accounts, to the extent the process was not completed prior to the Petition Date.

Only one of the Bank Accounts account number 649671393 (the Holdings Bank Account) is owned by Reddy Ice Holdings, Inc. (Holdings). The Holdings Bank Account currently has a zero balance, but has been used in the past to receive dividends from Reddy Ice Corporation and to pay the dividends and fees and expenses of certain advisors of Holdings. The Holdings Bank Account is subject to a Blocked Account Control Agreement (Shifting Control) among (a) Holdings, (b) Wells Fargo Bank, National Association, as trustee and collateral agent under that certain Indenture with respect to 11.25% Senior Secured Notes due 2015, dated as of March 15, 2010 (in such capacity, the First Lien Notes Agent), (c) Wells Fargo Bank, National Association, as trustee and collateral agent under that certain that certain Indenture, with respect to 13.25% Senior Secured Second Lien Notes due 2015, dated as of March 25, 2010 (in such capacity, the Second Lien Notes Agent), (d) Macquarie Bank Limited, as administrative agent under the Debtors prepetition secured revolving facility (in such capacity, the Prepetition Agent), and (e) JPMorgan Chase Bank, N.A. The Debtors to not anticipate that any funds will be distributed to the Holdings Bank Account during these chapter 11 cases.

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management functions within the existing Cash Management System is essential to the efficient execution and achievement of the Debtors strategic business objectives and, ultimately, quick exit from chapter 11. 63. While complex due to the broad geographic reach of the Debtors businesses and

operations, the Cash Management System generally operates in the same manner as cash management systems of other large national corporations. Funds received (including by wire transfer, automated clearinghouse (ACH) transfer, check and cash) are collected and concentrated into the relevant collection accounts, transferred to the relevant master and/or concentration accounts and, in turn, transferred to disbursement accounts to be used to satisfy outstanding payroll, accounts payable, or other obligations of the Debtors. 64. If the Debtors are permitted to use the Cash Management System in its current

form, the Debtors will continue to disburse funds through the existing Bank Accounts. The anticipated short duration of these chapter 11 cases does not justify the great amount of expense and disruption to the Debtors business that would inevitably occur if the Debtors were required to conform the Debtors cash management system to the U.S. Trustee Guidelines. 65. The continued use of the Cash Management System and the Bank Accounts

during the pendency of these chapter 11 cases is essential to the Debtors business operations and the goal of maximizing value. Requiring the Debtors to adopt new cash management systems and open new bank accounts would be expensive, impose needless administrative burdens, and cause undue disruption. Additionally, the Debtors are proceeding towards confirmation of their proposed plan of reorganization. It is the Debtors expectation, accordingly, that the duration of their chapter 11 cases will be brief. Thus, a wholesale alteration of the current Cash

Management System would likely take longer than the duration of these chapter 11 cases to

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implement. Further, any such disruption caused by modification of the Cash Management System would adversely (and perhaps irreparably) affect the Debtors abilities to survive these chapter 11 cases. 66. As a result, in order to ensure an orderly transition into chapter 11, the Debtors

have requested authority to continue to use their existing cash management system as maintained and operated by the Debtors in the ordinary course of business. I believe that such relief is necessary to avoid immediate and irreparable harm to the Debtors. 67. Consistent with the relief described above, the Debtors seek a waiver of the UST

Requirement that they close the existing Bank Accounts and open new DIP Accounts. As mentioned, continued use of the Bank Accounts is essential to the goal of maximizing value and is in the best interests of all parties. In order to minimize expenses to their estates, the Debtors also seek authority to use all correspondence and other business forms (including, without limitation, letterhead, purchase orders, and invoices) without reference to the Debtors status as debtors in possession.5 68. Most parties doing business with the Debtors will be aware of the Debtors status

as debtors in possession as a result of publicity of these cases and notice of the commencement of these cases to creditors and other parties in interest provided by the Debtors. Changing the Debtors existing correspondence and other business forms (other than checks) would be expensive, unnecessary, and burdensome to the Debtors estates. Further, such changes would be disruptive to the Debtors business operations and would not confer any benefit upon those dealing with the Debtors. For these reasons, the Debtors request that they be authorized to use
The Debtors will cause all postpetition checks to bear the Debtor In Possession designation, as required by the UST Requirements. The Debtors do not believe the UST Requirements impose any limitation on the Debtors other correspondence and business forms. Nevertheless, out of an abundance of caution, the Debtors seek explicit authority to continue using their existing correspondence and business forms without reference to the Debtors status as debtors in possession.
5

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all correspondence and business forms (other than checks) without being required to place the label Debtor in possession on any of the foregoing. 69. I believe that the Debtors will suffer immediate and irreparable harm absent the

granting of the relief described herein. Employee Wages, Salaries and Benefits 70. The Debtors workforce is comprised of full-time salaried employees (the

Salaried Employees), full-time6 hourly employees (the Hourly Employees, and together with the Salaried Employees, the Full Time Employees), and Seasonal employees (the Seasonal Employees, and together with the Full Time Employees, the Employees). As of March 20, 2012, the Debtors employed approximately 1079 Hourly Employees and 458 Salaried Employees, for a total of 1537 Full Time Employees, and 390 Seasonal Employees. The average weekly payroll, including amounts for employer paid taxes, for Hourly Employees is $916,429. The average bi-weekly payroll, including amounts for employer paid taxes, for Salaried Employees is $1,189,053. The total payroll cost for the Debtors for each two week period is $3,021,911. The estimated accrued but unpaid wages, salaries, and employer paid portion of employee taxes as of April 5, 2012 is $1,511,000. 71. (a) Pursuant to the Employee Motion, the Debtors are seeking the following relief: authorization to pay, in their discretion, any obligations arising under the Employee Programs which were accrued or earned but unpaid as of the Petition Date; confirmation by the Court of their right to continue each of the Employee Programs in the ordinary course of business during the pendency of these cases in the manner and to the extent that such Employee Programs were in effect immediately prior to the filing of these cases and to make payments in connection with expenses incurred in the administration of any Employee Program; confirmation that the Debtors are permitted to pay any and all local, state and federal withholding and payroll-related or similar taxes relating to the

(b)

(c)
6

Full time hourly employees work at least 32 hours per week.

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(d)

(e)

(f) (g)

(h)

Prepetition Employee Obligations including, but not limited to, all withholding taxes, social security taxes and Medicare taxes (the Payroll Taxes), whether remitted or paid by the Debtors. confirmation that the Debtors are permitted to pay to third parties any and all amounts deducted from Employee paychecks for payments on behalf of Employees for garnishments, benefit plans, insurance programs, and other similar programs (the Payroll Deductions, and together with the Payroll Taxes, the Employee Withholdings). express authorization, with respect to any Employee Programs and Prepetition Employee Obligations that are administered or paid through a third-party administrator or service provider (collectively, Providers), to pay any prepetition claims of such Providers in the ordinary course of business to ensure the uninterrupted delivery of payments or other benefits to the Employees. express authorization to pay outstanding amounts, if any, owed to agencies that supply the Debtors with Seasonal workers; authorization and direction to all banks to receive, process, honor and pay any and all checks drawn on the payroll and other bank accounts used by the Debtors to satisfy their Prepetition Employee Obligations, whether presented before, on or after the Petition Date, and authorizing the banks to rely on the representations of the Debtors as to which checks are subject to this Motion, provided that sufficient funds are on deposit in the applicable accounts to cover such payments; authorization to issue new postpetition checks to replace any checks that may be dishonored and to reimburse any expenses that Employees may incur as a result of any banks failure to honor a prepetition check.

72.

I believe that the payment of the Prepetition Employee Obligations serves the

sound business purpose of maximizing the value of the Debtors estates. The Debtors success in these cases hinges in large part on the morale and continued efforts of the Employees. Through the payment of the Prepetition Employee Obligations, the Debtors seek to motivate and encourage the Employees to continue to support the Debtors restructuring efforts. 73. With respect to the Employees, the Debtors have examined other options short of

payment of the Prepetition Employee Obligations and have determined that to avoid significant disruption of the Debtors business operations there exists no practical or legal alternative to payment of such obligations. Therefore, the I believe that the Debtors can only meet their

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fiduciary duties as debtors in possession under Bankruptcy Code sections 1107(a) and 1108 by payment of the Prepetition Employee Obligations. 74. I also believe that the Debtors will suffer immediate and irreparable harm absent

the Courts entry of an order granting the relief requested in the Employee Motion. Utilities 75. Uninterrupted utility services are critical to the Debtors ability to sustain their

operations during the pendency of their chapter 11 cases. In connection with the operation of their businesses and the management of their properties, the Debtors receive utility service from various Utility Companies, including providers of water, gas, electricity, telephone, waste, sewer and related services (collectively, the Utility Services), covering a number of utility accounts. Prior to the Petition Date, the Utility Companies provided Utility Services to the Debtors at various locations. The services provided by the Utility Companies are crucial to the continued operations of the Debtors. If the Utility Companies refuse or discontinue service, even for a brief period, the Debtors business operations would be severely disrupted. 76. Accordingly, the Debtors seek the entry of an order (i) approving the Debtors

segregation of blocked funds to be held by JPMorgan Chase Bank, N.A. (JPMC) in the amount of $1,000,000 in a segregated account to be administered in accordance with the Order (the Utility Blocked Account) as providing utilities with adequate assurance of payment under Bankruptcy Code sections 366(b) and 366(c)(1)(A) and deeming all utilities entitled to such assurance of payment under Bankruptcy Code section 366 to have received adequate assurance of payment pursuant to section 366(b), (ii) approving the Additional Adequate Assurance Procedures as the method for resolving disputes regarding adequate assurance of payment, (iii) scheduling a hearing, to be held on or before the day that is thirty (30) days after the Petition

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Date, on any Additional Adequate Assurance Requests that are disputed by the Debtors, and (iv) authorizing, but not directing, the Debtors to pay pre-petition amounts owed to Advantage IQ, a certain Third Party Vendor, in an amount not to exceed $10,000 (the Third Party Vendors Claims). 77. I believe that such relief on an interim basis is necessary to avoid immediate and

irreparable harm to the Debtors pending a final hearing. Prepetition Taxes and Related Relief 78. The Debtors, in the ordinary course of their businesses, incur various tax

liabilities and have generally paid such tax liabilities as they became due. The Debtors books and records reflect that they have paid all Taxes which were due and payable prior to the Petition Date. The Taxing Authorities, however, will continue to invoice the Debtors for Taxes relating to periods prior to the Petition Date following the commencement of these chapter 11 cases. Specifically, in the aggregate, the Debtors expect that approximately $3,200,000 in prepetition Taxes will become due and payable following the Petition Date. Of that amount, approximately $520,000 in Taxes will become due and payable within the first 60 days of these chapter 11 cases. 79. The Debtors are subject to the following Taxes:

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(a) Sales and Use Taxes. In the ordinary course of business, the Debtors incur sales and use taxes (the Sales and Use Taxes) as the result of providing services, selling merchandise or consuming goods. Certain Taxing Authorities require the Debtors to pay Sales and Use Taxes that are based on a percentage of sales prices. In most cases, the Sales and Use Taxes are paid in arrears once collected. The Debtors estimate approximately $144,800 in prepetition Sales Tax will become due and payable following the Petition Date for prepetition amounts owed. (b) Property Taxes. The Debtors pay property taxes (the Property Taxes) to certain of the Taxing Authorities . Property Taxes are assessed based on a statutorily mandated percentage of property value (for both real and personal property) and become payable in the ordinary course of business. Property Taxes are typically due annually, although the precise timing varies by jurisdiction. As of the Petition Date, the Debtors estimate that approximately $2.5 million in Property Taxes accrued but remain unpaid. Certain additional Property Taxes may be the subject of a dispute by the Debtor, or may be late in being invoiced, and therefore remain unpaid. Further additional Property Taxes may be billed during the pendency of these Cases. The Debtors estimate approximately $2.5 million in prepetition Property Taxes will become due and payable following the Petition Date. (c) Franchise and Other Taxes. The Debtors pay franchise taxes and de minimis registration fees and other business license fees (collectively, the Franchise Taxes) to certain of the Taxing Authorities so that the Debtors can operate their businesses in the applicable taxing jurisdiction. Some states assess a flat Franchise Tax on all businesses and other states assess a Franchise Tax based upon some measure of income, gross receipts, net worth or other measure of value. Additionally, the Debtors failure to pay the Franchise Taxes could cause some states to challenge the Debtors right to operate within their jurisdiction. Addressing any subsequent action taken by those states would be costly, place an administrative burden on management and divert managements attention from the reorganization process. The Debtors estimate approximately $550,000 in prepetition Franchise Tax will become due and payable following the Petition Date. (d) Annual Report Taxes. Various Taxing Authorities require the Debtors to pay annual report or bi-annual report taxes (collectively, the Annual Report Taxes) in order to be in good standing for purposes of conducting business within the state. The Debtors estimate approximately $2,500 in prepetition Annual Report Taxes will become due and payable in the sixty days following the Petition Date.

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80.

I believe that the continued payment of the prepetition Taxes on their normal due

dates will ultimately preserve the resources of the Debtors estates, thereby promoting their prospects for a successful reorganization. If such obligations are not timely paid, the Debtors will be required to expend time and money to resolve a multitude of issues related to such obligations, each turning on the particular terms of each Taxing Authoritys applicable laws, including (a) whether the obligations are priority, secured or unsecured in nature, (b) whether they are proratable or fully prepetition or postpetition, and (c) whether penalties, interest, attorneys fees and costs can continue to accrue on a postpetition basis, and if so, whether such penalties, interest, attorneys fees and costs are priority, secured or unsecured in nature. The Debtors desire to avoid unnecessary disputes with the Taxing Authorities and expenditures of time and money resulting from such disputes over a myriad of issues that are typically raised by such entities as they attempt to enforce their rights to collect taxes. 81. The Debtors may suffer immediate and irreparable harm if the prepetition Taxes

are not paid when they become due and payable. Additionally, the Taxing Authorities may cause the Debtors to be audited if Taxes are not paid immediately. Such audits will

unnecessarily divert the Debtors attention away from the reorganization process. If the Debtors do not pay such amounts in a timely manner, the Taxing Authorities may attempt to revoke the Debtors licenses, suspend the Debtors operations and pursue other remedies that will harm the estates. In all cases, the Debtors failure to pay Taxes could have a material adverse impact on their ability to operate in the ordinary course of business. Any disputes that could impact their ability to conduct business in a particular jurisdiction could have a wide-ranging and adverse effect on the Debtors operations as a whole.

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82.

Moreover, certain of the taxes may not be property of the estate, as they are

collected from third parties and held in trust for payment to various Taxing Authorities. The federal government and many states in which the Debtors operate have laws providing that the Debtors officers, directors or other responsible employees could, under certain circumstances, be held personally liable for the payment of such Taxes. To the extent any accrued Taxes of the Debtors were unpaid as of the Petition Date in these jurisdictions, the Debtors officers and directors could be subject to lawsuits during the pendency of these chapter 11 cases. In such events, collection efforts by the Taxing Authorities would be extremely distracting for the Debtors and their directors and officers in their efforts to bring these chapter 11 cases to an expeditious conclusion. Contractors and Service Providers 83. The Debtors are leading suppliers of packaged ice products, with manufacturing

and distribution facilities in various locations throughout the United States. In connection with the manufacture and distribution of their products, the Debtors require the ongoing maintenance and repair of their warehouses, facilities and other properties as well as delivery vehicles and other equipment essential to the Debtors operations. The Debtors employ third-party

contractors, maintenance companies and other service providers (collectively, the Contractors and Service Providers) to provide maintenance and repair services or supply materials pursuant to contract or other arrangement, giving rise to potential Liens against the Debtors. Unless satisfied, certain Contractors and Service Providers may refuse to perform their ongoing obligations, if any. Absent the Contractors and Service Providers services, the physical

condition of certain of the Debtors warehouses, facilities and other properties, as well as their

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vehicles and other equipment, would deteriorate and thus adversely impact the Debtors business operations and hamper their reorganization efforts. 84. Although the Debtors have generally made timely payments to the Contractors

and Service Providers, as of the Petition Date, a number of these parties may not have been paid for certain prepetition services provided and may attempt to perfect a Lien within the time period proscribed in Bankruptcy Code sections 362(b)(3) and 547(e)(2)(A).7 85. Therefore, to avoid undue delay and to facilitate the continued operation of the

Debtors business, the maintenance of delivery vehicles, warehouses, facilities and other properties or equipment, and the completion of ongoing construction, maintenance and repair projects, the Debtors seek entry of an order which will authorize, but not direct, them to pay and discharge, on a case-by-case basis and in their sole discretion, the claims of all Contractors and Service Providers that have given or could give rise to Liens against the Debtors relevant property regardless of whether such Contractors and Service Providers have already perfected their interests (the Contractor and Service Provider Claims); provided, however, that with respect to each Contractor and Service Provider Claim, (i) the Debtors shall not pay a Contractor and Service Provider Claim unless the Contractor or Service Provider has perfected or, in the Debtors judgment, is capable of perfecting or may be capable of perfecting in the future, one or more Liens in respect of such claim; (ii) the payment of such claim shall be made with a full reservation of rights regarding the extent, validity, perfection or possible avoidance of any Liens; and (iii) the Contractor and Service Provider agrees to promptly release any Liens upon payment of such Contractor or Service Provider Claim.

The Debtors estimate that, as of the Petition Date, Contractors and Service Providers are owed approximately $150,000 on account of prepetition services.

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86.

I believe that the Contractors and Service Providers may assert Liens against

certain of the Debtors property. Failure to satisfy these Contractor and Service Provider Claims would likely result in a Contractor or Service Provider refusing to continue to do business with the Debtors, jeopardizing the Debtors ongoing construction, maintenance and repair projects (the Projects), thus severely disrupting the Debtors operations. Second, the harm and

economic disadvantage that would stem from the failure to pay any of the Contractor and Service Provider Claims is grossly disproportionate to the amount of the prepetition claim that would have to be paid. Any disruption in the Debtors Projects would significantly disrupt the Debtors business and could ultimately cost the Debtors estates significant amounts in lost revenues and create administrative claims against the estates for the Debtors inability to perform contractual services postpetition. 87. The Contractors and Service Providers furnish services critical to the preservation

of the Debtors estates and the continued operation and maintenance of the Debtors delivery vehicles, warehouses, facilities and other properties or equipment. Because certain of the

Contractors and Service Providers may not be party to enforceable agreements and may be unwilling to do business with the Debtors postpetition the Debtors are requesting that the Court authorize the payment of the Contractor and Service Provider Claims to ensure that these essential services continue uninterrupted. 88. I believe that such relief on an interim basis is necessary to avoid immediate and

irreparable harm to the Debtors pending a final hearing. Shippers and Warehousemen 89. In the normal course of their businesses, the Debtors incur certain fees and

charges to the Carriers to ship, transport, store and deliver goods through the Debtors

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established distribution networks. At any given time, the Carriers are shipping goods to and from the Debtors production facilities, warehouse storage locations, and customers. The

Carriers are generally not paid in advance but rather invoice the Debtors for shipping services previously rendered. 90. Further, in the normal course of their businesses, the Debtors incur certain fees

and charges to the Warehousemen to store the Debtors goods through the Debtors established distribution network. At any given time, the Warehousemen are storing goods at various The

locations to facilitate the distribution of the Debtors goods to their customers.

Warehousemen are generally not paid in advance, but rather invoice the Debtors for storage services previously rendered. 91. The Debtors seek to pay the prepetition Shipping Charges and the Warehouse

Charges for several reasons. First, if the prepetition Shipping Charges are not paid, many of the Carriers may refuse to perform additional services for the Debtors. In such event, the Debtors will incur additional expenses (such as premium shipping costs) to replace the Carriers or other services, which amounts will likely exceed the amount of unpaid prepetition Shipping Charges that the Debtors request permission to pay hereunder. Additionally, if the prepetition Warehouse Charges are not paid, many of the Warehousemen may refuse to release the goods currently in storage, subjecting those goods to diminution in value if they are not properly preserved, and forcing the Debtors to produce replacement goods to deliver to their customers, resulting in a substantial burden on the Debtors production facilities. 92. Second, because of the nature of the Debtors product, any delay in shipments or

requirement that the Carriers and Warehousemen preserve the Debtors goods could cause a reduction in the value of the goods. Such reduction will undoubtedly result in lost value to the

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estate, would frustrate the expectations of customers who rely on receipt of the Debtors goods to stock their own stores, causing a loss of customer goodwill, and would impose a significant burden on the Debtors production facilities to produce replacement goods for delivery to customers. Such an outcome could be devastating to the Debtors reorganization efforts. 93. Finally, any delays in payment of Shipping Charges and Warehouse Charges with

respect to goods that are in the possession of the Carriers and the Warehousemen as of the Petition Date will likely result in the assertion, under applicable law, of possessory liens upon the Debtors property in the possession of such parties. Thus, the Debtors may have no alternative but to pay the Shipping Charges and Warehouse Charges in full in any event in order to effect the release of any liens securing payment of such charges. 94. I believe that if the Carriers halt the shipment of products due to non-payment of

the Shipping Charges or if the Warehousemen refuse to release the products in their possession due to non-payment of the Warehouse Charges, the Debtors will likely have inadequate inventory to satisfy the orders of its customers, which would reduce sales, frustrate the expectations of the Debtors customers, and cause a loss of customer goodwill. Therefore, to the extent that the requirements of Bankruptcy Rule 6003 are applicable to the relief requested in the motion, I submit the relief requested therein is necessary to avoid immediate and irreparable harm. Customer Practices 95. The Debtors operate in a very price sensitive and competitive business

environment. Prior to the Petition Date, in the ordinary course of their business, the Debtors provided their customers with cash rebates based on the volume of the Debtors products (the Products) purchased by the customer. Certain customers who purchase a significant volume of

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Products from the Debtors are entitled to submit rebates for cash payment pursuant to agreements with the Debtors (the Rebates). The calculation and payment of the Rebates varies according to a number of factors, including the quantity of Products purchased, existing contractual provisions, and a variety of other factors. The Debtors estimate that as of the Petition Date they may owe up to approximately $330,000 plus amounts for local plants with respect to unpaid Rebates.8 96. The success and viability of the Debtors business, and ultimately the Debtors

ability to successfully reorganize, is entirely dependent upon the loyalty of their customers. In the highly competitive atmosphere of the Debtors business, customer loyalty and satisfaction is vital to the success of the business. In this regard, the Debtors Customer Programs are critical, and any delay or failure to continue to honor the Debtors obligations thereunder will severely and irreparably harm customer relations. Any failure to honor prepetition Customer Programs or pay the prepetition Customer Claims, for even a brief time, may well drive away valuable customers or cause the Debtors to lose some customers completely, thereby harming the Debtors efforts to reorganize. 97. I submit that the relief requested in the motion is necessary to avoid immediate

and irreparable harm because the continuation of the Customer Programs, which helps to maintain customer loyalty and satisfaction, prevents the driving away of valuable customers. Critical Suppliers 98. The Debtors rely on hundreds of vendors whose goods or services may be

critical. However, due to the Debtors limited funds, the Debtors are only able to pay the

This amount includes a very recent claim by a customer for potentially $250,000 in past-due rebates. The Debtors are currently in negotiations with such customer. The Debtors are unable to calculate with certainty the amount of prepetition Rebates outstanding with respect to their local plants, but note that this amount is, on average, approximately $50,000 per month in the aggregate.

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claims of a very few Critical Vendors. Although the Debtors desire to resume normal business relationships with all vendors, and all vendors and their goods and services are important to the Debtors business and operations, the immediate need to maintain the relationships with their Critical Vendors is essential for the Debtors successful reorganization. Thus, the Debtors are requesting authority to pay their Critical Vendors on the terms set forth in the motion. 99. To ensure that the Debtors identified only those vendors/providers that are most

critical to the Debtors businesses or the preservation of value for their estates, certain of the Debtors employees and professionals, who are familiar with and responsible for maintaining the Debtors trade relationships, extensively analyzed and reviewed the Debtors immediate trade/service needs and supplier base. In performing this analysis, the Debtors used the

following criteria, among others: (a) whether the vendor in question is effectively a sole source provider; (b) whether the vendor in question is likely to refuse to deliver goods and services on reasonable credit terms absent payment of prepetition claims, thereby requiring the Debtors to access their limited availability under the proposed postpetition financing; (c) whether quality requirements or other specifications prevent the Debtors from obtaining a vendors products or services from alternative sources within a reasonable timeframe; (d) if a vendor is not a sole source provider, whether it would be practical for the Debtors to find a replacement vendor without causing significant disruption to the Debtors operations; and (e) whether a vendor would suffer significant financial hardship absent the Debtors payment of prepetition claims. The Debtors are confident that this process has appropriately identified only those vendors that meet some or all of the foregoing stringent guidelines.

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100.

Based on the analysis described above, the Debtors estimate that the Critical

Vendors may be owed up to approximately $3.5 million in the aggregate as of the Petition Date.3 101. I believe that the Debtors, their creditors and their estates may suffer immediate

and irreparable harm if the Debtors were unable to pay the Critical Vendor Claims in the ordinary course. 102. Payment of the Critical Vendor Claims in the ordinary course of business

mitigates certain risks to the Debtors business. The Debtors are making every effort to avoid interruptions in their ability to procure the goods and services necessary to their ongoing operations. The Debtors respectfully submit that the relief requested herein is necessary to preserve their ability to continue their operations without interruption or otherwise preserve the value of the estates. Absent payment of the Critical Vendor Claims in the ordinary course of business, the Debtors business may be disrupted and certain Critical Vendors may delay delivery of goods and services or demand trade terms that are less favorable to the Debtors, including payment in advance, as a condition to continuing a business relationship with the Debtors. Any short term disruption could generate instability and would undermine the Debtors efforts to repair customer confidence.

Upon request, the Debtors will provide a breakdown of such amounts to this Court, the United States Trustee for the Northern District of Texas, and any official committee of unsecured creditors to be appointed in these chapter 11 cases. More than half of the aggregate amount is attributable to contingent obligations relating to a tri-party arrangement with a vendor (Supplier) who is critical vendor of Easy Ice, LLC (Easy Ice) an entity in which the Debtors hold a 63% ownership interest on a fully-diluted basis. The goods provided by Supplier to Easy Ice are integral to Easy Ices operations, and without such goods Easy Ices operations and the Debtors ownership interests would be jeopardized. Supplier is not obligated to provide goods to Easy Ice, and Easy Ice does not have a practical alternative to the goods provided by Seller as Seller is effectively a sole source provider of such goods on the terms Supplier has historically provided. Through the Debtors significant ownership interest in Easy Ice, the Debtors consider Supplier to be a Critical Vendor of the Debtors and believe that payment of Suppliers prepetition claims in the ordinary course of business is necessary to preserve value of the estates.

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103.

Moreover, in that regard, the Debtors do business with many of the Critical

Vendors without the benefit of contracts and, therefore, these Critical Vendors generally are not obligated to do business with the Debtors or to honor particular trade terms in the future. As such, failure to pay the Critical Vendor Claims would likely result in a disruption or cancellation of deliveries of goods and services and thus, undermine the Debtors operations. This is especially significant right now as the Debtors are preparing to enter into the summer months, which typically account for a majority of the Debtors annual business, during which time the Debtors rely heavily on certain of their Critical Vendors to supply additional light and heavy equipment on an as-needed basis. Even if the Debtors were able to locate suitable replacement Critical Vendors or service providers, the disruption in the flow of goods and services to or at the sites of the Debtors offices would jeopardize the Debtors ability to provide services to their customers on a timely basis, thereby reducing the value of the estates. Conversely, the continued availability of trade credit will be extremely valuable to the Debtors to allow them to preserve working capital while maintaining optimal production levels. Thus, by the motion, the Debtors have reserved the right to ensure that the Critical Vendors will continue to supply trade credit necessary to the Debtors operations. 104. Finally, the relief requested in the motion also may help to avert the institution of

reclamation claims, adversary proceedings, and other creditor motions. Avoiding the time and expense of addressing such issues in this Court will maximize judicial efficiency and will benefit the Debtors, their estates, and their creditors. Such relief, therefore, will allow the Debtors to focus on effectuating the provisions of the proposed Plan. D. The Plan and Related Relief Motion to Approve Disclosure Statement and Procedures for Soliciting Votes on the Plan

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105.

In connection with the Plan, the Debtors prepared the Disclosure Statement

describing, among other things, the proposed reorganization and its effects on holders of claims against and interests in the Debtors. The Debtors, through their voting agent, Kurtzman Carson Consultants LLC (the Voting Agent), caused copies of the Disclosure Statement and the Plan (attached as an exhibit to the Disclosure Statement) and the appropriate Ballot (as defined herein) (together, a Solicitation Package) to be transmitted to the agents or nominees for the debt securities included in Class 2A First Lien Notes Claims, Class 3A Second Lien Notes Claims, Class 2B First Lien Notes Guarantee Claims, Class 3B Second Lien Notes Guarantee Claims and Class 7B Reddy Holdings General Unsecured Claims. Additionally, Solicitation Packages were sent directly to the holders of claims in Class 7B Reddy Holdings General Unsecured Claims who do not hold their claims through an agent or nominee. In accordance with applicable nonbankruptcy law, the Debtors established 11:59 p.m. (prevailing Eastern Time) on May 8, 2012 as the deadline to return ballots to the Voting Agent indicating acceptance or rejection of the Plan (the Voting Deadline). 106. The Debtors are continuing to solicit votes on the Plan following the Petition

Date. After expiration of the Voting Deadline, the Debtors will file a declaration of David M. Sharp certifying the results and methodology for tabulation of ballots accepting or rejecting the Plan (the Tabulation Declaration). David M. Sharp continues to monitor the solicitation and will audit the results of the solicitation following expiration of the voting deadline. 107. The Debtors have requested various relief with respect to the Disclosure

Statement, the Plan and the solicitation of votes for the Plan. I submit that the relief requested in the motion is fair and reasonable and in the best interests of the Debtors and their estates. Rights Offering Procedures and Indemnification Provisions

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108.

As described more fully in the Plan and Disclosure Statement, and as mentioned

above, the overall purpose of the Plan is to provide for a restructuring of the Debtors balance sheet liabilities and capital structure in a manner designed to maximize recoveries and to enhance the financial viability of the Reorganized Debtors in order to achieve a quick emergence from these Chapter 11 Cases. While developing the Plan with its advisors and various creditor constituencies, the Debtors determined that consummating a confirmable restructuring on the terms set forth in the Plan would require a new money investment. Prior to the Petition Date, the Debtors and the Debtors financial advisor and investment banker, Jefferies engaged in an intensive search for financing alternatives in which multiple bids and proposals were considered. As a result of, among other things, the Debtors prepetition capital structure and financial condition, the Debtors and their advisors determined that any new money investment could best be accomplished through the Rights Offering backstopped by a party in their existing debt structure, such that, if the Rights Offering were not fully subscribed, the backstop party could be relied upon to fund the entire amount of the required new money investment. As a result, the Debtors entered into the Investment Agreement, dated April 11, 2012 by and among Reddy Holdings, Reddy Corp and Centerbridge (the Investment Agreement). 109. In short, the Investment Agreement includes commitments of Centerbridge to (a)

backstop the Rights Offering, (b) directly purchase New Preferred Stock in an amount not less than $7.5 million, (c) provide equity capital for the acquisition of Arctic and (d) in the event of the failure to acquire Arctic, exchange First Lien Notes for New Preferred Stock of Reddy Holdings, in each case subject to certain terms and conditions. 110. The Investment Agreement also provides that Reddy Holdings and Reddy Corp

shall indemnify Centerbridge and its affiliates, members, partners, equityholders, officers,

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directors, employees, representatives, agents, advisors and controlling persons against any losses incurred by such persons in connection with the Rights Offering, the Plan (or the solicitation thereof), the Chapter 11 Cases and the Investment Agreement and the transactions contemplated thereby (the Indemnification Provisions). See Article X of the Investment Agreement. The Investment Agreement serves as the foundation for the Debtors Restructuring and the Rights Offering and is vital to the success of these Chapter 11 Cases. 111. A critical aspect of the Restructuring is the Debtors plan to undertake a

$17.5 million rights offering for preferred stock of Reddy Holdings in connection with the Debtors emergence from these Chapter 11 Cases. The Rights Offering will be open to existing holders the Debtors Second Lien Notes on a ratable basis. Additionally, to facilitate the

consummation of the Rights Offering, pursuant to the Investment Agreement and as part of the transactions contemplated by the Plan, the Investor has provided a backstop to the Rights Offering and has agreed, among other things, to purchase on the Effective Date of the Plan, at the Rights Exercise Price (as defined in the Rights Offering Procedures), the aggregate amount of New Preferred Stock (as defined in the Rights Offering Procedures) that have not been subscribed for by Eligible Holders by the Rights Offering Deadline. 112. The Rights Offering Procedures will allow the Debtors to efficiently transmit to

Eligible Holders the materials necessary to participate in the Rights Offering and afford such Eligible Holders a fair and reasonable opportunity to subscribe for the Subscription Rights. Accordingly, the Debtors seek approval of the Rights Offering Documents (including the Rights Exercise Forms), as well as the authority to implement the Rights Offering Procedures. It is my understanding that courts in various jurisdictions have approved similar procedures pursuant to which a debtor is authorized to conduct a rights offering.

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113.

After careful analysis and in the exercise of its business judgment, the Debtors

have determined that conducting the Rights Offering is essential to their expeditious emergence from chapter 11 protection. The Rights Offering provides the Debtors with the best opportunity to consummate the Plan, obtain additional liquidity and successfully emerge from these Chapter 11 Cases in a way that maximizes value for the Debtors estates. 114. The Debtors further submit that the Indemnity Provisions in the Investment

Agreement, in their business judgment, are fair, reasonable and necessary to implementing the Investment Agreement and in particular, the Rights Offering. V. CONCLUSION Accordingly, for the reasons stated herein and in each of the First Day Pleadings, the Debtors request that the relief sought in the First Day Pleadings be approved. I swear under penalty of perjury that the foregoing is true and correct.

Dated: April 12, 2012 Dallas, Texas

/s/ Steven J. Janusek Steven J. Janusek

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EXHIBIT A (List of First Day Pleadings)

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First Day Pleadings 1. Motion for Order Directing the Joint Administration of the Debtors Chapter 11 Cases 2. Debtors Motion for Order Under 11 U.S.C. 521 and Fed. R. Bankr. P. 1007(d) Authorizing Debtors to (i) Prepare a Consolidated Mailing Matrix and (ii) Mail Initial Notices 3. Debtors Motion for Order Under 11 U.S.C. 105 and 521 (i) Extending Time for Debtors to File Their Schedules of Assets and Liabilities and Statements of Financial Affairs, (ii) Permanently Waiving Same Upon Confirmation of Debtors Plan and (iii) Waiving Requirements to File Equity List 4. Application for Entry of Order Authorizing Debtors to Employ and Retain Kurtzman Carson Consultants LLC as Notice, Claims and Solicitation Agent Nunc Pro Tunc to the Petition Date 5. Debtors Motion for Interim and Final Orders Authorizing (i) Continued Use of Existing Cash Management System and Bank Accounts, and (ii) Waiver of Certain U.S. Trustee Requirements 6. Motion of Debtors for Order Authorizing Debtors to Pay Prepetition Wages, Compensation, and Employee Benefits 7. Motion of Debtors for Order Under Bankruptcy Code Sections 105(a), 363 and 366, and Bankruptcy Rule 6003 (i) Approving Debtors Adequate Assurance of Payment, (ii) Establishing Procedures for Resolving Requests by Utility Companies for Additional Assurance of Payment, (iii) Scheduling a Hearing with Respect to contested Adequate Assurance of Payment Requests, and (iv) Authorizing Debtors to Pay Claims of a Third Party Vendor 8. Debtors Motion for an Order Authorizing, But Not Directing, the Debtors to Pay Certain Prepetition Taxes and Related Relief 9. Debtors Motion for Order Pursuant to Bankruptcy Code Sections 105(a), 362(b), 506, 546(b), 1107(a), and 1108 and Bankruptcy Rule 6003 Authorizing Payment of Prepetition Claims of Certain Contractors and Service Providers in the Ordinary Course of Business 10. Debtors Motion for Order Pursuant to Bankruptcy Code Sections 105, 362(b)(3), 363(b), 506, 546(b), 1107(a) and 1108 and Bankruptcy Rule 6003 Authorizing Payment in the Ordinary Course of Business of (i) Certain Prepetition Shipping and Delivery Charges and (ii) Certain Prepetition Warehouse Charges 11. Debtors Motion for Order Authorizing Continuation of Certain Customer Practices 12. Debtors Motion Under 11 U.S.C. 105, 363, 503(b)(9), 1107 and 1108 and Fed. R. Bankr. P. 6003 for Order Authorizing Payment of Prepetition Claims of Certain Critical Suppliers in the Ordinary Course of Business

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13. Debtors Motion for Entry of Interim and Final Orders (i) Authorizing Debtors to Obtain Postpetition Financing Pursuant to Section 364 of the Bankruptcy Code, (ii) Authorizing the Use of Cash Collateral Pursuant to Sections 105, 361, 362 and 363 of the Bankruptcy Code; (iii) Granting Adequate Protection to the Prepetition Secured Parties Pursuant to Sections 361, 362, 363 and 364 of the Bankruptcy Code; (iv) Granting Liens and Superpriority Claims, and (v) Scheduling a Final Hearing on the Debtors Motion to Incur Such Financing on a Permanent Basis Pursuant to Bankruptcy Rules 4001(b) and 4001(c) 14. Debtors Motion Under 11 U.S.C. 105, 341, 1125, 1126, and 1129 and Fed. R. Bankr. P. 2002, 3017, 3018, and 3020 (i) For Order (a) Scheduling Combined Hearing on Adequacy of Disclosure Statement and Confirmation of Plan, (b) Establishing Procedures for Objecting to Disclosure Statement and Plan, (c) Approving Form and Manner of Notice of Combined Hearing and (d) Waiving Requirement for Meetings of Creditors or Equity Security Holders, and (ii) For Order (a) Approving Prepetition Solicitation Procedures (b) Approving Adequacy of Disclosure Statement and (c) Confirming Plan of Reorganization a. b. Disclosure Statement; and Plan of Reorganization

15. Debtors Motion for an Order (a) Authorizing the Debtors to Conduct the Rights Offering Pursuant to the Rights Offering Procedures, (b) Approving Rights Exercise Forms and Related Documents, and (c) Approving the Indemnity Provisions Under the Investment Agreement

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