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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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    <B><FONT style="font-size: 9pt">As filed with the Securities and
    Exchange Commission on March 12, 2010</FONT></B>
</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt"><!-- /XBRL,dc -->Registration
    No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</FONT></B>
</DIV>

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<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 14pt">UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 23%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt"><FONT style="white-space: nowrap">Form&#160;S-1</FONT></FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">REGISTRATION
    STATEMENT</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">UNDER</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">THE SECURITIES ACT OF
    1933</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 23%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 23pt">PRIMO WATER
    CORPORATION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Exact name of registrant as
    specified in its charter)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="34%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="32%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="32%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
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<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Delaware</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>5149</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>30-0278688</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(State or other jurisdiction
    of<BR>
    incorporation or organization)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(I.R.S. Employer<BR>
    Identification Number) </FONT></I>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>104 Cambridge Plaza Drive</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Winston-Salem, North Carolina 27104</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(336)&#160;331-4000</B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Address, including zip code,
    and telephone number,</FONT></I>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">including area code, of
    registrant&#146;s principal executive offices)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 23%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Mark Castaneda</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Chief Financial Officer</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Primo Water Corporation</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>104 Cambridge Plaza Drive</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Winston-Salem, North Carolina 27104</B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(336)&#160;331-4000</B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Name, address, including zip
    code, and telephone number,</FONT></I>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">including area code, of agent
    for service)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 23%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Please send copies of all communications to:</I></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="49%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>D. Scott Coward</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Rachel W. Sheridan</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>K&#038;L Gates LLP</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Latham &#038; Watkins LLP</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>4350 Lassiter at North Hills Avenue</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>555 Eleventh Street, NW</B>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Suite&#160;300</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>Suite 1000</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Raleigh, NC 27609</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Washington, DC 20004-1036</B>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><FONT style="white-space: nowrap">(919)&#160;743-7328</FONT></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>(202) 637-2200</B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Approximate date of commencement of proposed sale to the
    public:</B>&#160;&#160;As soon as practicable after the
    effective date of this registration statement.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act of 1933, check the
    following
    box.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    &#147;large accelerated filer,&#148; &#147;accelerated
    filer&#148; and &#147;smaller reporting company&#148; in Rule
    <FONT style="white-space: nowrap">12b-2</FONT> of the
    Exchange Act. (Check one):
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 04 -->

<TR>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
    <TD width="25%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">Large
    accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
    <TD nowrap align="center">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    <FONT style="white-space: nowrap">Non-accelerated</FONT>
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;</FONT>
    </FONT></TD>
    <TD nowrap align="right">    <FONT style="font-size: 9pt; font-family: 'Times New Roman', Times">
    Smaller reporting
    company&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;</FONT>
    </FONT></TD>
</TR>

</TABLE>



<DIV align="center" style="margin-left: 23%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 9pt">(Do not check if a smaller
    reporting company)
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 23%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CALCULATION
    OF REGISTRATION FEE</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Title of Each Class of<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Proposed Maximum Aggregate<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Securities to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Offering
    Price<SUP style="font-size: 85%; vertical-align: top">(1)(2)</SUP></B>

</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Registration
    Fee<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $60,000,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $4,278
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Includes shares to be sold upon
    exercise of the underwriters&#146; over-allotment option. See
    &#147;Underwriting.&#148;
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Estimated solely for the purpose of
    calculating the registration fee pursuant to Rule&#160;457(o) of
    the Securities Act of 1933.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 1%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant shall file a further amendment which
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933, as amended, or until the
    Registration Statement shall become effective on such date as
    the Commission, acting pursuant to Section&#160;8(a), may
    determine.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 92%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><TR><TD style=text-align:justify>
<FONT style="font-size: 10pt; font-family: Arial, Helvetica; color: #E8112D">The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell securities,
and it is not soliciting an offer to buy these securities, in
any state where the offer or sale is not permitted.<BR>
</FONT>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica; color: #E8112D">SUBJECT
    TO COMPLETION, DATED MARCH 12, 2010
    </FONT>
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 11pt; font-family: Arial, Helvetica">IPO
    PRELIMINARY PROSPECTUS
    </FONT>
</DIV>

<DIV style="font-size: 4pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235809.gif" alt="Primo Water Logo"><FONT style="font-size: 11pt">
    </FONT>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares<BR>
    Common Stock<BR>
    $&#160;&#160;&#160;&#160;&#160; per share
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Primo Water
    Corporation is
    selling&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock. We have granted the underwriters a
    <FONT style="white-space: nowrap">30-day</FONT>
    option to purchase up to an
    additional&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    from us to cover over-allotments, if any.
    </FONT>
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">This is an initial
    public offering of our common stock. We currently expect the
    initial public offering price to be between
    $&#160;&#160;&#160;&#160;&#160; and
    $&#160;&#160;&#160;&#160;&#160; per share. We intend to apply
    for approval to list our common stock on the Nasdaq Global
    Market under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#148;.
    </FONT>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">INVESTING IN OUR
    COMMON STOCK INVOLVES RISKS. SEE &#147;RISK FACTORS&#148;
    BEGINNING ON PAGE 10.
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <FONT style="font-size: 9pt; font-family: Arial, Helvetica">Per
    Share
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <FONT style="font-size: 9pt; font-family: Arial, Helvetica">Total
    </FONT>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Initial public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="font-family: Arial, Helvetica">
<DIV style="text-indent: -11pt; margin-left: 11pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="font-family: Arial, Helvetica">

</TD>
<TD nowrap align="left" valign="bottom" style="font-family: Arial, Helvetica">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 11pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Neither the
    Securities and Exchange Commission nor any state securities
    commission has approved or disapproved of these securities or
    passed upon the adequacy or accuracy of this prospectus. Any
    representation to the contrary is a criminal offense.
    </FONT>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Thomas
    Weisel Partners LLC</FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">BB&#038;T
    Capital Markets</FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Signal
    Hill</FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 11pt; font-family: Arial, Helvetica">The
    date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
    </FONT>
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>Prospectus Summary</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>The Offering</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>Cautionary Note Regarding Forward-Looking
    Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>Dividend Policy</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>Capitalization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>Dilution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>Selected Historical Consolidated Financial and
    Other Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>Business</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>Management</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    61
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>Executive Compensation</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>Principal Stockholders</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    90
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>Related Party Transactions</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    93
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>Description of Capital Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>Shares&#160;Eligible for Future Sale</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>Material U.S. Federal Income and Estate Tax
    Considerations For
    <FONT style="white-space: nowrap">Non-U.S.</FONT>
    Holders of Our Common Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    104
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>Underwriting</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    108
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>Change In Independent Registered Accounting
    Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#123'>Where You Can Find More Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#124'>Index to Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22358exv16w1.htm">EX-16.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="g22358exv23w1.htm">EX-23.1</A></FONT></TD></TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
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</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should rely only on the information contained in this
    prospectus. We have not, and the underwriters have not,
    authorized anyone to provide you with information that is
    different from that contained in this prospectus. This
    prospectus is not an offer to sell, nor is it seeking an offer
    to buy, these securities in any state where the offer or sale is
    not permitted. The information in this prospectus speaks only as
    of the date of this prospectus unless the information
    specifically indicates that another date applies, regardless of
    the time of delivery of this prospectus or of any sale of our
    common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Primo<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>,

    Taste
    Perfection<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>,

    Zero Waste. Perfect
    Taste<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>,

    <I>www.primowater.com</I>, the Primo logo and other trademarks
    or service marks of Primo Water Corporation appearing in this
    prospectus are the property of Primo Water Corporation. Trade
    names, trademarks and service marks of other companies appearing
    in this prospectus are the property of the respective owners.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    and Market Data</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We obtained the industry and market data used throughout this
    prospectus through our research, surveys and studies conducted
    by third-parties and industry and general publications. While we
    believe the data is reliable, we have not independently verified
    this industry and market data from third-party sources, and
    investors should not place undue reliance on this information.
    Some data are also based on our good faith estimates, which are
    derived from our review of internal surveys, as well as
    independent industry publications, government publications,
    reports by market research firms or other published sources.
    None of the independent industry publications referred to in
    this prospectus were prepared on our behalf or at our expense.
    The foregoing discussion does not, in any manner, disclaim our
    responsibilities with respect to the disclosures contained in
    this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Dealer
    Prospectus Delivery Obligation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 (25&#160;days after the date of this prospectus), all
    dealers that effect transactions in these securities, whether or
    not participating in this offering, may be required to deliver a
    prospectus. This is in addition to the dealers&#146; obligation
    to deliver a prospectus when acting as underwriters and with
    respect to their unsold allotments or subscriptions.
</DIV>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='101'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This summary highlights information about our Company and
    this offering contained elsewhere herein and is qualified in its
    entirety by the more detailed information and financial
    statements included elsewhere in this prospectus. You should
    read this entire prospectus carefully, including &#147;Risk
    Factors,&#148; &#147;Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations&#148; and our
    financial statements and related notes included elsewhere
    herein, before making an investment decision. In this
    prospectus, unless otherwise specified or the context otherwise
    requires, the terms &#147;Primo,&#148; &#147;we,&#148;
    &#147;us,&#148; &#147;our,&#148; &#147;our Company,&#148; or
    &#147;ours&#148; refer to Primo Water Corporation and its
    consolidated subsidiaries but do not refer to or include
    information about our former subsidiary, Prima Bottled Water,
    Inc., which was spun off to our stockholders effective
    December&#160;31, 2009.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Business</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a rapidly growing provider of three- and five-gallon
    purified bottled water and water dispensers sold through major
    retailers nationwide. We believe the market for purified water
    is growing due to evolving taste preferences, perceived health
    benefits and concerns regarding the quality of municipal tap
    water. Our products provide an environmentally friendly,
    economical, convenient and healthy solution for consuming
    purified water. We offer &#147;razor-razorblade&#148; products
    designed to generate recurring demand for Primo purified bottled
    water (the razorblade) through the initial sale of our
    innovative water dispensers (the razor). Once our bottled water
    is consumed using a water dispenser, empty bottles are exchanged
    at our recycling center displays where consumers receive a
    recycling ticket that offers a discount toward the purchase of a
    full bottle of Primo purified water. Primo consumers purchase an
    average of 35 bottles of water annually and each bottle can be
    sanitized and reused up to 40 times before being taken out of
    use, crushed and recycled, substantially reducing landfill waste
    compared to consumption of equivalent volumes of single-serve
    bottled water. Our sales and recycling center displays are
    prominently located at major retailers nationwide in spaces that
    are often underutilized. As of December&#160;31, 2009, our water
    bottle exchange service and water dispensers were offered in
    each of the contiguous United&#160;States and located in
    approximately 7,000 and 5,500 retail locations respectively,
    including Lowe&#146;s Home Improvement, Sam&#146;s Club, Costco,
    Walmart, Target, Kroger, Winn-Dixie, Albertsons and Walgreens.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have created a new nationwide single-vendor water bottle
    exchange solution for our retail customers, addressing a market
    demand that was previously unmet. Our water bottle exchange
    solution is easy for retailers to implement, requires minimal
    management supervision and store-based labor and provides
    centralized billing and detailed performance reports. Retailers
    benefit from year-round, high-margin, highly-predictable
    revenue, the potential to increase customer traffic and the
    ability to optimize retail space.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We deliver our solution to retailers utilizing our national
    network of primarily independent bottlers and distributors.
    These bottlers and distributors make a significant portion of
    the capital investment required to deliver our solution,
    including investment in bottling facilities and storage and
    distribution assets. We focus our capital expenditures on
    developing new store locations, raising brand awareness,
    developing new products and managing our national network
    utilizing our management information system (&#147;MIS&#148;)
    tools. We are able to manage our national network on a real-time
    basis through our MIS tools, which provide resource planning and
    delivery schedule tracking, thus enabling us to optimize our
    network&#146;s assets and respond to customer needs. In
    addition, our national network of bottlers and distributors
    benefits from a year-round product that optimizes utilization of
    their existing production and distribution assets. We believe
    our solution and national network provide us a significant
    competitive advantage in servicing our retail customers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We benefit significantly from management experience gained over
    the last 15&#160;years in exchange-based businesses, which
    enables us to implement best practices and develop and maintain
    key business relationships. Prior to founding Primo, our Chief
    Executive Officer founded Blue Rhino Corporation, a propane
    cylinder exchange business, in 1994 and, with several of our
    other key executive officers, led its initial public offering in
    1998 and successful sale in 2004. At the time of the sale, Blue
    Rhino was the market leader in propane grill cylinder exchange
    with over 29,000 retail locations in 49&#160;states.
</DIV>
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    <BR>
    1
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe there are several trends that support consumer demand
    for our water bottle exchange service and water dispensers,
    including the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Emphasis
    on Health and Wellness</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of a desire to live a healthier lifestyle, we believe
    consumers are increasingly focused on drinking more water
    relative to consumption of high caloric beverages, carbonated
    soft drinks and beverages containing artificial sweeteners.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Concerns
    Regarding Quality of Municipal Tap Water</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many consumers purchase purified water not only due to better
    taste, but also because of concerns regarding municipal tap
    water quality. Municipal water is typically surface water that
    is treated centrally and pumped to homes, which can allow
    additional contaminants to dissolve into the water through
    municipal or household pipes impacting taste and quality.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Growing
    Preference for Purified Water</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe consumer preference toward purified water relative to
    tap water continues to grow as purified water has become
    accepted on a mainstream basis. According to a June 2009 report
    by independent market analyst Datamonitor, <I>Bottled Water in
    the United States</I>, consumers spent $18.4&#160;billion in
    2008 on bottled water and the bottled water industry is expected
    to grow at a compound annual growth rate of approximately 7.5%,
    reaching $26.5&#160;billion by 2013.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increasing
    Demand for Products with Lower Environmental Impact</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that consumers are increasingly favoring products
    with a lower environmental impact with a &#147;reuse, recycle,
    reduce&#148; mindset becoming a common driver of consumer
    behavior. Most single-serve polyethylene terephthalate
    (&#147;PET&#148;) water bottles are produced using fossil fuels
    and contribute to landfill waste given that only 27% of PET
    bottles are recycled according to a November 2009 Environmental
    Protection Agency report. Governmental legislation also reflects
    these concerns with numerous initiatives enacted to either tax
    purchases of beverages in plastic bottles or prohibit their use
    within government facilities or disposal in community landfills.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Availability
    of an Economical Water Bottle Exchange Service and Innovative
    Water Dispensers</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on estimates derived from industry data, we believe the
    current household penetration rate of multi-gallon water
    dispensers is approximately 4%, with the vast majority of these
    households utilizing traditional home delivery services. We
    believe the lack of innovation, design enhancement and
    functionality and the retail pricing structure of our
    competitors&#146; dispenser models has prevented greater
    household adoption. Compounding these issues, there previously
    was no economical water bottle exchange service with major
    retailer relationships nationwide to promote dispenser usage
    beyond the traditional home delivery model. We believe our water
    bottle exchange service provides this alternative and we are
    currently the only provider delivering a solution nationally to
    retailers. We believe there are over 140,000 major retail
    locations nationwide that we can target to sell our dispensers
    or offer our water bottle exchange service.
</DIV>
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    <BR>
    2
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our competitive strengths include the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Appeal to
    Consumer Preferences</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Environmental Awareness.</I> Our water bottle exchange
    service incorporates reuse of existing bottles, recycles water
    bottles when their lifecycle is complete and reduces landfill
    waste and fossil fuel usage compared to alternative methods of
    bottled water consumption. We believe our water bottle exchange
    service has a lower environmental impact due to the reuse of
    existing bottles and the efficiencies associated with our
    bottling and distribution network.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Value.</I> We provide consumers the opportunity for cost
    savings when consuming our bottled water compared to both
    single-serve bottled water and typical home and office delivery
    services. Our water dispensers are sold at attractive retail
    prices in order to enhance consumer awareness and adoption of
    our water bottle exchange service, increase household
    penetration and drive sales of our bottled water.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Convenience.</I> Our water bottle exchange service and water
    dispensers are available at major retail locations nationwide.
    In addition, our water bottle exchange service provides
    consumers the convenience of exchanging empty bottles and
    purchasing full bottles at any participating retailer. We offer
    three- and five-gallon water bottle options to address different
    consumer volume preferences. We believe our water bottle
    exchange service provides a convenient way to consume purified
    water compared to self-service refill machines and home and
    office delivery services. Our water bottle sales displays are
    fully stocked and ready for consumer purchases, eliminating
    refill time. In addition, our exchange service permits consumers
    to purchase only the number of water bottles they need without
    the water bottle purchase minimums or bottle deposits often
    charged by home and office delivery providers.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Taste.</I> We have dedicated significant time and effort to
    develop our water purification process and formulate the
    proprietary blend of mineral ingredients included in Primo
    purified water. We believe that Primo purified water has a silky
    smooth taste and in an independent taste test that we
    commissioned, four out of five participants preferred Primo
    purified water over municipal tap water and three out of four
    participants preferred Primo purified water over their
    region&#146;s market-leading bottled water.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Health and Wellness.</I> As part of a desire to live a
    healthier lifestyle, we believe that consumers are increasingly
    focused on drinking more water relative to consumption of other
    beverages. As we raise our brand awareness, we believe consumers
    will recognize that our water bottle exchange service is an
    effective option for their purified water consumption needs.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Key
    Retail Relationships Served by National Single-Vendor
    Solution</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are the only water bottle exchange provider with a
    single-vendor solution for retailers nationwide. Our national
    network of 55 bottlers and 27 distributors utilize our MIS tools
    and processes to optimize their production and distribution
    assets while servicing our retail customers. We believe the
    combination of our major retail relationships, unique
    single-vendor solution for retail customers, national network of
    independent bottlers and distributors and our MIS tools is
    difficult to replicate. We anticipate these factors will
    facilitate our introduction of new purified water-related
    products in the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Ability
    to Attract and Retain Consumers</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer &#147;razor-razorblade&#148; products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of our innovative water
    dispensers (the razor), which include a coupon for a free three-
    or five-gallon bottle of Primo purified water. We acquire new
    consumers and enhance recycling efforts by accepting most
    dispenser-compatible water bottles in exchange for a recycle
    ticket discount toward the purchase
</DIV>
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    <BR>
    3
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    of a full bottle of Primo purified water. Our water bottle
    exchange service is attractive to retailers as our consumers
    purchase an average of 35 bottles of Primo purified water per
    year, which facilitates repeat consumer traffic in our
    retailers&#146; stores. In addition, we believe our offering
    high-quality water dispensers enhances consumer awareness and
    adoption of our water bottle exchange service, increases
    household penetration and drives sales of our bottled water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Efficient
    Business Model</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business model allows us to efficiently offer our solution
    to our retail partners and centrally manage our national network
    of bottlers and distributors without a substantial capital
    investment. Our business processes and MIS tools enable us to
    manage the bottling and distribution of our water, our product
    quality, retailer inventory levels and the return of used
    bottles on a centralized basis, leveraging our invested capital
    and personnel. Our water bottle exchange service is unique in
    that we are not required to make a significant portion of the
    capital investment required to operate our exchange service
    nationwide. Participation in our water bottle exchange service
    does not typically require independent bottlers and distributors
    to make substantial new investments because they often are able
    to augment their current production capacity and leverage their
    existing bottling and distribution assets. In addition, the flow
    of payments between the retailer and our bottlers and
    independent distributors is a critical component of our overall
    relationship with our major retail accounts that we control
    efficiently through electronic data interchange.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Benefit
    from Management&#146;s Proven Track Record</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We benefit greatly from management experience gained over the
    last 15&#160;years in exchange businesses to implement and
    refine best practices and develop and maintain key business
    relationships. In addition to our Chief Executive Officer, our
    Chief Financial Officer, Vice President of Operations, Vice
    President of Products and Vice President of National Accounts
    all held comparable positions within the Blue Rhino organization
    during its rapid sales and location growth.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Growth
    Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We seek to increase our market share and drive further growth in
    our business by pursuing the following strategies:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increase
    Penetration with Existing Retail Relationships and Develop New
    Retail Relationships</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we have significant opportunities to increase store
    penetration with our existing retail relationships and develop
    new retail relationships based on our competitive strengths. As
    of December&#160;31, 2009, our water bottle exchange service was
    offered at approximately 6,000 of our top ten retailers&#146;
    nationwide locations. Such retailers present an opportunity of
    approximately 7,500 additional nationwide locations. We intend
    to further penetrate our other existing retailers, which
    collectively provide us the opportunity to be present in an
    additional 22,400 locations nationwide. Our long-term strategy
    targets a total of approximately 40,000 retail store locations
    (which includes new locations with our existing retail
    customers) within our primary retail categories of home centers,
    hardware stores, mass merchants, membership warehouses and
    grocery and drug stores.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Drive
    Consumer Adoption Through Innovative Water Dispenser
    Models</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to continue to develop and sell innovative water
    dispensers at attractive retail prices, which we believe is
    critical to increasing consumer awareness and driving consumer
    adoption of our water bottle exchange service. We believe our
    water dispensers have appealing features, such as stainless
    steel finishes, adjustable hot and cold temperature controls and
    hidden bottom-loading bottle features for convenience. Since we
    first began selling our water dispensers in 2005, we have sold
    over 460,000&#160;units and have expanded our retail network
    from four locations as of December&#160;31, 2007, to our current
    network of approximately 5,500 locations. Our long term
</DIV>
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    <BR>
    4
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    strategy is to provide multiple purified water-based-beverages
    from a single Primo water dispenser, with consistent promotion
    of our water bottle exchange service to supply the purified
    water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increase
    Same Store Sales</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer &#147;razor-razorblade&#148; products that are designed
    to generate recurring demand for Primo purified bottled water
    (the razorblade) through the initial sale of water dispensers
    (the razor). We sell our water dispensers at minimal margin and
    provide a free three- or five-gallon bottle of water with every
    water dispenser sold to drive consumer demand for our water
    bottle exchange service.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe increasing unit sales of Primo purified bottled water
    is dependent on generating greater consumer awareness of the
    environmentally friendly and economical aspects of and the
    convenience associated with both our purified bottled water and
    our water bottle exchange service. We expect that our branding,
    marketing and sales efforts will result in greater usage of our
    water bottle exchange service. In addition, as consumers
    exchange dispenser-compatible water bottles, we encourage the
    use of our water bottle exchange service by providing them a
    recycling ticket that provides a discount on a full bottle of
    Primo purified water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Develop
    and Install Other Hydration Solutions</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we have significant opportunities to leverage our
    national bottling and distribution network and our systems and
    processes to offer other environmentally friendly, economical,
    convenient and healthy hydration solutions to our retail
    partners without significant increases in our centralized costs.
    For example, we intend to offer our retail partners self-service
    refill vending machines that dispense purified water into
    bottles and other containers. We believe this offering will
    cater to a more price-sensitive consumer. In addition, we intend
    to offer our retail partners automated, self-bagging purified
    ice dispensers. These purified ice dispensers will provide a
    simplified method of acquiring ice in customized offering sizes
    without the extensive manufacturing and storage networks typical
    of the ice dispensing industry.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Pursue
    Strategic Acquisitions to Augment Geographic and Retail
    Relationships</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe opportunities exist to expand through selective
    acquisitions, including smaller water bottle exchange businesses
    with established retail accounts, on-premises self-service water
    refill vending machine networks and retail accounts, ice
    dispenser machine networks and retail accounts and water
    dispenser companies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risk
    Factors</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business is subject to numerous risks, as more fully
    described in the section entitled &#147;Risk Factors&#148;
    beginning on page&#160;10. You should carefully consider these
    risks before deciding to invest in our common stock. These risks
    include, among others:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We have incurred operating losses in the past and may incur
    operating losses in the future.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We depend on a small number of large retailers for most of our
    consumer sales. Our arrangements with these retailers for our
    bottled water exchange services and sales of our water
    dispensers are nonexclusive and may be terminated at will.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The success of our business depends on retailer and consumer
    acceptance of our water bottle exchange service and water
    dispensers.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    In our bottled water business, we depend on independent
    bottlers, distributors and suppliers for our business to operate.
</TD>
</TR>

</TABLE>
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    <BR>
    5
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    In our bottled water business, if our distributors do not
    perform to our retailers&#146; expectations, if we encounter
    difficulties in managing our distributor operations or if we or
    our distributors are not able to manage growth effectively, our
    retail relationships may be adversely impacted and our business
    may suffer.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    We operate in a highly competitive industry, face competition
    from companies with far greater resources than we have and could
    encounter significant competition from these companies in our
    niche market of water bottle exchange services and related
    products.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    If our bottled water became contaminated, our business could be
    seriously harmed.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    While many members of our senior management have experience as
    executives of a products and exchange services business, there
    can be no assurances that this experience and past success will
    result in our business becoming profitable.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Corporate Information</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were incorporated as a Delaware corporation on
    October&#160;20, 2004. Our headquarters are located at 104
    Cambridge Plaza Drive, Winston-Salem, North Carolina 27104 and
    our telephone number is
    <FONT style="white-space: nowrap">(336)&#160;331-4000.</FONT>
    Our website is <I>www.primowater.com</I>. Information on, or
    accessible through, our website is not a part of and is not
    incorporated into this prospectus and the inclusion of our
    website address in this prospectus is an inactive textual
    reference only.
</DIV>
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    <BR>
    6
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<A name='102'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">THE
    OFFERING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="57%"></TD>
    <TD width="1%"></TD>
    <TD width="42%"></TD>
</TR>

<TR>
    <TD valign="top">
    Issuer</TD>
    <TD></TD>
    <TD valign="bottom">
    Primo Water Corporation</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Common stock offered by us</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    (&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    shares if the underwriters&#146; over-allotment option is
    exercised in full)</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Common stock to be outstanding after this offering</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    (&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    if the underwriters&#146; over-allotment option is exercised in
    full)</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="bottom">
    We estimate that the net proceeds to us from this offering will
    be approximately $&#160;&#160;&#160;&#160;&#160;&#160;million
    (or approximately $&#160;&#160;&#160;&#160;&#160;&#160;million
    if the underwriters&#146; over-allotment option is exercised in
    full), assuming an initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share, the midpoint of the
    range set forth on the cover page of this prospectus. We intend
    to use the net proceeds from this offering to repay our
    14%&#160;subordinated convertible notes due March&#160;31, 2011
    and for working capital and general corporate purposes. See
    &#147;Use of Proceeds.&#148;</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="bottom">
    We currently do not intend to pay any cash dividends on our
    common stock.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="bottom">
    You should carefully read and consider the information set forth
    under &#147;Risk Factors,&#148; together with all of the other
    information set forth in this prospectus, before deciding to
    invest in shares of our common stock.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>



<TR>
    <TD valign="top">
    Proposed Nasdaq Global Market symbol</TD>
    <TD></TD>
    <TD valign="bottom">
    We intend to apply to list our common stock on the Nasdaq Global
    Market under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#148;.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of our common stock that will be
    outstanding after this offering is based
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010. Unless otherwise indicated, all information in this
    prospectus, including the number of shares that will be
    outstanding after this offering and other share-related
    information:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reflects
    a&#160;&#160;&#160;&#160;&#160;-for-&#160;&#160;&#160;&#160;&#160;
    reverse stock split of our common stock that will occur
    immediately prior to the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reflects the conversion of our Series&#160;A convertible
    preferred stock and our Series&#160;C convertible preferred
    stock into common stock immediately prior to the closing of this
    offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series&#160;B preferred stock and Series&#160;C convertible
    preferred stock that will
    expire&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    days after the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire&#160;&#160;&#160;&#160;&#160;&#160;days after the closing
    of this offering;
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    14%&#160;subordinated convertible notes due March&#160;31, 2011
    that will expire December&#160;30, 2019;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2004 Stock Plan;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2010 Omnibus Long-Term
    Incentive Plan, which we have adopted in connection with this
    offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2010 Employee Stock Purchase
    Plan, which we have adopted in connection with this
    offering;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    assumes no exercise of the underwriters&#146; over-allotment
    option to purchase up to&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SUMMARY
    HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables summarize our historical consolidated
    financial data and other information for the periods indicated.
    We prepared the summary historical consolidated financial data
    using our audited consolidated financial statements that are
    included elsewhere in this prospectus. You should read this
    summary historical consolidated financial data in conjunction
    with such audited consolidated financial statements and related
    notes. See &#147;Selected Historical Consolidated Financial and
    Other Data&#148; and &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations.&#148;
    The summary historical consolidated financial data are not
    necessarily indicative of future results.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands, except per share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Consolidated statements of operations data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,969
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,210
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,409
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,917
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Interest (expense) and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (70
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,257
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Loss from continuing operations before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Loss from discontinued operations, net of income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,650
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,824
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Preferred dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,042
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16,221
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (21,673
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (14,866
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Basic and diluted loss per common share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Loss from continuing operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Loss from discontinued operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Basic and diluted weighted average common shares outstanding:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The unaudited pro forma consolidated balance sheet data set
    forth below gives effect to the conversion of all of our
    outstanding Series&#160;A convertible preferred stock and
    Series&#160;C convertible preferred stock into shares of our
    common stock. The unaudited pro forma as adjusted consolidated
    balance sheet data gives effect to our receipt of the net
    proceeds from the sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock offered by us at an assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share, the
    midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    commissions and estimated expenses payable by us and the
    application of a portion of such net proceeds to repay our
    14%&#160;subordinated convertible notes due March&#160;31, 2011.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Consolidated balance sheet data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,368
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Long-term debt, less current maturities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="74%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands, except location data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Other information:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Water bottle exchange locations at year end
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Water bottle units sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,853
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Water dispenser units sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    272
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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    <BR>
    9
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in our common stock involves a high degree of
    risk. You should read and consider carefully each of the risks
    and uncertainties described below together with the financial
    and other information contained in this prospectus before you
    decide to invest in our common stock. The risks described below
    are not the only ones we face and additional risks that we are
    not presently aware of or that we currently believe are
    immaterial may also impair our business. Our business, financial
    condition, results of operations, cash flows and prospects may
    be materially and adversely affected by any of these risks. As a
    result, the market price of our common stock could decline and
    you could lose all or part of your investment.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Relating to Our Business and Industry</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We have
    incurred operating losses in the past and may incur operating
    losses in the future.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have incurred operating losses in the past and expect to
    incur operating losses in the future. As of December&#160;31,
    2009, our accumulated deficit was approximately
    $91.0&#160;million. Our losses from continuing operations were
    $12.2&#160;million for the year ended December&#160;31, 2007,
    $13.6&#160;million for the year ended December&#160;31, 2008,
    and $8.2&#160;million for the year ended December&#160;31, 2009.
    We have not been profitable since our inception, and we may not
    become profitable in the future. While we anticipate being
    profitable in 2011, our losses may nonetheless continue as we
    incur additional costs and expenses related to branding and
    marketing, expansion of operations, product development and
    development of relationships with strategic business partners.
    If our operating expenses exceed our expectations, our financial
    performance will be adversely affected. If our sales do not grow
    to offset these increased expenses, we may not become
    profitable. If we do not achieve sustained profitability, we may
    be unable to continue operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">In both
    our bottled water and water dispenser businesses, we depend on a
    small number of large retailers for most of our consumer sales.
    Our arrangements with these retailers for our bottled water
    exchange services and sales of our water dispensers are
    nonexclusive and may be terminated at will.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain retailers make up a significant percentage of our retail
    sales volume, such that if one or more of these retailers were
    to materially reduce or terminate its business with us, our
    sales would suffer. For 2009, Lowe&#146;s Home Improvement,
    Sam&#146;s Club and Walmart represented approximately 33%, 19%
    and 15% of our consolidated net sales, respectively. While we
    sell a small percentage of our dispensers directly to consumers
    through our online store, the vast majority of our sales for
    both of our water bottle exchange service and of our water
    dispensers are made through our retail partners.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While we have arrangements with certain retailers for our
    products and services, we cannot provide any assurance of any
    future sales. None of our significant retail accounts are
    contractually bound to offer our water dispensers or bottle
    exchange service. As a result, retailers can discontinue our
    products or services at any time and offer a competitor&#146;s
    products or services, or none at all. Continued positive
    relations with a retailer depend upon various factors, including
    price, customer service, consumer demand and competition. In
    addition, certain of our retailers have multiple vendor policies
    and may seek to offer a competitor&#146;s products or services
    at new or existing locations. If any significant retailer
    materially reduces, terminates or is unwilling to expand its
    relationship with us, or requires price reductions or other
    adverse modifications in our selling terms, our sales would
    suffer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    success of our business depends on retailer and consumer
    acceptance of our water bottle exchange service and water
    dispensers.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a consumer products and services company operating in the
    highly-competitive bottled water market and rely on continued
    consumer demand or preference for our products and services. To
    generate sales and profits, we must sell products that appeal to
    retailers and to consumers. Our future success depends on
    consumer acceptance, particularly at the household level, of our
    bottled water products, water bottle exchange service and water
    dispensers. There is no guarantee that there will be significant
    market acceptance of our water bottle
</DIV>
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    <BR>
    10
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    exchange service or that we will be successful in selling our
    water dispensers on a scale necessary to achieve sustained
    profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for bottled water related products and services is
    evolving rapidly and we may not be able to accurately assess the
    size of the market or trends that may emerge and affect our
    business. Consumer preferences can change due to a variety of
    factors, including social trends, negative publicity and
    economic changes. If we are unable to convince current and
    potential retail customers and individual consumers of the
    advantages of our products and services, our ability to sell our
    bottled water products and water dispensers will be limited.
    Consumer acceptance also will affect, and be affected by, our
    existing retail partners&#146; and potential new retail
    partners&#146; decision to sell our products and services and
    their perception of the likelihood of consumers purchasing our
    products and services. Even if retail customers purchase our
    products or services, there is no guarantee that they will be
    successful in selling our products or services to consumers on a
    scale necessary for us to achieve sustained profitability. Any
    significant changes in consumer preferences for purified bottled
    water could result in reduced demand for our water bottle
    exchange service and our water dispensers and erosion of our
    competitive and financial position.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">In our
    bottled water business, we depend on independent bottlers,
    distributors and suppliers for our business to
    operate.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are and will continue to be for the foreseeable future,
    substantially dependent on independent bottlers, distributors
    and suppliers to bottle and deliver our bottled water products
    and provide our water bottle exchange service to our retail
    customers. We do not have our own manufacturing facilities to
    produce bottled water products. We are and will continue to be
    for the foreseeable future, entirely dependent on third parties
    to supply the bottle pre-forms, bottles, water and other
    materials necessary to operate our bottled water business. We
    rely on third-party supply companies to manufacture our three-
    and five-gallon water bottles and deliver them to our bottlers.
    In turn, we rely on bottlers to properly purify the water,
    include our mineral enhancements and bottle the finished product
    without contamination and pursuant to our quality standards and
    preparation procedures. Finally, we rely upon our distributors
    to deliver bottled water to our retail partners in a timely
    manner, accurately enter information regarding the delivery of
    the bottles into our management information system, manage our
    recycling center displays and return used bottles to the
    bottlers to be sanitized or crushed and recycled.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We can make no assurance that we will be able to maintain these
    third-party relationships or establish additional relationships
    as necessary to support growth and profitability of our business
    on economically viable terms. As independent companies, these
    bottlers, distributors and suppliers make their own business
    decisions. Suppliers may choose not to do business with us for a
    variety of reasons, including competition, brand identity,
    product standards and concerns regarding our economic viability.
    They may have the right to determine whether, and to what
    extent, they produce and distribute our products, our
    competitors&#146; products and their own products. Some of the
    business for these bottlers, distributors and suppliers comes
    from producing or selling our competitors&#146; products. These
    bottlers, distributors and suppliers may devote more resources
    to other products or take other actions detrimental to our
    brands. In addition, their financial condition could also be
    adversely affected by conditions beyond our control and our
    business could suffer. In addition, we will face risks
    associated with any bottler&#146;s or distributor&#146;s failure
    to adhere to quality control and service guidelines we establish
    or failure to ensure an adequate and timely supply of product
    and services at retail locations. Any of these factors could
    negatively affect our business and financial performance. If we
    are unable to obtain and maintain a source of supply for
    bottles, water and other materials, our business will be
    materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">In our
    bottled water business, if our distributors do not perform to
    our retailers&#146; expectations, if we encounter difficulties
    in managing our distributor operations or if we or our
    distributors are not able to manage growth effectively, our
    retail relationships may be adversely impacted and business may
    suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We rely on our distributors to deliver our three- and
    five-gallon bottled water and provide our water bottle exchange
    service to retailers. Accordingly, our success depends on our
    ability to manage our retail relationships through the
    performance of our distributor partners. The majority of our
    current distributors are independent and we exercise only
    limited influence over the resources they devote to delivery and
    exchange of our three- and five-
</DIV>
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    <BR>
    11
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    gallon water bottles. Our success depends on our ability to
    establish and maintain distributor relationships and on the
    distributors&#146; ability to operate viable businesses. We can
    provide no assurance that we will be able to maintain such
    relationships or establish additional relationships as necessary
    to support growth and profitability of our business on
    economically viable terms. Our retailers impose demanding
    service requirements on us and we could suffer a loss of
    consumer or retailer goodwill if our distributors do not adhere
    to our quality control and service guidelines or fail to ensure
    an adequate and timely supply of bottled water at retail
    locations. The poor performance of a single distributor to a
    national retailer could jeopardize our entire relationship with
    that retailer and cause our bottled water sales and exchange
    service to suffer. In addition, the number of retail locations
    offering our water bottle exchange service and our corresponding
    sales, have grown significantly over the past several years
    along with our national distributor network<B>.</B> Accordingly,
    our distributors must be able to adequately service an
    increasing number of retail accounts. If we or our distributors
    fail to manage our growth effectively, our bottled water sales
    and exchange service may suffer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We
    operate in a highly competitive industry, face competition from
    companies with far greater resources than we have and could
    encounter significant competition from these companies in our
    niche market of water bottle exchange services and related
    products.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We participate in the highly competitive bottled water segment
    of the nonalcoholic beverage industry. While the industry is
    dominated by large and well-known international companies,
    numerous smaller firms are also seeking to establish market
    niches. In our business model, we not only offer three- and
    five-gallon bottled water but also provide consumers the ability
    to exchange their used containers as part of our exchange
    service. While we are aware of a few direct competitors that
    operate water bottle exchange networks at retail, we believe
    they operate on a much smaller scale than we do and we believe
    they do not have equivalent MIS tools or bottling and
    distribution capabilities to effectively support major retailers
    nationwide. Competitive factors with respect to our business
    include pricing, taste, advertising, sales promotion programs,
    product innovation, increased efficiency in production and
    distribution techniques, the introduction of new packaging and
    brand and trademark development and protection.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary competitors in our bottled water business include
    Nestl&#233;, The
    <FONT style="white-space: nowrap">Coca-Cola</FONT>
    Company, PepsiCo, Dr Pepper Snapple Group and DS Waters of
    America. None of these companies currently offer a nationwide
    water bottle exchange service at retail. However, many of these
    competitors are leading consumer products companies, have
    substantially greater financial and other resources than we do,
    have established a strong brand presence with consumers and have
    established relationships with retailers, manufacturers,
    bottlers and distributors necessary to start an exchange
    business at retail locations nationwide should they decide to do
    so. In addition to competition between companies within the
    bottled water industry, the industry itself faces significant
    competition from other non-alcoholic beverages, including
    carbonated and non-carbonated soft drinks and waters, juices,
    sport and energy drinks, coffees, teas and spring and tap water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also compete directly and indirectly in the water dispenser
    marketplace. While we have had recent success in our sales of
    water dispensers to retailers, there are many large consumer
    products companies with substantially greater financial and
    other resources than we do, a larger brand presence with
    consumers and established relationships with retailers that
    could decide to enter the marketplace. Should any of these
    consumer products companies so decide to enter the water
    dispenser marketplace, sales of our water dispensers could be
    materially and adversely impacted, which, in turn, could
    materially and adversely affect our sales of bottled water.
    Finally, our water bottle exchange service faces competition
    from other methods of purified water consumption such as
    countertop filtration systems, faucet mounted filtration
    systems, in-line whole-house filtration systems, water
    filtration dispensing products such as pitchers and jugs,
    standard and advanced feature water coolers and
    refrigerator-dispensed filtered and unfiltered water.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we are
    unable to build and maintain our brand image and corporate
    reputation, our business may suffer.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a relatively new company, having been formed in late 2004
    and commenced operations in June 2005. Our success depends on
    our ability to build and maintain the brand image for our
    existing bottled water products and services and effectively
    build the brand image for any new products. We cannot assure
    you, however, that any additional expenditures on advertising
    and marketing will have the desired impact on our products&#146;
    brand image and on consumer preferences. Actual or perceived
    product quality issues or allegations of product contamination,
    even if false or unfounded, could tarnish the image of our brand
    and may cause consumers to choose other products. Allegations of
    product defects or product contamination, even if untrue, may
    require us from time to time to recall a product from all of the
    markets in which the affected product was distributed. Product
    recalls would negatively affect our profitability and brand
    image. Also, adverse publicity surrounding water usage and any
    campaigns by activists attempting to connect our system to
    environmental issues, water shortages or workplace or human
    rights violations in certain developing countries in which we or
    our business partners operate, could negatively affect our
    overall reputation and our products&#146; acceptance by
    consumers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Interruption
    or disruption of our supply chain, distribution channels or
    service network could adversely affect our business, financial
    condition and results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability and that of our business partners, including
    suppliers, bottlers, distributors and retailers, to manufacture,
    sell and deliver products and services is critical to our
    success. Interruption or disruption of our supply chain,
    distribution channels or service network due to unforeseen
    events, including war, terrorism and other international
    conflicts, public health issues, natural disasters such as
    earthquakes, fires, hurricanes or other adverse weather and
    climate conditions, strikes and other labor disputes, whether
    occurring in the United States or abroad, could impair our
    ability to manufacture, sell or deliver our products and
    services.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If our
    bottled water became contaminated, our business could be
    seriously harmed.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have adopted various quality, environmental, health and
    safety standards. However, our products may still not meet these
    standards or could otherwise become contaminated. A failure to
    meet these standards or contamination could occur in our
    operations or those of our bottlers, distributors or suppliers.
    Such a failure or contamination could result in expensive
    production interruptions, recalls and liability claims.
    Moreover, negative publicity could be generated even from false,
    unfounded or nominal liability claims or limited recalls. Any of
    these failures or occurrences could negatively affect our
    business and financial performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">In our
    water dispenser business, because all of our dispensers are
    manufactured by two manufacturers in China, a significant
    disruption in the operations of these manufacturers or political
    unrest in China could materially adversely affect us.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have only two manufacturers of water dispensers. Any
    disruption in production or inability of our manufacturers to
    produce quantities of water dispensers adequate to meet our
    needs could significantly impair our ability to operate our
    water dispenser business on a
    <FONT style="white-space: nowrap">day-to-day</FONT>
    basis. Our manufacturers are located in China, which exposes us
    to the possibility of product supply disruption and increased
    costs in the event of changes in the policies of the Chinese
    government, political unrest or unstable economic conditions in
    China or developments in the U.S.&#160;that are adverse to
    trade, including enactment of protectionist legislation. In
    addition, our dispensers are shipped directly from the
    manufacturer to our retail partners. Although we routinely
    inspect and monitor our manufacturing partners&#146; activities
    and products, we rely heavily upon their quality controls when
    producing and delivering the dispensers to our retail partners.
    Any of these matters could materially adversely affect our water
    dispenser business and, as a result, our profitability.
</DIV>
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    <B><FONT style="font-family: 'Times New Roman', Times">If we
    lose key personnel or are unable to recruit qualified personnel,
    our ability to implement our business strategies could be
    delayed or hindered. In addition, we may not be able to attract
    and retain the highly skilled employees we need to support our
    planned growth.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are highly dependent upon the services of our senior
    management because of their experience, industry relationships
    and knowledge of the business. We are particularly dependent on
    the services of Billy D. Prim, our Chairman, President and Chief
    Executive Officer. We do not have a formal succession plan in
    place for Mr. Prim. While our employment agreements with members
    of our senior management include customary confidentiality,
    non-competition and non-solicitation covenants, there can be no
    assurance that such provisions will be enforceable or adequately
    protect us. The loss of one or more of our key employees could
    seriously harm our business and we may not be able to attract
    and retain individuals with the same or similar level of
    experience or expertise. We face competition for qualified
    employees from numerous sources and there can be no assurance
    that we will be able to attract and retain qualified personnel
    on acceptable terms. Our ability to recruit and retain such
    personnel will depend upon a number of factors, such as our
    results of operations, prospects and the level of competition
    then prevailing in the market for qualified personnel. Failure
    to recruit and retain such personnel could materially adversely
    affect our business, financial condition and results of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">While
    many members of our senior management have experience as
    executives of a products and exchange services business, there
    can be no assurances that this experience and past success will
    result in our business becoming profitable.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many members of our senior management have had experience as
    senior managers of a company engaged in the supply, distribution
    and exchange of propane gas cylinders. While the business model
    for that company and the model for our business are similar, the
    propane gas industry and the bottled water industry are very
    different. For example, there are no assurances that consumer
    demand will exist for our bottled water products, water bottle
    exchange service or water dispensers sufficient to enable us to
    be profitable. While we believe our business model will be
    successful, any similarity between our business model and that
    of our senior management&#146;s predecessor employer should not
    be viewed as an indication that we will be profitable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    consolidation of retail customers may adversely impact our
    operating margins and profitability.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our customers, such as mass merchants, supermarkets, warehouse
    clubs, food distributors and drug and pharmacy stores, have
    consolidated in recent years and consolidation may continue. As
    a result of these consolidations, our large retail customers may
    seek lower pricing or increased promotions from us. If we fail
    to respond to these trends in our industry, our volume growth
    could slow or we may need to lower prices or increase trade
    promotions and consumer marketing for our products and services,
    both of which would adversely affect our financial results.
    These retailers may use floor or shelf space currently used for
    our products and services for their own private label products
    and services. In addition, retailers are increasingly carrying
    fewer brands in any one category and our results of operations
    will suffer if we are not selected by our significant customers
    to remain a vendor<B>.</B> In the event of consolidation
    involving our current retailers, we may lose key business if the
    surviving entities do not continue to purchase products or
    services from us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Adverse
    weather conditions could negatively impact our
    business.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unseasonable or unusual weather may negatively impact demand for
    our products. The sales of our bottled water products and water
    dispensers are influenced to some extent by weather conditions
    in the markets in which we operate. Unusually cool or rainy
    weather may reduce temporarily the demand for our products and
    contribute to lower sales, which would have an adverse effect on
    our results of operations for such periods.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We depend
    on key management information systems and third party service
    providers.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We depend on our management information systems (MIS) to process
    orders, manage inventory and accounts receivable, maintain
    distributor and customer information, maintain cost-efficient
    operations and assist distributors
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    in delivering products and services on a timely basis. Any
    disruption in the operation of our MIS tools, the loss of
    employees knowledgeable about such systems, the termination of
    our relationships with third-party MIS partners or our failure
    to continue to effectively modify such systems as business
    expands could require us to expend significant additional
    resources or to invest additional capital to continue to manage
    our business effectively, and could even affect our compliance
    with public reporting requirements. Additionally, our MIS tools
    are vulnerable to interruptions or other failures resulting
    from, among other things, natural disasters, terrorist attacks,
    software, equipment or telecommunications failures, processing
    errors, computer viruses, hackers, other security issues or
    supplier defaults. Security, backup and disaster recovery
    measures may not be adequate or implemented properly to avoid
    such disruptions or failures. Any disruption or failure of these
    systems or services could cause substantial errors, processing
    inefficiencies, security breaches, inability to use the systems
    or process transactions, loss of customers or other business
    disruptions, all of which could negatively affect our business
    and financial performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Water
    scarcity and poor quality could negatively impact our long-term
    profitability.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Water is a limited resource facing unprecedented challenges from
    overexploitation, population growth, increasing pollution, poor
    management and climate change. As demand for water continues to
    increase and as water becomes scarcer and the quality of
    available water deteriorates, our business may incur increasing
    costs or face capacity constraints which could adversely affect
    our profitability or net sales in the long run.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may
    pursue acquisitions and investments in new product lines,
    businesses or technologies that involve numerous risks, which
    could disrupt our business or adversely affect our financial
    condition and results of operations.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the future, we may acquire or invest in new product lines,
    businesses or technologies to expand our current bottled water
    products and services. Acquisitions present a number of
    potential risks and challenges that could disrupt our business
    operations, increase our operating costs or capital expenditure
    requirements and reduce the value of the acquired product line,
    business or technology. For example, if we identify an
    acquisition candidate, we may not be able to successfully
    negotiate or finance the acquisition on favorable terms or at
    all. The process of negotiating acquisitions and integrating
    acquired products, services, technologies, personnel or
    businesses might result in significant transaction costs,
    operating difficulties or unexpected expenditures and might
    require significant management attention that would otherwise be
    available for ongoing development of our business. If we are
    successful in consummating an acquisition, we may not be able to
    integrate the acquired product line, business or technology into
    our existing business and products and we may not achieve the
    anticipated benefits of any acquisition<B>.</B> Furthermore,
    potential acquisitions and investments may divert our
    management&#146;s attention, require considerable cash outlays
    and require substantial additional expenses that could harm our
    existing operations and adversely affect our results of
    operations and financial condition. To complete future
    acquisitions, we may issue equity securities, incur debt, assume
    contingent liabilities or incur amortization expenses and
    write-downs of acquired assets, any of which could dilute the
    interests of our stockholders or adversely affect our
    profitability or cash flow.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Changes
    in taxation requirements could affect our financial
    results.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to income tax in the numerous jurisdictions in
    which we generate net sales. In addition, our water dispensers
    are subject to certain import duties and sales taxes in certain
    jurisdictions in which we operate. Increases in income tax rates
    could reduce our after-tax income from affected jurisdictions,
    while increases in indirect taxes could affect our
    products&#146; and services&#146; affordability and therefore
    reduce demand for our products and services.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    ability to use net operating loss carryforwards in the United
    States may be limited.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had net operating losses of
    approximately $55.0&#160;million for federal income tax
    purposes, which expire at various dates through 2029. To the
    extent available and not otherwise utilized, we intend
</DIV>
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    to use any net operating loss carryforwards to reduce the
    U.S.&#160;corporate income tax liability associated with our
    operations. Section&#160;382 of the Internal Revenue Code of
    1986, as amended, generally imposes an annual limitation on the
    amount of net operating loss carryforwards that may be used to
    offset taxable income when a corporation has undergone certain
    changes in stock ownership. Our ability to utilize net operating
    loss carryforwards may be limited, under this section or
    otherwise, by the issuance of common stock in this offering. To
    the extent our use of net operating loss carryforwards is
    significantly limited, our income could be subject to
    U.S.&#160;corporate income tax earlier than it would if we were
    able to use net operating loss carryforwards, which could result
    in lower profits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    financial results may be negatively impacted by the recent
    global financial events.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The recent global financial events have resulted in the
    consolidation, failure or near failure of a number of
    institutions in the banking, insurance and investment banking
    industries and have substantially reduced the ability of
    companies to obtain financing. These events also led to a
    substantial reduction in stock market valuations during 2008 and
    the first few months of 2009, although stock market valuations
    rebounded significantly in the latter half of 2009. These events
    could have a number of different effects on our business,
    including:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a reduction in consumer spending, which could result in a
    reduction in our sales volume;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a shift in the purchasing habits of our target consumers;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a negative impact on the ability of our retail customers to
    timely pay their obligations to us, thus reducing our cash flow;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a negative impact on the ability of our vendors to timely supply
    materials;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an increased likelihood that our lender may be unable to honor
    its commitments under our revolving credit facility.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other events or conditions may arise directly or indirectly from
    the global financial events that could negatively impact our
    business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Relating to Regulatory and Legal Issues</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    products and services are heavily regulated at both the state
    and federal level. If we are unable to continue to comply with
    applicable regulations and standards in any jurisdiction, we
    might not be able to sell our products in that jurisdiction or
    they could be recalled, and our business could be seriously
    harmed.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The production, distribution and sale in the United States of
    our products are subject to the Federal Food, Drug and Cosmetic
    Act; the Occupational Safety and Health Act; the Americans with
    Disabilities Act (the &#147;ADA&#148;); the Lanham Act; various
    environmental statutes; and various other federal, state and
    local statutes and regulations applicable to the production,
    transportation, sale, safety, advertising, promotion, labeling
    and ingredients of such products. For example, measures have
    been enacted in various localities and states that require a
    deposit to be charged for certain non-refillable beverage
    containers. The precise requirements imposed by these measures
    vary. Other deposit, recycling or product stewardship proposals
    have been introduced in various jurisdictions. We anticipate
    that similar legislation or regulations may be proposed in the
    future at the local, state and federal levels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S. Food and Drug Administration (the &#147;FDA&#148;)
    regulates bottled water as a food under the federal Food, Drug
    and Cosmetic Act. Our bottled water must meet FDA requirements
    of safety for human consumption, identity, quality and labeling.
    Further, any claims we make in marketing our products, such as
    claims related to the beneficial health effects of drinking
    water, are subject to FDA&#146;s advertising and promotion
    requirements and restrictions. In addition, the FDA has
    established current good manufacturing practices, regulations
    which govern the facilities, methods, practices and controls
    used for the processing, bottling and distribution of bottled
    drinking
</DIV>
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    water. We and our third-party bottling and distribution partners
    are subject to these requirements<B>.</B> In addition, all
    public drinking water must meet Environmental Protection Agency
    standards established under the Safe Drinking Water Act for
    mineral and chemical concentration and drinking water quality
    and treatment. We also must comply with overlapping and, in some
    cases, inconsistent state regulations in a variety of areas.
    These state-level regulations, among other things, set standards
    for approved water sources and the information that must be
    provided and the basis on which any therapeutic claims for water
    may be made. We must expend resources to continuously monitor
    state legislative and regulatory activities in order to identify
    and ensure compliance with laws and regulations that apply to
    our bottled water business in each state in which we operate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, the manufacture, sale and use of resins used to
    make water bottles are subject to regulation by the FDA. These
    regulations relate to substances used in food packaging
    materials, not with specific finished food packaging products.
    Our beverage containers are deemed to be in compliance with FDA
    regulations if the components used in the containers:
    (i)&#160;are approved by the FDA as indirect food additives for
    their intended uses and comply with the applicable FDA indirect
    food additive regulations; or (ii)&#160;are generally recognized
    as safe for their intended uses and are of suitable purity for
    those intended uses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Consumer Product Safety Commission, FDA or other applicable
    regulatory bodies may require the recall, repair or replacement
    of our products if those products are found not to be in
    compliance with applicable standards or regulations. The failure
    of our third party manufacturers or bottlers to produce
    merchandise that adheres to our quality control standards could
    damage our reputation and lead to customer litigation against
    us. If our manufacturers or distributors are unable or unwilling
    to recall products failing to meet our quality standards, we may
    be required to remove merchandise or recall those products at a
    substantial cost to us. We may be unable to recover costs
    related to product recalls.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our self-imposed standards meet or exceed those
    set by federal, state and local regulations. Nevertheless, our
    failure or the failure of our suppliers, bottlers or
    distributors to comply with federal or state laws, rules or
    regulations could subject us to potential governmental
    enforcement action for violation of such regulations, which
    could result in warning letters, fines, product recalls or
    seizures, civil or criminal penalties
    <FONT style="white-space: nowrap">and/or</FONT>
    temporary or permanent injunctions, each of which could
    materially harm our business, financial condition and results of
    operations. In addition, our failure, or even our perceived
    failure, to comply with applicable laws, rules or regulations
    could cause retailers and others to determine not to do business
    with us or reduce the amount of business they do with us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">In
    January 2010, the U.S. Food and Drug Administration issued an
    updated report regarding bisphenol A, or BPA, a chemical used in
    food and beverage packaging and other products that can possibly
    have adverse health effects on consumers, particularly on young
    children. The three- and five- gallon polycarbonate plastic
    bottles that we use to bottle our water contain BPA. Any
    significant change in perception by our customers or government
    regulation of polycarbonate plastic in food and beverage
    products could adversely affect our operations and financial
    results.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2010, the U.S.&#160;Food and Drug Administration
    issued an updated report regarding its current perspective on
    the safety of BPA in food packaging materials, asserting the
    need for additional studies on BPA and issuing its interim
    public health recommendations. BPA is an industrial chemical
    used to make hard, clear plastic known as polycarbonate, which
    is currently used in our three- and five-gallon water bottles.
    BPA is regulated by the FDA as an indirect food additive. While
    the FDA notes that studies employing standardized toxicity tests
    support the safety of human exposure to BPA at the low levels
    currently experienced by consumers, the FDA&#146;s report
    additionally acknowledges the results of certain recent studies
    which suggest some concern regarding potential developmental and
    behavioral effects of BPA exposure, particularly on infants and
    young children.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The FDA indicated that it plans to continue to evaluate these
    low dose toxicity studies, as well as other recent peer-reviewed
    studies related to BPA while, at the same time, soliciting
    public comment and inter-agency scientific input before updating
    its formal assessment of the safety of BPA for use in food
    contact applications. In the interim, the FDA&#146;s public
    health recommendations include taking reasonable steps to reduce
    exposure of infants to
</DIV>
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    BPA in the food supply and working with industry to support and
    evaluate manufacturing practices and alternative substances that
    could reduce exposure in other populations. Further, the FDA
    indicates that it plans to review its existing authority to
    shift to a more robust regulatory framework for oversight of BPA.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Consistent with the findings of numerous international
    regulatory bodies, we believe that the scientific evidence
    suggests that polycarbonate plastic made with BPA is a safe
    packing material for all consumers. Nonetheless, media reports
    and the FDA report have prompted concern in our marketplace
    among existing and potential customers. It is possible that
    developments surrounding this issue could lead to adverse
    effects on our business. Such developments could include:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

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    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Increased publicity that changes public or regulatory perception
    regarding packaging that uses BPA, so that significant numbers
    of consumers stop purchasing products that are packaged in
    polycarbonate plastic.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The emergence of new scientific evidence that suggests that the
    low doses of BPA to which consumers may be exposed when using
    polycarbonate plastic is unsafe.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Interpretations of existing evidence by the FDA or other
    regulatory agencies that lead to prohibitions on the use of
    polycarbonate plastic as packaging for consumable products.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The inability of sellers of consumable products to find an
    adequate supply of alternative packaging if polycarbonate
    plastic containing BPA becomes an undesirable or prohibited
    packaging material.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of these events were to occur, our sales and operating
    results could be materially adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    inability to protect our intellectual property, or our
    involvement in damaging and disruptive intellectual property
    litigation, could adversely affect our business, results of
    operations and financial condition or result in the loss of use
    of products or services.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed certain patent applications and trademark
    registration applications and intend to seek additional patents,
    to develop additional trademarks and seek federal registrations
    for such trademarks and to develop other intellectual property.
    We consider our Primo name and related trademarks and our other
    intellectual property to be valuable to our business and the
    establishment of a national branded bottled water exchange
    program. We rely on a combination of patent, copyright,
    trademark and trade secret laws and other arrangements to
    protect our proprietary rights and could incur substantial
    expense to enforce our rights under such laws. A number of other
    companies, however, use trademarks similar or identical to the
    Primo<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    mark to identify their products, and we may not be able to stop
    these other companies from using such trademarks. The
    requirement to change any of our trademarks, service marks or
    trade names could entail significant expense and result in the
    loss of any goodwill associated with that trademark, service
    mark or trade name. While we have filed, and intend to file in
    the future, patent applications, where appropriate, and to
    pursue such applications with the patent authorities, we cannot
    be sure that patents will be issued on such applications or that
    any issued patents will not be successfully contested by third
    parties. Also, since issuance of a patent does not prevent other
    companies from using alternative, non-infringing technology or
    designs, we cannot be sure that any issued patents, or patents
    that may be issued to others and licensed to us, will provide
    significant or any commercial protection, especially as new
    competitors enter the market.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to patent protection, we also rely on trade secrets
    and other non-patented proprietary information relating to our
    product development, business processes and operating
    activities. We seek to protect this information through
    appropriate efforts to maintain its secrecy, including
    confidentiality agreements. We cannot be sure that these efforts
    will be successful or that confidentiality agreements will not
    be breached. We also cannot be sure that we would have adequate
    remedies for any breach of such agreements or other
    misappropriation of our trade secrets, or that our trade secrets
    and proprietary know-how will not otherwise become known or be
    independently discovered by others. Where necessary, we may
    initiate litigation to enforce our patent or other intellectual
    property rights. Any such litigation may require us to spend a
    substantial amount of time and money
</DIV>
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    and could distract management from its
    <FONT style="white-space: nowrap">day-to-day</FONT>
    operations<B>.</B> Moreover, there is no assurance that we will
    be successful in any such litigation or that such litigation
    will not result in successful counterclaims or challenges to the
    validity of our intellectual property rights. Our failure to
    successfully develop intellectual property, or to successfully
    obtain, maintain and enforce patents, trademarks and other
    intellectual property, could affect our ability to distinguish
    our products and services from those of our competitors and
    could cause our sales to suffer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business and our ability to provide products and services
    may be impaired by claims that we infringe the intellectual
    property rights of others. Vigorous protection and pursuit of
    intellectual property rights characterize the consumer products
    industry. These traits can result in significant, protracted and
    materially expensive litigation. In addition, parties making
    infringement and other claims may be able to obtain injunctive
    or other equitable relief that could effectively block our
    ability to provide our products, services or utilize our
    business methods and could cause us to pay substantial damages.
    In the event of a successful claim of infringement, we may need
    to obtain one or more licenses from third parties, which may not
    be available at a reasonable cost, or at all. It is possible
    that our intellectual property rights may not be valid or that
    we may infringe existing or future proprietary rights of others.
    Any successful infringement claims could subject us to
    significant liabilities, require us to seek licenses on
    unfavorable terms, prevent us from manufacturing or selling
    products, providing services and utilizing business methods and
    require us to redesign or, in the case of trademark claims,
    re-brand our Company, products or services, any of which could
    have a material adverse effect on our business, results of
    operations or financial condition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legislative
    and executive action in state and local governments enacting
    local taxes on bottled water to include multi-gallon bottled
    water could adversely affect our business and financial
    results.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Regulations have been enacted or proposed in some localities
    where we operate to enact local taxes on bottled water. These
    actions are purportedly designed to discourage the use of
    bottled water due in large part to concerns about the
    environmental effects of producing and discarding large numbers
    of plastic bottles. While we have not to date directly
    experienced any adverse effects from these concerns, and we
    believe that our products are sufficiently different from those
    affected by recent enactments, there is no assurance that our
    products will not be subject to future legislative and executive
    action by state and local governments, which could have a
    material adverse effect on our business, results of operations
    or financial condition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Litigation
    or legal proceedings could expose us to significant liabilities,
    including product liability claims, and damage our
    reputation.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are from time to time party to various litigation claims and
    legal proceedings. We evaluate these claims and proceedings to
    assess the likelihood of unfavorable outcomes and estimate, if
    possible, the amount of potential losses. If our products are
    not properly manufactured or designed, personal injuries or
    property damage could result, which could subject us to claims
    for damages. The costs associated with defending product
    liability and other claims, and the payment of damages, could be
    substantial. Our reputation could also be adversely affected by
    such claims, whether or not successful.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may establish a reserve as appropriate based upon assessments
    and estimates in accordance with our accounting policies. We
    base our assessments, estimates and disclosures on the
    information available to us at the time and rely on legal and
    management judgment. Actual outcomes or losses may differ
    materially from assessments and estimates. Actual settlements,
    judgments or resolutions of these claims or proceedings may
    negatively affect our business and financial performance. A
    successful claim against us that is not covered by insurance or
    is in excess of our available insurance limits could require us
    to make significant payments of damages and could materially
    adversely affect our results of operations and financial
    condition.
</DIV>
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    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Relating to This Offering and Our Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">There has
    not been a public market for our shares and an active market may
    not develop or be maintained, which could limit your ability to
    sell shares of our common stock.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for our
    common stock. Although we intend to apply to list the common
    stock on The Nasdaq Global Market, an active public market for
    our shares may not develop or be sustained after this offering.
    The initial public offering price for our common stock will be
    determined through our negotiations with the underwriters and
    may not be indicative of the market price of our common stock
    after this offering. If you purchase shares of our common stock,
    you may not be able to resell those shares at or above the
    initial public offering price, or at all. We cannot predict the
    extent to which investor interest in our Company will lead to
    the development of an active trading market on The Nasdaq Global
    Market or otherwise or how liquid that market might become. An
    active public market for our common stock may not develop or be
    sustained after this offering. If an active public market does
    not develop or is not sustained, it may be difficult for you to
    sell your shares of common stock at a price that is attractive
    to you, or at all.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The value
    of our common stock could be volatile.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The overall market and the price of our common stock may
    fluctuate greatly. The trading price of our common stock may be
    significantly affected by various factors, including:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    quarterly fluctuations in our operating results;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in investors&#146; and analysts&#146; perception of the
    business risks and conditions of our business;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our ability to meet the earnings estimates and other performance
    expectations of financial analysts or investors;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unfavorable commentary or downgrades of our stock by equity
    research analysts;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    termination of
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements or other restrictions on the ability of our existing
    stockholders to sell their shares after this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    fluctuations in the stock prices of our peer companies or in
    stock markets in general;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    general economic or political conditions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If
    securities or industry analysts do not publish research or
    publish inaccurate or unfavorable research about our business,
    our stock price and trading volume could decline.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The trading market for our common stock will depend in part on
    the research and reports that securities or industry analysts
    publish about us or our business. We do not currently have and
    may never obtain research coverage by securities and industry
    analysts. If no securities or industry analysts commence
    coverage of our Company, the trading price for our stock would
    be negatively impacted. If we obtain securities or industry
    analyst coverage and if one or more of the analysts who covers
    us downgrades our stock or publishes inaccurate or unfavorable
    research about our business, our stock price would likely
    decline. If one or more of these analysts ceases coverage of us
    or fails to publish reports on us regularly, demand for our
    stock could decrease, which could cause our stock price and
    trading volume to decline.
</DIV>
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    <BR>
    20
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Future
    sales of our common stock, or the perception in the public
    markets that these sales may occur, may depress our stock
    price.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales of a large number of our shares of common stock in the
    public market after this offering, or the perception that such
    sales could occur, could adversely affect the market price of
    our common stock and could impair our ability to sell equity
    securities in the future at a time and at a price that we deem
    appropriate. After the closing of this offering, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock
    (&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    if the underwriters exercise their option to purchase additional
    shares in full) outstanding. The shares of common stock offered
    in this offering will be freely tradable without restriction
    under the Securities Act of 1933, as amended (the
    &#147;Securities Act&#148;), except for any shares of our common
    stock that may be held or acquired by our directors, executive
    officers and other affiliates, as that term is defined in the
    Securities Act, which will be restricted securities under the
    Securities Act. Restricted securities may not be sold in the
    public market unless the sale is registered under the Securities
    Act or an exemption from registration is available.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We, our executive officers, directors and certain stockholders
    have agreed, subject to certain exceptions, with the
    underwriters not to offer, sell, contract to sell or otherwise
    dispose of any common stock or securities convertible into or
    exchangeable for shares of common stock during the period from
    the date of this prospectus continuing through the date
    180&#160;days after the date of this prospectus. These shares
    will represent&#160;&#160;&#160;&#160;&#160;% of our outstanding
    common stock after this offering
    (or&#160;&#160;&#160;&#160;&#160;% if the underwriters exercise
    their option to purchase additional shares in full). As
    restrictions on resale end, the market price of our common stock
    could decline if the holders of the restricted shares sell them
    or are perceived by the market as intending to sell them. Thomas
    Weisel Partners LLC may, in its sole discretion, release any of
    these shares from these restrictions at any time without notice.
    See &#147;Shares&#160;Eligible for Future Sale&#148; and
    &#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our shares of common stock outstanding as of the date of
    this prospectus may be sold in the public market by existing
    stockholders 180&#160;days after the date of this prospectus,
    subject to applicable volume and other limitations imposed under
    federal securities laws. See &#147;Shares&#160;Eligible for
    Future Sale&#148; for a more detailed description of the
    restrictions on selling shares of our common stock after this
    offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the future, we may also issue our securities in connection
    with investments or acquisitions or in order to raise capital
    for other purposes. The amount of shares of our common stock
    issued in connection with these matters could constitute a
    material portion of our then-outstanding shares of our common
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Purchasers
    in this offering will experience immediate and substantial
    dilution in net tangible book value.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The initial public offering price per share is expected to be
    substantially higher than the net tangible book value per share
    of our outstanding common stock. Purchasers of shares in this
    offering will experience immediate dilution in the net tangible
    book value of their shares. Based on an assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share, the
    mid-point of the range set forth on the cover of this
    prospectus, dilution per share in this offering will be
    $&#160;&#160;&#160;&#160;&#160; per share
    (or&#160;&#160;&#160;&#160;&#160;% of the price). Further, if we
    issue additional equity securities to raise additional capital,
    your ownership interest in our Company may be diluted and the
    value of your investment may be reduced. See
    &#147;Dilution.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Concentration
    of ownership among our existing executive officers, directors
    and their affiliates may prevent new investors from influencing
    significant corporate decisions.</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, our executive officers,
    directors and their affiliates will beneficially own, in the
    aggregate, approximately&#160;&#160;&#160;&#160;&#160;% of our
    outstanding shares of common stock. In particular, Billy D.
    Prim, our Chairman, Chief Executive Officer and President, will
    beneficially own approximately&#160;&#160;&#160;&#160;&#160;% of
    our outstanding shares of common stock upon completion of this
    offering. As a result, these stockholders will be able to
    exercise a significant level of control over all matters
    requiring stockholder approval, including the election of
    directors, amendment of our certificate of incorporation and
    approval of significant corporate transactions. This control
</DIV>
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    <BR>
    21
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    could have the effect of delaying or preventing a change of
    control of our Company or changes in management and will make
    the approval of certain transactions difficult or impossible
    without the support of these stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Anti-takeover
    provisions in our charter documents and Delaware law might
    discourage or delay acquisition attempts for us that you might
    consider favorable.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation and
    amended and restated bylaws will contain provisions that may
    make the acquisition of our Company more difficult without the
    approval of our Board of Directors. These provisions:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    authorize the issuance of undesignated preferred stock, the
    terms of which may be established and the shares of which may be
    issued without stockholder approval, and which may include super
    voting, special approval, dividend, or other rights or
    preferences superior to the rights of the holders of common
    stock;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    eliminate the ability of our stockholders to act by written
    consent;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establish advance notice requirements for nominations for
    elections to our Board of Directors or for proposing matters
    that can be acted upon by stockholders at stockholder meetings;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that the Board of Directors is expressly authorized to
    make, alter or repeal our amended and restated bylaws;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establish a classified board of directors the members of which
    will serve staggered three-year terms.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a Delaware corporation, we are also subject to provisions of
    Delaware law, including Section&#160;203 of the Delaware General
    Corporation Law, which prevents some stockholders holding more
    than 15% of our outstanding common stock from engaging in
    certain business combinations without approval of the holders of
    substantially all of our outstanding common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These anti-takeover provisions and other provisions under
    Delaware law could discourage, delay or prevent a transaction
    involving a change in control of our Company, including actions
    that our stockholders may deem advantageous, or negatively
    affect the trading price of our common stock. These provisions
    could also discourage proxy contests and make it more difficult
    for you and other stockholders to elect directors of your
    choosing and to cause us to take other corporate actions you
    desire.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Since we
    have no current plans to pay cash dividends on our common stock
    for the foreseeable future, you may not receive any return on
    investment unless you sell your common stock for a price greater
    than that which you paid for it.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not anticipate paying any dividends to our stockholders
    for the foreseeable future. The agreements governing our
    indebtedness also restrict our ability to pay dividends. Any
    determination to pay dividends in the future will be made at the
    discretion of our Board of Directors and will depend on our
    results of operations, financial conditions, contractual
    restrictions, restrictions imposed by applicable law and other
    factors our Board of Directors deems relevant. Accordingly, you
    may have to sell some or all of your common stock in order to
    generate cash flow from your investment. You may not receive a
    gain on your investment when you sell our common stock and may
    lose some or all of the amount of your investment. Investors
    seeking cash dividends in the foreseeable future should not
    purchase our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We will
    incur increased costs as a result of being a publicly-traded
    company.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a company with publicly-traded securities, we will incur
    significant legal, accounting and other expenses not presently
    incurred. In addition, the Sarbanes-Oxley Act of 2002, as well
    as rules promulgated by the U.S. Securities and Exchange
    Commission, or SEC, and The Nasdaq Stock Market, require us to
    adopt corporate
</DIV>
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    <BR>
    22
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    governance practices applicable to U.S. public companies<B>.</B>
    These rules and regulations may increase our legal and financial
    compliance costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">If we do
    not timely satisfy the requirements of Section&#160;404 of the
    Sarbanes-Oxley Act of 2002, the trading price of our common
    stock could be adversely affected.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a company with publicly-traded securities, we will be subject
    to Section&#160;404 of the Sarbanes-Oxley Act of 2002. This law
    requires us to document and test the effectiveness of our
    internal control over financial reporting in accordance with an
    established internal control framework and to report on our
    conclusion as to the effectiveness of our internal control over
    financial reporting. The cost to comply with this law will
    affect our net income adversely. Any delays or difficulty in
    satisfying the requirements of Section&#160;404 could, among
    other things, cause investors to lose confidence in, or
    otherwise be unable to rely on, the accuracy of our reported
    financial information, which could adversely affect the trading
    price of our common stock. In addition, failure to comply with
    Section&#160;404 could result in The Nasdaq Stock Market
    imposing sanctions on us, which could include the delisting of
    our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Relating to Our Indebtedness</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Restrictive
    covenants in our debt instruments restrict or prohibit our
    ability to engage in or enter into a variety of transactions,
    which could adversely restrict our financial and operating
    flexibility and subject us to other risks.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our senior revolving credit facility contains various
    restrictive covenants that limit our and our subsidiaries&#146;
    ability to take certain actions. In particular, these agreements
    limit our and our subsidiaries&#146; ability to, among other
    things:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    incur additional indebtedness;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    make restricted payments (including paying dividends on,
    redeeming or repurchasing capital stock);
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    make certain investments or acquisitions;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    create liens on our assets to secure debt;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    engage in certain types of transactions with affiliates;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    engage in
    <FONT style="white-space: nowrap">sale-and-leaseback</FONT>
    or similar transactions;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    transfer or sell assets, merge, liquidate or
    <FONT style="white-space: nowrap">wind-up.</FONT>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any or all of these covenants could have a material adverse
    effect on our business by limiting our ability to take advantage
    of financing, merger and acquisition or other corporate
    opportunities and to fund our operations. Any future debt could
    also contain financial and other covenants more restrictive than
    those imposed under our current senior revolving credit facility.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A breach of a covenant or other provision in any debt instrument
    governing our current or future indebtedness could result in a
    default under that instrument and, due to customary
    cross-default and cross-acceleration provisions, could result in
    a default under any other debt instrument that we may have. If
    the lenders under our current or future indebtedness were to so
    accelerate the payment of the indebtedness, we cannot assure you
    that our assets or cash flow would be sufficient to repay in
    full our outstanding indebtedness, in which event we likely
    would seek reorganization or protection under bankruptcy or
    other, similar laws.
</DIV>
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    23
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Global
    capital and credit market issues could negatively affect our
    liquidity, increase our costs of borrowing and disrupt the
    operations of our suppliers, bottlers, distributors and
    customers.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The global capital and credit markets have experienced increased
    volatility and disruption over the past two years, making it
    more difficult for companies to access those markets. There can
    be no assurance that continued or increased volatility and
    disruption in the capital and credit markets will not impair our
    liquidity or increase our costs of borrowing. Our business could
    also be negatively impacted if our suppliers, bottlers,
    distributors or retail customers experience disruptions
    resulting from tighter capital and credit markets or a slowdown
    in the general economy.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">We may be
    unable to generate sufficient cash flow to service our debt
    obligations. In addition, our inability to generate sufficient
    cash flows to support operations and other activities without
    debt financing could prevent future growth and
    success.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability to generate cash, make scheduled payments or
    refinance our obligations depends on our successful financial
    and operating performance. Our financial and operating
    performance, cash flow and capital resources depend upon
    prevailing economic conditions and various financial, business
    and other factors, many of which are beyond our control. If our
    cash flow and capital resources are insufficient to fund our
    debt service obligations, we may be forced to reduce or delay
    capital expenditures, sell material assets or operations, obtain
    additional capital or restructure our debt, any or all of which
    could have a material adverse effect on our business, financial
    condition and results of operations. In addition, we cannot
    assure you that we would be able to take any of these actions on
    terms acceptable to us, or at all, that these actions would
    enable us to continue to satisfy our capital requirements or
    that these actions would be permitted under the terms of our
    various debt agreements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we are unable to generate sufficient cash flows to support
    capital expansion, business acquisition plans and general
    operating activities, and are unable obtain the necessary
    funding for these items through debt financing, our business
    could be negatively affected and we may be unable to expand into
    existing and new markets. Our ability to generate cash flows is
    dependent in part upon obtaining necessary financing at
    favorable interest rates. Interest rate fluctuations and other
    capital market conditions may prevent us from doing so.
</DIV>
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    <BR>
    24
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='104'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAUTIONARY
    NOTE&#160;REGARDING FORWARD-LOOKING STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains forward-looking statements that are
    based on current expectations, estimates, forecasts and
    projections regarding management&#146;s beliefs and assumptions
    about the industry in which we operate. Such statements include,
    in particular, statements about our plans, strategies and
    prospects under the headings &#147;Prospectus Summary,&#148;
    &#147;Risk Factors,&#148; &#147;Use of Proceeds,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; and
    &#147;Business.&#148; When used in this prospectus, the words
    &#147;anticipate,&#148; &#147;believe,&#148; &#147;could,&#148;
    &#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148;
    &#147;may,&#148; &#147;plan,&#148; &#147;potential,&#148;
    &#147;predict,&#148; &#147;project,&#148; &#147;should,&#148;
    &#147;will,&#148; &#147;would,&#148; and similar expressions
    identify forward-looking statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Forward-looking statements are not a guarantee of future
    performance or results, and will not necessarily be accurate
    indications of the times at, or by, which such performance or
    results will be achieved. Forward-looking statements are based
    on information available at the time the statements are made and
    involve known and unknown risks, uncertainties and other factors
    that may cause actual outcomes and results to differ materially
    from what is expressed or forecasted in such forward-looking
    statements. These forward-looking statements include, but are
    not limited to, statements relating to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our expectations regarding the use of proceeds from this
    offering;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    growth in the market for purified water and increased consumer
    preference toward purified water relative to tap water or other
    beverages;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    consumer recognition of our brand and our water bottle exchange
    service and water dispenser products;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the use of our retail relationships, single-vendor solution,
    national network of independent bottlers and distributors and
    MIS tools to facilitate our introduction of new purified
    water-related products in the future;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our opportunities to increase store penetration with our
    existing retail relationships and develop new retail
    relationships;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the continuing development, innovation and sale of our water
    dispensers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our intention to offer new products and services, including
    self-service refill vending machines and automated, self-bagging
    purified ice dispensers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our expectations regarding our business strategy, anticipated
    profitability, liquidity position, future financial performance,
    inflation and expense levels;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our ability to use any net operating loss carryforwards;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our dividend policy;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our ability to attract and retain key personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our expectations regarding additional costs connected to the
    growth of our business and costs related to becoming a public
    company; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our policies regarding our executive compensation program and
    the level of executive compensation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have included important factors in the cautionary statements
    included in this prospectus, particularly in the section
    entitled &#147;Risk Factors,&#148; that we believe could cause
    actual results or events to differ materially from the
    forward-looking statements we make. Except as required by
    applicable law, we assume no obligation to update any
    forward-looking statements publicly or to update the reasons why
    actual results could differ materially from those anticipated in
    any forward looking statements, even if new information becomes
    available in the future.
</DIV>
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    <BR>
    25
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='105'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds to us from this offering will
    be approximately $&#160;&#160;&#160;&#160;&#160;&#160;million
    (approximately $&#160;&#160;&#160;&#160;&#160;&#160;million if
    the underwriters&#146; over-allotment option is exercised in
    full). This estimate is based upon an assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share,
    less estimated underwriting discounts and commissions and
    offering expenses payable by us. A $1.00 increase (decrease) in
    the assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share would increase
    (decrease) the net proceeds to us from this offering by
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting estimated underwriting discounts and commissions and
    estimated offering expenses payable by us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to use the net proceeds from this offering as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; to repay our
    14%&#160;subordinated convertible notes due March&#160;31, 2011
    (&#147;2011 Notes&#148;); and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the remaining $&#160;&#160;&#160;&#160;&#160; for working
    capital and general corporate purposes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010, we had $15.0&#160;million principal amount of 2011 Notes
    outstanding that bear interest at 14% per annum and mature on
    March&#160;31, 2011. We issued the 2011 Notes on
    December&#160;30, 2009 and used the proceeds of the 2011 Notes
    to retire $8.0&#160;million principal amount of subordinated
    debt and to repay approximately $7.0&#160;million of borrowings
    under our revolving credit facility.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pending use of the net proceeds of this offering, we intend to
    invest such net proceeds in short-term, interest-bearing
    investment grade securities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<A name='106'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have never paid or declared cash dividends on our common
    stock. We currently intend to retain all available funds and any
    future earnings to finance the development and expansion of our
    business. We do not expect to pay any dividends on our common
    stock in the foreseeable future. Any future determination to pay
    dividends will be at the discretion of our Board of Directors
    and will depend upon various factors, including our results of
    operations, financial condition, capital requirements,
    investment opportunities and other factors that our Board of
    Directors deems relevant. Our senior credit agreement currently
    limits our ability to pay cash dividends.
</DIV>
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    <BR>
    26
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our capitalization as of
    December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on an actual basis (without giving effect to
    the&#160;&#160;-for-&#160;&#160; reverse stock split of our
    common stock);
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on a pro forma basis to give effect to
    the&#160;&#160;-for-&#160;&#160; reverse stock split of our
    common stock and to the conversion of all outstanding
    Series&#160;A and Series&#160;C convertible preferred stock into
    common stock, as if both the reverse stock split and the
    conversion had occurred as of December&#160;31, 2009;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on a pro forma as adjusted basis to reflect the reverse stock
    split and conversion described above, as well as our sale of
    shares in this offering at an assumed initial public offering
    price of $&#160;&#160;&#160;&#160;&#160; per share, which is the
    midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us, and the
    application of a portion of the net proceeds from such sale of
    common stock to repay our 2011 Notes, as if each had occurred as
    of December&#160;31, 2009.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should read this table in conjunction with &#147;Use of
    Proceeds,&#148; &#147;Selected Historical Consolidated Financial
    and Other Data,&#148; &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations&#148;
    and our consolidated financial statements and the notes thereto
    included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="69%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>as Adjusted</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands, except par value data) (Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,326
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,451
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred stock, $0.001&#160;par value, 100,000&#160;shares
    authorized
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Series&#160;A convertible preferred stock, 18,780&#160;shares
    issued and outstanding, actual, and no shares issued or
    outstanding, pro forma and pro forma as adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Series&#160;B preferred stock, 23,280&#160;shares issued and
    outstanding, actual and pro forma, and no shares issued or
    outstanding, pro forma as adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Series&#160;C convertible preferred stock, 12,520&#160;shares
    issued and outstanding, actual, and no shares issued or
    outstanding, pro forma and pro forma as adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock ($0.001&#160;par value, 200,000&#160;shares
    authorized and 15,158&#160;shares issued and outstanding,
    actual;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    authorized
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issued and outstanding, pro forma,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issued and outstanding pro forma as adjusted)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86,723
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,797
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (90,999
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (409
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    22,368
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The shares outstanding data in the preceding table as of
    December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series&#160;B preferred stock and Series&#160;C convertible
    preferred stock that will expire&#160;&#160;&#160;&#160;&#160;
    days after the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire&#160;&#160;&#160;&#160;&#160;&#160;days after the closing
    of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our 2011 Notes
    that will expire December&#160;30, 2019;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2004 Stock Plan;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock available for issuance under our 2010 Omnibus
    Long-Term Incentive Plan, which we have adopted in connection
    with this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    excludes an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock available for issuance under our 2010 Employee
    Stock Purchase Plan, which we have adopted in connection with
    this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    assumes no exercise of the underwriters&#146; over-allotment
    option to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DILUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you invest in our common stock, your ownership interest will
    be diluted to the extent of the difference between the initial
    public offering price per share of our common stock and the pro
    forma as adjusted net tangible book value per share of our
    common stock immediately after the closing of this offering. Pro
    forma net tangible book value per share represents total
    tangible assets less total liabilities, divided by the number of
    shares of common stock outstanding, after giving effect to
    the&#160;&#160;&#160;&#160;&#160;-for-&#160;&#160;&#160;&#160;&#160;reverse
    stock split of our common stock and the conversion of all of our
    outstanding Series&#160;A and Series&#160;C convertible
    preferred stock into an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock as if both the reverse stock split and the
    conversion had occurred as of December&#160;31, 2009. The pro
    forma net tangible book value of our common stock as of
    December&#160;31, 2009, was approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or approximately
    $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After giving effect to our sale of shares at an assumed initial
    public offering price of $&#160;&#160;&#160;&#160;&#160; per
    share, which is the midpoint of the range set forth on the cover
    page of this prospectus, deducting estimated underwriting
    discounts and commissions and offering expenses payable by us,
    and applying the net proceeds from this sale, the pro forma as
    adjusted net tangible book value of our common stock, as of
    December&#160;31, 2009, would have been approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or
    $&#160;&#160;&#160;&#160;&#160; per share. This amount
    represents an immediate increase in net tangible book value to
    our existing stockholders of $&#160;&#160;&#160;&#160;&#160; per
    share and an immediate dilution to new investors of
    $&#160;&#160;&#160;&#160;&#160; per share. The following table
    illustrates this per share dilution:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Initial public offering price per share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Pro forma net tangible book value per share as of
    December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Increase in pro forma net tangible book value per share
    attributable to new investors in this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma as adjusted net tangible book value per share after
    giving effect to this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dilution per share to new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the underwriters exercise their over-allotment option in
    full, there will be an increase in pro forma as adjusted net
    tangible book value per share to existing stockholders of
    $&#160;&#160;&#160;&#160;&#160; per share and an immediate
    dilution in pro forma as adjusted net tangible book value per
    share to new investors of $&#160;&#160;&#160;&#160;&#160; per
    share based upon the assumed initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per share. A $1.00 increase or
    decrease in the assumed initial public offering price per share
    would increase or decrease, respectively, the pro forma as
    adjusted net tangible book value per share of common stock after
    this offering by $&#160;&#160;&#160;&#160;&#160; per share and
    increase or decrease, respectively, the pro forma as adjusted
    dilution per share of common stock to new investors in this
    offering by $&#160;&#160;&#160;&#160;&#160; per share, in each
    case calculated as described above and assuming that the number
    of shares offered by us, as set forth on the cover page of this
    prospectus, remains the same.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes, as of December&#160;31, 2009, on
    a pro forma as adjusted basis, the number of shares of common
    stock purchased from us, the total consideration paid to us and
    the average price per share paid by our existing stockholders
    and by new investors, based upon an assumed initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per share and
    before deducting estimated underwriting discounts and
    commissions and offering expenses payable by us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Consideration</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Share</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Existing stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    %
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    %
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    %
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    %
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    29
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The discussion and tables above are based
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding as of December&#160;31, 2009, on a
    pro forma as adjusted basis and:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reflect
    a&#160;&#160;&#160;&#160;&#160;-for-&#160;&#160;&#160;&#160;&#160;
    reverse stock split of our common stock that will occur
    immediately prior to the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reflect the conversion of our Series&#160;A and Series&#160;C
    convertible preferred stock into common stock immediately prior
    to the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series&#160;B preferred stock and Series&#160;C convertible
    preferred stock that will
    expire&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    days after the closing of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    shares of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire&#160;&#160;&#160;&#160;&#160;&#160;days after the closing
    of this offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with 2011 Notes that
    expire December&#160;30, 2019;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2004 Stock Plan;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2010 Omnibus Long-Term
    Incentive Plan, which we have adopted in connection with this
    offering;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exclude an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock issuable under our 2010 Employee Stock Purchase
    Plan, which we have adopted in connection with this
    offering;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    assume no exercise of the underwriters&#146; over-allotment
    option to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;additional
    shares of our common stock.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the underwriters&#146; over-allotment option is exercised in
    full, the number of shares held by the existing stockholders
    after this offering would be reduced
    to&#160;&#160;&#160;&#160;&#160;% of the total number of shares
    of our common stock outstanding after this offering, and the
    number of shares held by new investors would increase
    to&#160;&#160;&#160;&#160;&#160;% of the total number of shares
    of our common stock outstanding after this offering.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SELECTED
    HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables set forth our selected historical
    consolidated financial and other data for the periods indicated.
    We prepared the selected historical consolidated financial data
    using our consolidated financial statements for each of the
    years presented. The selected historical consolidated financial
    data for each year in the three-year period ended
    December&#160;31, 2009, were derived from our audited historical
    consolidated financial statements appearing elsewhere in this
    prospectus, and the selected historical consolidated financial
    data for each year in the two-year period ended
    December&#160;31, 2006, were derived from our audited historical
    consolidated financial statements not appearing in this
    prospectus. You should read this selected historical
    consolidated financial data in conjunction with such audited
    historical consolidated financial statements and related notes
    and &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; included elsewhere in
    this prospectus. The selected historical consolidated financial
    data are not necessarily indicative of future results.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(in thousands, except per share amounts)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated statements of operations data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    158
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,589
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,141
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,969
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (62
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    448
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,210
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,684
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,172
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,409
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,746
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,724
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,917
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest (expense) and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    175
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (70
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,257
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,571
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,571
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations, net of income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,650
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,571
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,824
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (851
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,563
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,042
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;(7,422
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (12,171
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16,221
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (21,673
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (14,866
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and diluted loss per common share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Loss from continuing operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Loss from discontinued operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and diluted weighted average common shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated balance sheet data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,606
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,638
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    516
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,904
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,570
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,368
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt, less current maturities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,403
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other long-term obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    481
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2005</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(in thousands, except location amounts)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Other information:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Water bottle exchange locations at year end
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Water bottle units sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    745
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,853
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Water dispenser units sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    272
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF<BR>
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with the section titled &#147;Selected Historical
    Consolidated Financial and Other Data&#148; and our financial
    statements and related notes appearing elsewhere in this
    prospectus. Our actual results could differ materially from
    those anticipated in the forward-looking statements included in
    this discussion as a result of certain factors, including, but
    not limited to, those discussed in the section of this
    prospectus titled &#147;Risk Factors.&#148;</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Primo Water Corporation is a rapidly growing provider of three-
    and five-gallon purified bottled water and water dispensers sold
    through major retailers nationwide. Our business is designed to
    generate recurring demand for Primo purified bottled water
    through the sale of our innovative water dispensers. Once our
    bottled water is consumed using a water dispenser, empty bottles
    are exchanged at our recycling center displays, which provide a
    recycling ticket that offers a discount toward the purchase of a
    new bottle of Primo purified water. We have created a nationwide
    single-vendor water bottle exchange service for our retail
    customers that requires minimal customer management supervision
    and store-based labor and provides centralized billing and
    detailed performance reports. We deliver this service utilizing
    our national network of primarily independent bottlers and
    distributors. As of December&#160;31, 2009, our water bottle
    exchange service and water dispensers were offered in each of
    the contiguous United States and located in approximately 7,000
    and 5,500 retail locations, respectively. For 2007, 2008 and
    2009, we generated net sales of $13.5&#160;million,
    $34.6&#160;million and $47.0&#160;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In this Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations, when we refer to &#147;same
    store sales&#148; for our Exchange segment, we are comparing
    retail locations at which our water bottle exchange service had
    been available for at least 12&#160;months at the beginning of
    the relevant period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Business
    Segments</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We manage our business primarily through two reporting segments:
    Primo Bottled Water Exchange (&#147;Exchange&#148;) and Primo
    Products (&#147;Products&#148;).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Exchange segment sells three- and five-gallon purified
    bottled water through retailers in each of the contiguous United
    States. We currently offer our exchange service at approximately
    7,000 locations through point of purchase display racks and
    recycling centers that are prominently located at major
    retailers in space that is often underutilized. We service these
    retail locations through our national network of primarily
    independent bottlers and distributors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Products segment sells water dispensers that are designed to
    dispense Primo and other dispenser-compatible bottled water. Our
    Products sales are primarily generated through major
    U.S.&#160;retailers. Our water dispensers are sold primarily
    through a direct-import model, where we recognize revenues for
    the sale of the water dispensers when title is transferred to
    our retailer customers. We support retail sell-through with
    limited domestic inventory.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We evaluate the financial results of these segments focusing
    primarily on segment net sales and segment income (loss) from
    operations before depreciation and amortization (&#147;segment
    income (loss) from operations&#148;). We utilize segment net
    sales and segment income (loss) from operations because we
    believe they provide useful information for effectively
    allocating our resources between business segments, evaluating
    the health of our business segments based on metrics that
    management can actively influence and gauging our investments
    and our ability to service, incur or pay down debt.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Operating segments that do not meet quantitative thresholds for
    segment reporting are included in Other.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    32
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cost of sales for Exchange consists of costs for bottling and
    related packaging materials and distribution costs for our
    bottled water. Cost of sales for Products consists of contract
    manufacturing, freight, duties and warehousing costs of our
    water dispensers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Selling, general and administrative expenses for both segments
    consist primarily of personnel costs for sales, marketing,
    operations support and customer service, as well as other
    supporting costs for operating each segment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Expenses not specifically related to operating segments are
    shown separately as Corporate. Corporate expenses are comprised
    mainly of compensation and other related expenses for corporate
    support, information systems, and human resources and
    administration. Corporate expenses also include certain
    professional fees and expenses and compensation of our Board of
    Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2009, we completed the divesture of our former
    subsidiary, Prima Bottled Water, Inc. (&#147;Prima&#148;), by
    distributing the stock in Prima to our existing stockholders on
    a pro rata basis based upon each such stockholder&#146;s
    proportionate ownership of our common stock, Series&#160;A
    preferred stock and Series&#160;C preferred stock on an
    as-converted basis. The assets, liabilities and results of
    operations of Prima are accounted for as discontinued
    operations. For 2007, 2008 and 2009, we recognized losses from
    discontinued operations of $1.9&#160;million, $5.7&#160;million
    and $3.7&#160;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Results
    of Operations</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our results of operations for the
    periods indicated:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated statements of operations data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,969
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38,771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,210
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,409
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,917
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest (expense) and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (70
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,257
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations, net of income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,650
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,824
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,042
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16,221
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (21,673
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (14,866
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    33
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our results of operations
    expressed as a percentage of net sales for the periods indicated:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated statements of operations data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89.0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    88.8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11.0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11.2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102.0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50.3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30.1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (91.0
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (39.1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12.6
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest (expense) and other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.2
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4.8
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (90.5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (39.3
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17.4
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (90.5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (39.3
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17.4
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations, net of income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14.1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (16.5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7.8
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (104.6
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (55.8
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25.2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our segment net sales and segment
    income (loss) from operations presented on a segment basis and
    reconciled to our consolidated loss from operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Segment Net Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    22,638
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,818
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,874
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,611
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inter-company elimination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (189
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (222
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (92
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Segment Income (Loss) from Operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,834
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,267
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,374
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (631
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,447
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (272
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (116
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inter-company elimination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Corporate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,077
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,789
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,366
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,618
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,205
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,917
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Year
    Ended December&#160;31, 2009 Compared to Year Ended
    December&#160;31, 2008</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net Sales.</I> Net sales for 2009 increased
    $12.3&#160;million or 35.6% to $47.0&#160;million from
    $34.6&#160;million in 2008. The increase in sales resulted
    primarily from a 65.9% increase in Products sales and a 17.7%
    increase in Exchange sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exchange.</I> Exchange net sales increased $3.4&#160;million
    or 17.7% to $22.6&#160;million in 2009, representing 48.2% of
    our total net sales in 2009. The increase was due to an increase
    in water bottle units sold of approximately 0.6&#160;million
    units or 19.8% to 3.9&#160;million units sold in 2009. The
    increase in units sold was driven by a same store sales increase
    of 7.9% as well as an 8.3% increase in selling locations to
    approximately 7,000 at December&#160;31, 2009. The average price
    per unit decreased 1.7% in 2009 compared to 2008 as a result of
    a shift in mix of transactions to 70.9% exchange and 29.1%
    initial purchase transactions in 2009 compared to 63.2% exchange
    and 36.8% initial purchase transactions in 2008. We recognize
    approximately twice as much revenue on initial purchase
    transactions as we do on exchange transactions. Adding new
    locations at which our water bottle
</DIV>
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    <BR>
    34
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    exchange service is offered is important to our strategy of
    penetrating more homes with our water dispensers as expanded
    locations and increased water bottle availability enhance the
    convenience of our service to consumers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Products.</I> Products net sales increased $9.1&#160;million
    or 65.9% to $22.8&#160;million in 2009, representing 48.6% of
    our total net sales in 2009. The increase was due to the
    successful launch of new water dispenser models and the
    increased number of retailers that offered our products in 2009.
    Dispenser sales increased 95,000&#160;units or 53% to
    approximately 272,000&#160;units in 2009. We anticipate
    continuing to introduce and offer new water dispenser models.
    Water dispenser home penetration is critical to the success of
    our strategy of increasing sales of our complementary
    recurring-revenue bottled water exchange service.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Gross Margin.</I> Our overall gross margin as a percentage of
    net sales increased to 17.5% for 2009 from 11.2% for 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exchange</I>. Gross margin as a percentage of net sales in
    our Exchange segment increased to 26.6% for 2009 from 15.2% in
    2008 due primarily to decreased freight costs as a result of the
    addition of bottling and distribution capabilities during 2008
    for which we received a full-year benefit in 2009. With these
    additions we believe we have sufficient bottling and
    distribution capabilities to service our continued growth. We
    anticipate slight improvements in gross margin for our Exchange
    segment for 2010 as we further benefit from improvements in our
    supply chain and realize efficiencies from our business model in
    which many of our variable costs are fixed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Products</I>. Gross margin as a percentage of net sales in
    our Products segment improved to 5.6% for 2009 from 0.5% in 2008
    due primarily to improved pricing from retailers. Our strategy
    is to sell our water dispensers at minimal operating profit in
    order to increase home penetration, which we believe will lead
    to increased recurring-revenue, higher margin Exchange sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Selling, General and Administrative Expenses.</I> Selling,
    general and administrative expenses for 2009 decreased
    $3.3&#160;million or 18.9% to $14.1&#160;million from
    $17.4&#160;million and, as a percentage of net sales, decreased
    to 30.1% for 2009 from 50.3% for 2008. The decrease is due to
    lower employee-related costs as a result of a reduction in
    headcount of 17&#160;employees as well as reduced levels of
    consulting fees and related travel and benefit costs resulting
    in about $2.6&#160;million of the overall reduction in selling,
    general and administrative expenses. The additional personnel
    resources were related to our efforts in 2008 to expand our
    supply chain with more bottling and distribution capacity and
    information system infrastructure as well as our efforts to
    establish new business segments. During 2009 we were able to
    reduce these personnel resources when our supply chain reached
    what we believe to be an appropriate size. We were able to
    significantly grow our business and expand our gross margins in
    2009 despite the reduction in selling, general and
    administrative expenses. While we do not expect to incur
    significant additional costs connected to the growth of our
    business in 2010, we do expect to incur about $1.0&#160;million
    in additional costs as a public company related to compliance,
    reporting and insurance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Interest (Expense) and Other Income, Net.</I> Net interest
    expense for 2009 increased to $2.3&#160;million from $70,000 in
    2008 as a result of increased use of debt to fund business
    operations. We expect the proceeds from this offering to repay
    debt and lower future interest cost relative to that experienced
    during 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Preferred Stock Dividends.</I> Dividends on our Series&#160;B
    preferred stock increased $0.7&#160;million to $3.0&#160;million
    in 2009 from $2.3&#160;million in 2008. In January 2009, we
    offered holders of our Series&#160;B preferred stock the option
    to suspend their current cash dividend payment of 10% in
    exchange for a dividend accrual of 15% for 2009. Cash dividends
    paid on our Series&#160;B preferred stock during 2009 and 2008
    were $1.3&#160;million and $2.3&#160;million, respectively. At
    December&#160;31, 2009 and 2008 the accrued and unpaid dividends
    on our Series&#160;B preferred stock were $2.4&#160;million and
    $0.6&#160;million, respectively, which is included in accrued
    expenses and other current liabilities in the consolidated
    balance sheet.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Year
    Ended December&#160;31, 2008 Compared to Year Ended
    December&#160;31, 2007</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net Sales.</I> Net sales for 2008 increased
    $21.2&#160;million or 157.5% to $34.6&#160;million from
    $13.5&#160;million in 2007. The increase in net sales resulted
    primarily from a 1,349.7% increase in Products sales and a 76.9%
    increase in Exchange sales.
</DIV>
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    <BR>
    35
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exchange.</I> Exchange net sales increased $8.3&#160;million
    to $19.2&#160;million in 2008, representing 55.5% of our total
    net sales in 2008. The increase was due to an increase in water
    bottle units sold of 1.2&#160;million or 61.2% to
    3.2&#160;million units sold in 2008. The increase in units was
    driven by a same store sales increase of 22.0% as well as a
    36.1% increase in selling locations to approximately 6,400
    selling locations at December&#160;31, 2008. The average price
    per unit increased 9.7% in 2008 primarily as a result of a price
    increase implemented in mid-2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Products.</I> Products net sales increased $12.8&#160;million
    to $13.8&#160;million, representing 39.7% of our total net sales
    in 2008. The increase is due to the successful launch of our
    Products business segment in late 2007. Product sales increased
    by approximately 165,000&#160;units to approximately
    177,000&#160;units sold in 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Gross Margin.</I> Our overall gross margin as a percentage of
    net sales increased to 11.2% for 2008 from 11.0% for 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exchange</I>. Gross margin as a percentage of net sales in
    our Exchange segment increased to 15.2% for 2008 from 6.1% in
    2007 due primarily to decreased freight costs as a result of the
    addition of 28 bottlers and ten distributors in 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Products</I>. Gross margin as a percentage of net sales in
    our Products segment improved to 0.5% for 2008 from (23.2)% in
    2007 due primarily to limited sales volume in 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Selling, General and Administrative Expenses.</I> Selling,
    general and administrative expenses, excluding impairment
    charges, for 2008 increased $3.7&#160;million or 26.2% to
    $17.4&#160;million from $13.7&#160;million and, as a percentage
    of net sales, decreased to 50.0% for 2008 from 102.0% for 2007.
    The increase is primarily due to higher employee-related costs
    as a result of headcount additions, consulting fees and related
    travel and benefit costs resulting in about $3.1&#160;million of
    the overall expense increase. The additional personnel resources
    were related to our efforts to expand our supply chain with more
    bottling and distribution capacity, enhance information system
    infrastructure and establish new business segments. Selling,
    general and administrative expenses as a percentage of net sales
    decreased significantly as we grew net sales at a faster rate
    than our expense growth.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Interest Expense and Other Income, Net.</I> Net interest and
    other income for 2008 decreased to an expense of $70,000 from
    income of $65,000 in 2007 as a result of the use of debt to fund
    business operations, which were primarily funded with equity in
    2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Preferred Stock Dividends.</I> Dividends on our Series&#160;B
    preferred stock increased $0.2&#160;million to $2.3&#160;million
    in 2008 from $2.1&#160;million in 2007. At both
    December&#160;31, 2008 and 2007, the accrued and unpaid
    dividends on our Series&#160;B preferred stock were
    $0.6&#160;million, which is included in accrued expenses and
    other current liabilities in the consolidated balance sheet.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since inception, we have financed our operations primarily
    through the sale of preferred stock, the issuance of long term
    debt and borrowings under credit facilities. At
    December&#160;31, 2009, our principal sources of liquidity were
    accounts receivable, net of allowance for doubtful accounts, of
    $1.9&#160;million compared to cash of $0.5&#160;million and
    accounts receivable, net of allowance for doubtful accounts, of
    $3.2&#160;million at December&#160;31, 2008. As of
    December&#160;31, 2009, we had a working capital deficit of
    $2.5&#160;million compared to a working capital deficit of
    $2.6&#160;million as of December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2009, the primary source of capital was proceeds from the
    issuance of long term debt and, as of December&#160;31, 2009, we
    had an outstanding debt balance of $14.8&#160;million, net of a
    $0.6&#160;million discount. During 2008 and 2007, our primary
    source of capital was the proceeds of preferred stock issuances
    of $19.6&#160;million and $14.1&#160;million, respectively.
    Additionally, during 2008 we made borrowings under our credit
    facilities, which had a balance of $7.0&#160;million at
    December&#160;31, 2008.
</DIV>
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    <BR>
    36
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Operating Activities</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used in operating activities was $2.0&#160;million for
    2009, $11.8&#160;million for 2008 and $6.8&#160;million for
    2007. For 2009, net cash used in operations was primarily the
    result of $8.2&#160;million of loss from continuing operations,
    partially offset by non-cash depreciation and amortization of
    $4.2&#160;million, non-cash interest expense of
    $0.7&#160;million related to our long term debt issuances and
    reduction in working capital components of $0.8&#160;million.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2008, net cash used in operations was primarily the result
    of $13.6&#160;million of loss from continuing operations,
    partially offset by depreciation and amortization of
    $3.6&#160;million. Additional working capital for accounts
    receivable and inventory due to revenue growth resulted in a use
    of cash of $1.9&#160;million and $1.3&#160;million, respectively
    and was partially offset by an increase in accounts payable of
    $1.1&#160;million.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2007, net cash used in operations was primarily the result
    of $12.2&#160;million of loss from continuing operations,
    partially offset by depreciation and amortization of
    $3.4&#160;million and the increase of accounts payable and
    accrued expenses of $1.0&#160;million and $1.3&#160;million,
    respectively.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Investing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash flows from investing activities included capital
    expenditures for property and equipment and bottles of
    $2.4&#160;million in 2009, $9.4&#160;million in 2008 and
    $5.0&#160;million for 2007, which were our primary investing
    activities for all periods. Our capital expenditures in the past
    have been primarily for the installation of our recycle centers
    and display racks at new locations that offer our water bottle
    exchange service as well as related transportation racks and
    bottles. We also invest in technology infrastructure to manage
    our network of independent bottlers and distributors.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Net Cash
    Flows from Financing Activities</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash provided by financing activities was $6.3&#160;million for
    2009, $24.4&#160;million for 2008 and $12.5&#160;million for
    2007. For 2009, financing activities were primarily the issuance
    of long term debt of $20.4&#160;million that was partially
    offset by payments of $6.6&#160;million on our senior revolving
    credit facility, payments of $5.4&#160;million related to other
    long-term debt, Series&#160;B preferred stock dividend payments
    of $1.3&#160;million and payment of debt issuance costs of
    $0.6&#160;million. The cash component of our Series&#160;B
    preferred stock dividends was partially reduced in 2009 and
    accrued as opposed to paid currently. Additionally, the cash
    dividends paid will be further reduced for 2010 to approximately
    $0.2&#160;million.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2008, financing activities were primarily the issuance of
    preferred stock of $19.6&#160;million and borrowings of
    $7.0&#160;million on our revolving credit facility that were
    partially offset by payments of $2.3&#160;million of
    Series&#160;B preferred stock dividends.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2007, financing activities were primarily the issuance of
    preferred stock of $14.1&#160;million that was partially offset
    by $1.6&#160;million of Series&#160;B Preferred Stock dividend
    payments.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Credit
    Facility</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We originally entered into a revolving credit facility with
    Wachovia Bank National Association in June 2005 and in June 2008
    we amended the facility to extend the term to June&#160;30,
    2010. The current facility commitment is $10.0&#160;million and
    is subject to a customary borrowing base calculation for
    advances. Interest on the outstanding borrowings under the
    revolving credit facility is payable quarterly at our option at
    (i)&#160;the LIBOR Market Index Rate (LMIR) plus the applicable
    margin or (ii)&#160;the greater of (A)&#160;the Federal Funds
    Rate plus 0.50% or (B)&#160;the bank&#146;s prime rate plus the
    applicable margin. At December&#160;31, 2009 and 2008, the
    interest rate on the outstanding balance under the facility was
    at the bank&#146;s prime rate plus 2.50% and 0.75%, respectively
    (5.75% at December&#160;31, 2009 and 4.00% at December&#160;31,
    2008). Beginning in January 2010 and effective with the December
    2009 amendment, the applicable margin for both the prime rate
    and the federal funds rate options was decreased to 1.00%. The
    availability under the Revolver was $5.9&#160;million and
    $1.5&#160;million at December&#160;31, 2009 and 2008,
    respectively.
</DIV>
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    <BR>
    37
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are required to pay a fee per annum equal to 3.50% of the
    outstanding amount of letters of credit issued under the
    revolving credit facility. In addition, there is a fee of 0.50%
    on the unused portion of the revolver lending commitment. At
    December&#160;31, 2009 and 2008, there were outstanding letters
    of credit totaling approximately $0.4&#160;million and
    $0.3&#160;million, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The revolving credit facility contains various conditions for
    extensions of credit and restrictive covenants including minimum
    quarterly EBITDA and gross revenue requirements. Substantially
    all of our assets are pledged as collateral to borrowings under
    the revolving credit facility.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">14%
    Subordinated Convertible Notes due March&#160;31, 2011</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2009, we issued our 14%&#160;subordinated
    convertible notes due March&#160;31, 2011 (&#147;2011
    Notes&#148;) to 28 investors, including existing stockholders,
    affiliates of existing stockholders and senior management. The
    2011 Notes have a total face value of $15.0&#160;million and are
    subordinated to our bank revolving credit facility. The 2011
    Notes pay quarterly interest at a rate of 14% per annum. We
    intend to use proceeds of this offering to repay the 2011 Notes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase 1,111,109&#160;shares of our common stock
    were issued in connection with the 2011 Notes. The initial fair
    value of the warrants is $0.6&#160;million and resulted in an
    original issue discount on the 2011 Notes which will be
    amortized as interest expense over the term of the 2011 Notes.
    The fair value of the warrants is included in other long-term
    liabilities in the consolidated balance sheet and will be
    adjusted periodically until such time as the exercise price
    becomes fixed at which time the then fair value will be
    reclassified as a component of stockholders&#146; equity
    (deficit).
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Adequacy
    of Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our future capital requirements may vary materially from those
    now anticipated and will depend on many factors, including the
    rate of growth in new locations and related display and rack
    costs, cost to develop new water dispensers, sales and marketing
    resources needed to further penetrate our markets, the expansion
    of our operations in the United States, the response of
    competitors to our solutions and products and any acquisitions
    of other businesses. Historically, we have experienced increases
    in our capital expenditures consistent with the growth in our
    operations and personnel, and we anticipate that our
    expenditures will continue to increase as we grow our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe our cash, the proceeds from this offering, funds
    available under our revolving credit facility and future cash
    flows from our operations will be sufficient to meet our
    currently anticipated working capital and capital expenditure
    requirements for at least the next twelve months.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Off-Balance
    Sheet Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not have any off-balance sheet arrangements, investments
    in special purpose entities or undisclosed borrowings or debt.
    Additionally, we are not a party to any derivative contracts or
    synthetic leases.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Contractual
    and Commercial Commitment Summary</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our contractual obligations and commercial commitments as of
    December&#160;31, 2009 are summarized below:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="49%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Payments Due by Period</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Less Than<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>More Than<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Contractual Obligations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>1&#160;Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>1-3&#160;Years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>3-5&#160;Years</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>5&#160;Years</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom">
    <B>(in thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Capital lease obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating lease obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    691
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    841
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    394
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Revolving credit facility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;1,118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,844
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;394
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;82
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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    <BR>
    38
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Inflation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the last three years, inflation and changing prices have
    not had a material effect on our business and we do not expect
    that inflation or changing prices will materially affect our
    business in the foreseeable future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Quantitative
    and Qualitative Disclosures About Market Risk</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For fixed rate debt, interest rate changes affect the fair value
    of financial instruments but do not impact earnings or cash
    flows. Conversely, for floating rate debt, interest rate changes
    generally do not affect the fair market value but do impact
    future earnings and cash flows, assuming other factors are held
    constant. The recorded carrying amounts of cash and cash
    equivalents approximate fair value due to their short maturities.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are exposed to market risk related to changes in interest
    rates on borrowings under our revolving credit facility. Our
    credit facility bears interest based on LIBOR and the prime
    rate, plus an applicable margin. To quantify our exposure to
    interest rate risk, a 100&#160;basis point increase in interest
    rates would have increased interest expense for the years ended
    December&#160;31, 2007, 2008, and 2009 by approximately $8,000,
    $29,000 and $132,000, respectively. Actual changes in interest
    rates may differ materially from the hypothetical assumptions
    used in computing this exposure.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Seasonality</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have experienced and expect to continue to experience
    seasonal fluctuations in our sales and operating income. Our
    sales and operating income have been highest in the spring and
    summer, and lowest in the fall and winter. Our Exchange segment,
    which generally enjoys higher margins than our Products segment,
    experiences higher sales and operating income in the spring and
    summer. Our Products segment had historically experienced higher
    sales and operating income in spring and summer, however, we
    believe the seasonality of this segment will be more dependent
    on retailer inventory management and purchasing cycles and not
    correlated to weather. Sustained periods of poor weather,
    particularly in the spring and summer, can negatively impact our
    sales in our higher margin Exchange segment. Accordingly, our
    results of operations in any quarter will not necessarily be
    indicative of the results that we may achieve for a fiscal year
    or any future quarter.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies and Estimates</FONT></B>
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our discussion and analysis of our financial condition and
    results of operations is based upon our consolidated financial
    statements and related notes, which have been prepared in
    accordance with accounting principles generally accepted in the
    United States of America (&#147;GAAP&#148;). The preparation of
    our financial statements in conformity with GAAP requires us to
    make certain estimates, judgments and assumptions. We believe
    that the estimates, judgments and assumptions used to determine
    certain amounts that affect the financial statements are
    reasonable, based on information available at the time they are
    made. To the extent there are material differences between these
    estimates, judgments and assumptions and actual results, our
    consolidated financial statements may be affected. Some of the
    more significant estimates include allowances for doubtful
    accounts, valuation of inventories, depreciation, valuation of
    deferred taxes and allowance for sales returns.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Revenue Recognition.</I> We recognize revenue when title to
    the product has transferred to the buyer, collectability of a
    fixed and determinable sales price is reasonably assured and we
    have no further obligations to assist in the resale of the
    products. Exchange revenue is recognized for the sale of three-
    and five-gallon purified bottled water upon either the delivery
    of inventory to the retail stores or the purchase by the
    consumer. Our water dispensers are procured primarily through a
    direct-import model, where we recognize revenue when title is
    transferred to our retail customers. Cash consideration provided
    for discounts and sales incentives, as well as provisions for
    returns and other adjustments are recorded as a reduction to
    sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Allowance for Doubtful Accounts.</I> We maintain an allowance
    for doubtful accounts for estimated losses resulting from our
    retail customers&#146; inability to pay us. The allowance for
    doubtful accounts is based on a review of specifically
    identified accounts in addition to an overall aging analysis.
    Judgments are made with respect to the collectability of
</DIV>
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    <BR>
    39
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    accounts receivable based on historical experience and current
    economic trends. Actual losses could differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Long-Lived Assets.</I> We review long-lived assets for
    impairment whenever events or changes in circumstances indicate
    that the carrying amount may not be recoverable. The carrying
    amount of a long-lived asset is not recoverable if it exceeds
    the sum of the undiscounted cash flows expected to result from
    the use and eventual disposition of the asset at the date it is
    tested for recoverability, whether in use or under development.
    An impairment loss is measured as the amount by which the
    carrying amount of a long-lived asset exceeds its fair value. We
    recorded an impairment charge in 2008 of $98,000, related to
    display racks no longer in use and to be disposed.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Income Taxes.</I> We account for income taxes using the asset
    and liability method, which requires recognition of deferred tax
    assets and liabilities for the expected future tax consequences
    of events that have been included in the financial statements.
    Under this method, deferred tax assets and liabilities are
    determined based on the difference between the financial
    statement and tax bases of assets and liabilities, using enacted
    tax rates in effect for the year in which the differences are
    expected to reverse. Deferred tax assets are reduced by a
    valuation allowance to the extent that utilization is not
    presently more likely than not.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2007, we adopted the provisions of
    Accounting Standards Codification (&#147;ASC&#148;)
    <FONT style="white-space: nowrap">740-10,</FONT>
    <I>Income Taxes</I>. Previously, we had accounted for tax
    contingencies in accordance with ASC
    <FONT style="white-space: nowrap">450-10,</FONT>
    <I>Contingencies</I>. As required by ASC
    <FONT style="white-space: nowrap">740-10,</FONT> we
    recognize the financial statement benefit of a tax position only
    after determining that the relevant tax authority would more
    likely than not sustain the position following an audit. For tax
    positions meeting the more-likely-than-not threshold, the amount
    recognized in the financial statements is the largest benefit
    that has a greater than 50&#160;percent likelihood of being
    realized upon ultimate settlement with the relevant tax
    authority. At the adoption date, we applied ASC
    <FONT style="white-space: nowrap">740-10</FONT> to
    all tax positions for which the statute of limitations remained
    open. The implementation of ASC
    <FONT style="white-space: nowrap">740-10</FONT> did
    not have a material impact on our consolidated financial
    statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock-Based Compensation.</I> We account for our stock-based
    employee and director compensation plans in accordance with ASC
    718, <I>Compensation-Stock Compensation</I>. ASC 718 requires
    recognition of the cost of employee services received in
    exchange for an award of equity instruments in the financial
    statements over the period the employee is required to perform
    the services in exchange for the award (presumptively the
    vesting period). In 2007, 2008 and 2009 compensation expense
    related to stock options was approximately $157,000, $215,000
    and $298,000 and is included in selling, general and
    administrative expenses from continuing operations,
    respectively, and approximately $25,000, $61,000 and $80,000 is
    included in discontinued operations, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The fair value of each option is estimated on the date of grant
    using the Black-Scholes method with the following assumptions
    used for grants:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="68%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Risk-free interest rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.6
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.2
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected life of options in years
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Estimated volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividend yield
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The risk-free interest rate is based on the implied yield
    available on U.S.&#160;Treasury zero-coupon issues with a
    remaining term approximately equal to the expected life of our
    stock options. The estimated pre-vesting forfeiture rate is
    based on our historical experience. The expected term of the
    options is based on evaluations of historical and expected
    future employee exercise behavior. As a non-public entity,
    historic volatility is not available for our shares. As a
    result, we estimated volatility based on a peer group of
    companies, which we believe collectively provide a reasonable
    basis for estimating volatility. We intend to continue to
    consistently use the same group of publicly traded peer
    companies to determine volatility in the future until sufficient
    information regarding volatility
</DIV>
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    <BR>
    40
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    of our share price becomes available or the selected companies
    are no longer suitable for this purpose. We do not expect to
    declare dividends on our common stock in the foreseeable future.
</DIV>

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    <I>Significant Factors Used in Determining Fair Value of Our
    Common Stock.</I> The fair value of the shares of common stock
    that underlie the stock options we have granted has historically
    been determined by our board of directors based upon information
    available to it at the time of grant. Because, prior to this
    offering, there has been no public market for our common stock,
    our board of directors has determined the fair value of our
    common stock by utilizing, among other things, recent or
    contemporaneous valuation information from negotiated equity
    transactions with third parties or third party valuations. The
    valuation information included reviews of our business and
    general economic, market and other conditions that could be
    reasonably evaluated at that time, including our financial
    results, business agreements, intellectual property and capital
    structure. These valuation approaches are based on a number of
    assumptions, including our future sales and industry, general
    economic, market and other conditions that could reasonably be
    evaluated at the time of the valuation.
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    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Accounting Pronouncements</FONT></B>
</DIV>

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    In June 2009, the Financial Accounting Standards Board
    (&#147;FASB&#148;) issued authoritative guidance which
    established the Accounting Standards Codification
    (&#147;ASC&#148; or &#147;Codification&#148;) as the source of
    authoritative GAAP recognized by the FASB to be applied to
    nongovernmental entities, and rules and interpretive releases of
    the SEC as authoritative GAAP for SEC registrants. The
    Codification supersedes all existing non-SEC accounting and
    reporting standards upon its effective date and, subsequently,
    the FASB will not issue new standards in the form of Statements,
    FASB Staff Positions or Emerging Issues Task Force Abstracts.
    The guidance is not intended to change or alter existing GAAP.
    The guidance became effective in our fourth quarter of 2009. The
    guidance did not have an impact on our consolidated financial
    position, results of operations or cash flows.
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    In May 2009, the FASB issued authoritative guidance on the
    accounting for and disclosure of events that occur after the
    balance sheet date. This guidance was effective for interim and
    annual financial periods ending after June&#160;15, 2009. This
    guidance was amended in February 2010. It requires an entity
    that is a SEC filer to evaluate subsequent events through the
    date that the financial statements are issued. The adoption did
    not impact our consolidated financial position, results of
    operations or cash flows.
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    In January 2010, the FASB issued guidance, which clarifies that
    the stock portion of a distribution to stockholders that allows
    them to receive cash or stock with a potential limitation on the
    total amount of cash that all stockholders can elect to receive
    in the aggregate is considered a share issuance that is
    reflected in earnings per share prospectively and is not a stock
    dividend. This update is effective for our first quarter of
    2010. The adoption is not expected to have a material impact on
    our consolidated financial position results of operations or
    cash flows.
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    In January 2010, the FASB issued guidance that clarifies ASC 810
    implementation issues relating to a decrease in ownership of a
    subsidiary that is a business or non-profit activity. This
    amendment affects entities that have previously adopted ASC
    <FONT style="white-space: nowrap">810-10.</FONT> This
    update is effective for our first quarter of 2010. The adoption
    is not expected to have a material impact on our consolidated
    financial position, results of operations or cash flows.
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    <B><FONT style="font-family: 'Times New Roman', Times">BUSINESS</FONT></B>
</DIV>
</A>
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    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a rapidly growing provider of three- and five-gallon
    purified bottled water and water dispensers sold through major
    retailers nationwide. We believe the market for purified water
    is growing due to evolving taste preferences, perceived health
    benefits and concerns regarding the quality of municipal tap
    water. Our products provide an environmentally friendly,
    economical, convenient and healthy solution for consuming
    purified water. We offer &#147;razor-razorblade&#148; products
    designed to generate recurring demand for Primo purified bottled
    water (the razorblade) through the initial sale of our
    innovative water dispensers (the razor). Once our bottled water
    is consumed using a water dispenser, empty bottles are exchanged
    at our recycling center displays where consumers receive a
    recycling ticket that offers a discount toward the purchase of a
    full bottle of Primo purified water. Primo consumers purchase an
    average of 35 bottles of water annually and each bottle can be
    sanitized and reused up to 40 times before being taken out of
    use, crushed and recycled, substantially reducing landfill waste
    compared to consumption of an equivalent volume of single-serve
    bottled water. Our sales and recycling center displays are
    prominently located at major retailers nationwide in spaces that
    are often underutilized. As of December&#160;31, 2009, our water
    bottle exchange service and water dispensers were offered in
    each of the contiguous United States and located in
    approximately 7,000 and 5,500 retail locations respectively,
    including Lowe&#146;s Home Improvement, Sam&#146;s Club, Costco,
    Walmart, Target, Kroger, Winn-Dixie, Albertsons and Walgreens.
</DIV>

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    <IMG src="g22358g2235801.gif" alt="(GRAPHIC)">
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have created a new nationwide single-vendor water bottle
    exchange solution for our retail customers, addressing a market
    demand that was previously unmet. Our water bottle exchange
    solution is easy for retailers to implement, requires minimal
    management supervision and store-based labor and provides
    centralized billing and detailed performance reports. Retailers
    benefit from year-round, high-margin, highly-predictable
    revenue, the potential to increase customer traffic and the
    ability to optimize retail space.
</DIV>

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    We deliver our solution to retailers utilizing our national
    network of primarily independent bottlers and distributors.
    These bottlers and distributors make a significant portion of
    the capital investment required to deliver our solution,
    including investment in bottling facilities and storage and
    distribution assets. We focus our capital expenditures on
    developing new store locations, raising brand awareness,
    developing new products and managing our national network
    utilizing our MIS tools. We are able to manage our national
    network on a real-time basis
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    through our MIS tools, which provide resource planning and
    delivery schedule tracking, thus enabling us to optimize our
    network&#146;s assets and respond to customer needs. In
    addition, our national network of bottlers and distributors
    benefits from a year-round product that optimizes utilization of
    their existing production and distribution assets. In addition,
    our national network benefits from our MIS tools that assist
    resource planning and delivery schedule optimization. We believe
    our solution and national network provide us a significant
    competitive advantage in servicing our retail customers.
</DIV>

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    We benefit significantly from management experience gained over
    the last 15&#160;years in exchange-based businesses, which
    enables us to implement best practices and develop and maintain
    key business relationships. Prior to founding Primo, our Chief
    Executive Officer founded Blue Rhino Corporation, a propane
    cylinder exchange business, in 1994 and, with several of our
    other key executive officers, led its initial public offering in
    1998 and successful sale in 2004. At the time of the sale, Blue
    Rhino was the market leader in propane grill cylinder exchange
    with over 29,000 retail locations in 49&#160;states.
</DIV>

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    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Background</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe there are several trends that support consumer demand
    for our water bottle exchange service and water dispensers,
    including the following:
</DIV>

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    <I><FONT style="font-family: 'Times New Roman', Times">Emphasis
    on Health and Wellness</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

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    The majority of the human body is comprised of water and nearly
    all critical body functions rely on proper hydration. As part of
    a desire to live a healthier lifestyle, we believe consumers are
    increasingly focused on drinking more water relative to
    consumption of high caloric beverages, carbonated soft drinks
    and beverages containing artificial sweeteners.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Concerns
    Regarding Quality of Municipal Tap Water</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many consumers purchase purified water not only due to better
    taste, but also because of concerns regarding municipal tap
    water quality. Municipal water is typically surface water that
    is treated centrally and pumped to homes, which can allow
    additional contaminants to dissolve into the water through
    municipal or household pipes impacting taste and quality. There
    have been many recent publications highlighting pollution and
    quality issues with municipal water in the United States.
    Additionally, due to budgetary deficits, municipalities are
    increasingly privatizing their water treatment and distribution
    systems, and there have been many compliance and quality issues
    documented in connection with privatized municipal water systems.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Growing
    Preference for Purified Water</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe consumer preference toward purified water relative to
    tap water continues to grow. With increasing availability in
    recent years, purified water has become accepted on a mainstream
    basis and preferred by many over municipal tap water. While it
    is difficult to quantify purified water consumption in all of
    its forms, we believe the growth of bottled water consumption
    reflects this trend. According to a June 2009 report by
    independent market analyst Datamonitor, <I>Bottled Water in the
    United States</I>, consumers spent $18.4&#160;billion in 2008 on
    bottled water and the industry is expected to grow at a compound
    annual growth rate of approximately 7.5%, reaching
    $26.5&#160;billion by 2013.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increasing
    Demand for Products with Lower Environmental Impact</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that consumers are increasingly favoring products
    with a lower environmental impact with a &#147;reuse, recycle,
    reduce&#148; mindset becoming a common driver of consumer
    behavior. Areas of concern include products&#146; packaging
    materials, carbon footprint and crude oil usage in production
    and distribution and the impact on landfills when disposed. Most
    single-serve PET water bottles are produced using fossil fuels
    and contribute to landfill waste given that only 27% of PET
    bottles are recycled according to a November 2009 Environmental
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    Protection Agency report. Additionally, according to the
    December 2008 report, <I>Bottled Water-U.S.,</I> by Mintel
    International Group Limited, the incidence of people who do not
    drink single-serve PET bottled water because of environmental
    concerns nearly doubled from 18.0% in 2007 to 35.0% in 2008.
    Governmental legislation also reflects these concerns with the
    passage of &#147;bottle bills&#148; in many jurisdictions that
    tax the purchase of plastic water bottles, require deposits with
    the purchase of certain plastic bottles, prohibit the use of
    government funds to purchase plastic water bottles and ban
    certain plastic bottles from landfills.
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    <IMG src="g22358g2235802.gif" alt="(GRAPHIC)">
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<DIV style="font-size: 2pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Source: National Association for PET Container Resources 2005
    and 2008 Reports on Postconsumer PET Container Recycling
    Activity.</I>
</DIV>

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<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Availability
    of an Economical Water Bottle Exchange Service and Innovative
    Water Dispensers</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    According to 2007 United States census data, there are
    approximately 112&#160;million households. Based on estimates
    derived from industry data, we believe the current household
    penetration rate of
    <FONT style="white-space: nowrap">multi-gallon</FONT>
    water dispensers is approximately 4%, with the vast majority of
    these households utilizing traditional home delivery services.
    Until recently, there has been little innovation, design
    enhancement and functionality improvement in water dispensers to
    meet modern household needs and competing water dispensers have
    traditionally retailed at prices we believe are unlikely to
    support greater household adoption. Compounding these issues,
    there previously was no viable provider of an economical water
    bottle exchange service with major retailer relationships
    nationwide to promote dispenser usage beyond the traditional
    home delivery model. We believe our water bottle exchange
    service provides this alternative and we are currently the only
    provider delivering a solution nationally to retailers. We
    believe there are over 140,000 major retail locations nationwide
    that we could target to sell our dispensers or offer our water
    bottle exchange service.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our competitive strengths include the following:
</DIV>

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<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Appeal to
    Consumer Preferences</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Environmental Awareness.</I> Our water bottle exchange
    service incorporates reuse of existing bottles, recycles water
    bottles when their lifecycle is complete and reduces landfill
    waste and fossil fuel usage compared to alternative methods of
    bottled water consumption. Our three- and five-gallon water
    bottles are exchanged, sanitized and reused up to 40 times
    before being taken out of service, crushed and recycled. Given
    its typical exchange lifecycle, one Primo five-gallon water
    bottle provides consumers with water in an amount equivalent to
    approximately 1,200 16 ounce single-serve PET bottles. When used
    as an alternative for consuming purified water, based on current
    recycling rates, one Primo five-gallon water bottle can prevent
</TD>
</TR>

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    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    approximately 875 16&#160;ounce single-serve PET bottles from
    contributing to landfill waste. In addition, we believe our
    water bottle exchange service uses less fossil fuel in the
    distribution process and has a lower carbon footprint than
    alternative methods of bottled water consumption. Our
    geographically dispersed national network of independent
    bottlers and distributors are closer to major retailers than our
    centralized single-serve bottled water competitors. In addition,
    our exchange service is utilized by consumers as part of their
    ordinary shopping patterns, compared to separate, non-optimized
    deliveries typically associated with traditional home delivery
    providers, generally by less fuel efficient vehicles.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Value.</I> We provide consumers the opportunity for cost
    savings when consuming our bottled water compared to both
    single-serve bottled water and typical home and office delivery
    services. We believe our five-gallon bottles of purified water
    typically cost a consumer between $4.69 and $7.99, after giving
    effect to the discount provided by our recycling ticket. We
    believe this compares favorably to the cost of single-serve PET
    bottles, case pack water and most home and office delivery
    services. The cost savings provided by our recycle ticket also
    provides consumers an incentive to remain a user of our water
    bottle exchange service. Finally, our water dispensers are sold
    at attractive retail prices in order to enhance consumer
    awareness and adoption of our water bottle exchange service,
    increase household penetration and drive sales of our bottled
    water.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Convenience.</I> Our water bottle exchange service and water
    dispensers are available at major retail locations nationwide.
    In addition, our water bottle exchange service provides
    consumers the convenience of exchanging empty bottles and
    purchasing full bottles at any participating retailer. We offer
    three- and five-gallon water bottle options to address different
    consumer volume preferences. We believe our water bottle
    exchange service provides a convenient way to consume purified
    water compared to self-service refill machines and home and
    office delivery services. Our water bottle sales displays are
    fully stocked and ready for consumer purchases, eliminating
    refill time. In addition, our exchange service permits consumers
    to purchase only the number of water bottles they need without
    the water bottle purchase minimums or bottle deposits often
    charged by home and office delivery providers.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Taste.</I> We have dedicated significant time and effort in
    developing our water purification process and formulating the
    proprietary blend of mineral ingredients included in Primo
    purified water that we believe has a silky smooth taste. In an
    independent taste test that we commissioned and was conducted in
    six regions throughout the United States in 2007, four out of
    five participants on average preferred Primo purified water over
    municipal tap water and three out of four participants on
    average preferred Primo purified water over their region&#146;s
    market-leading bottled water.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Health and Wellness.</I> As part of a desire to live a
    healthier lifestyle, we believe that consumers are increasingly
    focused on drinking more water relative to consumption of other
    beverages. As we raise our brand awareness, we believe consumers
    will recognize that our water bottle exchange service is an
    effective option for their purified water consumption needs.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Key
    Retail Relationships Served by National Single-Vendor
    Solution</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are the only water bottle exchange provider with a
    single-vendor solution for retailers nationwide. Our solution is
    easy to implement and supervise for national and regionally
    concentrated major retailers. We manage a national network of
    primarily independent bottlers and distributors to service our
    retail customers. This network of 55 bottlers and 27
    distributors utilize our MIS tools and processes to optimize
    their production and distribution assets while servicing our
    retail customers. We believe the combination of our major retail
    relationships, unique single-vendor solution for retail
    customers, national network of independent bottlers and
    distributors and our MIS tools is difficult to replicate. We
    anticipate these factors will facilitate our introduction of new
    purified water-related products in the future.
</DIV>
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<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Ability
    to Attract and Retain Consumers</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer &#147;razor-razorblade&#148; products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of our innovative water
    dispensers (the razor), which include a coupon for a free three-
    or five-gallon Primo bottle of water. We acquire new consumers
    and enhance recycling efforts by accepting most
    dispenser-compatible water bottles in exchange for a recycle
    ticket discount toward the purchase of a full bottle of Primo
    purified water. Our water bottle exchange service is attractive
    to retailers as our consumers purchase an average of 35 bottles
    of Primo purified water per year, which facilitates repeat
    consumer traffic in our retailers&#146; stores. In addition, we
    believe we are the leading provider of water dispensers to
    retailers, a status we believe we achieved within less than two
    years of entering the market. We believe this rapid success is
    due to the innovative features, design elements and attractive
    retail prices of our water dispensers. We further believe our
    offering high-quality water dispensers enhances consumer
    awareness and adoption of our water bottle exchange service,
    increases household penetration and drives sales of our bottled
    water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Efficient
    Business Model</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business model allows us to efficiently offer our solution
    to our retail partners and centrally manage our national network
    of bottlers and distributors without a substantial capital
    investment. Our business processes and MIS tools enable us to
    manage the bottling and distribution of our water, our product
    quality, retailer inventory levels and the return of used
    bottles on a centralized basis, leveraging our invested capital
    and personnel. We own the bottles, transportation racks, mineral
    injectors and sales and recycling displays to ensure product
    quality and proper positioning of the Primo brand. We focus our
    capital expenditures on developing new store locations, raising
    brand awareness, developing new products and optimizing our MIS
    tools. Our water bottle exchange service is unique in that we
    are not required to make a significant portion of the capital
    investment required to operate our exchange service nationwide.
    Participation in our water bottle exchange service does not
    typically require independent bottlers and distributors to make
    substantial new investments because they often are able to
    augment their current production capacity and leverage their
    existing bottling and distribution assets. In addition, the flow
    of payments between the retailer and our bottlers and
    independent distributors is a critical component of our overall
    relationship with our major retail accounts that we control
    efficiently through electronic data interchange.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Benefit
    from Management&#146;s Proven Track Record</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We benefit greatly from management experience gained over the
    last 15&#160;years in exchange businesses, which enables us to
    implement and refine best practices and develop and maintain key
    business relationships. Our Chief Executive Officer, Billy D.
    Prim, founded Blue Rhino Corporation, a propane cylinder
    exchange business, in 1994 and led its IPO in 1998 and its
    successful sale in 2004. At the time of the sale, Blue Rhino was
    the market leader of propane grill cylinder exchange with over
    29,000 retail locations in 49&#160;states. In addition to our
    Chief Executive Officer, our Chief Financial Officer, Vice
    President of Operations, Vice President of Products and Vice
    President of National Accounts all held comparable positions
    within the Blue Rhino organization during its rapid sales and
    location growth.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Growth
    Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We seek to increase our market share and drive further growth in
    our business by pursuing the following strategies:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increase
    Penetration with Existing Retail Relationships and Develop New
    Retail Relationships</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we have significant opportunities to increase store
    penetration with our existing retail relationships and develop
    new retail relationships based on our competitive strengths. As
    of December&#160;31, 2009, our water bottle exchange service was
    offered at 6,000 of our top ten retailers&#146; nationwide
    locations. Such retailers present us an opportunity of
    approximately 7,500 additional nationwide locations. We intend
    to further penetrate our other existing retailers, which
    collectively provide us the opportunity to be present in an
    additional 22,400 locations nationwide. Our long-term strategy
    includes targeting up to approximately 40,000 total retail store
    locations
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (which includes new locations with our existing retail
    customers) within our primary retail categories of home centers,
    hardware stores, mass merchants, membership warehouses and
    grocery and drug stores.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Within two years of our inception, we expanded our retail
    presence from 13 states to our current locations within each of
    the contiguous United States. In addition, from 2005 through
    2009, we increased our water bottle exchange locations from
    approximately 300 to 7,000, representing a compound annual
    growth rate of approximately 120%.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Drive
    Consumer Adoption Through Innovative Water Dispenser
    Models</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to continue to develop and sell innovative water
    dispensers at attractive retail prices, which we believe is
    critical to increasing consumer awareness and driving consumer
    adoption of our water bottle exchange service. We believe our
    water dispensers have appealing features, such as stainless
    steel finishes, adjustable hot and cold temperature controls and
    hidden bottle bottom-loading features for convenience. As a
    result of our strategy of developing innovative water
    dispensers, we believe we became the leading seller of water
    dispensers to retailers within less than two years of our entry
    into the market. Since we began selling our water dispensers in
    2005, we have sold over 460,000&#160;units, and have expanded
    our retail network from four locations as of December&#160;31,
    2007, to our current network of approximately 5,500 locations.
    We plan to continue introducing new dispenser models at
    attractive retail price points to meet the evolving needs of
    consumers, enhance consumer awareness and adoption of our water
    bottle exchange service, and increase household penetration. Our
    long term strategy is to provide multiple purified water-based
    beverages from a single Primo water dispenser, with consistent
    promotion of our water bottle exchange service to supply the
    purified water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Increase
    Same Store Sales</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer &#147;razor-razorblade&#148; products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of water dispensers (the
    razor). We sell our water dispensers at minimal margin and
    provide a free three- or five-gallon bottle of water with every
    water dispenser sold to drive consumer demand for our water
    bottle exchange service.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe increasing unit sales of Primo purified bottled water
    is dependent on generating greater consumer awareness of the
    environmentally friendly and economical aspects of and the
    convenience associated with both our purified bottled water and
    our water bottle exchange service. We expect that our branding,
    marketing and sales efforts will result in greater usage of our
    water bottle exchange service. We are also increasing our public
    relations initiatives associated with new market launches,
    developing additional cooperative advertising programs with
    retail distribution partners and increasing our field marketing
    activities. In addition, as consumers exchange
    dispenser-compatible water bottles, we encourage the use of our
    water bottle exchange service by providing them a recycling
    ticket that provides a discount on a full bottle of Primo
    purified water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Develop
    and Install Other Hydration Solutions</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we have significant opportunities to leverage our
    national bottling and distribution network and our systems and
    processes to offer other environmentally friendly, economical,
    convenient and healthy hydration solutions to our retail
    partners without significant increases in our centralized costs.
    For example, we intend to offer our retail partners self-service
    refill vending machines that dispense purified water into
    bottles and other containers. We believe this offering will
    cater to a more price-sensitive consumer. In addition, we intend
    to offer to our retail partners automated, self-bagging purified
    ice dispensers. These purified ice dispensers will provide a
    simplified method of acquiring ice in customized offering sizes
    without the extensive manufacturing and storage networks typical
    of the ice dispensing industry.
</DIV>
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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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    <I><FONT style="font-family: 'Times New Roman', Times">Pursue
    Strategic Acquisitions to Augment Geographic and Retail
    Relationships</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe opportunities exist to expand through selective
    acquisitions, including smaller water bottle exchange businesses
    with established retail accounts, on-premises self-service water
    refill vending machine networks and retail accounts, ice
    dispenser machine networks and retail accounts and water
    dispenser companies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Product
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Water</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have dedicated significant time and effort in developing our
    water purification process and formulating the proprietary blend
    of mineral ingredients included in our purified water. Our
    proprietary blend of mineral ingredients was developed with the
    assistance of consultants and several months of lab work and
    taste tests and has what we believe to be a silky smooth taste.
    In an independent taste test that we commissioned and was
    conducted in six regions throughout the United States in 2007,
    four out of five participants on average preferred Primo
    purified bottled water over tap water and three out of four
    participants on average preferred Primo over their region&#146;s
    market-leading bottled water brand. We believe it is important
    that each bottle of Primo purified water has consistent taste
    and each production lot is tested to ensure it meets our
    standards. In addition, to ensure that our safety standards are
    met and FDA and industry standards are met or exceeded, each
    production lot of our purified water undergoes chemical and
    microbiological testing and all facilities bottling Primo
    purified water undergo regular hygiene audits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Water
    Bottles</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235803.gif" alt="(GRAPHIC OF WATER BOTTLES)"><I> </I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently source three- and five-gallon water bottles from
    multiple vendors for use in our exchange service. Each of our
    Primo water bottles includes a handle designed for easy
    transportation and lifting when installing the bottle onto or
    into one of our water dispensers. Our bottles also include a
    specially designed cap that prevents spills when carrying or
    installing.
</DIV>
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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Water
    Dispensers</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently source and market three lines of water dispensers
    comprised of 15 models:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235804.gif" alt="(GRAPHIC OF WATER DISPENSERS)">
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our dispensers are designed to dispense Primo and other
    dispenser-compatible bottled water. Our dispensers have
    manufacturer suggested retail prices that range from $199.99 for
    our
    <FONT style="white-space: nowrap">top-of-the-line</FONT>
    bottom-loading model with a stainless steel finish to $14.99 for
    a simple pump that can be installed on a bottle and operated by
    hand.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, more than 95% of our dispenser sales are attributable
    to our bottom- and top-loading products. Consistent with our
    environmental focus, our electric dispensers are Energy
    Star<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    rated, and, we believe, utilize less energy than competing water
    dispensers without this industry rating. In addition, some of
    our dispenser models feature power switches to individually
    control the hot and cold tanks of the dispenser, saving
    additional energy when not in use and providing a child-safety
    feature. We believe both our bottom- and top-loading models
    dispense water twice as fast as competing products and have the
    fastest recovery time for heating and cooling water. In
    addition, certain models of our bottom- and top-loading
    dispensers come equipped with adjustable hot and cold
    temperature controls conveniently located on the top of the
    dispenser.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe our bottom loading dispensers are attractive to
    consumers and will drive the greatest increase in household
    penetration as a result of their innovative styling and
    features. Water bottles are loaded and concealed inside our
    bottom-loading dispensers by a hinged door for ease of use and a
    clean aesthetic appearance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, all of our water dispensers are manufactured by
    independent suppliers in China. Our dispensers are shipped
    directly to our retailer partners and we do not use distributors
    in connection with our water dispensers. We also provide private
    label water dispensers to Target that are branded as
    Black&#160;&#038; Decker products pursuant to a license
    agreement with The Black&#160;&#038; Decker Corporation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Primo
    Water Marketing</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our marketing efforts focus primarily on developing and
    maintaining a brand identity synonymous with an environmentally
    friendly, economical, convenient and healthy solution for
    purified water consumption. We direct our marketing efforts as
    close as possible to the point of sale to strengthen our brand
    and promote consumer
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    awareness of our water bottle exchange service. We believe our
    water bottle exchange service develops consumer loyalty through
    the use of our recycling tickets. Our marketing efforts include
    the following initiatives:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Primo
    Water Packaging</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our three- and five-gallon water bottles, sales and recycling
    center displays, water dispensers and certain distributor
    delivery vehicles prominently display our Primo logo and
    distinctive four-bubble design.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Primo
    Water Displays</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our sales and recycling center displays are typically located
    near the front of a store, providing
    <FONT style="white-space: nowrap">point-of-sale</FONT>
    advertising and branding. We believe our displays enhance
    consumer awareness of the Primo brand and reinforce the
    association of our water with an environmentally friendly,
    economical, convenient and healthy solution for purified water
    consumption. Our displays include Primo graphics, slogans and
    instructions on the exchange process that simply attach to the
    displays. We have the ability to quickly replace, customize or
    introduce new marketing materials on our displays throughout our
    retail network. In addition, we work with retailers to customize
    in-store solutions to best promote our brand.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Promotions</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our promotional activities target new customers by:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Accepting third-party dispenser-compatible water bottles in the
    exchange process (which we believe is unique in the industry);
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Providing attractive pricing on our water dispensers;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Offering a free bottle of water with the purchase of a water
    dispenser;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Advertising in retailers&#146; weekly circulars;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Providing samples of our purified water and water dispensers
    <FONT style="white-space: nowrap">on-site</FONT> at
    our retailers&#146; locations and educating consumers on the
    benefits of our purified bottled water and dispensers.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We promote our brand through social media, our website
    (<I>www.primowater.com</I>) and other public relations efforts.
    We also maintain a blog (<I>www.breakfree411.com</I>) that is
    styled as a third-party website and provides updates on the
    water industry. In addition, we seek to raise awareness of our
    brand and products through blogs and related periodicals that
    target women as well as household and kitchen matters. We
    believe that women often significantly influence household and
    kitchen appliance decisions and concentrating our efforts in
    this manner is designed to improve the effectiveness of our
    advertising campaigns and improve household penetration.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our promotional activities have evolved from our &#147;Taste
    Perfection&#148; campaign to our &#147;Zero Waste. Perfect
    Taste,&#148; campaign emphasizing our environmental efforts
    while simultaneously focusing on the taste of our purified
    water. We plan to increase our promotional activity as we expand
    our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The Primo
    Water Bottle Exchange Supply Chain</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Water
    Purification and Bottling</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our bottling process begins with either spring water or water
    from a public source that is processed through a pre-filtration
    stage to remove large particles. The water is then passed
    through polishing filters to catch smaller particles followed by
    a carbon filtration process that removes odors, tastes,
    sanitization by-products and pharmaceutical chemicals. A
    microfiltration process then removes microbes before the water
    is passed through a softener to
</DIV>
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    increase the purification efficiency. The water next passes
    through the last phase of reverse osmosis or distillation,
    completing the purification process. After the purification
    process is complete, our proprietary blend of mineral
    ingredients is injected into the water followed by the final
    ozonation process to sanitize the water. A bottle is filled with
    Primo purified water only after the inspection and sanitization
    steps outlined below are completed. Each of our production lots
    is placed on a
    <FONT style="white-space: nowrap">48-hour</FONT> hold
    to allow for testing and to ensure successful compliance with
    chemical and microbiological standards. We have the ability to
    trace each bottle of Primo water to its bottling and distributor
    sources, and we regularly perform recall tests to ensure our
    ability to react to a contamination event should it occur. In
    comparison, municipal water is generally treated at a
    centralized processing facility and then distributed throughout
    the pipeline network. As the water flows to the point of use,
    contaminants and other foreign objects may be dissolved into the
    water, and household piping and faucets may collect sediment
    that over time reduces the quality of municipally supplied water.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235805.gif" alt="(GRAPHIC)">
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our distributors are responsible for collecting empty Primo
    bottles and other dispenser-compatible bottles that are
    deposited into our recycling center displays. At the completion
    of the delivery cycle, a distributor inspects the exchanged
    bottles for reusability and coordinates the recycling efforts
    with our operations personnel to ensure that reuse of each water
    bottle we receive in the exchange process is being optimized.
    Our water bottles can be sanitized and reused up to 40 times
    before being taken out of use, crushed and recycled,
    substantially reducing landfill waste compared to consumption of
    similar amounts of single-serve PET bottled water. Bottles that
    pass a distributor&#146;s initial inspection are subject to
    three washing cycles to remove particles. Bottles are then
    passed through two sanitization stages before a final rinse with
    hyper-ozonated water to kill or inactivate any microbes that
    remain at that point in the sanitation process. The water
    bottles are then ready to be filled with our purified water.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235806.gif" alt="(GRAPHIC)">
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Distribution
    Network</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We rely on a national network of independent distributors and,
    to a lesser degree, a company-operated distribution system. Our
    water bottle exchange process begins when a distributor is
    directed through our proprietary MIS tool, Routeview, to stock
    or replenish a Primo bottled water retail location. Routeview
    enables our distributors to review delivery quantities and
    tentative scheduling requirements in their territory. Our
    systems provide anticipated demand based on historical sales
    and, to the extent available, retailer point of sale
    (&#147;POS&#148;) data. Each distributor is provided information
    to enable the distributor to load a truck with the appropriate
    inventory to stock or restock the water bottle sales displays on
    its route, including a tailored amount of excess bottles as
    safety stock. Upon arrival at each retail location, the driver
    first visits the recycling center display to collect empty Primo
    and other dispenser-compatible bottles. The driver enters data
    related to empty bottles on a handheld device to collect
    exchange efficiency information and potential customer
    conversion data and then loads empty bottles onto the truck. The
    driver next checks the in-store sales display to compare the
    number of remaining bottles of water with the anticipated demand
    report generated by our MIS tools. After entering current stock
    levels,
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    the driver is instructed by our MIS tools through the handheld
    device and based on proprietary algorithms, to replenish the
    sales display with an appropriate quantity of bottles.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At the completion of the delivery cycle and after inspection of
    the bottles, our distributors typically are responsible for
    coordinating the sanitization and bottling process with our
    bottlers. In addition, distributors must run
    <FONT style="white-space: nowrap">end-of-day</FONT>
    reports on their handheld devices which transmit crucial data
    points into our databases and validate daily activity. Our
    handheld devices also capture electronic signatures,
    significantly reducing paper exchange. This greatly improves our
    verification procedures and enhances our environmental efforts.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235810.gif" alt="">
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have the ability to test and refine procedures through our
    Company-operated distribution system before implementing them
    with our independent distributors nationwide. In addition, we
    regularly solicit feedback from our independent distributors to
    improve processes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Flow of
    Payments and Capital Requirements</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We control the flow of payments between our retail customers and
    our bottlers and distributors through electronic data
    interchange. Our distributors are responsible for handling
    distribution and servicing our sales and recycling center
    displays. Through our handheld devices, distributors report
    their deliveries which are received by our systems and verified
    by data integrity checks. Depending on the retailer, our
    distributors either present the store manager with an invoice
    for the bottles delivered or our systems electronically bill the
    retailer. We compensate our distributors with a fixed payment
    per delivered water bottle on the fifteenth day of the month
    following the delivery activity. Our fixed payment is a gross
    amount from which the distributor must typically pay the
    bottler. In order to maximize their returns and profitability,
    our distributors increasingly are becoming vertically
    integrated, using their capital to build bottling facilities.
    Due to the high degree of automation during our billing and
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    inventory management procedures, we are able to leverage our
    centralized personnel and believe we will be able to
    significantly expand our business with minimal increases in
    variable cost.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We focus our capital expenditures on developing new store
    locations, raising brand awareness, developing new products and
    optimizing our MIS tools. We are also responsible for the
    centralized operations and personnel, sales and recycling
    displays, bottles, transportation racks, mineral packets and
    mineral injectors and handheld devices. We rely on our national
    network of independent bottlers and distributors to make a
    significant portion of capital investment required to operate
    our exchange service nationwide, including a majority of the
    capital expenditures related to the bottling, sanitization and
    refill process and the distribution assets such as delivery
    trucks and warehouse storage. Participation in our water bottle
    exchange service does not typically require the independent
    bottlers and distributors to make substantial new investments
    because they often are able to augment their current production
    capacity and leverage their existing bottling and distribution
    assets. In addition, many of our major retail customers have
    invested their capital to expand store locations and generate
    customer traffic.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Flow of
    Payments and Capital Requirements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235808.gif" alt="(GRAPHIC)">
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Retailer
    Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We target major retailers with either a national footprint or a
    significant regional concentration. Our relationships are
    diversified among the following retail categories and major
    accounts:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="48%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Retail Category</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Major Accounts</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Home Centers / Hardware Stores
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Lowe&#146;s&#160;Home&#160;Improvement,&#160;Ace&#160;Hardware,&#160;True&#160;Value
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mass Merchants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Walmart, Target, Kmart
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Grocery Stores
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Kroger, Winn-Dixie, Albertsons, Food Lion
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Membership Warehouses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Sam&#146;s Club, Costco
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Drug Stores
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Walgreens, CVS
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Retailer
    Opportunity</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer retailers a single-vendor solution. Our water bottle
    exchange service provides retailers with a year-round consumer
    product and an opportunity to increase sales and profits with
    minimal labor and financial investment. Through our primarily
    independent network of bottlers and distributors, we are able to
    service major retailers nationwide. Retailers benefit from our
    water bottle exchange service that offers high margin and
    generates productivity from often underutilized interior and
    exterior retail space. In addition, our water bottle exchange
    service has the potential to increase retailers&#146; sales of
    ancillary products through increased traffic from repeat water
    bottle exchange consumers, who purchase an average of 35 water
    bottles annually.
</DIV>
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    <I><FONT style="font-family: 'Times New Roman', Times">Account
    <FONT style="white-space: nowrap">Set-Up</FONT></FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We actively pursue headquarters-based retail relationships to
    better serve our retail partners and minimize layers of approval
    and decision-making with regard to the roll-out of our water
    bottle exchange service to multiple locations. Upon confirmation
    of new retail locations, we coordinate with the retailer and
    distributor to schedule openings in a timely manner. We actively
    assist retailers in developing site plans for the setup of our
    sales and recycling center displays. While retailer setup
    preferences may vary, retailers often like to locate the
    recycling center display prominently on the exterior of their
    store to ease the transaction process, showcase their recycling
    and environmental efforts and conserve inside floor space while
    at the same time promoting the Primo brand.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Account
    Service</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our water bottle exchange service is a turn-key program for
    retailers in which we and our distributors actively service each
    retail account. After the retail location is established, our
    distributors complete
    <FONT style="white-space: nowrap">on-site</FONT>
    training and have an economic interest in supporting and growing
    the business relationship to increase product throughput.
    Distributors deliver three- and five-gallon Primo bottled water
    directly to retail locations and maintain the sales and
    recycling center displays.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sales
    Support</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While distributors service our retail accounts, the customer
    relationship is &#147;owned&#148; and maintained by our
    experienced retail sales organization, which allows us to
    develop strong brand affinity and maintain key
    headquarters-based relationships to secure and maintain our
    national retail network. Our retail relationships are divided
    into regions and managed by our sales personnel. In addition, we
    leverage our national network of primarily independent
    distributors that typically employ their own sales
    representatives. This combined team is responsible for selling
    and supporting our water bottle exchange service to targeted
    retailers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Systems
    Support</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We supply each major retail customer with a customized sales and
    business update on a monthly basis. The monthly update consists
    of a graphical dashboard highlighting sales trends and
    location-based information as well as qualitative commentary to
    assist store and headquarters personnel in their business
    decisions. We believe our reports help retail personnel monitor
    the success of our water bottle exchange service and highlight
    our analytical and customer support capabilities as a retail
    partner. In many cases, our retail customers do not have
    internal reporting capabilities to develop comparable analyses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Customer
    Service</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain a single 1-800 number for all distributors,
    retailers and customers to contact us directly with questions
    regarding our bottled water, water bottle exchange process and
    customer service inquires. In addition, we maintain a separate
    1-800 number for our water dispensers. We believe maintaining
    our own customer service numbers allows us to effectively
    monitor all aspects of our business and receive feedback on
    issues first-hand that we can direct to our distributors or
    dispenser suppliers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Significant
    Customers</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the year ended December&#160;31, 2009, Lowe&#146;s Home
    Improvement, Sam&#146;s Club and Walmart represented
    approximately 33%, 19% and 15% of our total sales, respectively.
</DIV>
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    <BR>
    54
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    <B><FONT style="font-family: 'Times New Roman', Times">National
    Bottler and Distributor Network</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In an effort to build a market-leading single-vendor national
    water bottle exchange service, we have sought to attract
    experienced and well-capitalized bottlers and distributors to
    support our network. As of December&#160;31, 2009, we had 55
    bottlers and 27 independent distributors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Opportunity</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide bottlers and distributors with an attractive business
    opportunity, complementing many of their existing operations. We
    continually pursue new relationships and additional locations
    with existing retail partners to increase the production at each
    bottler&#146;s manufacturing facility and the retail customer
    density within each distributor&#146;s territory.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Standards</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We work very closely with our national network of primarily
    independent bottlers and distributors to ensure their production
    and storage standards meet or exceed the requirements of the
    United States Food and Drug Administration and other industry
    regulations. As we seek to promote our brand, we believe it is
    critical to provide bottled water that has consistent taste and
    is produced in a manner that exceeds current industry
    requirements. We regularly monitor, test and arrange for
    third-party hygiene audits of each bottling facility.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we regularly monitor our distributors&#146;
    performance to ensure a high level of account service.
    Distributors are generally required to develop an infrastructure
    sufficient to:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Complete customer installations within 30&#160;days of the
    notification of a newly established account;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Monitor and maintain inventory levels with assigned retail
    accounts;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Resolve water bottle stock-outs within 36&#160;hours.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Selection Process</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have selectively identified and pursued high quality
    independent bottlers and distributors that can support our major
    retailers nationwide. We screen all bottler and distributor
    candidates by reviewing credit reports, safety records and
    manufacturing compliance reports, and conducting management
    reference checks. As a result of this thorough selection
    process, we have established what we believe to be a highly
    dependable national network of independent bottlers and
    distributors. We currently maintain three distributor or bottler
    relationships that have relatively high customer concentrations
    in the geographic areas they serve. None of these distributors
    or bottlers, however, had responsibility for more than 8.0% of
    the bottling or more than 12.6% of the distribution with respect
    to our water bottle exchange volume for the year ended
    December&#160;31, 2009. We believe we have a positive
    relationship with each of these parties and our senior
    executives have maintained a business relationship with each
    such party since they were managing operations at Blue Rhino
    Corporation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Services</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently employ raw material procurement and supply chain
    personnel who perform periodic inventory audits and month-end
    review procedures. In addition we have operations personnel who
    manage our independent bottler and distributor relationships,
    including training and monitoring personnel and activities. We
    also employ customer service personnel who handle bottler,
    distributor, retailer and end-user phone calls.
</DIV>
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    <BR>
    55
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    <I><FONT style="font-family: 'Times New Roman', Times">Company
    Owned Distribution Operations</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have distribution responsibilities for certain regions that
    are relatively near our primary facilities. We distribute our
    bottled water to major retailers in portions of North Carolina,
    South Carolina, Florida and Virginia. We believe distributing
    our bottled water in these areas is an important way for us to
    better understand the bottled water exchange process and
    provides us the necessary feedback to enhance our independent
    bottler and distributor relationships. In addition, distributing
    our bottled water in these areas should assist us in validating
    the economic arrangements we offer our bottlers and distributors
    and developing industry knowledge that we can deploy throughout
    our system. For the year ended December&#160;31, 2009, our
    Company-owned distribution operations accounted for
    approximately 23.5% of our water bottle exchange volume.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Agreements</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into bottler and distributor agreements with
    each of our 55 bottlers and 27 independent distributors on
    substantially similar terms. While individual agreements contain
    variances and exceptions, the material terms of such agreements
    are described generally below. No individual bottler or
    distributor is material to our overall financial condition or
    results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 10%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    Agreement</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our bottler agreement, we appoint a bottler as a
    non-exclusive supplier of our purified drinking water. The
    bottler is restricted from competing with us during the term of
    the agreement and for a specified period after the term in a
    specified geography.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The bottler is required to bottle and deliver product in
    conformance with our specifications, including our proprietary
    mineral formula. The bottler must ensure that our bottled water
    products comply with applicable laws, rules and regulations
    (including those of the FDA), industry standards (including
    those of the International Bottled Water Association) and our
    quality requirements. The agreement also imposes requirements on
    the bottler with respect to the maintenance of its facilities
    and equipment that are intended to ensure the quality of our
    products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide the necessary bottles, caps, labels, transportation
    racks, mineral injectors and formula minerals at no charge to
    the bottler to support the bottling and supply of our bottled
    water products. The bottler is required to maintain inventory
    levels necessary to satisfy our production requirements. Product
    may not be released for shipment until the bottler meets all
    applicable quality requirements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pricing is set forth in the agreement, and we have the right to
    modify pricing on thirty days notice to the bottler. The
    agreements generally have a three-year term, and if not
    otherwise terminated, automatically renew for successive
    one-year periods after the initial term. Either party may
    terminate the agreement in the event of an uncured material
    breach by the other party.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 10%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Distributor
    Agreement</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our distributor agreement, we grant a distributor the right
    to serve as our exclusive delivery and service agent and
    representative with respect to our bottled water exchange
    service for a specified term in a specified geographic
    territory. The distributor is restricted from competing with us
    during the term of the agreement and for a specified period
    after the term in the specified geography. We have the right, at
    any time, to purchase a distributor&#146;s rights under the
    agreement, along with related distribution equipment, for an
    amount based on the distributor&#146;s revenues under the
    agreement for the prior twelve-month period and the fair market
    value of the equipment being purchased.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The distributor must perform its services under the agreement in
    conformance with our distributor manual and all applicable laws
    and regulations, including those of the FDA.
</DIV>
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    56
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We compensate a distributor for its services while maintaining a
    direct relationship with and collecting payments from our
    retailer customers within the distributor&#146;s service
    territory. Pricing is set forth in the agreement, and we have
    the right to modify pricing and payment terms on thirty days
    notice to the distributor.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agreements generally have a ten-year term, and if not
    otherwise terminated, automatically renew for successive
    one-year terms after the initial ten-year term. Either party may
    terminate the agreement for, among other reasons, an uncured
    material breach by the other party.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Management
    Information Systems</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have made a substantial investment in MIS tools which enhance
    our ability to process orders, manage inventory and accounts
    receivable, maintain distributor and customer information,
    maintain cost-efficient operations and assist distributors in
    delivering products and services on a timely basis. Our
    technology utilizes highly integrated, scalable software
    applications that cost-effectively support our growing retail
    network. Our MIS tools also allow us to analyze historical
    trends and data to further enhance the execution, service and
    identification of new markets and marketing opportunities. The
    primary components of our systems include the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sales and
    Marketing Support Systems</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We operate a single customer relationship management database
    that integrates all financial and transaction-based data with
    respect to each retail account. Our MIS tools provide our
    account managers and customer service representatives access to
    crucial data to effectively manage each bottler, distributor and
    retail relationship.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Bottler
    and Distributor Level&#160;Technology</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our distribution process is highly automated and scalable. Our
    technology allows bottlers and distributors timely access to
    information for customer support needs and provides access to
    real-time data to enhance decisions. In addition, each
    distributor is electronically linked to our systems with our
    proprietary Routeview software. Routeview enables distributors
    to review delivery quantities and tentative scheduling
    requirements across our entire national network. In addition,
    our MIS tools allow drivers to update delivery, inventory and
    invoicing information through handheld devices. This technology
    provides retailers with accurate and timely inventory and
    invoices and assists each distributor in managing its
    responsibilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Financial
    Integration</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We utilize Microsoft&#146;s Dynamics GP software as our core
    platform which interfaces with all of our systems. Each handheld
    device is based on Microsoft&#146;s operating system and ensures
    integration within our reporting and financial databases. All
    delivery transactions are validated and data is imported into
    our database tables and mapped to corresponding accounting
    ledgers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Manufacturing
    and Sourcing</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our manufacturing strategy is to utilize third-party
    manufacturers to produce empty water bottles, sales displays and
    recycle centers and water dispensers at a reasonable cost. We
    believe that using contract manufacturers has several advantages
    over our manufacturing these items directly, including
    (i)&#160;decreased capital investment in manufacturing plants
    and equipment and working capital, (ii)&#160;the ability to
    leverage contract manufacturers&#146; purchasing relationships
    for lower materials costs, (iii)&#160;minimal fixed costs of
    maintaining unused manufacturing capacity and (iv)&#160;the
    ability to utilize our suppliers&#146; broad technical and
    process expertise.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, the majority of our water dispensers are assembled by
    a single manufacturer in China, which utilizes several
    <FONT style="white-space: nowrap">sub-suppliers</FONT>
    to provide components and subassemblies. We have the sole North
    American rights to develop products with this manufacturer and
    each dispenser unit is produced to our design specifications.
    Each unit is inspected and tested for quality by the
    manufacturer&#146;s personnel prior to shipment and any units
    returned
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    by consumers or retailers are sent directly to the manufacturer
    for a credit, replacement or refund issued by the manufacturer.
    Our units generally are shipped directly from Hong Kong to the
    retailer. For the year ended December&#160;31, 2009, this
    manufacturer produced water dispenser units that accounted for
    more than 95% of our water dispenser billings.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our water bottles and caps are produced by multiple vendors
    throughout the United States. We select suppliers based on
    price, quality and geographic proximity to our bottlers. We only
    purchase water bottles with handles as a convenience feature for
    consumers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our sales displays and recycle centers are made to our design.
    We frequently request bids from multiple manufacturers to
    achieve optimal pricing.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Product
    Design and Development</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A primary focus of our product research and development efforts
    is developing innovative water dispensers as part of our
    strategy to enhance consumer awareness and adoption of our water
    bottle exchange service, increase household penetration and
    drive sales of our bottled water. We continually work to improve
    water dispenser features, seek to lower manufacturing costs so
    that our innovative products are more affordable and introduce
    new models. Innovative improvements developed in cooperation
    with our manufacturing partners include bottom-loading
    dispensers, adjustable hot and cold temperature controls and
    faster water dispensing capabilities. Our water dispenser models
    are designed to appeal to consumers of diverse demographic
    audiences. We are currently working with our manufacturing
    partners to develop new product lines that include self-bagging
    automated purified ice dispensers and purified water refill
    dispensers to be located
    <FONT style="white-space: nowrap">on-site</FONT> at
    our retail customers. We expect to introduce these new product
    lines in 2010. We are also in the early development stage of
    creating a water dispenser product that provides consumers the
    ability to dispense multiple purified water-based beverages,
    including traditional hot drink products and flavored and
    carbonated beverages.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competition</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We participate in the highly competitive bottled water segment
    of the nonalcoholic beverage industry. While the industry is
    dominated by large and well-known international companies,
    numerous smaller firms are also seeking to establish market
    niches. We have a unique business model in the bottled water
    market in the United States in that we not only offer three- and
    five-gallon bottled water on a nationwide basis but also provide
    consumers the ability to exchange their used containers as part
    of our water bottle exchange service. We believe that we are one
    of the first companies to provide a national water bottle
    exchange service at retail. While we are aware of a few direct
    competitors that operate similar networks, we believe they
    operate on a much smaller scale than we do and do not have
    equivalent MIS tools or bottler and distributor capabilities to
    effectively support major retailers nationwide. Competitive
    factors with respect to our business include pricing, taste,
    advertising, sales promotion programs, product innovation,
    efficient production and distribution techniques, introduction
    of new packaging, and brand and trademark development and
    protection.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary competitors in our bottled water business include
    Nestl&#233;, The
    <FONT style="white-space: nowrap">Coca-Cola</FONT>
    Company, PepsiCo, Dr Pepper Snapple Group and DS Waters of
    America. None of these companies currently offer a nationwide
    water bottle exchange service at retail. However, many of these
    competitors are leading consumer products companies, have
    substantially greater financial and other resources than we do,
    have established a strong brand presence with consumers and have
    established relationships with retailers, manufacturers,
    bottlers and distributors necessary to start an exchange
    business at retail locations nationwide should they decide to do
    so. In addition to competition between firms within the bottled
    water industry, the industry itself faces significant
    competition from other non-alcoholic beverages, including
    carbonated and non-carbonated soft drinks and waters, juices,
    sport and energy drinks, coffees, teas and spring and tap water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also compete directly and indirectly in the water dispenser
    marketplace. This marketplace is diverse and faces competition
    from other methods of purified water consumption such as
    countertop filtration systems, faucet
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    mounted filtration systems, in-line whole-house filtration
    systems, water filtration dispensing products such as pitchers
    and jugs, standard and advanced feature water coolers and
    refrigerator-dispensed filtered and unfiltered water.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Intellectual
    Property and Trademarks</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our intellectual property provides a competitive
    advantage and we have invested substantial time, effort and
    capital in establishing and protecting our intellectual property
    rights. We have filed certain patent applications and trademark
    registration applications and intend to seek additional patents,
    to develop additional trademarks and seek federal registrations
    for such trademarks and to develop other intellectual property.
    We consider our Primo name and related trademarks and our other
    intellectual property to be valuable to our business and the
    establishment of a national branded bottled water exchange
    service. We rely on a combination of patent, copyright,
    trademark and trade secret laws and other arrangements to
    protect our proprietary rights. We own ten United States federal
    trademark registrations, including registrations for our
    Primo<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    and Taste
    Perfection<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    trademarks, our
    Primo<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    logo and our distinctive four bubble design. We also own a
    pending application to register our Zero Waste. Perfect
    Taste<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>

    trademark in the United States for use in association with
    drinking water dispensers, bottled drinking water and a variety
    of other non-alcoholic beverages. In addition, the design of our
    recycling center displays is protected by four United States
    design patents and two Canadian industrial design registrations.
    We own three pending utility patent applications in the United
    States for our bottled water distribution method and bottle
    return apparatus (or our recycling center displays).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to patent protection, we also rely on trade secrets
    and other non-patented proprietary information relating to our
    product development, business processes and operating
    activities. We regard portions of our proprietary MIS tools,
    various algorithms used in our business and the composition of
    our mineral formula to be valuable trade secrets of the Company.
    We seek to protect this information through appropriate efforts
    to maintain its secrecy, including confidentiality agreements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Governmental
    Regulation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The conduct of our businesses and the production, distribution,
    advertising, promotion, labeling, safety, transportation, sale
    and use of our products are subject to various laws and
    regulations administered by federal, state and local
    governmental agencies in the United States. It is our policy to
    abide by the laws and regulations that apply to us, and we
    require our bottling, manufacturing, and distributing partners
    to comply with all laws and regulations applicable to them.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are required to comply with:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    federal laws, such as the Federal Food, Drug and Cosmetic Act,
    the Occupational Safety and Health Act and the Americans with
    Disabilities Act;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    customs and foreign trade laws and regulations;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    state consumer protection laws;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    federal, state and local environmental, health and safety laws;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    laws governing equal employment opportunity and workplace
    activities;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    various other federal, state and local statutes and regulations.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain environmental, health and safety policies and a
    quality, environmental, health and safety program designed to
    ensure compliance with applicable laws and regulations.
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The United States Food and Drug Administration (the
    &#147;FDA&#148;) regulates bottled water as a food under the
    federal Food, Drug and Cosmetic Act. Our bottled water must meet
    FDA requirements of safety for human consumption, identity,
    quality and labeling. Further, the sale and marketing of our
    products is subject to FDA&#146;s advertising and promotion
    requirements and restrictions. In addition, FDA has established
    current &#147;good manufacturing practice&#148; regulations,
    which govern the facilities, methods, practices and controls
    used for the processing, bottling and distribution of bottled
    drinking water. We and our third-party supply, bottling and
    distribution partners are subject to these requirements. We also
    must comply with overlapping and sometimes inconsistent state
    regulations in various jurisdictions. As a result, we must
    expend resources to continuously monitor state legislative and
    regulatory activities for purposes of identifying and ensuring
    compliance with the laws and regulations that apply to our
    bottled water business in each state in which we operate. While
    we must meet the government-mandated standards, we believe that
    our self-imposed standards meet or exceed those set by federal,
    state and local regulations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, the manufacture, sale and use of resins used to
    make water bottles is subject to regulation by the FDA. Those
    regulations are concerned with substances used in food packaging
    materials, not with specific finished food packaging products.
    We believe our beverage containers are in compliance with FDA
    regulations. Additionally, the use of polycarbonates in food
    containers used by children under three years of age is subject
    to certain state and local restrictions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Measures have been enacted in various localities and states that
    require a deposit or tax to be charged for certain
    non-refillable beverage containers. The precise requirements
    imposed by these measures vary. Other deposit, recycling or
    product stewardship proposals have been introduced in various
    jurisdictions. We anticipate that similar legislation or
    regulations may be proposed in the future at the local, state
    and federal levels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From time to time, we are a party to various lawsuits, claims
    and other legal proceedings arising from our normal business
    activities. We have not had, and we do not believe that we have
    currently, any proceedings that, individually or in the
    aggregate, would be expected to have a material adverse effect
    on our business, results of operations or financial condition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Facilities</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate headquarters, including our principal
    administrative, marketing, sales, technical support and research
    and development facilities, are located in Winston-Salem, North
    Carolina where we lease approximately 14,200&#160;square feet
    under an agreement that expires on May&#160;31, 2011.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition we lease warehouse space in Winston-Salem, North
    Carolina, Lakeland, Florida and Petersburg, Virginia to support
    our Company-owned operations in these regions. These facilities
    have lease expirations that vary from May 2010 to November 2010.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our current facilities are suitable and adequate
    to meet our current needs, and that suitable additional or
    substitute space will be available as needed to accommodate
    expansion of our operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employees</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had 75&#160;employees. We
    believe that our continued success will depend on our ability to
    continue to attract and retain skilled personnel. We have never
    had a work stoppage and none of our employees are represented by
    a labor union. We believe our relationship with our employees is
    good.
</DIV>
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    60
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<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below are our executive officers and directors,
    together with their positions and ages as of March&#160;1, 2010.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="45%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="50%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Age</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    54
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Chairman,&#160;Chief&#160;Executive&#160;Officer,&#160;President&#160;and&#160;Director
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    45
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Chief Financial Officer
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    41
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Senior Vice President, Operations
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Duane G. Goodwin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    51
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Senior Vice President, Business Development
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard A. Brenner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    46
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David W. Dupree
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    55
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Malcolm McQuilkin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    63
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    51
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Director
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below is a brief description of the business
    experience of our directors and executive officers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Billy D. Prim&#160;&#151; Chairman, Chief Executive
    Officer, President and Director.</I></B> Mr.&#160;Prim has been
    our Chairman, Chief Executive Officer and President since he
    founded the Company in 2004. Mr.&#160;Prim has also served on
    our Board of Directors since 2004. Prior to founding the
    Company, Mr.&#160;Prim founded Blue Rhino Corporation (a
    provider of propane cylinder exchange and complementary propane
    and non-propane products) in March 1994 and served as its Chief
    Executive Officer and Chairman of the Board. He led Blue
    Rhino&#146;s initial public offering in May 1998 and remained
    its Chief Executive Officer until April 2004, when Blue Rhino
    was acquired by Ferrellgas Partners, L.P., at which time he was
    elected to the Ferrellgas board of directors on which he served
    until November&#160;2008. Mr.&#160;Prim also previously served
    on the board of directors of Southern Community Bank and Trust
    from 1996 until 2005. Mr.&#160;Prim brings extensive business,
    managerial and leadership experience to our Board of Directors.
    Mr.&#160;Prim&#146;s service as an executive and a Director of
    Primo provide our Board of Directors with a vital understanding
    and appreciation of our business. In addition,
    Mr.&#160;Prim&#146;s leadership abilities, his experience at
    Blue Rhino and his extensive knowledge of the bottled water
    industry position him well for service on our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Mark Castaneda&#160;&#151; Chief Financial
    Officer.</I></B> Mr.&#160;Castaneda has served as our Chief
    Financial Officer since March 2008. Prior to joining our
    Company, he served as Chief Financial Officer for Tecta America,
    Inc. (a private national roofing contractor) from October 2007
    until March 2008, as Chief Financial Officer for Interact Public
    Safety (a private software company) from September 2006 until
    October 2007 and as Chief Financial Officer for Pike Electric
    Corporation (a publicly-traded energy solutions provider) from
    October 2004 until August 2006, where he helped lead its initial
    public offering in July 2005. Mr.&#160;Castaneda served Blue
    Rhino Corporation as its Chief Financial Officer from November
    1997 until October 2004 and as a Director from September 1998
    until April 2004. Mr. Castaneda helped lead Blue Rhino&#146;s
    initial public offering with Mr.&#160;Prim in May 1998.
    Mr.&#160;Castaneda began his career with Deloitte&#160;&#038;
    Touche in 1988 and is a certified public accountant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Michael S. Gunter&#160;&#151; Senior Vice President,
    Operations.</I></B> Mr.&#160;Gunter has served as our Senior
    Vice President of Operations since March 2010 and previously
    served as our Vice President of Operations from our founding in
    October 2004 through February 2010. Prior to joining our
    Company, he served as the Senior Director of Strategy and
    Financial Analysis as well as the Director of Information
    Technology for Blue Rhino Corporation from 2000 until October
    2004. Mr.&#160;Gunter served as an Artillery Officer in the
    United States Marine Corps from 1990 to 1996.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Duane G. Goodwin&#160;&#151;&#160;Senior Vice President,
    Business Development.</I></B> Mr.&#160;Goodwin has served as our
    Senior Vice President of Business Development since February
    2010. Prior to joining our Company, he served as Chief Supply
    Chain Officer for BlueLinx Corporation (a distributor of
    building products) from December 2005 until April 2009, as
    Senior Operations Consultant for Cerberus Capital Management (a
    private investment firm) from June 2005 until December 2005 and
    in various management roles for The Home Depot (a home
</DIV>
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    61
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    improvement retailer) from 1994 until January 2005. Before
    joining The Home Depot Mr. Goodwin was with Walmart Stores, Inc.
    (a mass merchant retailer), where he served in a variety of
    roles from 1985 through 1994.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Richard A. Brenner&#160;&#151; Director.</I></B>
    Mr.&#160;Brenner has served on our Board of Directors since
    2005. He has been the Chief Executive Officer of Amarr Garage
    Doors (a manufacturer and distributor of garage doors) since
    July 2002 and was its President from July 1993 until June 2002.
    Mr.&#160;Brenner also serves on several boards of private and
    nonprofit entities, including ABC of North Carolina, Idealliance
    and Wake Forest University Health Sciences, and was a member of
    the board of directors of Blue Rhino Corporation from 1998 to
    2004. Mr.&#160;Brenner&#146;s significant executive and board
    service experience qualify him for service on our Board of
    Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>David W. Dupree&#160;&#151; Director.</I></B>
    Mr.&#160;Dupree has served on our Board of Directors since April
    2008. As a founder of The Halifax Group (a private equity group)
    in 1999, he serves as the Chief Executive Officer and Managing
    Director of Halifax. Prior to co-founding Halifax, Mr. Dupree
    was a Managing Director and Partner with The Carlyle Group,
    where he was primarily responsible for investments in healthcare
    and related sectors. Mr.&#160;Dupree is also a Director Emeritus
    of Whole Foods Markets, Inc. where he served as a director from
    1997 until 2008 and served on the Audit Committee and was
    Chairman of the Nominating and Governance Committee.
    Mr.&#160;Dupree also serves on several boards of private and
    non-profit organizations, including the Wake Forest University
    Board of Trustees. Mr. Dupree&#146;s business, financial,
    executive and managerial experience as well as service on the
    boards of various entities position him well to serve as a
    member of our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>Malcolm McQuilkin&#160;&#151; Director.</I></B>
    Mr.&#160;McQuilkin has served on our Board of Directors since
    2005. Since 1990, he has been Chief Executive Officer of Blue
    Rhino Global Sourcing, LLC (an import and design company and a
    wholly owned subsidiary of Ferrellgas Propane Partners). As the
    current Chief Executive Officer of Blue Rhino Global Sourcing,
    Mr.&#160;McQuilkin provides our Board of Directors with
    significant leadership and executive experience.
    Mr.&#160;McQuilkin&#146;s leadership abilities, his
    international business expertise (particularly with respect to
    outsourcing) and his extensive knowledge of complex financial
    and operational issues facing large companies qualify him to
    serve as a member of our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>David L. Warnock&#160;&#151; Director.</I></B>
    Mr.&#160;Warnock has served on our Board of Directors since
    2005. He is a founder and managing member of Camden Partners
    Holdings, LLC (a private investment management firm established
    in 1995 and formerly known as Cahill Warnock&#160;&#038;
    Company, LLC). Mr.&#160;Warnock serves on the board of National
    American University, Inc., New Horizons Worldwide, Inc., Nobel
    Learning Communities, Inc., Questar Assessment, Inc., Towne Park
    Ltd., Ranir LLC, and CIBT School of Business and Technology
    Corp., and was a member of the board of directors of Blue Rhino
    Corporation from 2000 to 2004. Mr.&#160;Warnock brings to our
    Board of Directors a unique and valuable perspective from his
    years of experience in private investment management.
    Mr.&#160;Warnock&#146;s business acumen and his financial,
    managerial, leadership and board service experience qualify him
    to serve on our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our executive officers are elected by, and serve at the
    discretion of, our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board of
    Directors</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Immediately following the closing of this offering, our Board of
    Directors will consist of five members. Our amended and restated
    bylaws that will be in effect immediately following the closing
    of this offering permit our Board of Directors to establish the
    authorized number of directors, and five directors are currently
    authorized. These amended and restated bylaws also provide that
    any vacancies or newly-created directorships may be filled only
    by the remaining members of our Board of Directors.
</DIV>
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    <BR>
    62
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the closing of this offering, our amended and restated
    certificate of incorporation and amended and restated bylaws
    will provide for a classified board of directors consisting of
    three classes of directors, each serving staggered three-year
    terms, as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the Class&#160;I directors will be Billy D. Prim and David W.
    Dupree, and their terms will expire at the annual meeting of
    stockholders to be held in 2011;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the Class&#160;II directors will be David L. Warnock and Malcolm
    McQuilkin, and their terms will expire at the annual meeting of
    stockholders to be held in 2012;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the Class&#160;III director will be Richard A. Brenner, and his
    term will expire at the annual meeting of stockholders to be
    held in 2013.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon expiration of the term of a class of directors, directors
    for that class will be elected for a three-year term at the
    annual meeting of stockholders in the year in which that term
    expires. Each director&#146;s term continues until the election
    and qualification of that director&#146;s successor, or that
    director&#146;s earlier death, resignation or removal. Any
    increase or decrease in the number of directors will be
    distributed among the three classes so that, as nearly as
    possible, each class will consist of one-third of the directors.
    This classification of our Board of Directors may have the
    effect of delaying or preventing changes in control of our
    Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Independence</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, we anticipate that our common
    stock will be listed on the Nasdaq Global Market. Under the
    applicable Nasdaq listing standards, independent directors must
    comprise a majority of a listed company&#146;s Board of
    Directors within a specified period following the closing of its
    initial public offering. In addition, Nasdaq&#146;s rules
    require that, subject to specific exceptions, each member of a
    listed company&#146;s audit committee and those members of the
    board of directors determining executive compensation and
    director nominations be independent. Audit committee members
    also must satisfy the independence criteria set forth in
    <FONT style="white-space: nowrap">rule&#160;10A-3</FONT>
    under the Securities Exchange Act of 1934. Under the Nasdaq
    rules, a director will only qualify as an &#147;independent
    director&#148; if, in the opinion of the company&#146;s board of
    directors, that person does not have a relationship that would
    interfere with the exercise of independent judgment in carrying
    out the responsibilities of a director.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to be considered independent for purposes of
    <FONT style="white-space: nowrap">rule&#160;10A-3</FONT>
    under the Securities Exchange Act of 1934, a member of an audit
    committee of a listed company may not, other than in his or her
    capacity as a member of the audit committee, the board of
    directors or any other board committee: (1)&#160;accept,
    directly or indirectly, any consulting, advisory or other
    compensatory fee from the listed company or any of its
    subsidiaries; or (2)&#160;be an affiliated person of the listed
    company or any of its subsidiaries.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    2010, our Board of Directors undertook a review of its
    composition, the composition of its committees and the
    independence of each director. Based upon information requested
    from and provided by each director concerning his background,
    employment and affiliations, including family relationships, our
    Board of Directors has determined that none of
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    representing&#160;&#160;&#160;&#160;&#160; of our five current
    directors, has a relationship that would interfere with the
    exercise of independent judgment in carrying out the
    responsibilities of a director and that each of these directors
    is &#147;independent&#148; as that term is defined under Nasdaq
    rules. Our Board of Directors also determined that
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    who comprise our audit committee, Messrs., who comprise our
    compensation committee, and
    Messrs.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    who comprise our nominating and governance committee, satisfy
    the independence standards for those committees established by
    applicable SEC rules and the rules of Nasdaq. In making these
    determinations, our Board of Directors considered the
    relationships that each non-employee director has with our
    Company and all other facts and circumstances our Board of
    Directors deemed relevant in determining their independence,
    including the beneficial ownership of our capital stock by each
    non-employee director. There is no family relationship between
    any director, executive officer or person nominated to become a
    director or executive officer.
</DIV>
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    63
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Committees</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors has established an audit committee, a
    compensation committee and a nominating and governance
    committee. Our Board of Directors may establish other committees
    from time to time to facilitate our corporate governance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Audit Committee.</I> Our audit committee is comprised of
    Messrs.&#160;Brenner, Dupree and Warnock, with Mr.&#160;Dupree
    acting as chair. The principal responsibilities and functions of
    our audit committee are to assist the Board of Directors in
    fulfilling its oversight of (i)&#160;the integrity of our
    financial statements, (ii)&#160;the effectiveness of our
    internal controls over financial reporting, (iii)&#160;our
    compliance with legal and regulatory requirements, (iv)&#160;the
    qualifications and independence of our registered public
    accounting firm, and (v)&#160;the performance of our registered
    public accounting firm. In carrying out its oversight
    responsibilities and functions, our audit committee, among other
    things, oversees and interacts with our independent auditors
    regarding the auditors&#146; engagement
    <FONT style="white-space: nowrap">and/or</FONT>
    dismissal, duties, compensation, qualifications and performance;
    reviews and discusses with our independent auditors the scope of
    audits and our accounting principles, policies and practices;
    reviews and discusses our audited annual financial statements
    with our independent auditors and management; and reviews and
    approves or ratifies (if appropriate) related party
    transactions. Our audit committee also is directly responsible
    for the appointment, compensation, retention and oversight of
    our independent auditors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors has determined
    that&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    is an audit committee financial expert, as defined under the
    applicable rules of the SEC, and that all members of the audit
    committee are &#147;independent&#148; within the meaning of the
    applicable Nasdaq listing standards and the independence
    standards of
    <FONT style="white-space: nowrap">rule&#160;10A-3</FONT>
    of the Securities Exchange Act of 1934. Each of the members of
    the audit committee meets the requirements for financial
    literacy under the applicable rules and regulations of the SEC
    and The Nasdaq Stock Market.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Compensation Committee.</I> Our compensation committee is
    comprised of Messrs.&#160;Dupree, McQuilkin and Warnock, with
    Mr.&#160;Warnock acting as the chair. The principal functions of
    our compensation committee include (i)&#160;reviewing our
    compensation practices and policies, (ii)&#160;reviewing and
    approving the compensation for our senior executives,
    (iii)&#160;evaluating the performance of our senior executives,
    and (iv)&#160;assisting in the Company&#146;s compliance with
    the regulations of the SEC regarding executive compensation
    disclosure. Our Board of Directors has determined that all
    members of the compensation committee are
    &#147;independent&#148; within the meaning of the applicable
    Nasdaq listing standards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Nominating and Governance Committee.</I> Our nominating and
    governance committee is comprised of Messrs.&#160;Brenner,
    Dupree, McQuilkin and Warnock, with Mr.&#160;Brenner acting as
    the chair. The principal functions of our nominating and
    corporate governance committee are, among other things, to
    (i)&#160;establish membership criteria for our Board of
    Directors, (ii)&#160;establish and communicate to stockholders a
    method of recommending potential director nominees for the
    committee&#146;s consideration, (iii)&#160;identify individuals
    qualified to become directors consistent with such criteria and
    select the director nominees, (iv)&#160;plan for continuity on
    our Board of Directors, (v)&#160;recommend action to our Board
    of Directors upon any vacancies on our Board of Directors,
    (vi)&#160;facilitate the annual evaluation of the performance of
    our Board of Directors and its committees,
    (vii)&#160;periodically review management succession plans, and
    (viii)&#160;consider and recommend to our Board of Directors
    other actions relating to our Board of Directors, its members
    and its committees. Our Board of Directors has determined that
    all members of the nominating and governance committee are
    &#147;independent&#148; within the meaning of the applicable
    Nasdaq listing standards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Code of
    Conduct</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors has adopted a Code of Business Conduct
    and Ethics that will become effective upon the closing of this
    offering. This code will apply to all of our employees,
    officers, and directors, including our principal executive,
    financial and accounting officers and all persons performing
    similar functions. A copy of our Code of Business Conduct and
    Ethics will be available upon the closing of this offering on
    our corporate website
</DIV>
<!-- XBRL Paragraph Pagebreak -->
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    64
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (<I>www.primowater.com</I>). We expect that any amendments to
    the code, or any waivers of its requirements, will be disclosed
    on our website.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not historically had any policy regarding compensation
    payable to our directors. Instead, we have from time to time in
    the past made awards of stock options to our non-employee
    directors. We made no such awards in 2008 or 2009 and we have
    not otherwise compensated our directors for services. In
    February 2010, we awarded each of our non-employee directors
    60,000&#160;shares of restricted common stock that vest in equal
    annual installments over a three-year period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After giving effect to these awards, our non-employee directors
    hold the following equity awards received as director
    compensation:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="14%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Stock Options
    (#)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Restricted Stock
    (#)<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard A. Brenner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David W. Dupree
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Malcolm McQuilkin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These stock options were granted
    prior to 2008, are vested in their entirety and have an exercise
    price of $1.25 per share. As of December&#160;31, 2009, the only
    outstanding equity awards were the stock options listed above.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These shares of restricted stock
    were granted on February&#160;18, 2010 and vest in equal annual
    installments over a three-year period.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, our Board of Directors
    approved and adopted our Non-Employee Director Compensation
    Policy. Under the Non-Employee Director Compensation Policy,
    each non-employee director will receive an annual retainer of
    $25,000, to be paid one-half in restricted common stock and
    one-half in options to purchase common stock, granted on the
    first business day following each annual meeting of our
    stockholders. Additionally, non-employee directors will receive
    the following cash awards: (i)&#160;a $5,000 retainer for
    directors who also serve as committee chairs and a $2,500
    retainer for other directors; (ii)&#160;$2,500 for each
    regularly scheduled Board of Directors meeting attended in
    person ($1,000 if attended telephonically); (iii)&#160;$1,000
    for each ad hoc telephonic special Board of Directors meeting
    attended; (iv)&#160;$1,000 for each regularly scheduled
    committee meeting attended; and (v)&#160;$500 for each ad hoc
    telephonic committee meeting attended. Grants made under the
    Non-Employee Director Compensation Policy will be made pursuant
    to the 2010 Omnibus Long-Term Incentive Plan and will vest in
    full on the day immediately following the first anniversary of
    the grant date.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, our compensation committee
    will consist of Messrs.&#160;Dupree, McQuilkin and Warnock.
    During 2009, Messrs.&#160;Prim, Brenner, McQuilkin and Warnock
    served on our compensation committee. Mr.&#160;Filipowski, a
    former member of our Board of Directors, also served on our
    compensation committee through the end of January 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Interlocks</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With the exception of Mr.&#160;Prim who served on our
    compensation committee through the end of 2009, none of the
    members of our current compensation committee or our
    compensation committee during 2009 is or has at any time during
    the past year been an officer or employee of ours. None of our
    executive officers has served as a member of the board of
    directors, or as a member of the compensation or similar
    committee, of any entity that has one or more executive officers
    who served on our Board of Directors or compensation committee
    during 2009.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    65
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sale of
    Subordinated Convertible Notes and Warrants</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, Dupree, McQuilkin and Warnock (either
    individually or through an affiliated entity) purchased an
    aggregate of $3.04&#160;million of our 2011 Notes and an
    aggregate of 225,185 warrants to purchase shares of our common
    stock in a private placement on December&#160;30, 2009. We
    issued a total of $15.0&#160;million of 2011 Notes and a total
    of 1,111,109 warrants in that private placement. The exercise
    price of these warrants is either (a)&#160;$1.25 per share or
    (b)&#160;following a public offering in which we realize at
    least $30.0&#160;million in net proceeds, 80% of the per share
    price of the shares issued in the offering. The following table
    sets forth certain information regarding such persons&#146;
    purchase of the 2011 Notes and the related warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="22%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="52%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Principal<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount of Notes<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Purchased<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Affiliated Investor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David W. Dupree
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,407
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Malcolm McQuilkin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Malcolm McQuilkin Living Trust
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74,074
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,344,140
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    99,566
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III-A, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,860
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,138
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sale of
    Series&#160;C Convertible Preferred Stock and Warrants</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, Dupree, McQuilkin and Warnock (either
    individually or through an affiliated entity) purchased an
    aggregate of 5,826,947&#160;shares of Series&#160;C convertible
    preferred stock and warrants to purchase an aggregate of
    582,695&#160;shares of common stock at an exercise price of
    $1.98 per share in private placement transactions between
    December&#160;14, 2007 and May&#160;20, 2008. We issued a total
    of 12,520,001 shares of Series C convertible preferred stock and
    warrants to purchase 1,252,001 shares of common stock in
    connection with these private placement transactions. The
    following table sets forth certain information regarding such
    persons&#146; ownership of those shares and warrants.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="23%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="40%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount Paid for<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Purchased<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Purchased<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares and Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Affiliated Investor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    512,363
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,229,671
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David W. Dupree
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Primo Investors, L.P.
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,281,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    428,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,275,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Malcolm McQuilkin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Malcolm McQuilkin Living Trust
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    480,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    800,084
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    80,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,920,202
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III-A, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,325
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Sale of
    Series&#160;B Preferred Stock and Warrants</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, McQuilkin, Warnock and Filipowski (either
    individually or through or with an affiliated entity or person)
    purchased an aggregate of 8,999,691&#160;shares of Series&#160;B
    preferred stock and warrants to purchase an aggregate of
    2,402,916&#160;shares of common stock at an exercise price of
    $1.25 per share in private placement transactions between
    April&#160;28, 2006 and June&#160;30, 2007. We issued a total of
    23,280,221&#160;shares of Series&#160;B preferred stock and
    warrants to purchase a total of 6,215,813&#160;shares of common
    stock in these private placement transactions. The following
    table sets forth certain information regarding such
    persons&#146; ownership of those shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="23%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="36%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount Paid for<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Purchased<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Purchased<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares and Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Affiliated Investor</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,379,013
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,164,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Deborah Prim
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,690
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    70,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Malcolm McQuilkin
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Malcolm McQuilkin Living Trust
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,880,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    769,040
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,880,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L. Warnock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Camden Partners Strategic Fund III-A, LP
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    119,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,959
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    119,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Andrew J. Filipowski
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,845
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,845
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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    <BR>
    66
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='113'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXECUTIVE
    COMPENSATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Discussion and Analysis</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following discussion and analysis of compensation
    arrangements of our (1)&#160;principal executive officer (Billy
    D. Prim), (2)&#160;principal financial officer (Mark Castaneda)
    and (3)&#160;three most highly compensated executive officers
    other than our principal executive officer and principal
    financial officer who were serving as executive officers on
    December&#160;31, 2009 (Michael S. Gunter, Richard E. Belmont
    and Brent C. Boydston, and collectively with Messrs.&#160;Prim
    and Castaneda, our NEOs) should be read together with the
    compensation tables and related disclosures set forth below.
    This discussion contains forward-looking statements that are
    based on our current considerations, expectations and
    determinations regarding future compensation programs. The
    actual amount and form of compensation and the compensation
    programs that we adopt may differ materially from current or
    planned programs as summarized in this discussion.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Introduction</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our compensation discussion and analysis discusses the total
    compensation for our NEOs, and it describes our overall
    compensation philosophy, objectives and practices. Our
    compensation philosophy and objectives generally apply to all of
    our employees and all of our employees are eligible to
    participate in the main components our compensation program
    consisting of:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    base salary;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    annual cash bonus;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    equity compensation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The relative value of each of these components for individual
    employees varies based on job role and responsibility, as well
    as our financial performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Philosophy and Objectives</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our compensation approach is necessarily tied to our stage of
    development. Our compensation philosophy is to offer our
    executive officers, including our NEOs, compensation and
    benefits that are competitive and meet our goals of attracting,
    retaining and motivating highly skilled management, which is
    necessary to achieve our financial and strategic objectives and
    create long-term value for our stockholders. Accordingly, our
    executive officer compensation program is designed to link
    annual and long-term cash and stock incentives to the
    achievement of Company and individual performance goals and to
    align the interests of executive officers with the creation of
    stockholder value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe compensation should be determined within a framework
    that is intended to reward individual contribution and the
    achievement of Company objectives. Within this overall
    philosophy, our objectives are to:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    attract, retain and motivate our executives by providing a total
    compensation program that takes into consideration competitive
    market requirements and strategic business needs;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    align the financial interests of executive officers with those
    of our stockholders, both in the short and long term;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide incentives for achieving and exceeding annual and
    long-term performance goals;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    appropriately reward executive officers for creating long-term
    stockholder value.
</TD>
</TR>

</TABLE>
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    <BR>
    67
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of Messrs.&#160;Prim, Castaneda and Gunter is entering into
    an employment agreement with the Company in connection with this
    offering. We are also entering into an employment agreement in
    connection with this offering with Duane G. Goodwin who joined
    our Company as Senior Vice President, Business Development in
    February 2010. The material terms of those employment agreements
    are described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Role of
    Directors and Executive Officers in Setting
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, we were a privately-held company. As a
    result, we have not been subject to any stock exchange listing
    or SEC rules requiring a majority of our Board of Directors to
    be independent or relating to the formation and functioning of
    Board committees, including our compensation committee.
    Historically, we have informally considered the competitive
    market for corresponding positions within comparable geographic
    areas and companies of similar size and stage of development,
    including other small, high-growth public companies. This
    consideration was based on the general knowledge possessed by
    members of our compensation committee and also included
    consultations with our Chief Executive Officer. As we gain
    experience as a public company, we expect that the specific
    direction, emphasis and components of our executive compensation
    program will continue to evolve. For example, over time, we
    expect to reduce our reliance upon subjective determinations in
    favor of a more empirically based approach that could involve,
    among other practices, benchmarking the compensation paid to our
    NEOs against peer companies that we identify and the use of
    clearly defined, objective targets to determine incentive
    compensation awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee typically considers, but is not
    required to accept, our Chief Executive Officer&#146;s
    evaluation regarding the performance and recommendation
    regarding proposed base salary and bonus and equity awards for
    the other NEOs, as well as himself. The compensation committee
    may also request the assistance of our Chief Financial Officer
    in evaluating the financial, accounting and tax implications of
    various compensation awards paid to the NEOs. However, our Chief
    Financial Officer does not recommend or determine the amounts or
    types of compensation paid to the NEOs. Our Chief Executive
    Officer and certain of our other NEOs may attend compensation
    committee meetings, as requested by the chairman of the
    compensation committee. Our NEOs, including our Chief Executive
    Officer, typically do not attend any portion of the compensation
    committee meetings during which their compensation is
    established and approved.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the levels of compensation we provide should be
    competitive, reasonable and appropriate for our business needs
    and circumstances. To date, the compensation committee has not
    engaged a compensation consultant. Rather, the compensation
    committee and our Chief Executive Officer applied subjective
    discretion to make compensation decisions and they have not used
    a specific formula or matrix to set compensation in relation to
    compensation paid by other companies. To date, our compensation
    committee has not established any percentile targets for the
    levels of compensation provided to our NEOs. Similarly, the
    compensation committee has not performed competitive reviews of
    our compensation programs with those of similarly-situated
    companies, nor have we engaged in benchmarking of compensation
    paid to our NEOs. Our historical approach has been to consider
    competitive compensation practices and other factors such as how
    much compensation was necessary to recruit and retain an
    executive and individual performance rather than establishing
    compensation at specific benchmark percentiles. This approach
    has enabled us to respond to dynamics in the labor market and
    provided us with flexibility in maintaining and enhancing our
    NEOs&#146; engagement, focus, motivation and enthusiasm for our
    future. However, as mentioned above, we expect to build some of
    these practices into our compensation approach over time as we
    review, evaluate and refine our compensation policies and
    practices as a public company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The amount of past compensation, including annual discretionary
    bonus awards and amounts realizable from prior stock option
    awards, is generally not a significant factor in the
    compensation committee&#146;s considerations because these
    awards would have been earned based on performance in prior
    years. The compensation committee does, however, consider prior
    awards when considering the retention aspects of our
    compensation program.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our NEOs are not subject to mandated stock ownership or stock
    retention guidelines. It is the belief of the compensation
    committee that the equity component of our executive
    compensation program ensures that our
</DIV>
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    <BR>
    68
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    NEOs are also owners and those components work to align the
    NEOs&#146; goals with the best interests of our stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Elements
    of Our Executive Compensation Program</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The principal elements of our executive compensation program
    have to date been base salary, a discretionary annual cash bonus
    and long-term equity compensation in the form of stock options.
    Each of these compensation elements satisfies one or more of our
    compensation objectives.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have not adopted any policies with respect to long-term
    versus currently-paid compensation, but feel that both elements
    are necessary for achieving our compensation objectives.
    Currently-paid salary compensation provides financial stability
    for each of our NEOs and annual increases in base salary provide
    a reward for short-term Company and individual performance.
    Annual cash bonuses likewise provide a reward for short-term
    Company and individual performance. Long-term equity
    compensation rewards achievement of strategic long-term
    objectives and contributes toward overall stockholder value.
    Similarly, while we have not adopted any policies with respect
    to cash versus non-cash compensation (or among different forms
    of non-cash compensation), we feel that it is important to
    encourage or provide for a meaningful amount of equity ownership
    by our NEOs to help align their interests with those of
    stockholders, one of our compensation objectives. We have also
    used equity compensation in order to preserve the Company&#146;s
    cash to the extent practicable in order to facilitate our growth
    and development. We combine the compensation elements for each
    NEO in a manner that the compensation committee believes, in its
    discretion and judgment, is consistent with the executive&#146;s
    contributions to our Company and our overall goals with respect
    to executive compensation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Base
    Salary</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that a competitive base salary is an important
    component of compensation as it provides a degree of financial
    stability for our NEOs and is critical to recruiting and
    retaining our executives. Base salary is also designed to
    recognize the scope of responsibilities placed on each NEO and
    reward each executive for his or her unique leadership skills,
    management experience and contributions. We make a subjective
    determination of base salary after considering such factors
    collectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Annual
    Bonuses</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cash bonus compensation is designed to reward achievement of
    goals that support our objective of enhancing stockholder value
    and motivating executives to achieve superior performance in
    their areas of responsibility. We generally utilize incentive
    plans that tie payment of cash bonuses to the Company&#146;s
    achievement of certain objectives, including revenue targets,
    EBITDA targets and new selling locations. Our incentive plans
    also base a portion of the bonus payment on the achievement of
    individual initiatives that are determined by the Chief
    Executive Officer, or, in the case of the Chief Executive
    Officer, by the compensation committee. We determined not to
    establish an annual incentive plan for 2009 given our desire to
    reduce expenses in the face of uncertain U.S.&#160;economic
    conditions. As a result, we paid no bonuses to our NEOs with
    respect to the 2009 performance year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have, however, established such an annual incentive plan for
    2010, which includes an opportunity for a cash award and an
    equity award as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Cash award:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    o&#160;
</TD>
    <TD align="left">
    A cash incentive pool will be created based upon the amount by
    which the Company&#146;s actual earnings before interest, taxes,
    depreciation and amortization (&#147;EBITDA&#148;) for 2010
    exceeds target EBITDA (based on the Company&#146;s 2010 budget).
    This cash pool with be funded as follows:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="2%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    <FONT style="font-size: 4pt"><FONT style="font-family: Wingdings; font-variant: normal">&#110;</FONT></FONT>&#160;
</TD>
    <TD align="left">
    50% of the first $1.0&#160;million of actual EBITDA in excess of
    target EBITDA; plus
</TD>
</TR>

</TABLE>
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    <BR>
    69
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="8%"></TD>
    <TD width="2%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    <FONT style="font-size: 4pt"><FONT style="font-family: Wingdings; font-variant: normal">&#110;</FONT></FONT>&#160;
</TD>
    <TD align="left">
    30% of the next $1.0&#160;million of actual EBITDA in excess of
    target EBITDA; plus
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    <FONT style="font-size: 4pt"><FONT style="font-family: Wingdings; font-variant: normal">&#110;</FONT></FONT>&#160;
</TD>
    <TD align="left">
    20% of any actual EBITDA more than $2.0&#160;million in excess
    of target EBITDA.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    o&#160;
</TD>
    <TD align="left">
    Each participant in the annual incentive plan for 2010 will be
    entitled to a portion of the cash incentive pool equal to that
    participant&#146;s individual 2010 salary over the total 2010
    salaries of all the participants in the 2010 annual incentive
    plan multiplied by the total amount in the cash incentive pool.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Equity award:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    o&#160;
</TD>
    <TD align="left">
    Target amounts are based on Company and employee-specific
    performance;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    o&#160;
</TD>
    <TD align="left">
    50% of the award will be payable in stock options and 50% will
    be payable in restricted stock;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    o&#160;
</TD>
    <TD align="left">
    Actual awards will be based on the compensation committee&#146;s
    subjective evaluation of the Company&#146;s and each
    individual&#146;s performance.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Long-Term
    Equity Compensation</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, we have provided long-term equity compensation
    primarily through grants of stock options. However, no such
    equity compensation was paid in 2009 other than certain awards
    that were made with respect to 2008 performance. Beginning in
    2010, we intend to use a combination of stock options and
    restricted stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted stock options and intend to grant stock options
    and restricted stock through annually-adopted executive
    incentive plans, initial grants to new employees and, on
    occasion, through additional grants approved by our Board of
    Directors or the compensation committee. We believe that such
    grants further our compensation objectives of aligning the
    interests of our NEOs with those of our stockholders,
    encouraging long-term performance, and providing a simple and
    <FONT style="white-space: nowrap">easy-to-understand</FONT>
    form of equity compensation that promotes executive retention.
    We view such grants both as incentives for future performance
    and as compensation for past accomplishments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We generally have used stock options in the past, rather than
    other forms of long-term incentives, because they create value
    for the executive only if stockholder value is increased through
    appreciation of our share price. Prior to this offering, all
    stock option grants were made pursuant to our 2004 Stock Plan.
    Historically, the exercise price of our stock options has been
    at least equal to the fair market value of our common stock on
    the date of grant. Prior to this offering, the fair market value
    of our common stock has been established by our Board of
    Directors using factors it considered appropriate for a
    reasonable valuation. Following this offering, the fair market
    value of our common stock will be the closing price of our
    common stock on the Nasdaq Global Market on the date of the
    grant, provided our shares are approved for listing on the
    Nasdaq Global Market. As a privately owned company prior to the
    date of this offering, we have not established a program, plan
    or practice pertaining to the timing of stock option grants to
    executive officers coinciding with the release of material
    non-public information. We have adopted a policy, to take effect
    upon completion of this offering, that provides for our
    compensation committee to approve stock option grants up to four
    times per year at its regularly scheduled quarterly meetings,
    and further provides that such grants will be effective on the
    third trading day following the date of the next public
    disclosure of our financial results following the date of each
    such meeting.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following this offering, we anticipate that we will continue to
    use stock option grants, as well as restricted stock and other
    forms of equity compensation. We believe restricted stock aligns
    the interests of our executive officers with those of our
    stockholders and serves as a retention tool as it will typically
    be subject to a multi-year vesting period. Following this
    offering, all equity award grants will be made pursuant to our
    2010 Omnibus Long-Term Incentive Plan. The exercise price of
    stock options will be based on the fair market value of our
    common stock on the grant date as described above.
</DIV>
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    <BR>
    70
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Chief Executive Officer received an initial stock option
    grant to purchase 100,000&#160;shares of our common stock in
    2004 in connection with the formation of the Company. Our other
    NEOs received stock option grants in connection with their
    initial hire. The number of stock options granted to our NEOs in
    connection with their initial hire was determined based upon
    negotiations with each executive, represented the number
    necessary to recruit each executive from his then-current
    position and reflected our Board of Directors&#146; subjective
    evaluation of the executive&#146;s experience and potential for
    future performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have made additional discretionary grants of equity
    compensation to all of our executive officers from time to time,
    as determined by our Board of Directors or the compensation
    committee taking into consideration factors such as individual
    performance and competitive market conditions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Perquisites
    and Other Benefits</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a general matter, we do not intend to offer perquisites or
    other benefits to any executive officer, including the NEOs,
    with an aggregate value in excess of $10,000 annually, because
    we believe we can provide better incentives for desired
    performance with compensation in the forms described above. We
    recognize that, from time to time, it may be appropriate to
    provide some perquisites or other benefits in order to attract,
    motivate and retain our executives, with any such decision to be
    reviewed and approved by the compensation committee as needed.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our executive officers are eligible to participate in standard
    employee benefit plans, including medical, dental, vision, life
    and any other employee benefit or insurance plan made available
    to employees. We maintain a 401(k) plan, which is intended to be
    a tax-qualified defined contribution plan under
    Section&#160;401(k) of the Internal Revenue Code of 1986, as
    amended, or the Code. In general, all of our employees are
    eligible to participate in this plan. The 401(k) plan includes a
    salary deferral arrangement pursuant to which participants may
    elect to reduce their current compensation by up to 90% or the
    statutory limit, $16,500 in 2009, whichever is less, and have
    the amount of the reduction contributed to the 401(k) plan. We
    made no matching contributions during 2009; however, in 2010 our
    Board of Directors established a Company match of up to 50% of
    employee contributions up to 6% of their salaries, with 50% of
    the matching amount being contingent upon our achievement of
    certain objectives to be determined by our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Employment
    and Severance and Change of Control Benefits</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that a strong, experienced management team is
    essential to the best interests of the Company and our
    stockholders. We recognize that the possibility of a change of
    control could arise and that such a possibility could result in
    the departure or distraction of members of the management team
    to the detriment of our Company and our stockholders. We are
    entering into new employment agreements with certain of our NEOs
    in connection with this offering, which are intended to minimize
    employment security concerns arising in the course of
    negotiating and completing a change of control transaction. A
    more detailed description of the change of control provisions
    provided in these employment agreements is available under the
    section captioned &#147;Employment Agreements and Change of
    Control Arrangements&#148; below, and the change of control
    benefits are quantified in the section captioned &#147;Potential
    Payments Upon Termination or Change of Control.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Analysis
    of 2009 Compensation for Named Executive Officers</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Base
    Salary</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In light of the uncertain U.S.&#160;economic conditions, we did
    not increase the base salaries of our NEOs for 2009 compared to
    2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008 and 2009, the base salary of our Chief Executive
    Officer, Billy D. Prim, was $400,000 per year.
</DIV>
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    <BR>
    71
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mark Castaneda, our Chief Financial Officer, became an employee
    of the Company in 2008. At that time, our Board of Directors set
    his base salary at $225,000 per year. Mr.&#160;Castaneda&#146;s
    2009 base salary remained at $225,000 per year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008 and 2009, the base salary of Michael S. Gunter, our
    Senior Vice President, Operations, was $173,363.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Richard E. Belmont, our Vice President, Products, became an
    employee of the Company in 2008. At that time, our Board of
    Directors set his base salary at $183,195 per year.
    Mr.&#160;Belmont&#146;s 2009 base salary remained at $183,195
    per year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008 and 2009, the base salary of Brent C. Boydston, our
    former Vice President, Business Development and current Vice
    President, National Accounts, was $217,350.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2010, we approved base salaries for our NEOs as
    follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount ($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    400,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    225,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    190,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    150,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Annual
    Cash Bonuses</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We did not make any cash bonus payments to NEOs for 2009. The
    compensation committee decided not to establish an annual
    incentive plan for 2009 given its desire to reduce expenses in
    the face of uncertain&#160;U.S.&#160;economic conditions. We
    paid the following cash bonuses to our NEOs for 2008:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount ($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,300
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Long-Term
    Equity Compensation</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We did not make any equity awards to NEOs for 2009 because, as
    noted above, the compensation committee determined not to
    establish an annual incentive plan for 2009. We awarded our NEOs
    options to purchase the following number of shares (at an
    exercise price of $1.25 per share) in 2009 for 2008 performance:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Options</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Tax
    Considerations</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other than our Chief Executive Officer, we have not provided any
    executive officer or director with a
    <FONT style="white-space: nowrap">gross-up</FONT> or
    other reimbursement for tax amounts the executive might pay
    pursuant to Section&#160;280G or Section&#160;409A of the
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    72
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Internal Revenue Code. As described in the section below
    captioned &#147;Employment Agreements and Change of Control
    Arrangements,&#148; any payments our Chief Executive Officer
    receives in connection with a change of control may be subject
    to increase to cover any excise tax imposed by Section&#160;280G
    of the Internal Revenue Code.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;280G and related Code sections provide that
    executive officers, directors who hold significant stockholder
    interests and certain other service providers could be subject
    to significant additional taxes if they receive payments or
    benefits in connection with a change of control that exceed
    certain limits, and that we or our successor could lose a
    deduction on the amounts subject to the additional tax.
    Section&#160;409A also imposes additional significant taxes on
    the individual in the event that an executive officer, director
    or service provider receives &#147;deferred compensation&#148;
    that does not meet the requirements of Section&#160;409A.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because of the limitations of Internal Revenue Code
    Section&#160;162(m), our federal income tax deduction for
    compensation paid to our Chief Executive Officer and to certain
    other highly compensated executive officers (other than our
    Chief Financial Officer) may be limited if the compensation
    exceeds $1,000,000 per person during any fiscal year, unless it
    is &#147;performance-based&#148; under Code Section&#160;162(m)
    or meets another exception to the deduction limits. In addition
    to salary and bonus compensation, upon the exercise of stock
    options that are not treated as incentive stock options, the
    excess of the current market price over the option price, or the
    option spread, is treated as compensation and accordingly, in
    any year, such exercise may cause an officer&#146;s total
    compensation to exceed $1,000,000. However, option compensation
    will not be subject to the $1,000,000 cap on deductibility if
    the options meet certain requirements, and in the past we have
    granted options that we believe met those requirements.
    Additionally, under a special Code Section&#160;162(m)
    transition rule, any compensation paid pursuant to a
    compensation plan in existence before the effective date of this
    public offering will not be subject to the $1,000,000 limitation
    until the first meeting of stockholders at which directors are
    elected after the close of the third calendar year following the
    year in which the public offering occurs, unless the
    compensation plan is materially modified. While the compensation
    committee cannot predict how the deductibility limit may impact
    our compensation programs in future years, the compensation
    committee intends to maintain an approach to executive
    compensation that links pay to performance. In addition, while
    the compensation committee has not adopted a formal policy
    regarding tax deductibility of compensation paid to our NEOs,
    the compensation committee intends to consider tax deductibility
    under Code Section&#160;162(m) as a factor in compensation
    decisions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risk
    Analysis of Compensation Program</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee has reviewed the Company&#146;s
    compensation program and does not believe that it encourages
    excessive or unnecessary risk taking. Base salaries are fixed in
    amount and thus do not encourage risk taking. By utilizing
    annual cash bonuses that are tied to individual and Company-wide
    performance measures and long-term equity compensation as a
    significant portion of total compensation, the compensation
    committee believes that it has aligned our executive
    officers&#146; objectives with those of our long-term
    stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Conclusion</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee believes that our executive
    leadership is a key element to our success and that the
    compensation package offered to our NEOs is a key element in
    attracting and retaining the appropriate personnel.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee believes it has maintained
    compensation for our NEOs at levels that are reflective of the
    talent and success of the individuals being compensated, and
    with the inclusion of additional compensation directly tied to
    performance, the compensation committee believes executive
    compensation will be sufficiently comparable to its industry
    peers to allow us to retain our key personnel at costs which are
    appropriate for us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The compensation committee will continue to develop, analyze and
    review its methods for aligning our executive officers&#146;
    long-term compensation with the benefits generated for
    stockholders. The compensation committee believes the idea of
    creating ownership helps align management&#146;s interests with
    the interests of stockholders. The compensation committee has no
    pre-determined timeline for implementing new or ongoing
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    73
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    long-term incentive plans. New plans are reviewed, discussed and
    implemented as the compensation committee believes it is
    necessary or appropriate as a measure to incentivize, retain and
    reward our NEOs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Compensation Table for 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding the
    compensation earned in 2009 for our NEOs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="55%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Salary<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim<BR>
    Chairman, Chief Executive<BR>
    Officer and President
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    400,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    138
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    400,138
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda<BR>
    Chief Financial Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    225,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    19,399
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    93
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    244,492
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter<BR>
    Senior Vice President, Operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    173,363
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    62
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    173,425
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont<BR>
    Vice President, Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    183,195
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    11,542
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    143
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    194,880
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston<BR>
    Vice President, Business<BR>
    Development<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    217,350
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10,184
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    62
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    227,596
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the aggregate grant date
    fair value of stock options awarded in 2009 calculated in
    accordance with Financial Accounting Standards Board Accounting
    Standards Codification&#160;718 (formerly referred to as
    SFAS&#160;123(R)). For a description of the assumptions used in
    estimating the grant date fair value of the option awards as
    reported in this column, see note&#160;9 to our consolidated
    financial statements for the year ended December&#160;31, 2009.
    </FONT></TD>
</TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Amounts shown in this column
    consist of life insurance premiums paid on behalf of each NEO.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Mr.&#160;Boydston served as Vice
    President, Business Development through February&#160;15, 2010.
    Mr.&#160;Boydston currently serves the Company as Vice
    President, National Accounts.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Grants of
    Plan-Based Awards for 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information regarding
    grants of plan-based awards to our NEOs in 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="9%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Grant Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Base Price of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Fair Value of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Grant<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($/Sh)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    1/29/2009
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,399
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    1/29/2009
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,542
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    1/29/2009
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,184
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">We granted the stock options listed
    in this column under our 2004 Stock Plan in 2009 for 2008
    performance. The vesting schedule applicable to each award is
    set forth below in the section entitled &#147;Outstanding Equity
    Awards at December&#160;31, 2009.&#148;
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the aggregate grant date
    fair value calculated in accordance with Financial Accounting
    Standards Board Accounting Standards Codification&#160;718
    (formerly referred to as SFAS&#160;123(R)). For a description of
    the assumptions used in estimating such fair value, see
    note&#160;9 to our consolidated financial statements for the
    year ended December&#160;31, 2009.
    </FONT></TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    74
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Outstanding
    Equity Awards at December&#160;31, 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding outstanding
    equity awards held by our NEOs as of December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="47%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="15" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Option Awards</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options (#)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options (#)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Expiration<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Unexercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11/01/14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    225,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/01/16
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,000
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    05/01/18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    37,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112,500
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    05/01/18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/29/19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11/01/14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    90,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/01/16
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,187
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,188
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53,125
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,000
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    09/11/16
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,425
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,425
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    33,188
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    05/01/18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,800
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/29/19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11/01/14
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/01/16
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,250
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,750
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/25/17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    05/01/18
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,000
</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    01/29/19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These options vest in two equal
    annual installments on January&#160;1, 2010 and January&#160;1,
    2011.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These options vest in three equal
    annual installments on May&#160;1, 2010, May&#160;1, 2011 and
    May&#160;1, 2012.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These options vested in their
    entirety on January&#160;30, 2010.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These options vested in their
    entirety on January&#160;1, 2010.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">These options vest in their
    entirety on September&#160;11, 2010.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Option
    Exercises and Stock Vested for 2009</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No stock options held by our NEOs were exercised during 2009. As
    of December&#160;31, 2009, none of our NEOs held any unvested
    restricted stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements and Change of Control Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summaries of the employment agreements of
    Messrs.&#160;Prim, Castaneda and Gunter describe the new
    employment agreements with such individuals that are being
    entered into in connection with this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreement with Mr.&#160;Prim</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Prim&#146;s employment agreement provides for a base
    annual salary of $400,000, which may be adjusted up but not down
    by our Board of Directors. Mr.&#160;Prim will also be eligible
    to receive bonuses and awards of equity and non-equity
    compensation as approved by our Board of Directors. The
    employment agreement entitles Mr.&#160;Prim to participate in
    all other Company benefits generally available to other senior
    executives. Mr.&#160;Prim&#146;s employment
</DIV>
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    <BR>
    75
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    agreement also provides for: (i)&#160;an annual automatic cost
    of living increase to base salary based on the Consumer Price
    Index; (ii)&#160;long-term disability coverage at 100% of base
    annual salary; (iii)&#160;an annual physical paid for by the
    Company; and (iv)&#160;Company&#146;s payment of certain
    attorneys fees incurred in the event Mr.&#160;Prim has to take
    action to enforce his rights under the employment agreement. We
    have agreed to maintain insurance coverage for and indemnify
    Mr.&#160;Prim in connection with his capacity as our director
    and officer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our employment agreement with Mr.&#160;Prim provides for an
    initial three-year employment term
    commencing&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and automatically extending for additional one-year periods
    unless terminated by Mr.&#160;Prim or us upon at least
    90&#160;days prior written notice of intention not to renew. The
    agreement may also be terminated by us or Mr.&#160;Prim for
    other reasons and, subject to the conditions set forth in the
    employment agreement, provides for certain payments to
    Mr.&#160;Prim upon a termination of his employment or a change
    of control of the Company, as described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If Mr.&#160;Prim&#146;s employment is terminated for any reason,
    he will be entitled to continued coverage under our
    directors&#146; and officers&#146; insurance policy and to
    continued rights to corporate indemnification, each as offered
    to (and on the same terms as) other executive officers for six
    years following his termination date. Unless Mr.&#160;Prim is
    terminated for Cause or he resigns without Good Reason (each as
    defined below), he will be entitled to any applicable prorated
    annual bonus for such year and any accrued but unpaid annual
    bonus for the immediately preceding year. Additionally, if
    Mr.&#160;Prim is terminated without Cause, resigns for Good
    Reason or we do not renew his employment agreement at the end of
    its term, Mr.&#160;Prim will be entitled to (a)&#160;severance
    payments in an amount equal to (i)&#160;his highest annual base
    salary in effect during the 12&#160;months immediately prior to
    his termination date plus (ii)&#160;the average annual bonus
    earned by him for the most recent two fiscal years ending prior
    to his termination date; (b)&#160;coverage under health, dental,
    life, accident, disability and similar benefit plans offered to
    (and on the same terms as) other executive officers for
    12&#160;months following his termination date; and (c)&#160;the
    immediate vesting of any restricted stock, stock option or other
    equity compensation awards scheduled to vest within six months
    after his termination date.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If Mr.&#160;Prim is terminated without Cause or if he resigns
    for Good Reason within two years following a Change of Control
    (as defined in the employment agreement), he will be entitled to
    (a)&#160;any applicable prorated annual bonus for such year and
    any accrued but unpaid annual bonus for the immediately
    preceding year; (b)&#160;severance payments in an amount equal
    to two times the sum of (i)&#160;his highest annual base salary
    in effect during the 12&#160;months immediately prior to his
    termination date plus (ii)&#160;the average annual bonus earned
    by Mr.&#160;Prim for the most recent two fiscal years ending
    prior to his termination date; and (c)&#160;coverage under
    health, dental, life, accident, disability and similar benefit
    plans offered to (and on the same terms as) the other executive
    officers for the 24&#160;months following his termination date.
    In addition, any restricted stock, stock option or other equity
    compensation awards will immediately vest as of the date of the
    Change of Control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As defined in Mr.&#160;Prim&#146;s employment agreement,
    &#147;Cause&#148; means (a)&#160;continued willful failure to
    substantially perform his duties with the Company,
    (b)&#160;willful engaging in misconduct materially and
    demonstrably injurious to the Company or (c)&#160;his uncured
    material breach of the agreement. Mr.&#160;Prim may terminate
    his employment for &#147;Good Reason&#148; (i)&#160;if there is
    a material reduction in his duties or responsibilities,
    (ii)&#160;if he is required to relocate to an employment
    location more than 50&#160;miles from his initial employment
    location, or (iii)&#160;upon our uncured material breach of the
    agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If Mr.&#160;Prim becomes subject to excise taxes under
    Section&#160;4999 of the Internal Revenue Code, we will make a
    tax <FONT style="white-space: nowrap">gross-up</FONT>
    payment to him in an amount sufficient to cover such excise
    taxes and any interest or penalties thereon.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Prim&#146;s employment agreement also contains
    confidentiality provisions and non-competition and
    non-solicitation covenants prohibiting, among other things,
    Mr.&#160;Prim&#146;s competition with us or his solicitation of
    our customers, suppliers or employees for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period following the termination of his employment.
</DIV>
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    <BR>
    76
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements with Messrs.&#160;Castaneda and Gunter</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s employment agreements with
    Messrs.&#160;Castaneda and Gunter are substantially similar to
    our employment agreement with Mr.&#160;Prim, except that the
    economic terms differ among the agreements and their agreements
    do not provide for: (i)&#160;an annual automatic cost of living
    increase to base salary; (ii)&#160;additional long-term
    disability coverage; (iii)&#160;a Company-paid annual physical;
    (iv)&#160;Company payment of certain attorney fees; and
    (v)&#160;a Section&#160;4999 excise tax
    <FONT style="white-space: nowrap">gross-up</FONT>
    payment to cover certain taxes and penalties.
    Mr.&#160;Castaneda&#146;s employment agreement provides for a
    base annual salary of $250,000 and Mr.&#160;Gunter&#146;s
    employment agreement provides for a base annual salary of
    $225,000, which base salaries may be adjusted up but not down by
    our Board of Directors. Messrs.&#160;Castaneda and Gunter will
    also each be eligible to receive bonuses and awards of equity
    and non-equity compensation as approved by our Board of
    Directors. The employment agreements entitle each of
    Messrs.&#160;Castaneda and Gunter to participate in all other
    Company benefits generally available to other senior executives.
    We have agreed to maintain insurance coverage for and indemnify
    each of Messrs.&#160;Castaneda and Gunter in connection with
    their respective capacities as officers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our employment agreements with each of Messrs.&#160;Castaneda
    and Gunter provide for initial three-year employment terms
    commencing&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    and automatically extending for additional one-year periods
    unless terminated by the NEO or us upon at least 90&#160;days
    prior written notice of intention not to renew. The agreement
    may also be terminated by us or the NEO for other reasons and,
    subject to the conditions set forth in the employment agreement,
    provides for certain payments to be made to such NEO upon a
    termination of his employment or a change of control of the
    Company, as described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If either of Messrs.&#160;Castaneda or Gunter is terminated for
    any reason, he will be entitled to continued coverage under our
    directors&#146; and officers&#146; insurance policy and
    continued rights to corporate indemnification, each as offered
    to (and on the same terms as) other executive officers for six
    years following his termination date. Unless either of
    Messrs.&#160;Castaneda or Gunter is terminated for Cause or
    resigns without Good Reason (each as defined above with respect
    to Mr.&#160;Prim&#146;s employment agreement), he will be
    entitled to any applicable prorated annual bonus for such year
    and any accrued but unpaid annual bonus for the immediately
    preceding year. Additionally, if either of
    Messrs.&#160;Castaneda or Gunter is terminated without Cause,
    resigns for Good Reason or we do not renew his employment
    agreement at the end of its term, he will be entitled to
    (a)&#160;severance payments in an amount equal to (i)&#160;his
    highest annual base salary in effect during the 12&#160;months
    immediately prior to his termination date plus (ii)&#160;the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date;
    (b)&#160;coverage under health, dental, life, accident,
    disability and similar benefit plans offered to (and on the same
    terms as) other executive officers for 12&#160;months following
    his termination date; and (c)&#160;the immediate vesting of any
    restricted stock, stock option or other equity compensation
    awards scheduled to vest within six months after his termination
    date.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If either of Messrs.&#160;Castaneda or Gunter is terminated
    without Cause or resigns for Good Reason within two years
    following a Change of Control (as defined in the employment
    agreements), he will be entitled to (a)&#160;any applicable
    prorated annual bonus for such year and any accrued but unpaid
    annual bonus for the immediately preceding year;
    (b)&#160;severance payments in an amount equal to 1.5 times the
    sum of (i)&#160;his highest base salary in effect during the
    12&#160;months immediately prior to his termination date plus
    (ii)&#160;the average annual bonus earned by him for the most
    recent two fiscal years ending prior to his termination date;
    and (c)&#160;coverage under health, dental, life, accident,
    disability and similar benefit plans offered to (and on the same
    terms as) the other executive officers for the 18&#160;months
    following his termination date. In addition, any restricted
    stock, stock option or other equity compensation awards will
    immediately vest as of the date of the Change of Control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If either of Messrs.&#160;Castaneda or Gunter becomes subject to
    excise taxes under Section&#160;4999 of the Internal Revenue
    Code, or any interest or penalty is incurred by any of them with
    respect to such excise taxes, then the payments owed under the
    applicable employment agreement will be reduced to avoid such
    taxes, interest or penalties if doing so will result in greater
    after tax payments to the executive.
</DIV>
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    <BR>
    77
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The employment agreements also contain confidentiality
    provisions and non-competition and non-solicitation covenants
    prohibiting Messrs.&#160;Castaneda and Gunter from, among other
    things, competing with us or soliciting our customers, suppliers
    or employees for the
    <FONT style="white-space: nowrap">12-month</FONT>
    period following the termination of their respective employment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Potential
    Payments Upon Termination or Change of Control</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Arrangements
    in Effect Prior to this Offering</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until Messrs. Prim, Castaneda and Gunter entered into the new
    employment agreements discussed below in connection with this
    offering, no NEO was party to any change of control agreement or
    employee agreement that would provide benefits to that NEO upon
    his termination or upon a change of control of the Company. The
    NEOs are entitled to certain benefits payable by our insurance
    carrier under our current insurance policies in the case of a
    termination resulting from death or disability. Certain option
    award agreements with our NEOs provide for accelerated vesting
    upon a change of control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the amounts payable to
    Messrs.&#160;Prim, Castaneda, Gunter, Belmont and Boydston upon
    a &#147;Change in Control&#148; as defined in such NEO&#146;s
    option award agreement, assuming the Change of Control occurred
    on December&#160;31, 2009. As of December&#160;31, 2009, no such
    NEO was entitled to any other compensation or benefits in
    connection with his termination or upon a change of control.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="57%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="10%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unvested Options Subject<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Amount Payable Upon a<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>to Vesting Upon a Change<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Change of Control<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Control&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the value of unvested
    stock options held at December&#160;31, 2009, based upon the
    amount by which the fair market value on December&#160;31, 2009
    ($&#160;&#160;&#160;&#160;&#160; ) of the shares of common stock
    underlying those options exceeded the $1.98 exercise price of
    such options. The fair market value on December&#160;31, 2009
    represents the midpoint range of the initial public offering
    price set forth on the cover page of this prospectus.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">New
    Employment Agreements</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, we are entering into new
    employment agreements with each of Messrs. Prim, Castaneda and
    Gunter. Under these new agreements, these NEOs will be entitled
    to certain benefits upon their termination or upon a Change of
    Control (as defined in the employment agreement). A more
    detailed description of the terms of these employment agreements
    and the definitions of &#147;Cause&#148; and &#147;Good
    Reason&#148; are available under the section captioned
    &#147;Employment Agreements and Change of Control
    Arrangements&#148; above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless any of Messrs. Prim, Castaneda or Gunter is terminated
    for Cause or resigns without Good Reason, he will be entitled to
    any applicable prorated annual bonus for that year and any
    accrued but unpaid annual bonus for the immediately preceding
    year.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under these new employment agreements, if any of Messrs. Prim,
    Castaneda or Gunter is terminated without Cause or if any of
    Messrs. Prim, Castaneda or Gunter resigns for Good Reason, then
    such individual will be entitled to the following benefits:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    severance payments in an amount equal to (i)&#160;his highest
    annual base salary in effect during the 12&#160;months
    immediately prior to his termination date plus (ii)&#160;the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    coverage under health, dental, life, accident, disability and
    similar benefit plans offered to (and on the same terms as) the
    other executive officers for the 12&#160;months following his
    termination date;&#160;and
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    78
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the immediate vesting of any restricted stock, stock option or
    other equity compensation awards scheduled to vest within six
    months his termination date.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under these new employment agreements, if any of
    Messrs.&#160;Prim, Castaneda or Gunter is terminated without
    Cause or if any such individual resigns for Good Reason within
    two years following a Change of Control, then he will be
    entitled to the following benefits under his employment
    agreement:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    severance payments in an amount equal to 1.5 times (two times in
    the case of Mr.&#160;Prim) the sum of (i)&#160;his highest
    annual base salary in effect during the 12&#160;months
    immediately prior to his termination date plus (ii)&#160;the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date; and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    coverage under health, dental, life, accident, disability and
    similar benefit plans offered to (and on the same terms as) the
    other executive officers for the 18&#160;months (24&#160;months
    in the case of Mr.&#160;Prim) following his termination date.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, any restricted stock, stock option or other equity
    compensation awards that are unvested will immediately vest as
    of the date of the Change of Control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the amounts payable to
    Messrs.&#160;Prim, Castaneda and, Gunter upon termination of
    employment or a &#147;Change in Control&#148; as defined in
    their employment agreements, assuming each of the events
    occurred on December&#160;31, 2009 and assuming that the
    employment agreements that such individuals are entering into in
    connection with this offering were in effect as of
    December&#160;31, 2009. As described in &#147;Arrangements in
    Effect Prior to this Offering,&#148; neither Mr.&#160;Belmont
    nor Mr.&#160;Boydston is entitled to any compensation or
    benefits in connection with his termination or upon Change of
    Control.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>for Cause or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Cause<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Cause or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Change of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B>Benefits and Payments<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Good<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>or for Good<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>for Good Reason<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Due to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Due to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Control (No<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Upon Termination</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Reason ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Reason ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Following a Change of Control ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Disability
    ($)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Death
    ($)<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Termination)
    ($)<SUP style="font-size: 85%; vertical-align: top">(3)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><I>Billy D. Prim:</I></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Base
    Salary<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    400,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    800,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Annual Cash Bonus
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Unvested Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(6)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Health
    Insurance<SUP style="font-size: 85%; vertical-align: top">(7)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Life
    Insurance<SUP style="font-size: 85%; vertical-align: top">(7)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    204
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Disability
    Coverage<SUP style="font-size: 85%; vertical-align: top">(7)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    923
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Total:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><I>Mark Castaneda:</I></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Base
    Salary<SUP style="font-size: 85%; vertical-align: top">(8)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    375,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Annual Cash
    Bonus<SUP style="font-size: 85%; vertical-align: top">(9)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Unvested Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(6)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Health
    Insurance<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,672
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Life
    Insurance<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    204
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Disability
    Coverage<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    923
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,385
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Total:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    79
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- XBRL Table Pagebreak -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>for Cause or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Cause<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Cause or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Termination<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Change of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B>Benefits and Payments<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without Good<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>or for Good<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>for Good Reason<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Due to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Due to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Control (No<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Upon Termination</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Reason ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Reason ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Following a Change of Control ($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Disability
    ($)<SUP style="font-size: 85%; vertical-align: top">(1)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Death
    ($)<SUP style="font-size: 85%; vertical-align: top">(2)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Termination)
    ($)<SUP style="font-size: 85%; vertical-align: top">(3)</SUP></B>

</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><I>Michael S. Gunter:</I></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Base
    Salary<SUP style="font-size: 85%; vertical-align: top">(8)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    225,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    337,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Annual Cash
    Bonus<SUP style="font-size: 85%; vertical-align: top">(9)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,055
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Unvested Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    <SUP style="font-size: 85%; vertical-align: top">(6)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Health
    Insurance<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,672
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Life
    Insurance<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    204
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Disability
    Coverage<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,296
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Total:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Excludes amounts payable to the
    executive by our insurance carrier upon termination resulting
    from the disability of such executive under disability insurance
    policies maintained for the benefit of the executive.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Excludes amounts payable to the
    executive by our insurance carrier upon termination resulting
    from the death of such executive under life insurance policies
    maintained for the benefit of the executive.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the value of unvested
    stock options subject to vesting in connection with a Change of
    Control (as defined in the executive&#146;s option award
    agreement) held at December&#160;31, 2009, based upon the amount
    by which the fair market value on December&#160;31, 2009
    ($&#160;&#160;) of the shares of common stock underlying those
    options exceeded the exercise price of such options. The fair
    market value on December&#160;31, 2009 represents the midpoint
    range of the initial public offering price set forth on the
    cover page of this prospectus.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents a payment equal to
    Mr.&#160;Prim&#146;s highest base salary in effect during the
    12&#160;months immediately prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to two times Mr.&#160;Prim&#146;s highest base
    salary in effect during the 12&#160;months immediately prior to
    the termination date in the case of a termination without Cause
    or for Good Reason in connection with a Change of Control.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the value of unvested
    stock options held at December&#160;31, 2009 which are scheduled
    to vest within six month of such date, based upon the amount by
    which the fair market value on December&#160;31, 2009
    ($&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;)
    of the shares of common stock underlying those options exceeded
    the exercise price of such options. The fair market value on
    December&#160;31, 2009 represents the midpoint range of the
    initial public offering price set forth on the cover page of
    this prospectus.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(6)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents the value of all
    unvested stock options held at December&#160;31, 2009, based
    upon the amount by which the fair market value on
    December&#160;31, 2009
    ($&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;)
    of the shares of common stock underlying those options exceeded
    the exercise price of such options. The fair market value on
    December&#160;31, 2009 represents the midpoint range of the
    initial public offering price set forth on the cover page of
    this prospectus.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(7)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">In the case of a termination
    without Cause or for Good Reason, represents the estimated
    incremental cost to maintain coverage under the applicable
    policy for 12&#160;months. In the case of a termination without
    Cause or for Good Reason in connection with a Change of Control,
    represents the estimated incremental cost to us maintain
    coverage under the applicable policy for 24&#160;months.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(8)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents a payment equal to such
    executive&#146;s highest base salary in effect during the
    12&#160;months immediately prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to 1.5 times such executive&#146;s highest base
    salary in effect during the 12&#160;months immediately prior to
    the termination date in the case of a termination without Cause
    or for Good Reason in connection with a Change of Control.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(9)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Represents a payment equal to the
    average annual bonus earned by the executive for the most recent
    two fiscal years ending prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to 1.5 times the average annual bonus earned by
    the executive for the most recent two fiscal years ending prior
    to the termination date in the case of a termination without
    Cause or for Good Reason in connection with a Change of Control.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(10)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">In the case of a termination
    without Cause or for Good Reason, represents the estimated
    incremental cost to maintain coverage under the applicable
    policy for 12&#160;months. In the case of a termination without
    Cause or for Good Reason in connection with a Change of Control,
    represents the estimated incremental cost to us maintain
    coverage under the applicable policy for 18&#160;months.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Equity
    and Stock Option Plans</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">2010
    Omnibus Long-Term Incentive Plan</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010 our Board of Directors adopted and
    in&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;2010
    our stockholders approved the Primo Water Corporation 2010
    Omnibus Long-Term Incentive Plan, which we refer to as the 2010
    Omnibus Plan
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    80
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and which will be effective prior to the closing of this
    offering. The material terms of the 2010 Omnibus Plan are
    summarized below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration of the Plan.</I> Our Board of Directors has
    such powers and authorities related to the administration of the
    2010 Omnibus Plan as are consistent with our corporate
    governance documents and applicable law. The Board of Directors
    may (and in some cases under applicable law, our governance
    documents or regulatory requirements, must) delegate to a
    committee (the &#147;committee&#148;) administration of all or
    some parts of the 2010 Omnibus Plan. Following the initial
    public offering and to the extent required by applicable law,
    the committee or a
    <FONT style="white-space: nowrap">sub-committee,</FONT>
    as applicable, to which administrative responsibility will be
    delegated will be comprised of directors who (i)&#160;qualify as
    &#147;outside directors&#148; within the meaning of
    Section&#160;162(m) of the Internal Revenue Code of 1986, as
    amended (the &#147;Code&#148;), (ii)&#160;meet such other
    requirements as may be established from time to time by the SEC
    for plans intended to qualify for exemption under
    <FONT style="white-space: nowrap">Rule&#160;16b-3</FONT>
    (or its successor) under the Securities Exchange Act of 1934, as
    amended, and (iii)&#160;comply with the independence
    requirements of the stock exchange on which our common stock is
    listed.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Number of Authorized Shares.</I> The initial number of shares
    of our common stock reserved for issuance under the 2010 Omnibus
    Plan is 7,500,000. In addition, any shares of our stock which
    are subject to stock options granted under the 2004 Stock Plan
    and are canceled, expired, forfeited, settled in cash or
    otherwise terminated without delivery of shares, will be
    available for issuance under the 2010 Omnibus Plan. Subject to
    the terms of the 2010 Omnibus
    Plan,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;of
    the reserved shares may be issued pursuant to incentive stock
    options (&#147;ISOs&#148;). Following the end of the Transition
    Period (as defined herein) and subject to adjustment as
    described below, the maximum number of each type of award
    granted to any grantee in any
    <FONT style="white-space: nowrap">36-month</FONT>
    period and intended to constitute &#147;performance-based
    compensation&#148; under Section&#160;162(m) will not exceed the
    following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    options&#160;&#151; 1,000,000;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    stock appreciation rights&#160;&#151; 1,000,000;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    restricted stock&#160;&#151; 1,000,000;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    restricted stock units&#160;&#151; 1,000,000;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    other stock-based performance awards&#160;&#151; 1,000,000.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any shares covered by an award that are forfeited, expired,
    cancelled, settled in cash, settled by issuance of fewer shares
    than the amount underlying the award, or otherwise terminated
    without delivery of shares to the grantee, will be available for
    future grants under the 2010 Omnibus Plan. The number and class
    of shares available under the 2010 Omnibus Plan
    <FONT style="white-space: nowrap">and/or</FONT>
    subject to outstanding awards may be equitably adjusted by our
    Board of Directors in the event of various changes in the
    capitalization of the Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility and Participation.</I> Eligibility to participate
    in the 2010 Omnibus Plan is limited to such employees, officers,
    non-employee directors, consultants and advisors of the Company,
    or of any affiliate, as our Board of Directors may determine and
    designate from time to time.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Type of Awards.</I> The following types of awards are
    available for grant under the 2010 Omnibus Plan: ISOs,
    non-qualified stock options (&#147;NSOs&#148;), stock
    appreciation rights (&#147;SARs&#148;), restricted stock,
    restricted stock units, cash- or stock-based performance awards
    and other stock-based awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock
    Options and SARs</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Grant of Options and SARs.</I> Our Board of Directors may
    award ISOs, NSOs (together, &#147;Options&#148;), and SARs to
    grantees. Our Board of Directors is authorized to grant SARs
    either in tandem with or as a component of other awards or alone.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exercise Price of Options and SARs.</I> The exercise price
    per share of an Option will be at least 100% of the fair market
    value per share of our stock underlying the award on the grant
    date and in no case will the exercise price of any Option be
    less than the par value of a share of our stock. A SAR will
    confer on the grantee a right to receive, upon exercise, a
    payment of the excess of (i)&#160;the fair market value of one
    share of our stock on the date of exercise over (ii)&#160;the
    grant price of the SAR as determined by our Board of Directors.
    The grant price will be fixed at the fair market value of a
    share of stock on the date of grant. SARs granted in tandem with
    an outstanding Option following the grant date of such Option
    will have a grant price that is equal to the Option&#146;s
    exercise price; provided, however, that the SAR&#146;s grant
    price may not be less than the fair market value of a share of
    stock on the grant date of the SAR.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vesting of Options and SARs.</I> Our Board of Directors will
    determine the terms and conditions (including any performance
    requirements) under which an Option or SAR will become
    exercisable and will include such information in the award
    agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Special Limitations on ISOs.</I> In the case of a grant of an
    Option intended to qualify as an ISO to a grantee that owns more
    than ten percent of the total combined voting power of all
    classes of our outstanding stock (a &#147;Ten Percent
    Stockholder&#148;), the exercise price of the Option will not be
    less than 110% of the fair market value of a share of our stock
    on the grant date. Additionally, an Option will constitute an
    ISO only (i)&#160;if the grantee is an employee of the Company
    or a subsidiary of the Company, (ii)&#160;to the extent such
    Option is specifically designated as an ISO in the related award
    agreement, and (iii)&#160;to the extent that the aggregate fair
    market value (determined at the time the option is granted) of
    the shares of stock with respect to which all ISOs held by such
    grantee become exercisable for the first time during any
    calendar year (under the 2010 Omnibus Plan and all other plans
    of the grantee&#146;s employer and its affiliates) does not
    exceed $100,000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exercise of Options and SARs.</I> An Option may be exercised
    by the delivery to us of written notice of exercise and payment
    in full of the exercise price (plus the amount of any taxes
    which we may be required to withhold). The minimum number of
    shares with respect to which an Option may be exercised, in
    whole or in part, at any time will be the lesser of (i)&#160;the
    number set forth in the applicable award agreement and
    (ii)&#160;the maximum number of shares available for purchase
    under the Option at the time of exercise. Our Board of Directors
    has the discretion to determine the method or methods by which a
    SAR may be exercised.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Expiration of Options and SARs.</I> Options and SARs will
    expire at such time as our Board of Directors determines;
    provided, however, that no Option may be exercised more than ten
    years from the date of grant, or in the case of an ISO held by a
    Ten Percent Stockholder, not more than five years from the date
    of grant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Restricted
    Stock and Restricted Stock Units</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Restricted Stock.</I> At the time a grant of restricted stock
    is made, our Board of Directors may, in its sole discretion,
    establish the applicable &#147;restricted period&#148; and
    prescribe restrictions in addition to or other than the
    expiration of the restricted period, including the satisfaction
    of corporate or individual performance objectives. Unless our
    Board of Directors otherwise provides in an award agreement,
    holders of restricted stock will have the right to vote such
    stock and the right to receive any dividends declared or paid
    with respect to such stock. Our Board of Directors may provide
    that any such dividends paid must be reinvested in shares of
    stock, which may or may not be subject to the same vesting
    conditions and restrictions applicable to such restricted stock.
    All distributions, if any, received by a grantee with respect to
    restricted stock as a result of any stock split, stock dividend,
    combination of shares, or other similar transaction will be
    subject to the restrictions applicable to the original grant.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The grantee will be required, to the extent required by
    applicable law, to purchase the restricted stock at a price
    equal to the greater of (i)&#160;the aggregate par value of the
    shares of stock represented by such restricted stock or
    (ii)&#160;the price, if any, specified in the award agreement
    relating to such restricted stock. If specified in the award
    agreement, the price may be deemed paid by services already
    rendered.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Restricted Stock Units.</I> At the time a grant of restricted
    stock units is made, our Board of Directors may, in its sole
    discretion, establish the applicable &#147;restricted
    period&#148; and prescribe restrictions in addition to or other
    than the expiration of the restricted period, including the
    satisfaction of corporate or individual performance objectives.
    Holders of restricted stock units will have no rights as
    stockholders of the Company. Our Board of Directors may provide
    that the holder of restricted stock units will be entitled to
    receive dividend equivalent rights, which may be deemed
    reinvested in additional restricted stock units.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cash- and
    Stock-Based Performance Awards</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The right of a grantee to exercise or receive a grant or
    settlement of any award, and the timing thereof, may be subject
    to such performance conditions as may be specified by our Board
    of Directors. Our Board of Directors may use such business
    criteria and other measures of performance as it may deem
    appropriate in establishing any performance conditions, and may,
    subject to certain limitations in the case of a performance
    award intended to qualify under Section&#160;162(m) of the Code
    (&#147;Section&#160;162(m)&#148;), exercise its discretion to
    reduce the amounts payable under any award subject to
    performance conditions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the completion of the Transition Period (as defined
    herein), we intend that performance awards granted to persons
    who are designated by our Board of Directors as likely to be
    &#147;Covered Employees&#148; within the meaning of
    Section&#160;162(m) and regulations thereunder will, if so
    designated by our Board of Directors, constitute &#147;qualified
    performance-based compensation&#148; within the meaning of
    Section&#160;162(m) and regulations thereunder. The grant,
    exercise
    <FONT style="white-space: nowrap">and/or</FONT>
    settlement of such performance awards will be contingent upon
    achievement of pre-established performance goals which will
    consist of one or more business criteria and a targeted level or
    levels of performance with respect to each of such criterion.
    Performance goals will be objective and will otherwise meet the
    requirements of Section&#160;162(m) and regulations thereunder.
    In addition, after the Transition Period, the maximum amount of
    each cash-based performance award intended to constitute
    &#147;performance-based compensation&#148; under
    Section&#160;162(m) granted to a grantee in any
    <FONT style="white-space: nowrap">12-month</FONT>
    period will not exceed $2,000,000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    One or more of the following business criteria for the Company
    will be used exclusively by our Board of Directors in
    establishing performance goals for such awards: net sales;
    revenue; revenue growth or product revenue growth; operating
    income (before or after taxes); pre-or after-tax income (before
    or after allocation of corporate overhead and bonuses); net
    earnings; earnings per share; net income (before or after
    taxes); return on equity; total stockholder return; return on
    assets or net assets; appreciation in
    <FONT style="white-space: nowrap">and/or</FONT>
    maintenance of, share price; market share; gross profits;
    earnings (including earnings before taxes, earnings before
    interest and taxes or earnings before interest, taxes
    depreciation and amortization); economic value-added models or
    equivalent metrics; comparisons with various stock market
    indices; reduction in costs; cash flows or cash flows per share
    (before or after dividends); return on capital (including return
    on total capital or return on invested capital); cash flow
    return on investment; improvement in or attainment of expense
    levels or working capital levels; operating margins; gross
    margins or cash margin; year-end cash; debt reductions;
    stockholder equity; regulatory performance; implementation,
    completion or attainment of measurable objectives with respect
    to research, development, products or projects and recruiting
    and maintaining personnel; and, prior to the completion of the
    Transition Period (as defined herein), to the extent permitted
    by applicable law, any other business criteria as determined by
    our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Other
    Stock-Based Awards</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors may, in its discretion, grant other
    stock-based awards, consisting of stock units or other awards,
    valued in whole or in part by reference to, or otherwise based
    upon, our common stock. The terms of such other stock-based
    awards will be set forth in the applicable award agreements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Effect of Certain Transactions.</I> Except as otherwise
    provided in an award agreement, in the event of (a)&#160;the
    liquidation or dissolution of the Company or (b)&#160;a
    reorganization, merger, exchange or consolidation of the Company
    or involving the shares of our common stock (a
    &#147;Transaction&#148;), the 2010 Omnibus Plan and the awards
    issued pursuant to the plan shall continue in effect in
    accordance with their respective terms, except that following a
    Transaction either (i)&#160;each outstanding award will be
    treated as provided for in the agreement entered into in
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    connection with the Transaction or (ii)&#160;if not so provided
    in such agreement, each grantee will be entitled to receive in
    respect of each share of our common stock subject to any
    outstanding awards, upon exercise or payment or transfer in
    respect of any award, the same number and kind of stock,
    securities, cash, property or other consideration that each
    holder of a share of our common stock was entitled to receive in
    the Transaction in respect of a share of common stock; provided,
    however, that, unless otherwise determined by our Board of
    Directors, such stock, securities, cash, property or other
    consideration shall remain subject to all of the conditions,
    restrictions and performance criteria which were applicable to
    the awards prior to such Transaction. Without limiting the
    generality of the foregoing, the treatment of outstanding
    Options and SARS in connection with a Transaction in which the
    consideration paid or distributed to our stockholders is not
    entirely shares of common stock of the acquiring or resulting
    corporation may include the cancellation of outstanding Options
    and SARS upon consummation of the Transaction as long as, at the
    election of our Board of Directors, (x)&#160;the holders of
    affected Options and SARs have been given a period of at least
    fifteen days prior to the date of the consummation of the
    Transaction to exercise the Options or SARs (whether or not they
    were otherwise exercisable) or (y)&#160;the holders of the
    affected Options and SARs are paid (in cash or cash equivalents)
    in respect of each share covered by the Option or SAR being
    canceled an amount equal to the excess, if any, of the per share
    price paid or distributed to our stockholders in the Transaction
    (the value of any non-cash consideration to be determined by our
    Board of Directors in its sole discretion) over the Option or
    SAR exercise price, as applicable. For avoidance of doubt,
    (1)&#160;the cancellation of Options and SARs as described in
    the preceding sentence may be effected notwithstanding anything
    to the contrary contained in the 2010 Omnibus Plan or any award
    agreement and (2)&#160;if the amount determined pursuant to the
    preceding sentence is zero or less, the affected Option or SAR
    may be cancelled without any payment therefor.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Change in Control.</I> Our Board of Directors will determine
    the effect of a change in control (as defined in the 2010
    Omnibus Plan) of the Company with respect to any Award or
    Awards, including but not limited to, acceleration of vesting,
    termination or assumption of Awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Deferral Arrangements.</I> Our Board of Directors may permit
    or require the deferral of any award payment into a deferred
    compensation arrangement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Nontransferability of Awards.</I> Generally, during the
    lifetime of a grantee, only the grantee may exercise rights
    under the 2010 Omnibus Plan and no award will be assignable or
    transferable other than by will or laws of descent and
    distribution. If authorized in the award agreement, a grantee
    may transfer, not for value, all or part of an award (other than
    an ISO) to certain family members (including trusts and
    foundations for the benefit thereof). Neither restricted stock
    nor restricted stock units may be sold, transferred, assigned,
    pledged or otherwise encumbered or disposed of during the
    restricted period or prior to the satisfaction of any other
    restrictions prescribed by our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Separation from Service.</I> Our Board of Directors may
    provide in the applicable award agreements for actions that will
    be taken upon a grantee&#146;s separation from service from the
    Company, including but not limited to, accelerated vesting or
    termination of awards.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tax Withholding and Tax Offset Payments.</I> We will have the
    right to deduct from payments of any kind otherwise due to a
    grantee any federal, state, or local taxes of any kind required
    by law to be withheld with respect to the vesting of or other
    lapse of restrictions applicable to an award or upon the
    issuance of any shares of stock upon the exercise of an Option
    or pursuant to an award.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Term of Plan.</I> Unless earlier terminated by our Board of
    Directors, the authority to make grants under the 2010 Omnibus
    Plan will terminate on the date that is ten years after it is
    adopted by our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment and Termination.</I> Our Board of Directors may, at
    any time and from time to time, amend, suspend, or terminate the
    2010 Omnibus Plan as to any shares of stock as to which awards
    have not been made. An amendment will be contingent on approval
    of our stockholders to the extent stated by our Board of
    Directors, required by applicable law or required by applicable
    stock exchange listing requirements. No awards will be made
    after termination of the 2010 Omnibus Plan. No amendment,
    suspension, or termination of the 2010 Omnibus
</DIV>
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    Plan will, without the consent of the grantee, impair rights or
    obligations under any award theretofore awarded under the 2010
    Omnibus Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>New Plan Benefits.</I> All grants of awards under the 2010
    Omnibus Plan will be discretionary. Therefore, in general, the
    benefits and amounts that will be received under the 2010
    Omnibus Plan are not determinable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Federal Income Tax Consequences.</I> The following is a
    summary of the general federal income tax consequences to the
    Company and to U.S.&#160;taxpayers of awards granted under the
    2010 Omnibus Plan. Tax consequences for any particular
    individual or under state or
    <FONT style="white-space: nowrap">non-U.S.&#160;tax</FONT>
    laws may be different.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>NSOs and SARs.</I> No taxable income is reportable when a NSO
    or SAR is granted. Upon exercise, generally, the recipient will
    have ordinary income equal to the fair market value of the
    underlying shares of stock on the exercise date minus the
    exercise price. Any gain or loss upon the disposition of the
    stock received upon exercise will be capital gain or loss to the
    recipient if the appropriate holding period under federal tax
    law is met for such treatment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>ISOs.</I> No taxable income is reportable when an ISO is
    granted or exercised (except for grantees who are subject to the
    alternative minimum tax, who may be required to recognize income
    in the year in which the ISO is exercised). If the recipient
    exercises the ISO and then sells the underlying shares of stock
    more than two years after the grant date and more than one year
    after the exercise date, the excess of the sale price over the
    exercise price will be taxed as long-term capital gain or loss.
    If the recipient exercises the ISO and sells the shares before
    the end of the two- or one-year holding periods, he or she
    generally will have ordinary income at the time of the sale
    equal to the fair market value of the shares on the exercise
    date (or the sale price, if less) minus the exercise price of
    the ISO.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Restricted Stock and Restricted Stock Units.</I> A recipient
    of restricted stock or restricted stock units will not have
    taxable income upon the grant unless, in the case of restricted
    stock, he or she elects to be taxed at that time. Instead, he or
    she will have ordinary income at the time of vesting equal to
    the fair market value on the vesting date of the shares (or
    cash) received minus any amount paid for the shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cash- and Stock-Based Performance Awards and Other
    Stock-Based Awards.</I> Typically, a recipient will not have
    taxable income upon the grant of cash or stock-based performance
    awards or other stock-based awards. Subsequently, when the
    conditions and requirements for the grants have been satisfied
    and the payment determined, any cash received and the fair
    market value of any common stock received will constitute
    ordinary income to the recipient.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 8%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tax Effect for the Company.</I> We generally will receive a
    tax deduction for any ordinary income recognized by a grantee in
    respect of an award under the 2010 Omnibus Plan (for example,
    upon the exercise of a NSO). In the case of ISOs that meet the
    holding period requirements described above, the grantee will
    not recognize ordinary income; therefore, we will not receive a
    deduction.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Once we become a public company, special rules limit the
    deductibility of compensation paid to our CEO and to each of our
    three most highly compensated executive officers whose
    compensation is required to be reported annually in our proxy.
    Under Section&#160;162(m), the annual compensation paid to each
    of these executives may not be deductible to the extent that it
    exceeds $1&#160;million. However, we intend to rely on Treas.
    Reg.
    <FONT style="white-space: nowrap">Section&#160;1.162-27(f)</FONT>
    which provides that the deduction limit of Section&#160;162(m)
    does not apply to any remuneration paid pursuant to a
    compensation plan or agreement that existed during the period in
    which the company was not publicly held. Subject to certain
    requirements, we may rely on this &#147;grandfather&#148;
    provision until the first meeting of stockholders at which
    directors are elected that occurs after the end of the third
    calendar year following the calendar year in which the offering
    occurs (the &#147;Transition Period&#148;). Additionally, after
    the expiration of the grandfather period, we can preserve the
    deductibility of compensation over $1&#160;million if certain
    conditions of Section&#160;162(m) are met. These conditions
    include stockholder approval of the 2010 Omnibus Plan, setting
    limits on the number of awards that any individual may receive
    and, for awards other than Options and SARs,
</DIV>
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    establishing performance criteria that must be met before the
    award will actually be granted, be settled, vest or be paid. The
    2010 Omnibus Plan has been designed to permit our Board of
    Directors to grant awards that qualify as performance-based for
    purposes of satisfying the conditions of Section&#160;162(m).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Registration of Shares.</I> Following the closing of this
    offering we intend to file a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act to register the full number of shares
    of our common stock which will be reserved for issuance under
    the 2010 Omnibus Plan, as described in the section titled
    &#147;<I>Number of Authorized Shares</I>&#148; above (plus such
    number of shares reserved under the 2004 Stock Plan that become
    available for issuance under the 2010 Omnibus Plan), as well as
    registration statements on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    to register shares of common stock reserved for issuance under
    the 2004 Stock Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">2004
    Stock Plan</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;1, 2004, our Board of Directors adopted the
    Primo Water Corporation 2004 Stock Plan, which we refer to as
    the 2004 Stock Plan. The material terms of the 2004 Stock Plan
    are summarized below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration of the Plan.</I> Our Board of Directors has
    such powers and authorities related to the administration of the
    2004 Stock Plan as are consistent with our corporate governance
    documents and applicable law and may delegate to a committee
    administration of all or some parts of the 2004 Stock Plan. Our
    Board of Directors has the authority to, among other things,
    interpret the plan, terminate or amend the plan, determine
    individuals eligible to participate in the plan and determine
    the size and terms of awards granted under the plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Number of Authorized Shares.</I> A total of
    4,500,000&#160;shares of our common stock are reserved for
    issuance under the 2004 Stock Plan. As of March&#160;1, 2010,
    options to purchase a total of 3,247,587&#160;shares of our
    common stock with a weighted average exercise price of $1.26
    were outstanding under our 2004 Stock Plan. In addition,
    1,102,500&#160;shares of restricted stock have been issued
    pursuant to the 2004 Stock Plan. We do not intend to issue any
    additional awards under the 2004 Stock Plan following the
    closing of this offering. All awards outstanding under the 2004
    Stock Plan will remain in effect and will continue to be
    governed by their existing terms.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility and Participation.</I> Eligibility to participate
    in the 2004 Stock Plan is limited to such key employees,
    non-employee directors and consultants of the Company, or of any
    parent or subsidiary, as our Board of Directors may determine
    and designate from time to time.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Types of Awards.</I> The following types of awards are
    available for grant under the 2004 Stock Plan: incentive stock
    options (&#147;ISOs&#148;), non-qualified stock options
    (&#147;NSOs&#148;, and together with ISOs, &#147;Options&#148;)
    and rights to purchase restricted shares of our common stock
    (&#147;Purchase Rights&#148;).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 6%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock Options</I>
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Grant of Options.</I> Our Board of Directors may award ISO
    and NSOs to grantees under the 2004 Stock Plan. The exercise
    price per share of an Option is determined by our Board of
    Directors; provided, however, in no event will the exercise
    price of an ISO be less than 100% of the fair market value per
    share of our stock underlying the award on the grant date. In
    the case of a grant of an Option intended to qualify as an ISO
    to a grantee that owns more than ten percent of the total
    combined voting power of all classes of our outstanding stock,
    the exercise price of the Option will not be less than 110% of
    the fair market value of a share of our stock on the grant date.
    Additionally, an Option will constitute an ISO only (i)&#160;if
    the grantee is an employee of the Company or a subsidiary of the
    Company, (ii)&#160;to the extent specifically provided in the
    related award agreement, and (iii)&#160;to the extent that the
    aggregate fair market value (determined at the time the option
    is granted) of the shares of stock with respect to which all
    ISOs held by such grantee become exercisable for the first time
    during any calendar year (under the 2004 Stock Plan and all
    other plans of the grantee&#146;s employer and its affiliates)
    does not exceed $100,000.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;<I>Stock Option
    Vesting and Exercise.</I> Our Board of Directors will determine
    the vesting terms of all Options and will include such
    information in the award agreement. An Option may be exercised
    by the delivery to us of written notice of exercise and payment
    in full of the exercise price (plus the amount of any taxes
    which we may be required to withhold). The exercise price may be
    paid in cash or, at the discretion of our Board of Directors, in
    shares of the Company&#146;s stock having a fair market value
    equal to the exercise price or by a combination of cash and
    stock. Once vested, Options granted under the 2004 Stock Plan
    remain exercisable for the term of the Option, which may not
    exceed ten years, provided that the Options may terminate prior
    to the end of the term if the grantee&#146;s service
    relationship with us terminates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;<I>Transferability of
    Options.</I> A grantee of an Option under the 2004 Stock Plan
    may not transfer such Option except by will or the laws of
    descent or distribution.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">&#160;&#160;&#160;&#160;&#160;&#160;&#160;Stock
    Purchase Rights</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors may award Purchase Rights evidenced by
    restricted stock agreements
    <FONT style="white-space: nowrap">and/or</FONT>
    subscription agreements under the 2004 Stock Plan. Our Board of
    Directors will determine the number of shares subject to the
    Purchase Right and the purchase price for each share to be
    purchased pursuant to the Purchase Right and set forth this
    information in the grantee&#146;s award agreement. Our Board of
    Directors will also determine any transfer restrictions on
    shares purchased pursuant to a Purchase Right and may, in their
    sole discretion, provide for a right of the Company to
    repurchase any shares purchased pursuant to a Purchase Right in
    the grantee&#146;s award agreement. Upon the exercise of a
    Purchase Right, the grantee will possess all rights of a
    stockholder of the Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Change in Control.</I> The 2004 Stock Plan does not specify
    any particular effect of a change in control of the Company on
    awards granted under the 2004 Stock Plan. A majority of the
    Option awards currently outstanding under the 2004 Stock Plan
    will be deemed 100% vested and exercisable upon a &#147;Transfer
    of Control&#148; (as defined in the Option award agreements) of
    the Company. This offering will not qualify as a Transfer of
    Control for purposes of the Option award agreements under the
    2004 Stock Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Corporate Event.</I> In the event of a merger or
    consolidation of the Company, a sale of all or substantially all
    of our assets or a dissolution or liquidation of the Company,
    our Board of Directors may make such adjustments to the awards
    granted under the 2004 Stock Plan as it deems appropriate and
    equitable to prevent substantial dilution or enlargement of the
    rights granted under the 2004 Stock Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Term of Plan.</I> Unless earlier terminated by our Board of
    Directors, the authority to make grants under the 2004 Stock
    Plan will terminate on October&#160;31, 2014. However, we do not
    intend to issue any additional awards under the 2004 Stock Plan
    following the closing of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Federal Income Tax Consequences.</I> The following is a
    summary of the general federal income tax consequences to the
    Company and to U.S.&#160;taxpayers of awards granted under the
    2004 Stock Plan. Tax consequences for any particular individual
    or under state or
    <FONT style="white-space: nowrap">non-U.S.&#160;tax</FONT>
    laws may be different.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>NSOs.</I> No taxable income is reportable when a NSO is
    granted. Upon exercise, generally, the recipient will have
    ordinary income equal to the fair market value of the underlying
    shares of stock on the exercise date minus the exercise price.
    Any gain or loss upon the disposition of the stock received upon
    exercise will be capital gain or loss to the recipient if the
    appropriate holding period under federal tax law is met for such
    treatment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>ISOs.</I> No taxable income is reportable when an ISO is
    granted or exercised (except for grantees who are subject to the
    alternative minimum tax, who may be required to recognize income
    in the year in which the ISO is exercised). If the recipient
    exercises the ISO and then sells the underlying shares of stock
    more than two years after the grant date and more than one year
    after the exercise date, the excess of the sale price over the
    exercise price will be taxed as long-term capital gain or loss.
    If the recipient exercises the ISO and sells the shares before
    the end of the two- or one-year holding periods, he or she
    generally will have ordinary income at the time
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    of the sale equal to the fair market value of the shares on the
    exercise date (or the sale price, if less) minus the exercise
    price of the ISO.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Purchase Rights.</I> A recipient of a Purchase Right will
    recognize ordinary income on the later of the date the Purchase
    Right is exercised and the date any applicable vesting
    conditions with respect to the Purchase Rights have been met.
    The amount of taxable income recognized by the recipient will be
    the difference between the fair market value of the stock on the
    exercise or vesting date, as applicable, and the purchase price
    paid for the shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 10%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tax Effect for the Company.</I> We generally will receive a
    tax deduction for any ordinary income recognized by a grantee in
    respect of an award under the 2004 Stock Plan (for example, upon
    the exercise of a NSO). In the case of ISOs that meet the
    holding period requirements described above, the grantee will
    not recognize ordinary income; therefore, we will not receive a
    deduction.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Once we become a public company, special rules limit the
    deductibility of compensation paid to our CEO and to each of our
    three most highly compensated executive officers (other than our
    Chief Financial Officer) whose compensation is required to be
    reported annually in our proxy. Under Section&#160;162(m), the
    annual compensation paid to each of these executives may not be
    deductible to the extent that it exceeds $1&#160;million.
    However, we intend to rely on Treas. Reg.
    <FONT style="white-space: nowrap">Section&#160;1.162-27(f)</FONT>
    which provides that the deduction limit of Section&#160;162(m)
    does not apply to any remuneration paid pursuant to a
    compensation plan or agreement that existed during the period in
    which the company was not publicly held. Subject to certain
    requirements, we may rely on this &#147;grandfather&#148;
    provision until the first meeting of stockholders at which
    directors are elected that occurs after the end of the third
    calendar year following the calendar year in which the offering
    occurs (the &#147;Transition Period&#148;). Additionally, after
    the expiration of the grandfather period, we can preserve the
    deductibility of compensation over $1&#160;million if certain
    conditions of Section&#160;162(m) are met. These conditions
    include stockholder approval of the 2004 Stock Plan, setting
    limits on the number of awards that any individual may receive
    and, for awards other than Options, establishing performance
    criteria that must be met before the award will actually be
    granted, be settled, vest or be paid.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Registration of Shares.</I> Following the closing of this
    offering we intend to file a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act to register
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock reserved for issuance pursuant to outstanding
    awards under the 2004 Stock Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">2010
    Employee Stock Purchase Plan</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010 our Board of Directors adopted and
    in&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;2010
    our stockholders approved the 2010 Employee Stock Purchase Plan,
    or the ESPP. Our ESPP is intended to qualify as an
    &#147;employee stock purchase plan&#148; as defined under
    Section&#160;423 of the Code and will become effective on the
    day preceding the consummation of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration of the ESPP.</I> The compensation committee of
    our Board has authority to interpret and implement the terms of
    the ESPP. The committee will have the discretion to set the
    terms of each offering in accordance with the provisions of the
    ESPP, to make all determinations regarding the ESPP, including
    eligibility, and otherwise administer the ESPP.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Number of Authorized Shares.</I> A total of
    250,000&#160;shares of our common stock will be made available
    for sale under our ESPP, subject to adjustment in the event of
    any significant change in our capitalization, such as a stock
    split, a combination or exchange or shares, or a stock dividend
    or other distribution.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility and Participation.</I> All of our employees
    generally are eligible to participate if they are customarily
    employed by us or any participating subsidiary for at least
    20&#160;hours per week and more than five months in any calendar
    year. The committee may exclude from an offering period
    highly-compensated employees or employees
</DIV>
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    <BR>
    88
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    who have not satisfied a minimum period of employment with us
    which may not exceed a period of two years. In addition, an
    employee may not be granted rights to purchase stock under our
    ESPP if such employee would:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    immediately after any grant of purchase rights, own stock
    possessing 5% or more of the total combined voting power or
    value of all classes of our capital stock;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    hold rights to purchase stock under all of our employee stock
    purchase plans that would accrue at a rate that exceeds $25,000
    worth of our stock for each calendar year.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Offer Periods and Purchase Periods.</I> The ESPP provides for
    offering periods of up to 27&#160;months. The initial offering
    period under the ESPP will begin on the effective date of this
    offering and will end on December&#160;31, 2010. Subsequent
    offerings are expected to consist of
    <FONT style="white-space: nowrap">12-month</FONT>
    offering periods, with a new offering period beginning every
    January 1 and separate purchases taking place every
    6&#160;months during each offering period. However, we may
    change the timing and duration of offering periods and the
    frequency of purchases, as long as such changes comply with the
    terms of the ESPP. Unless otherwise specified by the committee,
    a participant may purchase a maximum of 50,000&#160;shares of
    common stock during an offering period. No grant of purchase
    rights will be made under the ESPP prior to the consummation of
    this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Payroll Deductions.</I> Our ESPP permits participants to
    exercise their stock purchase rights under the ESPP through
    payroll deductions of up to 15% of their eligible compensation,
    which includes a participant&#146;s gross base compensation from
    the Company, excluding overtime payments, sales commissions,
    incentive compensation, bonuses, expense reimbursements, fringe
    benefits and other special payments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Exercise of Purchase Rights.</I> Amounts deducted and
    accumulated by the participant are used to purchase shares of
    our common stock at the end of each purchase period during an
    offering period. The purchase price of the shares will not be
    less than 85% of the fair market value of our common stock on
    the first trading day of the offering period or on the last day
    of the applicable purchase period, whichever is lower.
    Participants may withdraw from participation in the ESPP at any
    time during an offering period, and will be paid their accrued
    payroll deductions that have not yet been used to purchase
    shares of common stock. Participation ends automatically upon
    termination of employment with us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Change in Control.</I> In the event of a &#147;Change in
    Control&#148; (as defined in the ESPP), the committee may
    provide for the successor corporation to assume or substitute
    each outstanding purchase right, cashout of the
    participant&#146;s purchase right, acceleration of the next
    purchase date or termination of the current offering period
    without a purchase.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment and Termination.</I> The ESPP will automatically
    terminate in 2020, unless we terminate it sooner. In addition,
    our Board of Directors has the authority to amend, suspend or
    terminate our ESPP, except that, subject to certain exceptions
    described in the ESPP, no such action may adversely affect any
    outstanding rights to purchase stock under our ESPP.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Registration of Shares.</I> Following the completion of this
    offering we intend to file a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act to register the full number of shares
    of our common stock which will be reserved for issuance under
    the ESPP, as described in the section titled &#147;<I>Number of
    Authorized Shares</I>&#148; above.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    89
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='114'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRINCIPAL
    STOCKHOLDERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth certain information regarding the
    beneficial ownership of our common stock as of March&#160;1,
    2010, and as adjusted to reflect the sale of our common stock
    offered by this prospectus, by:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each of our named executive officers;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each of our directors;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    all of our directors and current executive officers as a group;
    and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each person (or group of affiliated persons) known to us to be
    the beneficial owner of more than 5% of our common stock.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beneficial ownership is determined in accordance with the rules
    of the SEC and includes any shares over which a person exercises
    sole or shared voting or investment power. Under these rules,
    beneficial ownership also includes any shares as to which the
    individual or entity has the right to acquire beneficial
    ownership of within 60&#160;days of March&#160;1, 2010 through
    the exercise of any warrant, stock option or other right. Except
    as noted by footnote, and subject to community property laws
    where applicable, we believe that the stockholders named in the
    table below have sole voting and investment power with respect
    to all shares of common stock shown as beneficially owned by
    them.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beneficial ownership is based upon 59,054,196&#160;shares of
    common stock outstanding as of March&#160;1, 2010, and assumes
    the conversion of all of our issued and outstanding
    Series&#160;A and Series&#160;C convertible preferred stock into
    shares of common stock effective upon such date. The information
    in the table below has not been adjusted to reflect our
    anticipated reverse stock split.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as set forth below, the address of all stockholders
    listed under &#147;Directors and named executive officers&#148;
    and &#147;5% or greater stockholders&#148; is
    <FONT style="white-space: nowrap">c/o&#160;104</FONT>
    Cambridge Plaza Drive, Winston-Salem, North Carolina 27104.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="49%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage Ownership</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>After Offering<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>After Offering<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>(Assuming No<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>(Assuming Full<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Prior to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise of Over-<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise of Over-<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offering&#160;(%)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Allotment)&#160;(%)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Allotment)&#160;(%)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Directors and named executive officers</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D.
    Prim<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,949,276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29.4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard A.
    Brenner<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    506,676
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David W.
    Dupree<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,715,532
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14.7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Malcolm
    McQuilkin<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,785,274
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David L.
    Warnock<SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,672,037
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard E.
    Belmont<SUP style="font-size: 85%; vertical-align: top">(6)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    356,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C.
    Boydston<SUP style="font-size: 85%; vertical-align: top">(7)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    513,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark
    Castaneda<SUP style="font-size: 85%; vertical-align: top">(8)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    686,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Michael S.
    Gunter<SUP style="font-size: 85%; vertical-align: top">(9)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    422,561
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    All directors and current executive officers as a group
    (8&#160;individuals)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,737,654
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    56.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>5% or greater stockholders</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Primo Investors,
    L.P.<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,648,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Camden Partners Strategic Fund&#160;III,
    L.P.<SUP style="font-size: 85%; vertical-align: top">(11)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,365,075
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Andrew J.
    Filipowski<SUP style="font-size: 85%; vertical-align: top">(12)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,965,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10.1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig J. Duchossois Revocable
    Trust<SUP style="font-size: 85%; vertical-align: top">(13)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,935,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Charles
    Ergen<SUP style="font-size: 85%; vertical-align: top">(14)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,263,149
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.2
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Edward A. Fortino
    Trust<SUP style="font-size: 85%; vertical-align: top">(15)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,230,190
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    90
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">*&#160;
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Indicates less than 1%.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;15,320,336&#160;shares of common stock held directly;
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 1,470,250&#160;shares of common stock held directly;
    (c)&#160;shares issuable upon the exercise of options to
    purchase 440,000&#160;shares of common stock held directly;
    (d)&#160;50,000&#160;shares of common stock held by
    Mr.&#160;Prim&#146;s spouse; (e)&#160;shares issuable upon the
    exercise of warrants to purchase 18,690&#160;shares of common
    stock held by Mr.&#160;Prim&#146;s spouse;
    (f)&#160;50,000&#160;shares of common stock held by BD Prim,
    LLC, of which Mr.&#160;Prim is the sole manager;
    (g)&#160;250,000&#160;shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Sarcanda Westmoreland
    Bellissimo, of which Mr.&#160;Prim is the sole trustee;
    (h)&#160;250,000&#160;shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Anthony Gray Westmoreland,
    of which Mr.&#160;Prim is the sole trustee;
    (i)&#160;50,000&#160;shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Jager Grayln Dean
    Bellissimo, of which Mr.&#160;Prim is the sole trustee;
    (j)&#160;50,000&#160;shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Joseph Alexander
    Bellissimo, of which Mr.&#160;Prim is the sole trustee.
    Mr.&#160;Prim may be deemed to have voting and investment power
    with respect to securities held by his spouse, BD Prim, LLC or
    the aforementioned irrevocable trusts and expressly disclaims
    beneficial ownership of any such securities, except to the
    extent of his pecuniary interest therein, if any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;410,000&#160;shares of common stock held directly,
    which includes 60,000&#160;shares of restricted common stock
    over which Mr.&#160;Brenner has voting but not dispositive
    power; (b)&#160;shares issuable upon the exercise of warrants to
    purchase 71,194&#160;shares of common stock held directly;
    (c)&#160;shares issuable upon the exercise of options to
    purchase 24,000&#160;shares of common stock held directly;
    (d)&#160;shares issuable upon the exercise of warrants to
    purchase 741&#160;shares of common stock held by the ALB-3
    Trust, of which he is the trustee; and (e)&#160;shares issuable
    upon the exercise of warrants to purchase 741&#160;shares of
    common stock held by the ALB-5 Trust, of which he is the
    trustee. Mr.&#160;Benner may be deemed to have voting and
    investment power with respect to securities held by the ALB-3
    Trust or the ALB-5 Trust and expressly disclaims beneficial
    ownership of any such securities, except to the extent of his
    pecuniary interest therein, if any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;60,000&#160;shares of restricted common stock over
    which Mr.&#160;DuPree has voting but not dispositive power;
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 7,407&#160;shares of common stock held directly;
    (c)&#160;8,220,000&#160;shares of common stock held by Primo
    Investors, L.P.; and (d)&#160;shares issuable upon the exercise
    of warrants to purchase 428,125&#160;shares of common stock held
    by Primo Investors, L.P. Mr.&#160;Dupree is the managing member
    of GenPar Primo, L.L.C., the general partner of Primo Investors,
    L.P., and as such, he may be deemed to have voting and
    investment power with respect to all securities beneficially
    owned by Primo Investors, L.P. Mr.&#160;Dupree disclaims
    beneficial ownership of any such securities held by Primo
    Investors, L.P. except to the extent of his pecuniary interest
    therein, if any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;60,000&#160;shares of restricted common stock over
    which Mr.&#160;McQuilken has voting but not dispositive power;
    (b)&#160;shares issuable upon the exercise of options to
    purchase 87,000&#160;shares of common stock held directly;
    (c)&#160;1,384,000&#160;shares of common stock held by the
    Malcolm McQuilkin Living Trust; and (d)&#160;shares issuable
    upon the exercise of warrants to purchase 254,274&#160;shares of
    common stock held by the Malcolm McQuilkin Living Trust.
    Mr.&#160;McQuilkin is a co-trustee of the Malcolm McQuilkin
    Living Trust and as such, he may be deemed to have shared voting
    and investment power with respect to such shares.
    Mr.&#160;McQuilken expressly disclaims beneficial ownership of
    any such securities held in the trust, except to the extent of
    his pecuniary interest therein, if any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;60,000&#160;shares of restricted common stock over
    which Mr.&#160;Warnock has voting but not dispositive power;
    (b)&#160;shares issuable upon the exercise of options to
    purchase 24,000&#160;shares of common stock held directly;
    (c)&#160;4,416,461&#160;shares of common stock held by Camden
    Partners Strategic Fund&#160;III, L.P.; (d)&#160;shares issuable
    upon the exercise of warrants to purchase 948,614&#160;shares of
    common stock held by Camden Partners Strategic Fund&#160;III,
    L.P.; (e)&#160;183,540&#160;shares of common stock held by
    Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P.; and (f)&#160;shares issuable upon the exercise of warrants
    to purchase 39,422&#160;shares of common stock held by Camden
    Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund&#160;III, L.P.
    and Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P., and as such, he may be deemed to have voting and
    investment power with respect to all securities beneficially
    owned by such entities. Mr.&#160;Warnock expressly disclaims
    beneficial ownership of any such securities held by Camden
    Partners Strategic Fund&#160;III, L.P. and Camden Partners
    Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. except to the extent of his pecuniary interest therein, if
    any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(6)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of (a)&#160;shares
    issuable upon the exercise of warrants to purchase
    7,407&#160;shares of common stock held directly; (b)&#160;shares
    issuable upon the exercise of options to purchase
    138,625&#160;shares of common stock held directly; (c) 150,000
    restricted shares of common stock over which Mr. Belmont has
    voting but not dispositive power; (d)&#160;19,200&#160;shares of
    common stock held by Mr.&#160;Belmont&#146;s spouse;
    (e)&#160;shares issuable upon the exercise of warrants to
    purchase 1,000&#160;shares of common stock held by
    Mr.&#160;Belmont&#146;s spouse; (f)&#160;19,200&#160;shares of
    common stock held by Mr.&#160;Belmont&#146;s son;
    (g)&#160;warrants to purchase 1,000&#160;shares of common stock
    held by Mr.&#160;Belmont&#146;s son; (h)&#160;19,200&#160;shares
    of common stock held by Mr.&#160;Belmont&#146;s daughter; and
    (i)&#160;shares issuable upon the exercise of warrants to
    purchase 1,000&#160;shares of common stock held by
    Mr.&#160;Belmont&#146;s daughter. Mr.&#160;Belmont may be deemed
    to have voting and investment power with respect to securities
    held by his spouse or children and expressly disclaims
    beneficial ownership of any such securities, except to the
    extent of his pecuniary interest therein, if any.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(7)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;241,998&#160;shares of common stock held directly;
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 1,666&#160;shares of common stock held directly; and
    (c)&#160;shares issuable upon the exercise of options to
    purchase 269,500&#160;shares of common stock held directly.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(8)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;524,056&#160;shares of common stock held directly,
    which includes 250,000&#160;shares of restricted common stock
    over which Mr.&#160;Castaneda has voting but not dispositive
    power; (b)&#160;shares issuable upon the exercise of warrants to
    purchase 47,242&#160;shares of common stock held directly; and
    (c)&#160;shares issuable upon the exercise of options to
    purchase 115,000&#160;shares of common stock held directly.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(9)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;170,000&#160;shares of common stock held directly,
    which includes 150,000&#160;shares of restricted common stock
    over which Mr.&#160;Gunter has voting but not dispositive power;
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 3,155&#160;shares of common stock held directly; and
    (c)&#160;shares issuable upon the exercise of options to
    purchase 249,406&#160;shares of common stock held directly.
    </FONT></TD>
</TR>

</TABLE>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    91
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(10)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;8,220,000&#160;shares of common stock; and
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 428,125&#160;shares of common stock.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(11)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;4,416,461&#160;shares of common stock; and
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 948,614&#160;shares of common stock.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(12)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;5,900,000&#160;shares of common stock; (b)&#160;shares
    issuable upon the exercise of warrants to purchase
    44,014&#160;shares of common stock; and (c)&#160;shares issuable
    upon the exercise of options to purchase 21,000&#160;shares of
    common stock.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(13)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;4,474,999&#160;shares of common stock; and
    (b)&#160;shares issuable upon the exercise of warrants to
    purchase 460,004&#160;shares of common stock.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(14)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;4,000,001&#160;shares of common stock held directly;
    and (b)&#160;shares issuable upon the exercise of warrants to
    purchase 263,148&#160;shares of common stock held directly.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(15)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of
    (a)&#160;2,875,000&#160;shares of common stock held directly;
    and (b)&#160;shares issuable upon the exercise of warrants to
    purchase 355,190&#160;shares of common stock held directly.
    </FONT></TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    92
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RELATED
    PARTY TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Audit Committee Charter that we are adopting in connection
    with this offering will require our Audit Committee to review
    and approve or ratify any transaction that is required to be
    disclosed under Item&#160;404 of
    <FONT style="white-space: nowrap">Regulation&#160;S-K.</FONT>
    In the course of its review or approval of a transaction, our
    Audit Committee will consider:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the nature of the related person&#146;s interest in the
    transaction, including the actual or apparent conflict of
    interest of the related person;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the material terms of the transaction and their commercial
    reasonableness;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the significance of the transaction to the related person;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the significance of the transaction to us and the benefit and
    perceived benefits, or lack thereof, to us;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    opportunity costs of alternate transactions;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    whether the transaction would impair the judgment of a director
    or executive officer to act in the best interest of the
    Company;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any other matters the Committee deems appropriate.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our audit committee will not approve or ratify a related person
    transaction unless it determines that, upon consideration of all
    relevant information, the transaction is in, or is not
    inconsistent with, the best interests of our Company and
    stockholders. No related person transaction will be consummated
    without the approval or ratification of our audit committee, and
    directors interested in a related person transaction will recuse
    themselves from any vote relating to a related person
    transaction in which they have an interest.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Set forth below are certain transactions that have occurred
    since January&#160;1, 2007, and through the date of this
    prospectus with our directors, executive officers, holders of
    more than five percent of our voting securities and affiliates
    of our directors, executive officers and five percent
    stockholders. We did not have a formal review and approval
    policy for related party transactions at the time of any
    transaction described in this &#147;Certain Relationships and
    Related Party Transactions&#148; section. Based on our
    experience in the business sectors in which we participate and
    the terms of our transactions with unaffiliated third persons,
    we believe that all of the transactions set forth below were on
    terms and conditions that were not materially less favorable to
    us than could have been obtained from unaffiliated third parties.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sale of
    Subordinated Convertible Notes and Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, Castaneda, Belmont, Brenner, Dupree,
    McQuilkin and Warnock (either individually or through an
    affiliated entity) purchased an aggregate of $3.52&#160;million
    of our 2011 Notes with an aggregate of 260,740 warrants to
    purchase shares of our common stock in a private placement
    transaction on December&#160;30, 2009. We issued a total of
    $15.0&#160;million of 2011 Notes and a total of 1,111,109
    warrants in this private placement transaction. The exercise
    price of these warrants after giving effect to this offering
    will
    be&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    per share. The following table sets forth certain information
    regarding such persons&#146; ownership of the 2011 Notes and the
    related warrants.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="29%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Maximum<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount Owned at<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount Owned<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31, 2009<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Principal Paid in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Interest Paid in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>in 2009&#160;($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009&#160;($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009&#160;($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Warrants&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,222
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Rick E. Belmont
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,407
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard A.
    Brenner<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    80,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    80,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David W. Dupree
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,407
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Malcolm
    McQuilkin<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74,074
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David L.
    Warnock<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,400,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,400,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,704
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    93
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of $60,000 in 2011 Notes
    and 4,444 warrants held by Mr.&#160;Brenner individually,
    $10,000 in 2011 Notes and 741 warrants held by the ALB-3 Trust
    and $10,000 in 2011 Notes and 741 warrants held by the ALB-5
    Trust. Mr.&#160;Brenner is the trustee of both the ALB-3 Trust
    and the ALB-5 Trust. Mr.&#160;Brenner disclaims beneficial
    ownership of 2011 Notes owned by the ALB-3 Trust and the ALB-5
    Trust except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of $1,000,000 in 2011
    Notes and 74,074 warrants held by the Malcolm McQuilkin Living
    Trust. Mr.&#160;McQuilkin is a co-trustee of the Malcolm
    McQuilkin Living Trust.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of $1,344,140 in 2011
    Notes and 99,566 warrants held by Camden Partners Strategic
    Fund&#160;III, L.P. and $55,860 in 2011 Notes and 4,138 warrants
    held by Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund&#160;III, L.P.
    and Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock disclaims beneficial ownership of 2011
    Notes owned by Camden Partners Strategic Fund&#160;III, L.P. and
    Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sale of
    Series&#160;C Convertible Preferred Stock and Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, Castaneda, Belmont, Boydston, Dupree,
    McQuilkin, Warnock, Ergen and Duchossois (either individually or
    through an affiliated entity) purchased an aggregate of
    8,906,976&#160;shares of Series&#160;C convertible preferred
    stock and warrants to purchase an aggregate of
    890,697&#160;shares of common stock at an exercise price of
    $1.98 per share in private placement transactions between
    December&#160;14, 2007 and May&#160;20, 2008. We issued a total
    of 12,520,001&#160;shares of Series&#160;C convertible preferred
    stock and warrants to purchase 1,252,001&#160;shares of common
    stock during in connection with these private placement
    transactions. The following table sets forth certain information
    regarding such persons&#146; ownership of those shares and
    warrants.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="46%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="13%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="15%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount Paid for<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares and Warrants<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Warrants Purchased&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Billy D. Prim
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    512,363
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,229,671
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    116,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,670
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    280,070
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Rick E.
    Belmont<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Brent C. Boydston
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,666
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39,998
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David W.
    Dupree<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,281,250
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    428,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,275,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Malcolm
    McQuilkin<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    480,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    David L.
    Warnock<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    833,334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83,333
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000,002
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Charles Ergen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,083,334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    208,333
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,000,002
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig J.
    Duchossois<SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    833,333
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83,333
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,999,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of: (a) 10,000&#160;shares
    of Series C convertible preferred stock and warrants to purchase
    1,000 shares of common stock purchased by
    Mr.&#160;Belmont&#146;s spouse; (b) 10,000&#160;shares of
    Series&#160;C convertible preferred stock and warrants to
    purchase 1,000&#160;shares of common stock purchased by Mr.
    Belmont&#146;s son; and (c) 10,000&#160;shares of Series&#160;C
    convertible preferred stock and warrants to purchase
    1,000&#160;shares of common stock purchased by
    Mr.&#160;Belmont&#146;s daughter.
    </FONT></TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 4,281,250&#160;shares
    of Series&#160;C convertible preferred stock and warrants to
    purchase 428,125&#160;shares of common stock purchased by Primo
    Investors, L.P. Mr.&#160;Dupree is the managing member of GenPar
    Primo, L.L.C., the general partner of Primo Investors, L.P.
    Mr.&#160;Dupree disclaims beneficial ownership of the
    Series&#160;C convertible preferred stock and warrants owned by
    Primo Investors, L.P. except to the extent of his pecuniary
    interest therein.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 200,000&#160;shares of
    Series&#160;C convertible preferred stock and warrants to
    purchase 20,000&#160;shares of common stock purchased by the
    Malcolm McQuilkin Living Trust. Mr.&#160;McQuilkin is a
    co-trustee of the Malcolm McQuilkin Living Trust.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 800,084&#160;shares of
    Series&#160;C convertible preferred stock and warrants to
    purchase 80,008&#160;shares of common stock purchased by Camden
    Partners Strategic Fund&#160;III, L.P. and 33,250&#160;shares of
    Series&#160;C convertible preferred stock and warrants to
    purchase 3,325&#160;shares of common stock purchased by Camden
    Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund&#160;III, L.P.
    and Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock disclaims beneficial ownership of the
    Series&#160;C convertible preferred stock and warrants owned by
    Camden Partners Strategic Fund&#160;III, L.P. and Camden
    Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 833,333&#160;shares of
    Series&#160;C convertible preferred stock and warrants to
    purchase 83,333&#160;shares of common stock purchased by Craig
    J. Duchossois Revocable Trust UAD 9/11/1989. Mr.&#160;Duchossois
    is trustee of the Craig J. Duchossois Revocable Trust&#160;UAD
    9/11/1989.
    </FONT></TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    94
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sale of
    Series&#160;B Preferred Stock and Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Messrs.&#160;Prim, Brenner, McQuilkin, Warnock, Castaneda,
    Gunter, Filipowski, Duchossois and Fortino (either individually
    or through an affiliated entity) purchased an aggregate of
    11,561,511&#160;shares of Series&#160;B preferred stock and
    warrants to purchase an aggregate of 3,086,921&#160;shares of
    common stock at an exercise price of $1.25&#160;per share in
    private placement transactions between April&#160;28, 2006 and
    June&#160;30, 2007. We issued a total of 23,280,221 shares of
    Series&#160;B preferred stock and warrants to purchase a total
    of 6,215,813&#160;shares of common stock in these private
    placement transactions. The following table sets forth certain
    information regarding such persons&#146; ownership of those
    shares and warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Amount Paid for Shares<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Warrants Purchased&#160;(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>and Warrants&#160;($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Billy D.
    Prim<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,234,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,397,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,234,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Richard Brenner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    250,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Malcolm
    McQuilkin<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    160,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    David L.
    Warnock<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    800,999
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Mark Castaneda
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Michael S. Gunter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,820
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,155
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,820
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Andrew J. Filipowski
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,845
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,845
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Craig J.
    Duchossois<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Edward A
    Fortino<SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,125,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 5,164,846 shares of
    Series B preferred stock and warrants to purchase 1,379,013
    shares of common stock purchased by Mr.&#160;Prim and 70,000
    shares of Series B preferred stock and warrants to purchase
    18,690 shares of common stock purchased by Mr. Prim&#146;s
    spouse.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 600,000&#160;shares of
    Series&#160;B preferred stock and warrants to purchase 160,200
    shares of common stock purchased by the Malcolm McQuilkin Living
    Trust. Mr.&#160;McQuilkin is a co-trustee of the Malcolm
    McQuilkin Living Trust.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 2,880,300&#160;shares
    of Series&#160;B preferred stock and warrants to purchase
    769,040&#160;shares of common stock purchased by Camden Partners
    Strategic Fund&#160;III, L.P. and 119,700&#160;shares of
    Series&#160;B preferred stock and warrants to purchase 31,959
    shares of common stock purchased by Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund&#160;III, L.P.
    and Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. Mr.&#160;Warnock disclaims beneficial ownership of the
    Series&#160;B preferred stock and warrants to purchase common
    stock owned by Camden Partners Strategic Fund&#160;III, L.P. and
    Camden Partners Strategic
    <FONT style="white-space: nowrap">Fund&#160;III-A,</FONT>
    L.P. except to the extent of his pecuniary interest therein.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 1,125,000&#160;shares
    of Series&#160;B preferred stock and warrants to purchase
    300,375 shares of common stock purchased by the Craig J.
    Duchossois Revocable Trust&#160;UAD 9/11/1989.
    Mr.&#160;Duchossois is trustee of the Craig J. Duchossois
    Revocable Trust&#160;UAD 9/11/1989.
    </FONT></TD>
</TR>

<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 8pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">Consists of 1,125,000 shares of
    Series B preferred stock and warrants to purchase 300,375 shares
    of common stock purchased by the Edward A. Fortino Trust UAD
    12/15/1994. Mr. Fortino is trustee of the Edward A. Fortino
    Trust UAD 12/15/1994.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PWC
    Leasing, LLC</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On March&#160;29, 2006 we entered into a Master Equipment Lease
    Agreement with PWC Leasing, LLC (the &#147;Lease
    Agreement&#148;), pursuant to which we leased certain equipment
    used in our water bottle exchange service. Primier, LLC, a
    company wholly-owned by Mr.&#160;Prim, was a one third owner of
    PWC Leasing, LLC. We made payments to PWC Leasing, LLC pursuant
    to the Lease Agreement that totaled approximately $693,000 and
    $318,000 in 2007 and the first six months of 2008, respectively.
    On June&#160;30, 2008, we purchased the leased assets from PWC
    Leasing, LLC at their fair value of $3,500,000 and terminated
    the Lease Agreement. Our Board of Directors authorized and
    approved this transaction after obtaining an independent,
    third-party evaluation of a fair and reasonable price for the
    assets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Spin-Off
    of Prima Bottled Water, Inc. and Related Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On December&#160;31, 2009, we distributed all of the shares of
    our wholly-owned subsidiary, Prima Bottle Water, Inc.
    (&#147;Prima&#148;), to all of the holders of our Series&#160;A
    and Series&#160;C preferred stock and common stock on a pro rata
    basis assuming the conversion of all Series&#160;A and
    Series&#160;C preferred stock into common stock (the
    &#147;Spin-Off&#148;). Recipients of the Prima shares included
    our directors, officers and holders of more than five percent of
    our voting securities, but only in direct proportion to each
    individual&#146;s ownership of our Series&#160;A and
    Series&#160;C preferred stock and common stock at the time of
    the Spin-Off.
    On&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    , 2010, we entered into a license agreement with Prima pursuant
    to which we license the
    Prima<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    trademark to Prima in exchange for a license fee based upon the
    number of bottles manufactured from bioresin by Prima, an
    affiliate of Prima and certain third parties.
</DIV>
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    <BR>
    95
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The following is a description of the material provisions of
    our capital stock, as well as other material terms of our
    amended and restated certificate of incorporation and amended
    and restated bylaws as they will be in effect as of the
    completion of this offering. This description is only a summary.
    For more detailed information, you should refer to our amended
    and restated certificate of incorporation and amended and
    restated bylaws filed as exhibits to the registration statement,
    of which this prospectus is a part.</I>
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Authorized
    Capital</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the closing of this offering, our authorized capital
    stock consists of: (1)&#160;200,000,000&#160;shares of common
    stock (15,158,305 of which were outstanding at March&#160;1,
    2010)&#160;and (2)&#160;100,000,000&#160;shares of preferred
    stock, including 18,780,000 authorized shares of Series&#160;A
    convertible preferred stock (18,755,000 of which were
    outstanding at March&#160;1, 2010), 30,000,000 authorized shares
    of Series&#160;B preferred stock (23,280,221 of which were
    outstanding at March&#160;1, 2010)&#160;and 14,000,000
    authorized shares of Series&#160;C convertible preferred stock
    (12,520,001 of which were outstanding at March&#160;1, 2010).
    Each share of Series&#160;A convertible preferred stock is
    convertible into one share of common stock and each share of
    Series&#160;C convertible preferred stock is convertible into
    1.92&#160;shares of common stock. As of March&#160;1, 2010,
    there were 18 holders of record of our common stock, 37 holders
    of record of our Series&#160;A convertible preferred stock, 41
    holders of record of our Series&#160;B preferred stock and 38
    holders of record of our Series&#160;C convertible preferred
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, we will amend and restate our
    certificate of incorporation to provide that our authorized
    capital stock will consist of
    (1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock, $0.01&#160;par value per share and
    (2)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of preferred stock, par value $0.01 per share. Immediately prior
    to the closing of this offering, all outstanding shares of our
    Series&#160;A and Series&#160;C preferred stock will be
    converted into shares of common stock and
    a&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    -for-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;reverse
    stock split of our common stock will occur. Following the sale
    of shares of common stock in this offering, we expect to
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock and no shares of preferred stock outstanding
    (or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock and no shares of preferred stock outstanding if
    the underwriters exercise in full their option to purchase
    additional shares to cover overallotments, if any).
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Voting.</I> Except as otherwise required by Delaware law, at
    every annual or special meeting of stockholders, every holder of
    common stock is entitled to one vote per share. There is no
    cumulative voting in the election of directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Dividend Rights.</I> Subject to preferences that may be
    applicable to any outstanding series of preferred stock, the
    holders of our common stock will receive ratably any dividends
    declared by our Board of Directors out of funds legally
    available for the payment of dividends. We have never paid or
    declared cash dividends on our common stock. We currently intend
    to retain all available funds and any future earnings to finance
    the development and expansion of our business. We do not expect
    to pay any dividends on our common stock in the foreseeable
    future. Any future determination to pay dividends will be at the
    discretion of our Board of Directors and will depend upon
    various factors, including our results of operations, financial
    condition, capital requirements, investment opportunities and
    other factors that our Board of Directors deems relevant. Our
    senior revolving credit agreement currently limits our ability
    to pay cash dividends. See &#147;Dividend Policy.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Liquidation and Preemptive Rights.</I> In the event of our
    liquidation, dissolution or
    <FONT style="white-space: nowrap">winding-up,</FONT>
    the holders of our common stock are entitled to share ratably in
    all assets remaining after payment of liabilities, subject to
    prior distribution rights of our preferred stock, if any, then
    outstanding. The holders of our common stock have no preemptive
    or other subscription rights.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our outstanding shares of common stock are, and the shares
    offered by us in this offering will be, when issued and paid
    for, fully paid and nonassessable. The rights, preferences and
    privileges of holders of common
</DIV>
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    <BR>
    96
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    stock are subject to, and may be adversely affected by, the
    rights of the holders of shares of any series of preferred stock
    that we may designate and issue in the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Following the closing of this offering, there will be no shares
    of preferred stock outstanding. Upon the closing of this
    offering and the effectiveness of our amended and restated
    certificate of incorporation, our Board of Directors will be
    authorized to issue from time to time up
    to&#160;&#160;&#160;&#160;&#160;&#160;million shares of
    preferred stock in one or more series without stockholder
    approval. Our Board of Directors will have the discretion to
    determine the rights, preferences, privileges and restrictions,
    including voting rights, dividend rights, conversion rights,
    redemption privileges and liquidation preferences, of each
    series of preferred stock. It is not possible to state the
    actual effect of the issuance of any shares of preferred stock
    on the rights of holders of common stock until our Board of
    Directors determines the specific rights associated with that
    preferred stock. Although we have no current plans to issue
    shares of preferred stock, the effects of issuing preferred
    stock could include one or more of the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    decreasing the amount of earnings and assets available for
    distribution to holders of common stock;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    restricting dividends on the common stock;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    diluting the voting power of the common stock;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    impairing the liquidation rights of the common stock;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    delaying, deferring or preventing changes in our control or
    management.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the ability of our Board of Directors to issue
    one or more series of preferred stock will provide us with
    flexibility in structuring possible future financings and
    acquisitions, and in meeting other corporate needs that may
    arise. The authorized shares of preferred stock, as well as
    authorized and unissued shares of common stock, will be
    available for issuance without action by our stockholders,
    unless such action is required by applicable law or the rules of
    any stock exchange or automated quotation system on which our
    securities may be listed or traded.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors may authorize, without stockholder
    approval, the issuance of preferred stock with voting and
    conversion rights that could adversely affect the voting power
    and other rights of holders of common stock. Although our Board
    of Directors has no current intention of doing so, it could
    issue a series of preferred stock that could, depending on the
    terms of such series, impede the completion of a merger, tender
    offer or other takeover attempt of our Company. Our Board of
    Directors could also issue preferred stock having terms that
    could discourage an acquisition attempt through which an
    acquirer may be able to change the composition of our Board of
    Directors, including a tender offer or other transaction that
    some, or a majority, of our stockholders might believe to be in
    their best interests or in which stockholders might receive a
    premium for their stock over the then-current market price. Any
    issuance of preferred stock therefore could have the effect of
    decreasing the market price of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Board of Directors will make any determination to issue such
    shares based on its judgment as to the best interests of our
    Company and its stockholders. We have no current plan to issue
    any preferred stock after this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stock
    Options and Restricted Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of March&#160;1, 2010, we had granted options to purchase a
    total of 3,247,587&#160;shares of common stock at a weighted
    average exercise price of $1.26 per share. Of this total,
    2,615,145 options have vested and 632,442 remain unvested. As of
    March&#160;1, 2010, we had also granted 1,102,500&#160;shares of
    restricted stock, all of which are unvested. As of March&#160;1,
    2010, an additional 16,608&#160;shares of common stock were
    available for future awards
</DIV>
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    <BR>
    97
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    under our 2004 Stock Plan. Upon the closing of this offering, an
    additional 7,500,000&#160;shares of our common stock will be
    available for future awards under our 2010 Omnibus Long-Term
    Incentive Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of March&#160;1, 2010, we had issued warrants to purchase a
    total of 8,678,923&#160;shares of common stock at a weighted
    average exercise price of $&#160;&#160;&#160;&#160;&#160; per
    share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 1,111,109&#160;shares of our
    common stock were issued in connection with our 2011 Notes.
    These warrants will remain outstanding after this offering, will
    expire December&#160;30, 2019 and will have an exercise price of
    $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 6,215,813&#160;shares of our
    common stock were issued in connection with the private
    placement of our Series&#160;B preferred stock. The exercise
    price of these warrants is $1.25 per share and they will
    expire&#160;&#160;&#160;&#160;&#160; days after the closing of
    this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 1,252,001&#160;shares of our
    common stock were issued in connection with the private
    placement of our Series&#160;C convertible preferred stock. The
    exercise price of these warrants is $1.98 per share and they
    will expire&#160;&#160;&#160;&#160;&#160; days after the closing
    of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A warrant to purchase a total of 100,000&#160;shares of common
    stock was issued on June&#160;4, 2008 to two individuals in
    connection with a potential business arrangement. The exercise
    price of the warrant is $1.98 per share and it will
    expire&#160;&#160;&#160;&#160;&#160;days after the closing of
    this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Anti-Takeover
    Provisions</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Delaware law, our amended and restated certificate of
    incorporation and our amended and restated bylaws that will be
    effective upon the closing of this offering contain provisions
    that could delay or prevent a change of control of our Company
    or changes in our Board of Directors that our stockholders might
    consider favorable. The following is a summary of these
    provisions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Delaware
    Law</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to Section&#160;203 of the Delaware General
    Corporation Law. Section&#160;203 generally prohibits a public
    Delaware corporation from engaging in a &#147;business
    combination&#148; with an &#147;interested stockholder&#148; for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or the
    transaction which resulted in the stockholder becoming an
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    upon the consummation of the transaction which resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the voting stock
    outstanding (a)&#160;shares owned by persons who are directors
    and also officers, and (b)&#160;shares owned by employee stock
    plans in which employee participants do not have the right to
    determine confidentially whether shares held subject to the plan
    will be tendered in a tender or exchange offer;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on or subsequent to the date of the transaction, the business
    combination is approved by the board of directors and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least two-thirds
    of the outstanding voting stock which is not owned by the
    interested stockholder.
</TD>
</TR>

</TABLE>
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    <BR>
    98
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;203 defines a business combination to include:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any merger or consolidation involving the corporation and the
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any sale, lease, exchange, mortgage, transfer, pledge or other
    disposition involving the interested stockholder of 10% or more
    of the assets of the corporation;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, Section&#160;203 defines an interested stockholder
    as any entity or person beneficially owning 15% or more of the
    outstanding voting stock of the corporation and any entity or
    person affiliated with or controlling or controlled by the
    entity or person.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Amended
    and Restated Certificate of Incorporation and Amended and
    Restated Bylaws</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Undesignated Preferred Stock.</I> Our Board of Directors has
    the ability to issue preferred stock with voting or other
    rights, preferences and privileges that could have the effect of
    deterring hostile takeovers or delaying changes in control of
    our Company or management.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Limits on Ability to Act by Written Consent or Call a Special
    Meeting.</I> We have provided in our amended and restated
    certificate of incorporation and our amended and restated bylaws
    that our stockholders may not act by written consent. This limit
    on the ability of our stockholders to act by written consent
    may, in the future, lengthen the amount of time required to take
    stockholder actions. As a result, a holder controlling a
    majority of our capital stock would not be able to amend our
    certificate of incorporation or bylaws or remove directors
    without holding a meeting of our stockholders called in
    accordance with our amended and restated bylaws.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our amended and restated certificate of
    incorporation and amended and restated bylaws provide that
    special meetings of the stockholders may be called only by our
    Board of Directors. A stockholder may not call a special
    meeting, which may delay the ability of our stockholders to
    force consideration of a proposal or for holders controlling a
    majority of our capital stock to take any action, including the
    removal of directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Requirements for Advance Notification of Stockholder
    Nominations and Proposals.</I> Our amended and restated bylaws
    establish advance notice procedures with respect to stockholder
    proposals and the nomination of candidates for election as
    directors, other than nominations made by or at the direction of
    our Board of Directors or a committee of our Board of Directors.
    Stockholders must notify our corporate secretary in writing
    prior to the meeting at which the matters are to be acted upon
    or directors are to be elected. The notice must contain the
    information specified in our amended and restated bylaws. To be
    timely, the notice must be received at our principal executive
    office not later than the 90th&#160;day nor earlier than the
    120th&#160;day prior to the first anniversary of the date of the
    prior year&#146;s annual meeting of stockholders. If the date of
    the annual meeting is more than 30&#160;days before or after
    such anniversary date, or if no annual meeting was held in the
    preceding year, notice by the stockholder, to be timely, must be
    received not earlier than the 120th&#160;day prior to the annual
    meeting, and not later than the later of the 90th&#160;day prior
    to the annual meeting, or the 10th&#160;day following the day on
    which public announcement of the date of such meeting is first
    made or notice of the meeting date is mailed, whichever occurs
    first.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated bylaws may have the effect of
    precluding the conduct of certain business at a meeting if the
    proper procedures are not followed. These provisions may also
    discourage or deter a potential acquirer from conducting a
    solicitation of proxies to elect the acquirer&#146;s own slate
    of directors or otherwise attempting to obtain control of our
    Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Board of Directors.</I> Our Board of Directors may elect a
    director to fill a vacancy, including vacancies created by the
    expansion of our Board of Directors.
</DIV>
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    <BR>
    99
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation and the
    amended and restated bylaws will not provide for cumulative
    voting in the election of directors. The absence of cumulative
    voting may make it more difficult for stockholders who own an
    aggregate of less than a majority of our voting power to elect
    any directors to our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation and the
    amended and restated bylaws provide that our Board of Directors
    is divided into three classes, with members of each class
    serving staggered three-year terms. Our classified Board of
    Directors could have the effect of delaying or discouraging an
    acquisition of us or a change in management.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Limitations
    of Directors&#146; Liability and Indemnification</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation will limit
    the liability of our directors to the fullest extent permitted
    by Delaware law. Delaware law provides that directors of a
    corporation will not be personally liable for monetary damages
    for breach of their fiduciary duties as directors, except for
    liability for any:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    breach of their duty of loyalty to us or our stockholders;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unlawful payment of dividends or redemption of shares as
    provided in Section&#160;174 of the Delaware General Corporation
    Law;&#160;or
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    transaction from which the directors derived an improper
    personal benefit.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated bylaws, in the form that will become
    effective upon the closing of this offering, provide that we
    will indemnify and advance expenses to our directors and
    officers to the fullest extent permitted by law or, if
    applicable, pursuant to indemnification agreements. They further
    provide that we may choose to indemnify other employees or
    agents of the corporation from time to time. Section&#160;145(g)
    of the Delaware General Corporation Law and our amended and
    restated bylaws also permit us to secure insurance on behalf of
    any officer, director, employee or other agent for any liability
    arising out of his or her actions in connection with his or her
    services to us, regardless of whether our bylaws permit
    indemnification. We have obtained a directors&#146; and
    officers&#146; liability insurance policy.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into indemnification agreements with each of our
    directors that provide, in general, that we will indemnify them
    to the fullest extent permitted by law in connection with their
    service to us or on our behalf.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At present, there is no pending litigation or proceeding
    involving any of our directors or officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to our directors, officers and
    controlling persons pursuant to the foregoing provisions, or
    otherwise, we have been advised that in the opinion of the
    Securities and Exchange Commission this indemnification is
    against public policy as expressed in the Securities Act and is
    therefore unenforceable.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Agent and Registrar</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The transfer agent and registrar for our common stock
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stock
    Market</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to apply to have our common stock listed on the Nasdaq
    Global Market under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#148;.
</DIV>
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    <BR>
    100
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES&#160;ELIGIBLE
    FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no market for our common
    stock, and a liquid trading market for our common stock may not
    develop or be sustained after this offering. Future sales of
    amounts of our common stock in the public market, or the
    perception that such sales may occur, could adversely affect
    prevailing market prices of our common stock. Furthermore, since
    only a limited number of shares will be available for sale
    shortly after this offering because of certain contractual and
    legal restrictions on resale described below, sales of amounts
    of our common stock in the public market after the restrictions
    lapse could also adversely affect the market price of our common
    stock and our ability to raise equity capital in the future. See
    &#147;Risk Factors.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Eligibility
    of Restricted Shares for Resale in the Public Markets</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, based on our outstanding
    shares as of March&#160;1, 2010, and assuming the conversion of
    our Series&#160;A and Series&#160;C convertible preferred stock
    and no exercise of options or warrants, we will have outstanding
    an aggregate
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock
    (&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    if the underwriters&#146; over-allotment is exercised in full).
    Of these shares, all of the shares sold in this offering will be
    freely transferable without restriction or registration under
    the Securities Act, except for any shares purchased by one of
    our existing &#147;affiliates,&#148; as that term is defined in
    Rule&#160;144 under the Securities Act, who may sell only the
    volume of shares described below and whose sales would be
    subject to additional restrictions described below. The
    remaining&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock will be held by our existing stockholders and
    will be considered &#147;restricted securities&#148; as defined
    in Rule&#160;144. Of these restricted
    securities,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    will be subject to transfer restrictions for 180&#160;days from
    the date of this prospectus pursuant to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described below. Restricted securities may be sold in
    the public market only if registered or if they qualify for an
    exemption from registration under Rules&#160;144 or 701 of the
    Securities Act, as described below. In addition, the shares
    underlying options and warrants will become available for resale
    into the public markets as described below under
    &#147;&#151;&#160;Options, Restricted Stock and Warrants.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-up</FONT>
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our officers and directors, holders
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock (after giving effect to the conversion of
    our Series&#160;A and Series&#160;C convertible preferred stock)
    and holders
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock issuable upon exercise of outstanding
    options and warrants have entered into
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements pursuant to which they have agreed, subject to
    certain exceptions, not to offer, sell, contract to sell,
    pledge, grant any option to purchase, make any short sale or
    otherwise dispose of any shares of common stock, or any
    securities convertible into, exchangeable for or that represent
    the right to receive shares of common stock for a period of
    180&#160;days from the date of this prospectus without the prior
    written consent of Thomas Weisel Partners LLC. There are no
    contractually specified conditions for the waiver of
    <FONT style="white-space: nowrap">lock-up</FONT>
    restrictions and any waiver is at the sole discretion of Thomas
    Weisel Partners LLC, which may be granted by Thomas Weisel
    Partners LLC for any reason. The
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT>
    period will be automatically extended if (i)&#160;during the
    last 17&#160;days of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period we issue an earnings release or announce
    material news or a material event or (ii)&#160;prior to the
    expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period, we announce that we will release earnings
    results during the
    <FONT style="white-space: nowrap">15-day</FONT>
    period following the last day of the
    <FONT style="white-space: nowrap">180-day</FONT>
    period, in which case the restrictions described in this
    paragraph will continue to apply until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    announcement of the material news or material event. After the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period, these shares may be sold, subject to applicable
    securities laws. See &#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, and beginning 90&#160;days after the date of this
    prospectus, under Rule&#160;144 as in effect on the date of this
    prospectus, a person who is not one of our affiliates at any
    time during the three months preceding a sale, and who has
    beneficially owned shares of our common stock for at least six
    months, would be entitled to sell an unlimited number of shares
    of our common stock provided current public information about us
    is available and, after owning such shares for at least one
    year, would be entitled to sell an unlimited number of shares of
    our
</DIV>
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    <BR>
    101
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    common stock without restriction. Beginning 90&#160;days after
    the date of this prospectus, our affiliates who have
    beneficially owned shares of our common stock for at least six
    months are entitled to sell within any three-month period a
    number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    1% of the number of shares of our common stock then
    outstanding;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the average weekly trading volume of our common stock on the
    Nasdaq Global Market during the four calendar weeks preceding
    the filing of a notice on Form&#160;144 with respect to the sale.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales under Rule&#160;144 by our affiliates are also subject to
    manner of sale provisions and notice requirements and to the
    availability of current public information about us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period described
    above,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock will be eligible for sale
    under Rule&#160;144, including shares eligible for resale
    immediately upon the closing of this offering as described
    above. We cannot estimate the number of shares of our common
    stock that our existing stockholders will elect to sell under
    Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;701</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;701, any of our employees,
    directors, officers, consultants or advisors who acquires common
    stock from us in connection with a compensatory stock or option
    plan or other written agreement before the effective date of
    this offering, to the extent not subject to a
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement, is entitled to resell such shares 90&#160;days after
    the effective date of this offering in reliance on Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The SEC has indicated that Rule&#160;701 will apply to typical
    stock options granted by an issuer before it becomes subject to
    the reporting requirements of the Exchange Act, along with the
    shares acquired upon exercise of such options, including
    exercises after the date of this prospectus. Securities issued
    in reliance on Rule&#160;701 are restricted securities and,
    subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above, beginning 90&#160;days after the
    date of this prospectus, may be sold by persons other than
    affiliates, as defined in Rule&#160;144, subject only to the
    manner of sale provisions of Rule&#160;144 and by affiliates
    under Rule&#160;144 without compliance with its minimum holding
    period requirement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Options,
    Restricted Stock and Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, options to purchase a total
    of 3,247,587&#160;shares of our common stock will be outstanding
    with a weighted average per share exercise price of $1.26 and
    expiration dates between November&#160;1, 2014 and
    January&#160;29, 2019. As of March&#160;1, 2010, we had also
    granted 1,102,500&#160;shares of restricted stock, all of which
    are unvested. As of March&#160;1, 2010, an additional
    16,608&#160;shares of common stock were available for future
    awards under our 2004 Stock Plan. We have also reserved an
    additional 7,500,000&#160;shares of common stock for issuance
    pursuant to our 2010 Omnibus Long-Term Incentive Plan and an
    additional 250,000&#160;shares of common stock for issuance
    pursuant to our 2010 Employee Stock Purchase Plan, both of which
    we will adopt in connection with this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the closing of this offering, warrants to purchase a total
    of 8,678,923&#160;shares of our common stock will be outstanding
    with a weighted average per share exercise price of
    $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 1,111,109&#160;shares of our
    common stock were issued in connection with our 2011 Notes.
    These warrants will remain outstanding after this offering, will
    expire December&#160;30, 2019 and will have an exercise price of
    $&#160;&#160;&#160;&#160;&#160; per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 6,215,813&#160;shares of our
    common stock were issued in connection with the private
    placement of our Series&#160;B preferred stock. The exercise
    price of these warrants is $1.25 per share and they will
    expire&#160;&#160;&#160;&#160;&#160; days after the closing of
    this offering.
</DIV>
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    <BR>
    102
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warrants to purchase a total of 1,252,001&#160;shares of our
    common stock were issued in connection with the private
    placement of our Series&#160;C convertible preferred stock. The
    exercise price of these warrants is $1.98 per share and they
    will expire&#160;&#160;&#160;&#160;&#160; days after the closing
    of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A warrant to purchase a total of 100,000&#160;shares of common
    stock was issued on June&#160;4, 2008 to two individuals in
    connection with a potential business arrangement. The exercise
    price of the warrant is $1.98 per share and it will
    expire&#160;&#160;&#160;&#160;&#160;days after the closing of
    this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;701 of the Securities Act as
    currently in effect, any of our employees, consultants or
    advisors who purchase shares of our common stock from us
    pursuant to options granted prior to the closing of this
    offering under our 2004 Stock Plan or other written agreement is
    eligible to resell those shares 90&#160;days after the effective
    date of this offering in reliance on Rule&#160;144, but without
    compliance with some of the restrictions, including the holding
    period, contained in Rule&#160;144.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, following the closing of this offering, we intend
    to file one or more registration statements on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    under the Securities Act to register the sale of shares issued
    or issuable upon the exercise of our currently outstanding stock
    options as well as pursuant to our 2010 Omnibus Long-Term
    Incentive Plan and 2010 Employee Stock Purchase Plan. The
    registration statements will become effective upon filing.
    Subject to the exercise of issued and outstanding options and
    contractual restrictions, shares of our directors and executive
    officers to which Rule&#160;701 is applicable or which are to be
    registered under the registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    will be available for sale into the public market after the
    expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements with the underwriters described under the caption
    &#147;Underwriting.&#148;
</DIV>
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    <BR>
    103
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='118'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MATERIAL
    U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS<BR>
    FOR <FONT style="white-space: nowrap">NON-U.S.</FONT>
    HOLDERS OF OUR COMMON STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following discussion summarizes certain material
    U.S.&#160;federal income and estate tax considerations relating
    to the acquisition, ownership and disposition of our common
    stock purchased in this offering by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    (as defined below). This discussion is based on the provisions
    of the Internal Revenue Code of 1986, as amended, final,
    temporary and proposed U.S.&#160;Treasury regulations
    promulgated thereunder and current administrative rulings and
    judicial decisions, all as in effect as of the date hereof. All
    of these authorities may be subject to differing interpretations
    or repealed, revoked or modified, possibly with retroactive
    effect, which could materially alter the tax consequences to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    described in this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There can be no assurance that the IRS will not take a contrary
    position to the tax consequences described herein or that such
    position will not be sustained by a court. No ruling from the
    IRS has been obtained with respect to the U.S.&#160;federal
    income or estate tax consequences to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    of the purchase, ownership or disposition of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I>This discussion is for general information only and is not
    tax advice. All prospective
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    of our common stock should consult their own tax advisors with
    respect to the U.S.&#160;federal, state, local and
    <FONT style="white-space: nowrap">non-U.S.&#160;tax</FONT>
    consequences of the purchase, ownership and disposition of our
    common stock.</I></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As used in this discussion, the term
    <FONT style="white-space: nowrap">&#147;non-U.S.&#160;holder&#148;</FONT>
    means a beneficial owner of our common stock that is not any of
    the following for U.S.&#160;federal income tax purposes:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an individual who is a citizen or a resident of the United
    States;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a corporation or other entity taxable as a corporation for
    U.S.&#160;federal income tax purposes that was created or
    organized in or under the laws of the United States, any state
    thereof or the District of Columbia;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an estate whose income is subject to U.S.&#160;federal income
    taxation regardless of its source;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a trust (a)&#160;if a U.S.&#160;court is able to exercise
    primary supervision over the trust&#146;s administration and one
    or more U.S.&#160;persons have the authority to control all of
    the trust&#146;s substantial decisions or (b)&#160;that has a
    valid election in effect under applicable U.S.&#160;Treasury
    regulations to be treated as a U.S.&#160;person;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an entity that is disregarded as separate from its owner for
    U.S.&#160;federal income tax purposes if all of its interests
    are owned by a single person described above.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An individual may be treated, for U.S.&#160;federal income tax
    purposes, as a resident of the United States in any calendar
    year by being present in the United States on at least
    31&#160;days in that calendar year and for an aggregate of at
    least 183&#160;days during a three-year period ending in the
    current calendar year. The
    <FONT style="white-space: nowrap">183-day</FONT> test
    is determined by counting all of the days the individual is
    treated as being present in the current year, one-third of such
    days in the immediately preceding year and one-sixth of such
    days in the second preceding year. Residents are subject to
    U.S.&#160;federal income tax as if they were U.S.&#160;citizens.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This discussion assumes that a prospective
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will hold shares of our common stock as a capital asset
    (generally, property held for investment). This discussion does
    not address all aspects of U.S.&#160;federal income and estate
    taxation that may be relevant to a particular
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    in light of that
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    individual circumstances. In addition, this discussion does not
    address any aspect of U.S.&#160;federal alternative minimum,
    U.S.&#160;state or U.S.&#160;local or
    <FONT style="white-space: nowrap">non-U.S.&#160;taxes,</FONT>
    or the special tax rules applicable to particular
    <FONT style="white-space: nowrap">non-U.S.&#160;holders,</FONT>
    such as:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    insurance companies and financial institutions;
</TD>
</TR>

</TABLE>
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    <BR>
    104
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    tax-exempt organizations;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    partnerships or other pass-through entities;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    regulated investment companies or real estate investment trusts;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    pension plans;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    persons who received our common stock as compensation;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    brokers and dealers in securities;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    owners that hold our common stock as part of a straddle, hedge,
    conversion transaction, synthetic security or other integrated
    investment;&#160;and
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    former citizens or residents of the United States subject to tax
    as expatriates.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If a partnership or other entity treated as a partnership for
    U.S.&#160;federal income tax purposes is an owner of our common
    stock, the treatment of a partner in the partnership generally
    will depend on the status of the partner and the activities of
    the partnership. We urge any owner of our common stock that is a
    partnership and partners in that partnership to consult their
    tax advisors regarding the U.S.&#160;federal income tax
    consequences of acquiring, owning and disposing of our common
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Distributions
    on Our Common Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any distribution on our common stock paid to
    <FONT style="white-space: nowrap">non-U.S.&#160;holders</FONT>
    will generally constitute a dividend for U.S.&#160;federal
    income tax purposes to the extent paid from our current or
    accumulated earnings and profits, as determined under
    U.S.&#160;federal income tax principles. Distributions in excess
    of our current and accumulated earnings and profits will
    generally constitute a return of capital to the extent of the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    adjusted tax basis in our common stock, and will be applied
    against and reduce the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    adjusted tax basis. Any remaining excess will be treated as
    capital gain, subject to the tax treatment described below in
    &#147;&#151;&#160;Gain on Sale, Exchange or Other Disposition of
    Our Common Stock.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are not treated as effectively connected with the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    conduct of a trade or business in the United States generally
    will be subject to withholding of U.S.&#160;federal income tax
    at a rate of 30% on the gross amount paid, unless the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is entitled to an exemption from or reduced rate of withholding
    under an applicable income tax treaty. In order to claim the
    benefit of a tax treaty, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    must provide a properly executed IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN</FONT>
    (or successor form) prior to the payment of dividends. A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    eligible for a reduced rate of withholding pursuant to an income
    tax treaty may be eligible to obtain a refund of any excess
    amounts withheld by timely filing an appropriate claim for a
    refund with the IRS.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are treated as effectively connected with a trade or
    business conducted by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    within the United States (and, if an applicable income tax
    treaty so provides, are also attributable to a permanent
    establishment or a fixed base maintained within the United
    States by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder)</FONT>
    are generally exempt from the 30% withholding tax if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    satisfies applicable certification and disclosure requirements.
    To obtain the exemption, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    must provide us with a properly executed IRS
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    (or successor form) prior to the payment of the dividend.
    Dividends received by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that are treated as effectively connected with a U.S.&#160;trade
    or business generally are subject to U.S.&#160;federal income
    tax at rates applicable to U.S.&#160;persons. A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    that is a corporation may, under certain circumstances, be
    subject to an additional &#147;branch profits tax&#148; imposed
    at a rate of 30%, or such lower rate as specified by an
    applicable income tax treaty between the United States and such
    holder&#146;s country of residence.
</DIV>
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    <BR>
    105
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    who provides us with an IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN,</FONT>
    <FONT style="white-space: nowrap">Form&#160;W-8ECI</FONT>
    or other form must update the form or submit a new form, as
    applicable, if there is a change in circumstances that makes any
    information on such form incorrect.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Gain On
    Sale, Exchange or Other Disposition of Our Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will not be subject to any U.S.&#160;federal income tax or
    withholding on any gain realized from the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    sale, exchange or other disposition of shares of our common
    stock unless:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the gain is effectively connected with a U.S.&#160;trade or
    business (and, if an applicable income tax treaty so provides,
    is also attributable to a permanent establishment or a fixed
    base maintained within the United States by the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder),</FONT>
    in which case the gain will be taxed on a net income basis
    generally in the same manner as if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    were a U.S.&#160;person, and, if the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a corporation, the additional branch profits tax described
    above in &#147;Distributions on Our Common Stock&#148; may also
    apply;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is an individual who is present in the United States for
    183&#160;days or more in the taxable year of the disposition and
    certain other conditions are met, in which case the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will be subject to a 30% tax on the net gain derived from the
    disposition, which may be offset by
    <FONT style="white-space: nowrap">U.S.-source</FONT>
    capital losses of the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder,</FONT>
    if any;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we are, or have been at any time during the five-year period
    preceding such disposition (or the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    holding period, if shorter), a &#147;United States real property
    holding corporation.&#148;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, we will be a &#147;United States real property
    holding corporation&#148; if the fair market value of our
    U.S.&#160;real property interests equals or exceeds 50% of the
    sum of the fair market values of our worldwide real property
    interests and other assets used or held for use in a trade or
    business, all as determined under applicable U.S.&#160;Treasury
    regulations. We believe that we have not been and are not
    currently, and do not anticipate becoming in the future, a
    &#147;United States real property holding corporation&#148; for
    U.S.&#160;federal income tax purposes.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Backup
    Withholding and Information Reporting</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must report annually to the IRS and to each
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    the amount of distributions paid to such holder and the amount
    of tax withheld, if any. Copies of the information returns filed
    with the IRS to report the distributions and withholding may
    also be made available to the tax authorities in a country in
    which the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a resident under the provisions of an applicable income tax
    treaty or agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The United States imposes a backup withholding tax on the gross
    amount of dividends and certain other types of payments.
    Dividends paid to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    will not be subject to backup withholding if proper
    certification of foreign status (usually on IRS
    <FONT style="white-space: nowrap">Form&#160;W-8BEN)</FONT>
    is provided, and we do not have actual knowledge or reason to
    know that the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a U.S.&#160;person. In addition, no backup withholding or
    information reporting will be required regarding the proceeds of
    a disposition of our common stock made by a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    within the United States or conducted through certain
    U.S.&#160;financial intermediaries if the payor receives the
    certification of foreign status described in the preceding
    sentence and the payor does not have actual knowledge or reason
    to know that such
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    is a U.S.&#160;person or the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    otherwise establishes an exemption.
    <FONT style="white-space: nowrap">Non-U.S.&#160;holders</FONT>
    should consult their own tax advisors regarding the application
    of the information reporting and backup withholding rules to
    them.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Backup withholding is not an additional tax. Amounts withheld
    under the backup withholding rules from a payment to a
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    can be refunded or credited against the
    <FONT style="white-space: nowrap">non-U.S.&#160;holder&#146;s</FONT>
    U.S.&#160;federal income tax liability, if any, provided that
    certain required information is furnished to the IRS in a timely
    manner.
</DIV>
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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">U.S.
    Federal Estate Tax</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An individual
    <FONT style="white-space: nowrap">non-U.S.&#160;holder</FONT>
    who is treated as the owner, or who has made certain lifetime
    transfers, of an interest in our common stock will be required
    to include the value of the common stock in his or her gross
    estate for U.S.&#160;federal estate tax purposes and may be
    subject to U.S.&#160;federal estate tax, unless an applicable
    estate tax treaty provides otherwise or no U.S.&#160;federal
    estate tax is in effect.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Proposed
    Legislation Relating to Foreign Accounts</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Legislation has been introduced into the U.S.&#160;Congress that
    would impose withholding taxes on certain types of payments made
    to &#147;foreign financial institutions&#148; and certain other
    <FONT style="white-space: nowrap">non-U.S.&#160;entities.</FONT>
    A substantially similar proposal was also included as a part of
    President Obama&#146;s proposed budget plan for fiscal year
    2011. If this legislation or other similar legislation is
    enacted, the failure to comply with additional certification,
    information reporting and other specified requirements could
    result in withholding tax being imposed on payments of dividends
    and sales proceeds to foreign intermediaries and certain
    <FONT style="white-space: nowrap">non-U.S.&#160;holders.</FONT>
    Any such legislation could substantially change some of the
    rules discussed above relating to certification requirements,
    information reporting and withholding. The U.S.&#160;House of
    Representatives and the U.S.&#160;Senate have each passed, as
    parts of different bills, a version of this legislation that
    would apply to payments made after December&#160;31, 2012. No
    assurances can be given whether, or in what form, this
    legislation will be enacted. Prospective investors should
    consult their own tax advisers regarding this legislation and
    similar proposals.
</DIV>
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    <BR>
    107
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the terms and conditions set forth in the
    underwriting agreement, each of the underwriters named below has
    severally agreed to purchase from us the aggregate number of
    shares of common stock set forth opposite its name below:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="85%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Underwriters</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number of Shares</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Thomas Weisel Partners LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    BB&#038;T Capital Markets, a division of Scott&#160;&#038;
    Stringfellow, LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Signal Hill Capital Group LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of
    the&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    to be purchased by the underwriters will be purchased from us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriting agreement provides that the obligations of the
    several underwriters are subject to various conditions,
    including approval of legal matters by counsel. The underwriting
    agreement provides that the underwriters are obligated to
    purchase all the shares of common stock in the offering if any
    are purchased, other than those shares covered by the
    over-allotment option described below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriting agreement provides that we will indemnify the
    underwriters against liabilities specified in the underwriting
    agreement under the Securities Act, or will contribute to
    payments that the underwriters may be required to make relating
    to these liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters expect to deliver the shares of common stock to
    purchasers on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Over-Allotment
    Option</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted a
    <FONT style="white-space: nowrap">30-day</FONT>
    over-allotment option to the underwriters to purchase up to a
    total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional shares of our common stock from us at the initial
    public offering price, less the underwriting discount payable by
    us, as set forth on the cover page of this prospectus. If the
    underwriters exercise this option in whole or in part, then each
    of the underwriters will be separately committed, subject to the
    conditions described in the underwriting agreement, to purchase
    the additional shares of our common stock in proportion to their
    respective commitments set forth in the table above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Determination
    of Offering Price</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations between us and the underwriters.
    In addition to prevailing market conditions, the factors to be
    considered in determining the initial public offering price will
    include the valuation multiples of publicly-traded companies
    that the representatives of the underwriters believe are
    comparable to us, our financial information, our history and
    prospects and the outlook for our industry, an assessment of our
    management, our past and present business operations and
    relationships, and the prospects for, and timing of, our future
    sales and an assessment of these factors in relation to market
    values and various valuation measures of other companies engaged
    in activities similar to ours.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot assure you that an active or orderly trading market
    will develop for our common stock or that our common stock will
    trade in the public markets subsequent to this offering at or
    above the initial offering price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Commissions
    and Discounts</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters propose to offer the shares of common stock
    directly to the public at the public offering price set forth on
    the cover page of this prospectus, and at this price less a
    concession not in excess of $&#160;&#160;&#160;&#160;&#160; per
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    108
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    share of common stock to other dealers specified in a master
    agreement among underwriters who are members of the Financial
    Industry Regulatory Authority, Inc. The underwriters may allow,
    and the other dealers specified may re-allow, concessions not in
    excess of $&#160;&#160;&#160;&#160;&#160; per share of common
    stock to these other dealers. After this offering, the offering
    price, concessions and other selling terms may be changed by the
    underwriters. Our common stock is offered subject to receipt and
    acceptance by the underwriters and to other conditions,
    including the right to reject orders in whole or in part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the compensation to be paid to
    the underwriters by us and the proceeds, before expenses,
    payable to us:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="64%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Without<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>With<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Per Share<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Over-Allotment<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Over-Allotment<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public offering price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, before expenses, to us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Underwriters</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will indemnify the underwriters against some civil
    liabilities, including liabilities under the Securities Act and
    liabilities arising from breaches of our representations and
    warranties contained in the underwriting agreement. If we are
    unable to provide this indemnification, we will contribute to
    payments the underwriters may be required to make in respect of
    those liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">No Sales
    of Similar Securities</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters will require all of our directors and officers
    and certain other of our stockholders to agree, subject to
    certain exceptions, not to offer, sell, contract to sell,
    pledge, grant any option to purchase, make any short sale or
    otherwise dispose of any shares of common stock, or any options
    or warrants to purchase any shares of common stock, or any
    securities convertible into, exchangeable for or that represent
    the right to receive shares of common stock without the prior
    written consent of Thomas Weisel Partners LLC for a period of
    180&#160;days after the date of this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed that for a period of 180&#160;days after the date
    of this prospectus, we will not, without the prior written
    consent of Thomas Weisel Partners LLC, offer, sell, contract to
    sell or otherwise dispose of any securities that are
    substantially similar to the common stock, including but not
    limited to any securities that are convertible into or
    exchangeable for, or that represent the right to receive, common
    stock or any such substantially similar securities except for
    the shares of common stock offered in this offering, the shares
    of common stock issuable upon exercise of outstanding options
    and warrants on the date of this prospectus and the shares of
    our common stock that are issued under our 2010 Omnibus
    Long-Term Incentive Plan, which we will adopt in connection with
    this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The <FONT style="white-space: nowrap">180-day</FONT>
    restricted period described in the preceding two paragraphs will
    be automatically extended if: (1)&#160;during the last
    17&#160;days of the 180-day restricted period we release
    earnings results or announce material news or a material event
    or (2)&#160;prior to the expiration of the
    <FONT style="white-space: nowrap">180-day</FONT>
    restricted period, we announce that we will release earnings
    results during the
    <FONT style="white-space: nowrap">15-day</FONT>
    period following the last day of the
    <FONT style="white-space: nowrap">180-day</FONT>
    period, in which case the restrictions described in the
    preceding paragraph will continue to apply until the expiration
    of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the date of release of the earnings results
    or the announcement of the material news or material event.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Nasdaq
    Global Market Listing</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to apply to have our common stock listed on the Nasdaq
    Global Market under the symbol
    &#147;&#160;&#160;&#160;&#160;&#148;.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    109
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Short
    Sales, Stabilizing Transactions and Penalty Bids</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to facilitate this offering, persons participating in
    this offering may engage in transactions that stabilize,
    maintain or otherwise affect the price of our common stock
    during and after this offering. Specifically, the underwriters
    may engage in the following activities in accordance with the
    rules of the SEC.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Short sales.</I> Short sales involve the sales by the
    underwriters of a greater number of shares than they are
    required to purchase in the offering. Covered short sales are
    short sales made in an amount not greater than the
    underwriters&#146; over-allotment option to purchase additional
    shares from us in this offering. The underwriters may close out
    any covered short position by either exercising their
    over-allotment option to purchase shares or purchasing shares in
    the open market. In determining the source of shares to close
    out the covered short position, the underwriters will consider,
    among other things, the price of shares available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. Naked short
    sales are any short sales in excess of such over-allotment
    option. The underwriters must close out any naked short position
    by purchasing shares in the open market. A naked short position
    is more likely to be created if the underwriters are concerned
    that there may be downward pressure on the price of the common
    stock in the open market after pricing that could adversely
    affect investors who purchase in this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stabilizing transactions.</I> The underwriters may make bids
    for or purchases of the shares for the purpose of pegging,
    fixing or maintaining the price of the shares, so long as
    stabilizing bids do not exceed a specified maximum.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Penalty bids.</I>&#160;&#160;If the underwriters purchase
    shares in the open market in a stabilizing transaction or
    syndicate covering transaction, they may reclaim a selling
    concession from the underwriters and selling group members who
    sold those shares as part of this offering. Stabilization and
    syndicate covering transactions may cause the price of the
    shares to be higher than it would be in the absence of these
    transactions. The imposition of a penalty bid might also have an
    effect on the price of the shares if it discourages presales of
    the shares.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The transactions above may occur on the Nasdaq Global Market or
    otherwise. Neither we nor the underwriters make any
    representation or prediction as to the effect that the
    transactions described above may have on the price of the
    shares. If these transactions are commenced, they may be
    discontinued without notice at any time.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters may, from time to time, perform investment
    banking and advisory services for us or engage in transactions
    with us for which they may receive customary fees and expenses.
</DIV>
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    <BR>
    110
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The validity of the shares of common stock offered hereby and
    certain other legal matters will be passed upon for us by
    K&#038;L Gates LLP, Raleigh, North Carolina. Certain legal
    matters in connection with this offering will be passed upon for
    the underwriters by Latham&#160;&#038; Watkins LLP, Washington,
    DC.
</DIV>

<A name='121'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements of Primo Water Corporation and
    subsidiaries as of December&#160;31, 2009 and 2008, and for each
    of the three years ended December&#160;31, 2009 included in this
    prospectus and registration statement have been so included in
    reliance on the report of McGladrey&#160;&#038; Pullen, LLP, an
    independent registered public accounting firm, as set forth in
    its report thereon appearing elsewhere herein, and are included
    in reliance upon such report given on the authority of such firm
    as experts in accounting and auditing.
</DIV>

<A name='122'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CHANGE IN
    INDEPENDENT REGISTERED ACCOUNTING FIRM</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On February&#160;10, 2009, our Board of Directors approved the
    dismissal of Ernst&#160;&#038; Young LLP (&#147;E&#038;Y&#148;),
    as our independent registered public accounting firm, which was
    immediately effective, and appointed McGladrey&#160;&#038;
    Pullen, LLP (&#147;McGladrey&#148;) as our independent
    registered public accounting firm for the year ended
    December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    E&#038;Y&#146;s report on our financial statements for the year
    ended December&#160;31, 2007, did not contain an adverse opinion
    or a disclaimer of opinion and was not qualified or modified as
    to uncertainty, audit scope or accounting principles. During our
    two most recent fiscal years and any subsequent interim period
    preceding the dismissal of E&#038;Y, there were no disagreements
    with E&#038;Y on any matters of accounting principles or
    practices, financial statement disclosure or auditing scope or
    procedure, which, if not resolved to E&#038;Y&#146;s
    satisfaction, would have caused E&#038;Y to make reference to
    the matter in their report, and there have been no
    &#147;reportable events&#148; as defined in Item&#160;304
    (a)(1)(v) of
    <FONT style="white-space: nowrap">Regulation&#160;S-K.</FONT>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the engagement of McGladrey, we did not consult with
    such firm regarding the application of accounting principles to
    a specific completed or contemplated transaction, or any matter
    that was either the subject of a disagreement or a reportable
    event. We also did not consult with McGladrey regarding the type
    of audit opinion which might be rendered on our financial
    statements and no oral or written report was provided by
    McGladrey.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have provided E&#038;Y with a copy of this disclosure prior
    to its filing with the Commission and have requested E&#038;Y to
    furnish us with a letter addressed to the Commission stating
    whether it agrees with the above statements regarding E&#038;Y
    and, if not, stating the respects in which is does not agree. A
    copy of this letter, dated March&#160;12, 2010, which states
    that E&#038;Y agrees with these statements, is filed as
    Exhibit&#160;16.1 to the registration statement of which this
    prospectus forms a part.
</DIV>

<A name='123'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND MORE INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    under the Securities Act with respect to the shares of common
    stock offered by this prospectus. This prospectus does not
    contain all of the information included in the registration
    statement, portions of which are omitted as permitted by the
    rules and regulations of the SEC. For further information
    pertaining to us and the common stock to be sold in this
    offering, you should refer to the registration statement and its
    exhibits. Whenever we make reference in this prospectus to any
    of our contracts, agreements or other documents, the references
    are not necessarily complete, and you should refer to the
    exhibits attached to the registration statement for copies of
    the actual contract, agreement or other document filed as an
    exhibit to the registration statement or such other document,
    each such statement being qualified in all
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    111
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    respects by such reference. On the closing of this offering, we
    will be subject to the informational requirements of the
    Securities Exchange Act of 1934 and will be required to file
    annual, quarterly and current reports, proxy statements and
    other information with the SEC. We anticipate making these
    documents publicly available, free of charge, on our website
    (<I>www.primowater.com</I>) as soon as reasonably practicable
    after filing such documents with the SEC.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You can read the registration statement and our future filings
    with the SEC over the Internet at the SEC&#146;s website at
    www.sec.gov. You may request copies of the filing, at no cost,
    by telephone at
    <FONT style="white-space: nowrap">(336)&#160;331-4000</FONT>
    or by mail at Primo Water Corporation, 104 Cambridge Plaza
    Drive, Winston-Salem, North Carolina 27104. You may also read
    and copy any document we file with the SEC at its public
    reference facility at 100&#160;F&#160;Street, N.E.,
    Room&#160;1580, Washington,&#160;D.C. 20549. You may also obtain
    copies of the documents at prescribed rates by writing to the
    Public Reference Section of the SEC. Please call the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0330</FONT>
    for further information on the operation of the public reference
    facilities.
</DIV>
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    <BR>
    112
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='124'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="96%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#300'>Report of Independent Registered Public
    Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Consolidated Balance Sheets as of
    December&#160;31, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#302'>Consolidated Statements of Operations for the
    years ended December&#160;31, 2007, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#303'>Consolidated Statements of Stockholders&#146;
    Equity (Deficit) for the years ended December&#160;31, 2007,
    2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#304'>Consolidated Statements of Cash Flows for the
    years ended December&#160;31, 2007, 2008 and 2009</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-6
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#305'>Notes to Consolidated Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-7
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='300'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">To the Board
    of Directors and Stockholders of
    </FONT>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Primo Water Corporation
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying consolidated balance sheets of
    Primo Water Corporation and subsidiaries (the
    &#147;Company&#148;) as of December&#160;31, 2009 and 2008, and
    the related consolidated statements of operations,
    stockholders&#146; equity (deficit) and cash flows for each of
    the three years in the period ended December&#160;31, 2009.
    These financial statements are the responsibility of the
    Company&#146;s management. Our responsibility is to express an
    opinion on these financial statements based on our audits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statements. An audit also includes assessing the
    accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial
    statement presentation. We believe that our audits provide a
    reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Primo Water Corporation and subsidiaries as of
    December&#160;31, 2009 and 2008, and the results of their
    operations and their cash flows for each of the three years in
    the period ended December&#160;31, 2009 in conformity with
    U.S.&#160;generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    /s/ MCGLADREY&#160;&#038; PULLEN, LLP
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Raleigh, North Carolina
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    March&#160;12, 2010
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    <!-- XBRL,bs --> <BR>
    <A name='301'>CONSOLIDATED BALANCE SHEETS<BR>
    (in thousands, except par value data)</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cash
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    516
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts receivable, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,205
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,888</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inventories
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,818
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,849</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Prepaid expenses and other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    281
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,083</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Assets associated with discontinued operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,573
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,393
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,820</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bottles, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,069
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,997</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property and equipment, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,321</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Intangible assets, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,077</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>153</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    30,570
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,368</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Liabilities and equity</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,704
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,756</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accrued expenses and other current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,925
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,144</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Current portion of long-term debt, capital leases and notes
    payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>426</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Liabilities associated with discontinued operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,957
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>7,326</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt, capital leases and notes payable, net of current
    portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,403</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other long-term liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    481
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,048</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,443
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,777</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Commitments and contingencies
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common stock, $0.001&#160;par value&#160;&#151;
    200,000&#160;shares authorized, 15,158 and 15,157&#160;shares
    issued and outstanding at December&#160;31, 2009 and 2008,
    respectively
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>15</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Preferred stock, $0.001&#160;par value&#160;&#151;
    100,000&#160;shares authorized
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Series&#160;A preferred stock, 18,755&#160;shares issued and
    outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>19</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Series&#160;B preferred stock, 23,280&#160;shares issued and
    outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>23</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Series&#160;C preferred stock, 12,520&#160;shares issued and
    outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>13</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>86,723</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common stock warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,797
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,797</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74,083)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(90,999)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(409)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities and stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    30,570
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,368</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See accompanying notes.
</DIV>
<!-- /XBRL,bs -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='302'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,op -->CONSOLIDATED
    STATEMENTS OF OPERATIONS<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="68%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>46,981</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,969
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>38,771 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,484
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>8,210</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,409
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,127 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(5,917)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (29)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (153)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,258)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(8,174)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(8,174)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations, net of income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,650) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(11,824)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,042) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (16,221)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (21,673)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(14,866) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and diluted loss per common share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Loss from continuing operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.95)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1.05)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(0.74)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Loss from discontinued operations attributable to common
    stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.12)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.38)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(0.24) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net loss attributable to common stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1.07)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1.43)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(0.98) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and diluted weighted average common shares outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,150
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>15,158 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See accompanying notes.
</DIV>
<!-- /XBRL,op -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- landscape -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <A name='303'><B><FONT style="font-family: 'Times New Roman', Times">
    <!-- XBRL,se -->CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146;
    EQUITY (DEFICIT)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands)</FONT></B></A>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="39%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=10 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=10 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=10 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=10 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=11 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=11 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=11 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=11 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=12 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=12 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=12 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=12 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=13 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=13 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=13 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=13 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=14 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=14 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=14 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=14 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="22" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Preferred Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Preferred Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Additional<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Common<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Series A</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Series B</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Series C</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Subscriptions<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Paid-in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Stockholders&#146;<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Receivable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Capital</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Warrants</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Deficit</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Equity (Deficit)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Balance, December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,085
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,755
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,274
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;(3,773)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    39,404
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (18,641)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19,789
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of preferred stock, Series&#160;B
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,773
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (508)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,265
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Warrants attached to Series&#160;B Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of preferred stock, Series&#160;C
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,515
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (489)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,149
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Warrants attached to Series&#160;C Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Stock-based compensation expense, net of forfeitures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Dividends accrued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,147)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Balance, December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,147
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,755
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,515
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (489)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    49,772
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,433
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,862)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of preferred stock, Series&#160;C
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,005
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    489
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,735
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,232
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Warrants attached to Series&#160;C Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    320
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    320
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Warrants issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    44
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Stock-based compensation expense, net of forfeitures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Beneficial conversion feature of Series&#160;C Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,548
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17,548)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Dividends accrued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Balance, December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,157
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,755
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,520
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    86,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,797
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74,083)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    16,127
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Issuance of common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Stock-based compensation expense, net of forfeitures
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>378</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>378</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Dividend of subsidiary stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,050)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,050)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Dividends accrued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,042)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,042)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(11,824)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(11,824) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Balance, December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>15,158</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>15</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>18,755</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>19</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>23,280</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>23</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>12,520</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>13</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>86,723</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,797</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(90,999)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(409) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See accompanying notes.
</DIV>
<!-- /XBRL,se -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <B><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,cf --><A name='304'>CONSOLIDATED
    STATEMENTS OF CASH FLOWS<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands)</FONT></B></A>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Operating activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (14,074)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (19,346)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(11,824)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Less: Loss from discontinued operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,650) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Loss from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (12,170)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,608)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(8,174)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Adjustments to reconcile net loss from continuing operations to
    net cash used in operating activities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,618
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,205</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Stock-based compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    156
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    259
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>298</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Non-cash interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>696</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Bad debt expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    362
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>153</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>15</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Changes in operating assets and liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (427)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,943)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,164</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Inventories
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (316)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,277)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>969</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Prepaid expenses and other assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (89)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (93)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(782)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,004
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,140
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>198</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accrued expenses and other liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,342
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (213)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(714) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net cash used in operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,752)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,832)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(1,972)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Investing activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Purchases of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,917)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,331)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(1,589)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Purchases of bottles, net of disposals
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,076)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,089)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(835)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Proceeds from the sale of property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Additions to and acquisitions of intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (232)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(48) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net cash used in investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,992)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,628)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,450)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Financing activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Net borrowings from revolving line of credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,004
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(6,580)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Issuance of long term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>20,350</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Note payable and capital lease payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (74)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(5,353)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Debt issuance costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (134)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(636)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Prepaid equity issuance costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(105)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Net change in book overdraft
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(147)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Proceeds from issuance of common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Net proceeds from issuance of preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,104
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,552
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Dividends paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,563)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,327)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(1,257) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net cash provided by financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,529
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,361
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>6,274 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Net increase in cash from continuing operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,901
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,852</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cash, beginning of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,638
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>516</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cash used in discontinued operations from:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Operating Activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,269)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,764)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(1,514)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Investing Activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (378)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,194)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(41)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Financing Activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (203)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(813) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cash used in discontinued operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,647)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,161)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,368) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cash, end of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,776
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    516
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Supplemental cash flow information</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cash paid for interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,535 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Assets acquired under capital lease
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Preferred dividends accrued not paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,785 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See accompanying notes.
</DIV>
<!-- /XBRL,cf -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- XBRL,ns -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">


    <A name='305'><B><FONT style="font-family: 'Times New Roman', Times">NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B></A>
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Description
    of Business and Significant Accounting Policies</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Business</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Primo Water Corporation (together with its consolidated
    subsidiaries, &#147;Primo&#148;, &#147;we&#148;,
    &#147;our&#148;, the &#147;Company&#148;) is a rapidly growing
    provider of three- and five-gallon purified bottled water and
    water dispensers sold through major retailers nationwide.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Principles
    of Consolidation</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our consolidated financial statements include the accounts of
    the Company and its wholly-owned subsidiaries. All intercompany
    amounts and transactions have been eliminated in consolidation.
    Our consolidated statements have been prepared in accordance
    with generally accepted accounting principles in the United
    States (&#147;GAAP&#148;).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Operating
    Segments</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We manage our business primarily through two reporting segments,
    Primo Bottled Water Exchange (Exchange) and Primo Products
    (Products). Our Exchange segment sells three- and five-gallon
    purified bottled water through retailers in the each of the
    contiguous United States. We service the retail locations
    through our national network of primarily independent bottlers
    and distributors. Our Products segment sells water dispensers
    that are designed to dispense Primo and other
    dispenser-compatible bottled water through major U.S. retailers.
    We design, market and arrange for certification and inspection
    of our products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, information in these notes to
    consolidated financial statements relates to continuing
    operations. Certain of our operations have been presented as
    discontinued. See Note&#160;13.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Use of
    Estimates</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of our financial statements in conformity with
    GAAP requires us to make certain estimates, judgments and
    assumptions. We believe that the estimates, judgments and
    assumptions used to determine certain amounts that affect the
    financial statements are reasonable, based on information
    available at the time they are made. To the extent there are
    material differences between these estimates and actual results,
    our consolidated financial statements may be affected. Some of
    the more significant estimates include allowances for doubtful
    accounts, valuation of inventories, depreciation, valuation of
    deferred taxes and allowance for sales returns.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We recognize revenue from the sale of our products when title to
    the product has transferred to the buyer, collectability of a
    fixed and determinable sales price is reasonably assured and we
    have no further obligations to assist in the resale of the
    products. Revenue is recognized for the sale of three- and
    five-gallon purified bottled water upon either the delivery of
    inventory to the retail stores or the purchase by the consumer.
    Our water dispensers are sold primarily through a direct-import
    model, where we recognize revenue when title is transferred to
    our retail customers. Cash consideration provided for discounts
    and sales incentives, as well as provisions for returns and
    other adjustments are recorded as a reduction to sales.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Cash and
    Cash Equivalents</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All highly liquid investments with an original maturity of three
    months or less at the date of purchase are considered to be cash
    equivalents.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Accounts
    Receivable</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All trade accounts receivable are due from customers located
    within the United States. We maintain an allowance for doubtful
    accounts for estimated losses resulting from the inability of
    our customers to make required payments. The allowance for
    doubtful accounts is based on a review of specifically
    identified accounts in addition to an overall aging analysis.
    Judgments are made with respect to the collectability of
    accounts receivable based on historical experience and current
    economic trends. Actual losses could differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the changes in the allowance for
    doubtful accounts for the preceding three years:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="60%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amounts<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Charged to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Beginning<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Sales, Costs<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>End<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>or Expense</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Deductions</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Year</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    362,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (58,000)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    304,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
     December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    304,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    139,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (18,000)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    425,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    425,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    166,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (479,000)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    112,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Inventories</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our inventories consist primarily of finished goods and are
    valued at the lower of cost or realizable value, with cost
    determined using the
    <FONT style="white-space: nowrap">first-in,</FONT>
    first-out (FIFO) method. Miscellaneous selling supplies such as
    labels are expensed when incurred.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Bottles</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Bottles consist of three- and five- gallon refillable
    polycarbonate bottles used in our exchange business and are
    stated at cost, less accumulated depreciation. Depreciation is
    calculated using the straight-line method over the estimated
    useful life of three years.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Property
    and Equipment</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property and equipment are stated at cost, less accumulated
    depreciation and amortization. Depreciation and amortization are
    calculated using straight-line methods over estimated useful
    lives that range from two to 10&#160;years.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Intangible
    Assets</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Intangible assets consist of customer lists, patents, and
    trademarks. Intangible assets not subject to amortization are
    tested for impairment on an annual basis or more frequently if
    indicators of impairment are present. Patent costs are amortized
    using a straight-line basis over estimated lives of three years,
    while customer lists are amortized on an accelerated basis over
    an estimated useful life of 10&#160;years.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Long-Lived
    Assets</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We review long-lived assets for impairment whenever events or
    changes in circumstances indicate that the carrying amount may
    not be recoverable. The carrying amount of a long-lived asset is
    not recoverable if it exceeds the sum of the undiscounted cash
    flows expected to result from the use and eventual disposition
    of the asset at the date it is tested for recoverability,
    whether in use or under development. An impairment loss is
    measured as the amount by which the carrying amount of a
    long-lived asset exceeds its fair value. We recorded an
    impairment charge in 2008 of $98, reflected in selling, general
    and administrative expenses of the Exchange segment in the
    statement of operations, related to display racks no longer in
    use and to be disposed.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Fair
    Value Measurements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2008, we adopted Accounting Standards
    Codification (&#147;ASC&#148;) 820, <I>Fair Value Measurements
    and Disclosures, </I>for financial assets and liabilities. ASC
    820 defines fair value, establishes a framework for measuring
    fair value in accordance with generally accepted accounting
    principles and expands disclosures about fair value
    measurements. The adoption of ASC 820 did not have a material
    impact on the Company&#146;s financial condition or results of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ASC 820 defines fair value as the price that would be received
    for an asset or paid to transfer a liability (an exit price) in
    the principal or most advantageous market for the asset or
    liability in an orderly transaction between market participants
    on the measurement date. ASC 820 also describes three levels of
    inputs that may be used to measure fair value:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Level&#160;1&#160;&#151; quoted prices in active markets for
    identical assets and liabilities.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Level&#160;2&#160;&#151; observable inputs other than quoted
    prices in active markets for identical assets and liabilities.
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Level&#160;3&#160;&#151; unobservable inputs in which there is
    little or no market data available, which require the reporting
    entity to develop its own assumptions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The table below presents our assets and liabilities measured at
    fair value on a recurring basis as of December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="69%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 1</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 2</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Level 3</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a reconciliation of the common stock warrants,
    which are measured at fair value on a recurring basis using
    significant unobservable inputs (Level&#160;3 inputs):
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance as of January&#160;1, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total (gains) losses recognized
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total (gains) losses recognized
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Initial fair value
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The carrying amounts of the Company&#146;s financial
    instruments, which include cash and cash equivalents, accounts
    receivable, accounts payable, and other accrued expenses,
    approximate their fair values due to their short maturities.
    Based on borrowing rates currently available to the Company for
    loans with similar terms, the carrying value of long-term debt,
    capital leases and notes payable approximates fair value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Advertising
    Costs</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Costs incurred for producing and distributing advertising and
    advertising materials are expensed when incurred. Advertising
    costs totaled approximately $948, $717 and $270 for 2007, 2008
    and 2009, respectively, and are included in selling, general,
    and administrative expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Beneficial
    Conversion Charges</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Series&#160;C Preferred Stock (Series&#160;C)&#160;is
    convertible into common stock and was issued with an adjustable
    conversion feature, which was based upon consolidated sales for
    the year ending December&#160;31, 2008 with a conversion price
    ranging from $1.25 to $2.40 per common equivalent share. A
    beneficial conversion charge is measured as the difference
    between the initial price of $2.40 per share and the conversion
    price at December&#160;31, 2008 of $1.25 per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2008 we recorded a beneficial conversion
    charge (also referred to as a deemed dividend) of approximately
    $17,500 related to the adjustment in the conversion price of the
    Series&#160;C convertible preferred stock, based upon
    consolidated sales for the year ending December&#160;31, 2008.
    The beneficial conversion charge for equity instruments is
    recorded to additional paid in capital with no effect on total
    stockholders&#146; equity or the consolidated statement of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Concentrations
    of Risk</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal financial instruments subject to potential
    concentration of credit risk are cash and cash equivalents,
    trade receivables, accounts payable and accrued expenses. We
    invest our funds in a highly rated institution and believe the
    financial risks associated with cash and cash equivalents are
    minimal. At December&#160;31, 2008 and 2009, approximately $250
    and $0, respectively, of our cash on deposit exceeded the
    federally insured limits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We perform ongoing credit evaluations of our customers&#146;
    financial condition and maintain allowances for doubtful
    accounts that we believe are sufficient to provide for losses
    that may be sustained on realization of accounts receivable. We
    had one customer that accounted for approximately 59% of sales
    in 2007 and two customers that accounted for 42% and 21% of
    sales in 2008 and three customers that accounted for
    approximately 33%, 19% and 15% of sales in 2009. We had two
    customers that accounted for approximately 32% and 11% of total
    trade receivables at December&#160;31, 2008 and one customer
    with a balance that accounted for approximately 21% of total
    trade receivables at December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Basic and
    Diluted Net loss Per Share</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net loss per share has been computed using the weighted average
    number of shares of common stock outstanding during each period.
    Diluted amounts per share include the dilutive impact, if any,
    of the Company&#146;s outstanding potential common shares, such
    as options and warrants and convertible preferred stock.
    Potential common shares that are anti-dilutive are excluded from
    the calculation of diluted net loss per common share.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following outstanding options, convertible preferred stock
    and warrants were excluded from the computation of diluted net
    loss per share for the periods indicated because including them
    would have had an anti-dilutive effect:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Years Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Options to purchase common stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,451
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,478
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,448</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Convertible preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,279
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    52,992
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>57,952</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We account for income taxes using the asset and liability
    method, which requires recognition of deferred tax assets and
    liabilities for the expected future tax consequences of events
    that have been included in the financial statements. Under this
    method, deferred tax assets and liabilities are determined based
    on the difference between the financial statement and tax bases
    of assets and liabilities, using enacted tax rates in effect for
    the year in which the differences are expected to reverse.
    Deferred tax assets are reduced by a valuation allowance to the
    extent that utilization is not presently more likely than not.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2007, we adopted the provisions of
    Accounting Standards Codification (&#147;ASC&#148;)
    <FONT style="white-space: nowrap">740-10,</FONT>
    <I>Income Taxes</I>. Previously, we had accounted for tax
    contingencies in accordance with ASC
    <FONT style="white-space: nowrap">450-10,</FONT>
    <I>Contingencies</I>. As required by ASC
    <FONT style="white-space: nowrap">740-10,</FONT> we
    recognize the financial statement benefit of a tax position only
    after determining that the relevant tax authority would more
    likely than not sustain the position following an audit. For tax
    positions meeting the more-likely-than-not threshold, the amount
    recognized in the financial statements is the largest benefit
    that has a greater than 50&#160;percent likelihood of being
    realized upon ultimate settlement with the relevant tax
    authority. At the adoption date, we applied ASC
    <FONT style="white-space: nowrap">740-10</FONT> to
    all tax positions for which the statute of limitations remained
    open. The implementation of ASC
    <FONT style="white-space: nowrap">740-10</FONT> did
    not have a material impact on our consolidated financial
    statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Accounting Pronouncements</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the Financial Accounting Standards Board
    (&#147;FASB&#148;) issued authoritative guidance which
    established the Accounting Standards Codification
    (&#147;ASC&#148; or &#147;Codification&#148;) as the source of
    authoritative GAAP recognized by the FASB to be applied to
    nongovernmental entities, and rules and interpretive releases of
    the SEC as authoritative GAAP for SEC registrants. The
    Codification supersedes all existing non-SEC accounting and
    reporting standards upon its effective date and, subsequently,
    the FASB will not issue new standards in the form of Statements,
    FASB Staff Positions or Emerging Issues Task Force Abstracts.
    The guidance is not intended to change or alter existing GAAP.
    The guidance became effective in our fourth quarter of 2009. The
    guidance did not have an impact on our consolidated financial
    position, results of operations or cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, the FASB issued authoritative guidance on the
    accounting for and disclosure of events that occur after the
    balance sheet date. This guidance was effective for interim and
    annual financial periods ending after June&#160;15, 2009. This
    guidance was amended in February 2010. It requires public
    reporting companies to evaluate subsequent events through the
    date that the financial statements are issued. The adoption did
    not impact our consolidated financial position, results of
    operations or cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2010, the FASB issued guidance which clarifies that
    the stock portion of a distribution to stockholders that allows
    them to receive cash or stock with a potential limitation on the
    total amount of cash that all stockholders can elect to receive
    in the aggregate is considered a share issuance that is
    reflected in earnings per share
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    prospectively and is not a stock dividend. This update is
    effective for our first quarter of 2010. The adoption is not
    expected to have a material impact on our consolidated financial
    position, results of operations or cash flows.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In January 2010, the FASB issued guidance that clarifies ASC 810
    implementation issues relating to a decrease in ownership of a
    subsidiary that is a business or non-profit activity. This
    amendment affects entities that have previously adopted ASC
    <FONT style="white-space: nowrap">810-10.</FONT> This
    update is effective for our first quarter of 2010. The adoption
    is not expected to have a material impact on our consolidated
    financial position, results of operations or cash flows.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,n -->
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Change in
    Accounting Estimate</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2008, we changed our method of
    depreciation for property and equipment from accelerated methods
    to the straight-line method. Originally, we utilized accelerated
    methods due to our business model being new and the related
    uncertainty in the sustainability of the business model. Also,
    initial projections showed that upon installation of a new
    retail customer the sales would initially peak and then diminish
    over time, so using accelerated methods of depreciation was
    expected to reflect the pattern of use. However, after we
    developed some history and sustainability in our business model
    we determined that sales did not peak after installation and
    then diminish over time. Instead, sales have maintained at their
    initial level or increased steadily following the installation
    of our water bottle exchange services at a retail customer.
    Therefore, the straight-line method is more reflective of the
    pattern of use and also provides a better matching of
    depreciation expense to the related sales. We accounted for the
    change as a change in accounting estimate in the period of the
    change and did not restate prior periods. The effect on
    depreciation expense for 2008 was a decrease of approximately
    $1,100.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,n -->
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Bottles</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Bottles are summarized as follows at December 31:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,637</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less accumulated depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (531)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(640) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;2,069
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#160;1,997 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense for bottles was approximately $721, $853
    and $907 in 2007, 2008 and 2009, respectively, and is reflected
    in selling, general and administrative expenses in the
    consolidated statements of operations.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Property
    and Equipment</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property and equipment is summarized as follows at December 31:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    72
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>72</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Machinery and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,232
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,640</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Racks and display panels
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,530
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>12,389</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Office furniture and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>218</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Software and computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,521
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,770</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transportation racks
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,944
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,039 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21,517
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>23,128</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less accumulated depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,943)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(8,807) </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,321 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense for property and equipment was
    approximately $1,935, $2,223 and $2,897 in 2007, 2008 and 2009,
    respectively, and is reflected in selling, general and
    administrative expenses in the consolidated statements of
    operations.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Intangible
    Assets</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Intangible assets are summarized as follows at December 31:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="37%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Gross Carrying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Accumulated<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Net</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amortization</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Net</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Amortized intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Customer lists
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,985
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,699)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,985</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,089)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>896</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Patent costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (26)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>71</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(36)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>35 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,020
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,725)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,295
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,056</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,125)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>931</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Unamortized intangible assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Trademarks
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>146</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>146 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,152
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,725)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,427
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,202</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(2,125)</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,077 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amortization expense for intangible assets was approximately
    $710, $542 and $401 respectively, in 2007, 2008 and 2009,
    respectively, and is reflected in selling, general and
    administrative expenses in the consolidated statements of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amortization expense related to intangible assets, which is an
    estimate for each future year and subject to change, is as
    follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="94%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    295
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    150
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    106
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2015 and thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    88
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    931
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">6.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Accrued
    Expenses and Other Current Liabilities</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accrued expenses and other current liabilities is summarized as
    follows at December 31:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="84%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividends payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    582
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,367</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued payroll and related items
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    410
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>184</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued professional and other expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>580</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    80
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>107</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued sales tax payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    518
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>534</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued advertising
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>17</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued receipts not invoiced
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    244
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>182</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>173 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,925
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,144 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">7.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Long-Term
    Debt, Capital Leases and Notes Payable</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Long-term debt, capital leases and notes payable are summarized
    as follows at December 31:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="82%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Senior loan agreement
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    7,004
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>423</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Subordinated convertible notes payable, net of original issue
    discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,400</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Capital leases
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>6 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,011
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,829</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,006
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(426</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt, capital leases and notes payable, net of current
    portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>14,403 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We entered into a Loan and Security Agreement in June 2005 that
    was amended in April 2006, April 2007, June 2008, January 2009
    and December 2009 (the &#147;Senior Loan Agreement&#148;)
    pursuant to which the bank originally provided a $25,000
    revolving loan commitment (the &#147;Revolver&#148;). In June
    2008, the Revolver commitment was reduced to $20,000 and
    subsequently reduced to $10,000 in January 2009. The Revolver is
    subject to certain borrowing base restrictions based on eligible
    accounts receivable, eligible inventory less reserves, and the
    aggregate face amount of undrawn trade letters of credit of
    which the Company is the beneficiary. The Revolver also provides
    for letters of credit issued to our vendors, which reduce the
    amount available for cash borrowings. The availability under the
    Revolver was approximately $1,500 and $5,900 at
    December&#160;31, 2008 and 2009, respectively. All amounts
    outstanding under the Revolver are due in full on June&#160;30,
    2010; however, at December&#160;31, 2008 the Revolver is
    classified as current in the consolidated balance sheet due to
    the terms and conditions included in the Senior Loan Agreement.
    At December&#160;31, 2008 and 2009, there were outstanding
    letters of credit under the Revolver totaling approximately $296
    and $371, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Interest on the outstanding borrowings under the Revolver is
    payable quarterly at the option of the Company at (i)&#160;the
    LIBOR Market Index Rate plus the applicable margin or
    (ii)&#160;the greater of (a)&#160;the federal funds rate plus
    0.50% or (b)&#160;the bank&#146;s prime rate plus in either case
    the applicable margin. At December&#160;31, 2009 and 2008, the
    interest rate on the outstanding balance on the Revolver was
    based on the bank&#146;s prime rate plus 2.50% and 0.75%,
    respectively (5.75% at December&#160;31, 2009 and 4.00% at
    December&#160;31, 2008). Beginning in January
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2010 and effective with the December 2009 amendment, the
    applicable margin for both the prime rate and the federal funds
    rate options was decreased to 1.00%.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are required to pay a fee of 3.50% on the outstanding amount
    of letters of credit issued under the Revolver. In addition,
    there is a fee of 0.50% on the unused portion of the Revolver
    lending commitment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On January&#160;7, 2009, we entered into a Loan and Security
    Agreement with our primary bank that was subordinated to the
    Senior Loan Agreement (the &#147;Prior Subordinated Loan
    Agreement&#148;), pursuant to which a $10,000 term loan was
    provided (the &#147;Prior Subordinated Loan&#148;). The bank
    acted as syndication agent and provided $4,100 of the facility.
    Twelve existing investors in the Company (including our CEO and
    CFO) funded the $5,900 balance of the facility. The proceeds of
    the Prior Subordinated Loan were used to repay the then
    outstanding balance on the Revolver and for working capital
    purposes. Interest on the Prior Subordinated Loan was at the
    bank&#146;s prime rate plus 10.0%, payable monthly. The Prior
    Subordinated Loan had an original maturity of January&#160;6,
    2010; however, the balance was paid in full in December 2009. In
    connection with the Prior Subordinated Loan the Company paid
    fees totaling approximately $575, which were deferred and
    amortized as a component of interest expense.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Senior Loan Agreement contains and the Prior Subordinated
    Loan Agreement contained various conditions precedent to
    extensions of credit and restrictive covenants including minimum
    EBITDA and gross sales requirements. We were in violation of
    certain covenants and received a waiver from the bank at
    December&#160;31, 2009. Substantially all of the Company&#146;s
    assets are pledged as collateral to for borrowings under the
    Senior Loan Agreement and were pledged as collateral for
    borrowings under the Prior Subordinated Loan Agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On December&#160;30, 2009, we issued Subordinated Convertible
    Promissory Notes (&#147;Notes&#148;) to existing and new
    investors that have a total face value of $15,000 and are
    subordinated to the Senior Loan Agreement. The Notes pay
    quarterly interest at 14% and are payable in full on
    March&#160;31, 2011 (the &#147;Maturity Date&#148;). We may
    prepay the Notes at any time prior to the Maturity Date with a
    prepayment premium of 2% of the principal amount being prepaid,
    except where such prepayment is made in connection with an
    initial public offering of our common stock. Upon (i)&#160;an
    initial public offering of the Company&#146;s common stock
    resulting in net proceeds to the Company of at least $30,000 (a
    &#147;Qualified IPO&#148;), (ii)&#160;the consummation by the
    Company of a merger or consolidation with or into another entity
    or other corporate reorganization in which the Company is not
    the surviving entity, (iii)&#160;the sale of all of the capital
    stock of the Company, or (iv)&#160;the sale of all or
    substantially all of the assets of the Company, the holders of
    the Notes may elect to sell to the Company and the Company will
    be required to purchase the Notes in full by payment of an
    amount equal to the unpaid principal balance thereof, plus, all
    unpaid interest accrued thereon through the date of redemption,
    plus in the case of clauses (ii), (iii), and (iv)&#160;above the
    principal amount of the Notes being redeemed multiplied by the
    prepayment premium of 2%.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, if a Qualified IPO has not occurred by the Maturity
    Date and the Company has completed a sale of shares of its
    capital stock within 90&#160;days of the Maturity Date or
    anytime thereafter resulting in net proceeds to the Company of
    at least $5,000 (a &#147;Qualified Equity Financing&#148;), all
    unpaid principal on any Notes and unpaid accrued interest is
    convertible, at the option of the Note holders, into the
    securities being issued in the Qualified Equity Financing. If
    the Notes become convertible there would be a beneficial
    conversion that would be calculated as the intrinsic value at
    the measurement or commitment date.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Notes are accompanied by detachable warrants with a value at
    issuance equal to 4% of the face amount of the corresponding
    Notes. The exercise price per share of the warrants is equal to
    80% of the purchase price per share of common stock in a
    Qualified IPO (if a Qualified IPO has occurred by the time of
    such exercise) or ($1.25 if a Qualified IPO has not occurred by
    the time of such exercise). The total number of shares of common
</DIV>
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    <BR>
    F-15
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    stock issuable under the warrants is 1,111. The initial fair
    value of the warrants is $600 and resulted in an original issue
    discount on the Notes which will be amortized as interest
    expense over the term of the Notes. The fair value of the
    warrants is included in other long-term liabilities in the
    consolidated balance sheet based upon the estimated fair value
    and will be adjusted periodically until such time as the
    exercise price becomes fixed at which time the then fair value
    will be reclassified as a component of stockholders&#146; equity
    (deficit).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our CEO, CFO, Vice President of Products and certain members of
    our Board of Directors (either individually or through an
    affiliated entity) purchased an aggregate of $3,520 of the Notes
    with an aggregate of 261 warrants to purchase common stock.
    Substantially all of the Company&#146;s assets are pledged as
    collateral to secure the Notes, which security interest is
    junior to that securing the Senior Loan Agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The aggregate future maturities of long-term debt, capital
    leases and notes payable as of December&#160;31, 2009 are as
    follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    426
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,003
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Amounts representing interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stockholders&#146;
    Equity</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2008, we amended and restated our Certificate of
    Incorporation to increase the number of shares authorized to be
    issued to 200,000&#160;shares of $0.001&#160;par value common
    stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Series&#160;A
    Preferred Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are authorized to issue up to 100,000&#160;shares of
    $0.001&#160;par value preferred stock. We designated
    18,780&#160;shares of preferred stock as Series&#160;A Preferred
    Stock (&#147;Series&#160;A&#148;). At December&#160;31, 2009 and
    2008, the Company had outstanding 18,755&#160;shares of the
    Series&#160;A that were issued at a price of $1.00 per share.
    Dividends on the Series&#160;A are neither mandatory nor
    cumulative; however, no dividends will be paid on common stock
    unless equivalent dividends are paid on the Series&#160;A on a
    pro rata basis with the common stock and Series&#160;C.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In liquidation, either voluntary or involuntary, holders of the
    Series&#160;A will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    common stock. Each share of the Series&#160;A is convertible, at
    the option of the holder, at any time into common stock. The
    initial conversion price of the shares is equal to the
    consideration paid per share and the initial conversion ratio is
    1:1. Conversion will be mandatory in the event of a public
    offering of common stock at a price per share of at least $5.00
    (as adjusted for any stock splits, reverse stock splits or other
    similar events) resulting in gross proceeds to the Company of at
    least $20,000 or upon a vote or written consent of the holders
    of more than 50% of the then-outstanding shares of the
    Series&#160;A.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-16
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Series&#160;B
    Preferred Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company designated 30,000&#160;shares of preferred stock as
    Series&#160;B Preferred Stock (&#147;Series&#160;B&#148;). At
    December&#160;31, 2009 and 2008, the Company had outstanding
    23,280&#160;shares of Series&#160;B that were issued at a price
    of $1.00 per share. The Series&#160;B shares are non-voting and
    non-convertible. Each share of the Series&#160;B is accompanied
    by a warrant to purchase 0.267&#160;shares of common stock with
    an exercise price of $1.25 per share (both subject to adjustment
    in the case of stock splits, reverse stock splits or other
    similar events). Each warrant will be exercisable through the
    earliest to occur of (i)&#160;the sixteenth
    (16<SUP style="font-size: 85%; vertical-align: top">th</SUP>)

    day after delivery of a notice of an exercise event (which
    includes an initial public offering of the Company&#146;s common
    stock resulting in proceeds of at least $20,000), (ii)&#160;ten
    (10)&#160;years from the date of such warrant, or
    (iii)&#160;five (5)&#160;years after the date of exercise of
    either the put or repurchase rights with respect to the
    Series&#160;B. The value of the warrants was determined to be
    approximately $3,252 and is included in common stock warrants on
    the consolidated balance sheet. No warrants had been exercised
    as of December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends on the Series&#160;B accrue at an annual rate of $0.10
    per share or 10%, payable when declared by the Board of
    Directors, and are cumulative. All accrued dividends on the
    Company&#146;s Series&#160;B will be paid prior to the payment
    of any dividends on the Company&#146;s Series&#160;A,
    Series&#160;C or common stock. In January 2009, the Company
    offered Series&#160;B investors the option to suspend their
    current dividend payment of 10% in exchange for a dividend
    accrual of 15% for 2009. In January 2010 the dividends began to
    accrue at 10%. Series&#160;B dividends paid during 2007, 2008
    and 2009 were $1,563, $2,327 and $1,257, respectively. At
    December&#160;31, 2008 and 2009 the accrued and unpaid dividends
    were $582 and $2,367, respectively, which is included in accrued
    expenses and other current liabilities in the consolidated
    balance sheet.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In liquidation, either voluntary or involuntary, holders of the
    Series&#160;B will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    Company&#146;s Series&#160;A and common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Series&#160;C
    Preferred Stock</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2008, the Company amended and restated its Certificate of
    Incorporation to increase the number of shares authorized to be
    issued and designated 14,000&#160;shares of preferred stock as
    Series&#160;C. As of December&#160;31, 2009 and 2008, the
    Company had issued 12,520&#160;shares of the Series&#160;C, at a
    price of $2.40 per share. The Series&#160;C is convertible into
    the Company&#146;s common stock based upon a formula taking into
    account the Company&#146;s sales for the year ending
    December&#160;31, 2008, which resulted in a conversion ratio of
    1:1.92 as of December&#160;31, 2008. In accordance with GAAP the
    Company determined that a beneficial conversion resulted from
    the change in the conversion ratio from 1:1 on the issuance date
    of the Series&#160;C to 1:1.92 on December&#160;31, 2008. The
    value of the beneficial conversion feature is analogous to a
    dividend and is recognized as a return to the preferred
    stockholders over the period from the date of issuance to the
    commitment or measurement date, which was December&#160;31,
    2008. At December 31, 2008, the Company recorded a beneficial
    conversion or deemed dividend of approximately $17,500.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Conversion of the Series C will be mandatory in the event of a
    public offering of common stock at a price per share of at least
    $5.00 (as adjusted for any stock splits, reverse stock splits or
    similar events) resulting in gross proceeds to the Company of at
    least $20,000 or upon a vote or written consent of the holders
    of more than 50% of the then-outstanding shares of Series&#160;C.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each share of Series&#160;C is accompanied by a warrant to
    purchase 0.10&#160;shares of common stock with an exercise price
    of $1.98 per share (subject to adjustment in the case of stock
    splits, reverse stock splits or other
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    similar events). Each warrant will be exercisable through the
    earlier to occur of (i)&#160;the sixteenth
    (16<SUP style="font-size: 85%; vertical-align: top">th</SUP>)

    day after delivery of a notice of an exercise event (which
    includes an initial public offering of the Company&#146;s common
    stock resulting in gross proceeds to the Company of at least
    $20,000) or (ii)&#160;December&#160;14, 2017. The total value of
    the warrants was determined to be approximately $501 and is
    included in common stock warrants in the Consolidated Balance
    Sheet. No warrants had been exercised as of December&#160;31,
    2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dividends on Series&#160;C are neither mandatory nor cumulative;
    however, no dividends will be paid on common stock or the
    Series&#160;A unless equivalent dividends are paid on the
    Series&#160;C.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In liquidation, either voluntary or involuntary, holders of the
    Series&#160;C will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    Company&#146;s Series&#160;A, Series&#160;B and common stock.
    Each share of Series&#160;C is convertible, at the option of the
    holder, at any time into common stock.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Compensation</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has a stock-based compensation plan (the
    &#147;Plan&#148;) for employees, including officers,
    non-employee directors and non-employee consultants. The Plan
    provides for the issuance of incentive or nonqualified stock
    options and restricted common stock. The Company has reserved
    4,500&#160;shares of common stock for issuance under the Plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We account for our stock-based employee and director
    compensation plans in accordance with ASC 718,
    <I>Compensation-Stock Compensation</I>. ASC 718 requires
    recognition of the cost of employee services received in
    exchange for an award of equity instruments in the financial
    statements over the period the employee is required to perform
    the services in exchange for the award (presumptively the
    vesting period). In 2007, 2008 and 2009 compensation expense
    related to stock options was approximately $157, $215 and $298
    and is included in selling, general, and administrative expenses
    from continuing operations, respectively, and approximately $25,
    $61 and $80 is included in discontinued operations, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock options are granted with an exercise price equal to 100%
    of the fair market value per share of the common stock on the
    date of grant. The options generally vest over a period of one
    to four years, based on graded vesting, and expire ten years
    from the date of grant. The terms and conditions of the awards
    made under the Plan vary but, in general, are at the discretion
    of the board of directors or its appointed committee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We measure the fair value of each stock option grant at the date
    of grant using a Black-Scholes option pricing model. The
    weighted-average fair value per share of the options granted
    during 2007, 2008 and 2009 was $0.67, $0.83, and $0.49
    respectively. The following assumptions were used in arriving at
    the fair value of options granted:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="6%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="6%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected life of options in years
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>5.5</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Risk-free interest rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.6
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.2
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2.0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    39.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>39.0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividend yield
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>0.0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>% </B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The risk free interest rate is based on the U.S.&#160;Treasury
    rate for the expected life of the options at the time of grant.
    As a non-public entity, historic volatility is not available for
    our shares. As a result, we estimated volatility based on a peer
    group of companies, which collectively provide a reasonable
    basis for estimating volatility. We intend to continue to
    consistently use the same group of publicly traded peer
    companies to determine volatility in the future
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    until sufficient information regarding volatility of our share
    price becomes available or the selected companies are no longer
    suitable for this purpose. The expected life is based on the
    estimated average life of the options, and forfeitures are
    estimated on the date of grant based on certain historical data
    and management estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A summary of awards under the Plan at December&#160;31, 2007,
    2008 and 2009, and changes during the years then ended is
    presented in the table below:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Remaining<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Contractual<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Intrinsic<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>per Share</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Life (Years)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,115
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    677
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (62
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (265
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.05
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,465
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,123
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercisable at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,368
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.03
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.1
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Available for grant at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,913
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,465
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    552
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.25
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.73
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.26
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    367
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercisable at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,672
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.04
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.7
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Available for grant at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,536
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.26
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>142</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1.25</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(1</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1.25</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(50</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1.20</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,923</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1.26</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>6.6</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>331</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercisable at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,197</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1.21</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>6.2</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>329</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Available for grant at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,444</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The total intrinsic value of the options exercised during 2007,
    2008 and 2009 was approximately $16, $8 and $0, respectively,
    with proceeds to the Company of $62, $13 and $2, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009 there was approximately $244 of
    total unrecognized compensation cost related to non-vested
    stock-based compensation grants. This unrecognized compensation
    is expected to be recognized over a weighted-average period of
    approximately 1.0&#160;years.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Employee
    Stock Purchase Plan</FONT></I></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010 our Board of Directors adopted the 2010 Employee
    Stock Purchase Plan (the &#147;2010 ESPP&#148;). The 2010 ESPP
    provides for the purchase of common stock and is generally
    available to all employees. The Company has reserved 250 shares
    of common stock for issuance under the 2010 ESPP.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">2010
    Omnibus Long-Term Incentive Plan</FONT></I></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2010 our Board of Directors adopted the 2010 Omnibus
    Long-Term Incentive Plan (the &#147;2010 Plan&#148;). The 2010
    Plan is limited to employees, officers, non-employee directors,
    consultants and advisors. The 2010 Plan provides for the
    issuance of incentive or nonqualified stock options, restricted
    stock, stock appreciation rights, restricted stock units, cash-
    or stock-based performance awards and other stock-based awards.
    The Company has reserved 7,500 shares of common stock for
    issuance under the 2010 Plan.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Commitments
    and Contingencies</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Operating
    Leases</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company leases office space and vehicles under various lease
    arrangements. Total rental expense from continuing operations
    for 2007, 2008 and 2009 was approximately $1,658, $1,496 and
    $1,101, respectively. The rental expense includes $693 and $325
    in 2007 and 2008, respectively, paid to PWC Leasing, LLC, which
    is an entity with common ownership. On June&#160;30, 2008, we
    purchased the leased assets of PWC Leasing, LLC at the fair
    value of $3,500 and terminated the related lease agreement. At
    December&#160;31, 2009, future minimum rental commitments under
    noncancelable operating leases are as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="93%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    691
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    472
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    369
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    128
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2015 and thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    82
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sales
    Tax</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We routinely purchase equipment for use in operations from
    various vendors. These purchases are subject to sales tax
    depending on the equipment type and local sales tax regulations,
    however, certain vendors have not assessed the appropriate sales
    tax. For purchases that are subject to sales tax in which the
    vendor did not assess the appropriate amount, we accrue an
    estimate of the sales tax liability we ultimately expect to pay.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Other
    Contingencies</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the normal course of business the Company may be involved in
    various claims and legal actions. Management believes that the
    outcome of such legal actions will not have a significant
    adverse effect on the Company&#146;s financial position, results
    of operations or cash flows.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">11.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no income tax provision (benefit) for federal or state
    income taxes as the Company has incurred operating losses since
    inception.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A reconciliation of the statutory U.S.&#160;federal tax rate and
    effective tax rates is as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=align1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang2 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=align1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang2 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=align1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang2 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Federal statutory taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
    .0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34
</TD>
<TD nowrap align="left" valign="bottom">
    .0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>34</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.0</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State income taxes, net of federal tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
    .5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
    .9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.9</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Permanent differences
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0
</TD>
<TD nowrap align="left" valign="bottom">
    .5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0
</TD>
<TD nowrap align="left" valign="bottom">
    .2
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.2</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Change in valuation allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (35
</TD>
<TD nowrap align="left" valign="bottom">
    .9
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (37
</TD>
<TD nowrap align="left" valign="bottom">
    .7
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(37</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.9</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>%</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    .1
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    .0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.2</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>% </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    .0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    .0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>0</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>.0</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>% </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred income taxes are recorded based upon differences
    between the financial reporting and income tax basis of assets
    and liabilities. The following deferred income taxes are
    recorded:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred tax assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Federal net operating loss carryforward
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,131
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>18,802</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    State net economic loss carryforward
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,967
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,314</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Intangible assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,240
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,325</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Allowance for bad debts
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    538
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>506</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Reserve for obsolescence
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    546
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Stock-based compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>399</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    84
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>93</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total gross deferred tax assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,760
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>23,442</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred tax liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Fixed assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (861
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(67</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total gross deferred tax liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (861
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(67</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Valuation allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (18,899
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(23,375</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total net deferred tax liability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In assessing the realizability of deferred tax assets,
    management considers whether it is more likely than not that
    some portion of the deferred tax assets will be realized. The
    ultimate realization of deferred tax assets is dependent upon
    the generation of future taxable income during the periods in
    which those temporary differences become deductible. Management
    considers the scheduled reversal of deferred tax liabilities,
    available taxes in the carryback periods, projected future
    taxable income, and tax planning strategies in making this
    assessment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accordingly, in connection with the losses incurred in 2008 and
    2009, the Company has provided a valuation allowance of $18,899
    and $23,375 at December&#160;31, 2008 and 2009, respectively to
    reduce the net deferred tax asset to a realizable value. The net
    increase in the valuation allowance of $4,476 primarily reflects
    the net increase in the federal and state NOL deferred tax
    assets.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has approximately $55,000 in federal net operating
    loss carryforwards that begin to expire in 2025, and
    approximately $51,000&#160;state net economic loss carryforwards
    that begin to expire in 2020. Utilization of net operating loss
    carryforwards and other deferred tax assets may be subject to
    certain limitations under Internal Revenue Code Section&#160;382
    and similar state income tax provisions.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">12.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Segments</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We manage our business primarily through two reporting segments,
    Primo Bottled Water Exchange (Exchange) and Primo Products
    (Products). Our Exchange segment sells three- and five-gallon
    purified bottled water through retailers in each of the
    contiguous United States. We service the retail locations
    through our national network of primarily independent bottlers
    and distributors. Our Products segment sells water dispensers
    that are designed to dispense Primo and other
    dispenser-compatible bottled water through major U.S. retailers.
    We design, market and arrange for certification and inspection
    of our products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We utilize segment net sales and segment income (loss) from
    operations before depreciation and amortization because we
    believe they provide useful information for effectively
    allocating resources among business segments, evaluating the
    health of our business segments based on metrics that management
    can actively influence, and gauging our investments and our
    ability to service, incur or pay down debt.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Operating segments that do not meet quantitative thresholds for
    segment reporting are included in Other.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cost of sales for Exchange consists of costs for bottling,
    related packaging materials and distribution costs for our
    bottled water. Cost of sales for Products consists of contract
    manufacturing, freight, duties, and warehousing costs of our
    water dispensers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Selling, general and administrative expenses consist primarily
    of personnel costs for sales, marketing, operations support,
    customer service, as well as other supporting cost for operating
    the segment.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Selling, general and administrative expenses not specifically
    related to operating segments are shown separately as Corporate.
    Corporate expenses are comprised mainly of the compensation and
    other related expenses for corporate support, information
    systems and human resources and administration. Corporate
    expenses also include certain professional fees and expenses and
    compensation of our Board of Directors.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table presents segment information for each of the
    last three years:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang2 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Segment Net Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    19,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,638</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,824</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,818
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,874
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,611</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inter-company elimination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (189
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (222
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(92</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    34,647
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>46,981 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL Table Pagebreak -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang2 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Segment Income (Loss) From Operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,834
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,267)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,374</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (631
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,447)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(272</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (116)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(34</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inter-company elimination
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>9</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Corporate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,077)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(4,789</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,366
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,618)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(4,205</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (12,235
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (13,538)
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(5,917</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Depreciation and Amortization Expense:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,084
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,592
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>3,124</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>133</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    774
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    618
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>491</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Corporate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    339
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>457 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,618
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>4,205 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Capital Expenditures:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,174
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,916</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    105
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    336
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>95</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>165</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Corporate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    672
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>248 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,993
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,420
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,424 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 6pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Identifiable Assets:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exchange
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,939
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>16,685</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,541
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,655</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,601</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Corporate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,517
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,427</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,997
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>22,368</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD></TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">13.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Discontinued
    Operations</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In July, 2008, the Company and its Board of Directors made the
    decision to divest the operations of its subsidiary, Prima
    Bottled Water, Inc. (&#147;Prima&#148;). As a result, the
    related assets, liabilities and results of the operations of
    Prima are accounted for as discontinued operations. In December
    2009, the Company completed the divesture by distributing the
    stock in Prima to existing stockholders of the Company. Each
    stockholder received a number of shares in Prima based upon such
    stockholder&#146;s proportionate ownership of our Series&#160;A,
    Series&#160;C and common stock on an as converted basis as of
    the date of distribution. This transaction is reflected as a
    dividend of subsidiary stock in the statement of
    stockholders&#146; equity (deficit) in the amount of $2,050, the
    book value of the net assets of Prima as of the distribution
    date.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    F-23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIMO
    WATER CORPORATION AND SUBSIDIARIES<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">(in
    thousands, except per share amounts)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net sales and operating results classified as discontinued
    operations were as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>561</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cost of sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    443
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>428 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gross profit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (204
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,568
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>133</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Selling, general and administrative expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>1,313</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Impairment of assets held for sale
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    174
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>2,407 </B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,672
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,587</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest (expense) income, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (66
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(63</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations, before income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,650</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>)</B>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>&#151;</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Loss from discontinued operations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,904
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,738
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    <B>$</B>
</TD>
<TD nowrap align="right" valign="bottom">
    <B>(3,650</B>
</TD>
<TD nowrap align="left" valign="bottom">
    <B>) </B>
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The assets and liabilities that comprise the discontinued
    operations are summarized as follows at December&#160;31, 2008:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="93%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Discontinued Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    246
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Inventory
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,962
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Property and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,185
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,573
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Discontinued Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Notes payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    829
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">14.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Employee
    Retirement Savings Plan</FONT></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective April&#160;1, 2005, the Company established the Primo
    Water Corporation 401(k) Plan&#160;&#038; Trust retirement plan
    covering substantially all full-time employees who are at least
    21&#160;years of age and who have completed at least two months
    of service. Plan participants may make before tax elective
    contributions up to the maximum percentage of compensation and
    dollar amount allowed under the Internal Revenue Code. The
    Company&#146;s matching contributions to the Plan are
    discretionary and determined with respect to each Plan year. The
    Company did not make any matching contributions during 2007,
    2008 or 2009. Plan participants are 100% vested in their
    elective contributions at all times, and are vested 25% per year
    of service for four years in the Company&#146;s discretionary
    contributions. A year of service for vesting purposes is
    1,000&#160;hours of service in a Plan year. In 2010, our Board
    of Directors established a Company match of up to 50% of the
    employee contributions up to 6% of their salaries, with 50% of
    the matching amount being contingent upon our achievement of
    certain specified objectives to be determined by our Board of
    Directors.
</DIV>
<!-- /XBRL,ns -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->

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</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="g22358g2235809.gif" alt="Primo Water Logo">
</DIV>

<DIV style="margin-top: 42pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 12pt; font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Shares
    </FONT>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 12pt; font-family: Arial, Helvetica">Common
    Stock
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 35%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 13pt; font-family: Arial, Helvetica">PROSPECTUS
    </FONT>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 13pt; font-family: Arial, Helvetica">&#160;&#160;&#160;&#160;&#160;,
    2010
    </FONT>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 35%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Thomas
    Weisel Partners LLC</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">BB&#038;T
    Capital Markets</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 16pt; font-family: Arial, Helvetica">Signal
    Hill</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 0pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Neither we nor the
    underwriters have authorized anyone to provide information
    different from that contained in this prospectus. When you make
    a decision about whether to invest in our common stock, you
    should not rely upon any information other than the information
    in this prospectus. Neither the delivery of this prospectus nor
    the sale of our common stock means that information contained in
    this prospectus is correct after the date of this prospectus.
    This prospectus is not an offer to sell or solicitation of an
    offer to buy these shares of common stock in any circumstances
    under which the offer or solicitation is unlawful.
    </FONT>
</DIV>

<DIV style="margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-family: Arial, Helvetica">Until&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 (25&#160;days after the date of this prospectus), all
    dealers that effect transactions in these securities, whether or
    not participating in this offering, may be required to deliver a
    prospectus. This is in addition to the dealers&#146; obligation
    to deliver a prospectus when acting as underwriters and with
    respect to their unsold allotments or subscriptions.
    </FONT>
</DIV>
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<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INFORMATION
    NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;13.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Other
    Expenses Of Issuance And Distribution</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth all costs and expenses, other
    than the underwriting discount payable by us, in connection with
    the offer and sale of the securities being registered. All
    amounts shown are estimates except the SEC registration fee, the
    Financial Industry Regulatory Authority, Inc. filing fee and the
    Nasdaq Global Market listing fee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Item</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SEC Registration Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,278
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FINRA Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nasdaq Global Market Listing Fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer Agent and Registrar Fees and Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT style="font-size: 8pt">*
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 8pt">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;14.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    Of Directors And Officers</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are a corporation organized under the laws of the State of
    Delaware. Section&#160;145 of the Delaware General Corporation
    Law provides that a corporation may indemnify any person who was
    or is a party or is threatened to be made a party to an action
    by reason of the fact that he or she was a director, officer,
    employee or agent of the corporation or is or was serving at the
    request of the corporation against expenses (including
    attorneys&#146; fees), judgments, fines and amounts paid in
    settlement actually and reasonably incurred by him or her in
    connection with such action if he or she acted in good faith and
    in a manner he or she reasonably believed to be in, or not
    opposed to, the best interests of the corporation and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe his or her conduct was unlawful, except that,
    in the case of an action by or in right of the corporation, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the
    corporation. Our amended and restated bylaws, in the form that
    will become effective upon the closing of this offering, provide
    that we will indemnify and advance expenses to our directors and
    officers (and may choose to indemnify and advance expenses to
    other employees and other agents) to the fullest extent
    permitted by law; provided, however, that if we enter into an
    indemnification agreement with such directors or officers, such
    agreement controls.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    breach of a director&#146;s duty of loyalty to the corporation
    or its stockholders;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unlawful payment of dividends or redemption of shares;&#160;or
</TD>
</TR>


<TR style="line-height: 12pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    transaction from which the director derives an improper personal
    benefit.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, provides that our directors are not personally liable
    for breaches of fiduciary duties to the fullest extent permitted
    by the Delaware General Corporation Law.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;145(g) of the Delaware General Corporation Law
    permits a corporation to purchase and maintain insurance on
    behalf of any person who is or was a director, officer, employee
    or agent of the corporation. Our amended and restated bylaws, in
    the form that will become effective upon the closing of this
    offering, permit us to secure insurance on behalf of any
    officer, director, employee or other agent for any liability
    arising out of his or her actions in connection with their
    services to us, regardless of whether our bylaws permit
    indemnification. We have directors&#146; and officers&#146;
    liability insurance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors
    that require us to indemnify such persons against various
    actions including, but not limited to, third-party actions where
    such director, by reason of his or her corporate status, is a
    party or is threatened to be made a party to an action, or by
    reason of anything done or not done by such director in any such
    capacity. We intend to indemnify directors against all costs,
    judgments, penalties, fines, liabilities, amounts paid in
    settlement by or on behalf such directors and for any expenses
    actually and reasonably incurred by such directors in connection
    with such action, if such directors acted in good faith and in a
    manner they reasonably believed to be in or not opposed to the
    best interests of the corporation, and with respect to any
    criminal proceeding, had no reasonable cause to believe their
    conduct was unlawful. We also intend to advance to our directors
    expenses (including attorney&#146;s fees) incurred by such
    directors in advance of the final disposition of any action
    after the receipt by the corporation of a statement or
    statements from directors requesting such payment or payments
    from time to time, provided that such statement or statements
    are accompanied by an undertaking, by or on behalf of such
    directors, to repay such amount if it shall ultimately be
    determined that they are not entitled to be indemnified against
    such expenses by the corporation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The indemnification agreements also set forth certain procedures
    that will apply in the event of a claim for indemnification or
    advancement of expenses, including, among others, provisions
    about providing notice to the corporation of any action in
    connection with which a director seeks indemnification or
    advancement of expenses from the corporation and provisions
    concerning the determination of entitlement to indemnification
    or advancement of expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the closing of this offering we plan to enter into an
    underwriting agreement, which will provide that the underwriters
    are obligated, under some circumstances, to indemnify our
    directors, officers and controlling persons against specified
    liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;15.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Sales of Unregistered Securities</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the three years preceding the filing of this registration
    statement, we issued the securities indicated below that were
    not registered under the Securities Act. All share and price
    information does not reflect the conversion of all of our issued
    and outstanding shares Series&#160;A and Series&#160;C
    convertible preferred stock into common stock or the reverse
    stock split of our common stock, both of which will occur
    immediately prior to the closing of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock,
    Warrants and Convertible Subordinated Notes</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1.&#160;On February&#160;18, 2010, we granted to 18 employees
    and four non-employee directors 1,102,500 shares of restricted
    common stock. We received no consideration from the individuals
    in connection with the grant of the restricted stock.
</DIV>
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    <BR>
    II-2
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2.&#160;On December&#160;30, 2009, we issued subordinated
    convertible promissory notes, bearing interest at 14% per annum,
    in an aggregate original principal amount of $15,000,000, and
    warrants to purchase an aggregate of 1,111,109&#160;shares of
    common stock to 28 accredited investors. The aggregate
    consideration received by us was $15,000,000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    3.&#160;On June&#160;4, 2008, we issued a warrant to purchase
    100,000&#160;shares of common stock to two residents of Ontario,
    Canada. The consideration received by us was $10.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    4.&#160;Between December&#160;14, 2007 and June&#160;2, 2008, we
    issued an aggregate of 12,520,001&#160;shares of Series&#160;C
    convertible preferred stock and warrants to purchase an
    aggregate of 1,252,001&#160;shares of common stock to 37
    accredited investors. The aggregate consideration received by us
    was $30,048,002.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    5.&#160;Between November&#160;19, 2007 and February&#160;26,
    2009, we issued an aggregate of 73,305&#160;shares of our common
    stock to five employees. The aggregate consideration received by
    us was $76,118.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    6.&#160;Between June&#160;1, 2007 and July&#160;13, 2007, we
    issued an aggregate of 3,530,495&#160;shares of Series&#160;B
    preferred stock to 26 accredited investors. The aggregate
    consideration received by us was $3,530,495.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    7.&#160;On January&#160;10, 2007, we issued 3,000&#160;shares of
    Series&#160;B preferred stock and warrants to purchase
    801&#160;shares of common stock to one accredited investor. The
    consideration received by us was $3000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The grants of restricted common stock described in
    (1)&#160;above were made pursuant to our 2004 Stock Plan to our
    officers, directors and employees in reliance upon an available
    exemption from the registration requirements of the Securities
    Act, including those contained in Rule&#160;701 promulgated
    under Section&#160;3(b) of the Securities Act. Among other
    things, we relied on the fact that, under Rule&#160;701,
    companies that are not subject to the reporting requirements of
    Section&#160;13 or Section&#160;15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    &#147;compensatory benefit plans&#148; as defined under that
    rule. We believe that our 2004 Stock Plan qualifies as a
    compensatory benefit plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the offer and sale of the securities referenced
    in (2), (4), (6)&#160;and (7)&#160;above were exempt from
    registration under the Securities Act by virtue of
    Section&#160;4(2) of the Securities Act
    <FONT style="white-space: nowrap">and/or</FONT>
    Regulation&#160;D promulgated thereunder as transactions not
    involving any public offering. All of the purchasers of
    unregistered securities for which we relied on Section&#160;4(2)
    <FONT style="white-space: nowrap">and/or</FONT>
    Regulation&#160;D represented that they were accredited
    investors as defined under the Securities Act. The purchasers in
    each case represented that they intended to acquire the
    securities for investment only and not with a view to the
    distribution thereof and that they either received adequate
    information about the registrant or had access, through
    employment or other relationships, to such information;
    appropriate legends were affixed to the stock certificates
    issued in such transactions; and offers and sales of these
    securities were made without general solicitation or advertising.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The sales of common stock referenced in (5)&#160;above was made
    pursuant to the exercise of stock options granted under our 2004
    Stock Plan to our officers, directors, employees and consultants
    and, we believe, were made in reliance upon an available
    exemption from the registration requirements of the Securities
    Act, including those contained in Rule&#160;701 promulgated
    under Section&#160;3(b) of the Securities Act. Among other
    things, we relied on the fact that, under Rule&#160;701,
    companies that are not subject to the reporting requirements of
    Section&#160;13 or Section&#160;15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    &#147;compensatory benefit plans&#148; as defined under that
    rule. We believe that our 2004 Stock Plan qualifies as a
    compensatory benefit plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe the sales of common stock referenced in
    (3)&#160;above were exempt from registration under the
    Securities Act by virtue of Regulation&#160;S promulgated
    thereunder. All of the purchasers of unregistered securities for
    which we relied on Regulation&#160;S represented that they were
    not acquiring the securities for the account or benefit of any
    U.S.&#160;Person as defined by Regulation&#160;S.
</DIV>
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    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There were no underwriters engaged in connection with any of the
    transactions referenced above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock
    Options</FONT></I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1.&#160;On February 18, 2010, we granted one of our employees an
    option to purchase 100,000 shares of our common stock at an
    exercise price of $1.23 per share. We received no consideration
    from this individual in connection with the issuance of such
    option.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2.&#160;On January&#160;28, 2010, we granted to three of our
    employees options to purchase 225,000&#160;shares of our common
    stock at an exercise price of $1.23 per share. We received no
    consideration from these individuals in connection with the
    issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    3.&#160;On January&#160;29, 2009, we granted to seven of our
    employees options to purchase an aggregate of
    142,000&#160;shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    4.&#160;On August&#160;1, 2008, we granted to two of our
    employees options to purchase an aggregate of 30,000&#160;shares
    of our common stock at an exercise price of $1.98 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    5. On July&#160;23, 2008, we granted to one employee an option
    to purchase 40,000&#160;shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    6.&#160;On June&#160;25, 2008, we granted to one employee an
    option to purchase 8,310&#160;shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    7.&#160;On May&#160;1, 2008, we granted to 18&#160;employees
    options to purchase an aggregate of 471,807&#160;shares of our
    common stock at an exercise price of $1.98 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    8.&#160;On January&#160;31, 2008, we granted to one employee an
    option to purchase 1,944&#160;shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    9.&#160;On December&#160;31, 2007, we granted to three employees
    options to purchase an aggregate of 75,000&#160;shares of our
    common stock at an exercise price of $2.40 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    10.&#160;On October&#160;31, 2007, we granted to three employees
    options to purchase an aggregate of 72,038&#160;shares of our
    common stock at an exercise price of $1.25 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    11.&#160;On August&#160;15, 2007, we granted to one employee an
    option to purchase 10,000&#160;shares of our common stock at an
    exercise price of $1.25 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    12.&#160;On August&#160;10, 2007, we granted to two employees
    options to purchase and aggregate of 15,000&#160;shares of our
    common stock at an exercise price of $1.25 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-4
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    13.&#160;On April&#160;26, 2007, we granted to one employee an
    option to purchase 10,000&#160;shares of our common stock at an
    exercise price of $1.25 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    14.&#160;On January&#160;25, 2007, we granted to
    16&#160;employees options to purchase an aggregate of
    347,295&#160;shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    15.&#160;On January&#160;25, 2007, we granted to four
    non-employee directors options to purchase an aggregate of
    148,000&#160;shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of the stock options described above were granted under our
    2004 Stock Plan to our officers, directors, employees and
    consultants in reliance upon an available exemption from the
    registration requirements of the Securities Act, including those
    contained in Rule&#160;701 promulgated under Section&#160;3(b)
    of the Securities Act. Among other things, we relied on the fact
    that, under Rule&#160;701, companies that are not subject to the
    reporting requirements of Section&#160;13 or Section&#160;15(d)
    of the Exchange Act are exempt from registration under the
    Securities Act with respect to certain offers and sales of
    securities pursuant to &#147;compensatory benefit plans&#148; as
    defined under that rule. We believe that our 2004 Stock Plan
    qualifies as a compensatory benefit plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There were no underwriters engaged in connection with any of the
    transactions referenced above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;16.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Exhibits
    and Financial Statement Schedules</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    See Exhibit&#160;Index following the signature page.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;17.&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Undertakings</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes to provide to the
    underwriters at the closing specified in the underwriting
    agreement, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to directors, officers and
    controlling persons of the registrant pursuant to the foregoing
    provisions, or otherwise, the registrant has been advised that
    in the opinion of the Securities and Exchange Commission such
    indemnification is against public policy as expressed in the
    Securities Act and is, therefore, unenforceable. In the event
    that a claim for indemnification against such liabilities (other
    than the payment by the registrant of expenses incurred or paid
    by a director, officer or controlling person of the registrant
    in the successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&#160;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&#160;424(b)(1) or (4)&#160;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
</DIV>
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    <BR>
    II-5
</DIV><!-- END PAGE WIDTH -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, the
    registrant has duly caused this registration statement to be
    signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Winston-Salem, State of North
    Carolina, on March&#160;12, 2010.
</DIV>

<DIV style="margin-top: 20pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    PRIMO WATER CORPORATION
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="49%"></TD>
    <TD width="5%"></TD>
    <TD width="46%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;&#160;
</TD>
    <TD align="left">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Billy
    D. Prim</FONT></DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 54%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV align="left" style="margin-left: 54%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Billy D. Prim
</DIV>

<DIV align="left" style="margin-left: 54%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Chairman, Chief Executive Officer and President</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">POWER OF
    ATTORNEY</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each person whose signature appears below constitutes and
    appoints Billy D. Prim and Mark Castaneda and each of them, his
    true and lawful attorneys-in-fact and agents, each with full
    power of substitution and resubstitution, severally, for him and
    in his name, place and stead, in any and all capacities, to sign
    any and all amendments (including post-effective amendments) to
    this registration statement, any subsequent registration
    statements pursuant to Rule&#160;462 of the Securities Act of
    1933, as amended, and to file the same, with all exhibits
    thereto and other documents in connection therewith, with the
    Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, and each of them, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in and about the premises, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming all that said
    attorneys-in-fact and agents, or any of them or their or his or
    her substitute or substitutes, may lawfully do or cause to be
    done by virtue hereof. This power of attorney my be executed in
    counterparts.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Exchange Act of
    1934, this report has been signed below by the following persons
    on behalf of the Registrant and in the capacities indicated, in
    each case on March&#160;12, 2010:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="37%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="56%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 12pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Billy
    D. Prim</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Billy
    D. Prim
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chairman, Chief Executive Officer, President and Director
    (Principal Executive Officer)
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Mark
    Castaneda</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Mark
    Castaneda
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chief Financial Officer (Principal Financial Officer)
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">David
    J. Mills</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>David
    J. Mills
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Controller (Principal Accounting Officer)
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Richard
    A. Brenner</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Richard
    A. Brenner
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">David
    W. Dupree</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>David
    W. Dupree
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Malcolm
    McQuilkin</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Malcolm
    McQuilkin
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
<TR valign="bottom" style="line-height: 11pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">David
    L. Warnock</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>David
    L. Warnock
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    EXHIBITS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Underwriting Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation of Primo Water
    Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Bylaws of Primo Water Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Specimen Certificate representing shares of common stock of
    Primo Water Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of K&#038;L Gates LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Loan and Security Agreement, dated as June&#160;23, 2005, among
    Primo Water Corporation, Primo To Go, LLC, Primo Products, LLC,
    Primo Direct, LLC, and Wachovia Bank, National Association (the
    &#147;Credit Agreement&#148;)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amendment to Loan and Security Agreement, dated as of
    April&#160;26, 2006, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Second Amendment to Loan and Security Agreement, dated as of
    April&#160;30, 2007, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Third Amendment to Loan and Security Agreement, dated as of
    June&#160;24, 2008, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Fourth Amendment to Loan and Security Agreement, dated as of
    January&#160;7, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Fifth Amendment to Loan and Security Agreement, dated as of
    December&#160;30, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Sixth Amendment to Loan and Security Agreement, dated as of
    December&#160;30, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2004 Stock Option Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2010 Omnibus Long-Term Incentive Plan (&#147;2010 Omnibus
    Plan&#148;)**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Option Agreement under 2010 Omnibus Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Restricted Stock Award Agreement under 2010 Omnibus
    Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .12*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2010 Employee Stock Purchase Plan**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .13*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Non-Employee Director Compensation Policy**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .14*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 between the Company and Billy D. Prim**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .15*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 between the Company and Mark Casteneda**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .16*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 between the Company and Michael S. Gunter**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .17*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010 between the Company and Duane G. Goodwin**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .18*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Indemnification Agreement for Directors**
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    16
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Letter from Independent Registered Accounting Firm
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    List of subsidiaries of Primo Water Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
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[{"type": "S-1", "sequence": "1", "filename": "g22358sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1761839}]
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sv1
Table of Contents
As filed with the Securities and
    Exchange Commission on March 12, 2010
Registration
    No. 333-
UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
Washington, D.C.
    20549
Form S-1
REGISTRATION
    STATEMENT
UNDER
THE SECURITIES ACT OF
    1933
PRIMO WATER
    CORPORATION
(Exact name of registrant as
    specified in its charter)
Delaware
5149
30-0278688
(State or other jurisdiction
    of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
(336) 331-4000
(Address, including zip code,
    and telephone number,
including area code, of
    registrant's principal executive offices)
Mark Castaneda
Chief Financial Officer
Primo Water Corporation
104 Cambridge Plaza Drive
Winston-Salem, North Carolina 27104
(336) 331-4000
(Name, address, including zip
    code, and telephone number,
including area code, of agent
    for service)
Please send copies of all communications to:
D. Scott Coward
Rachel W. Sheridan
K&L Gates LLP
Latham & Watkins LLP
4350 Lassiter at North Hills Avenue
555 Eleventh Street, NW
Suite 300
Suite 1000
Raleigh, NC 27609
Washington, DC 20004-1036
(919) 743-7328
(202) 637-2200
Approximate date of commencement of proposed sale to the
    public:
As soon as practicable after the
    effective date of this registration statement.
If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule 415 under the Securities Act of 1933, check the
    following
    box.
o
If this Form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    "large accelerated filer," "accelerated
    filer" and "smaller reporting company" in Rule
12b-2
of the
    Exchange Act. (Check one):
Large
    accelerated
    filer
o
Accelerated
    filer
o
Non-accelerated
filer
þ
Smaller reporting
    company
o
(Do not check if a smaller
    reporting company)
CALCULATION
    OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum Aggregate
Amount of
Securities to be Registered
Offering
    Price
(1)(2)
Registration
    Fee
(2)
Common Stock
$60,000,000
$4,278
(1)
Includes shares to be sold upon
    exercise of the underwriters' over-allotment option. See
    "Underwriting."
(2)
Estimated solely for the purpose of
    calculating the registration fee pursuant to Rule 457(o) of
    the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on
    such date or dates as may be necessary to delay its effective
    date until the Registrant shall file a further amendment which
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section 8(a)
    of the Securities Act of 1933, as amended, or until the
    Registration Statement shall become effective on such date as
    the Commission, acting pursuant to Section 8(a), may
    determine.
Table of Contents
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell securities,
and it is not soliciting an offer to buy these securities, in
any state where the offer or sale is not permitted.
SUBJECT
    TO COMPLETION, DATED MARCH 12, 2010
IPO
    PRELIMINARY PROSPECTUS
Shares
Common Stock
$      per share
Primo Water
    Corporation is
    selling           shares
    of common stock. We have granted the underwriters a
30-day
option to purchase up to an
    additional           shares
    from us to cover over-allotments, if any.
This is an initial
    public offering of our common stock. We currently expect the
    initial public offering price to be between
    $      and
    $      per share. We intend to apply
    for approval to list our common stock on the Nasdaq Global
    Market under the symbol
    "     ".
INVESTING IN OUR
    COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
    BEGINNING ON PAGE 10.
Per
    Share
Total
Initial public offering price
$
$
Underwriting discount
$
$
Proceeds, before expenses, to us
$
$
Neither the
    Securities and Exchange Commission nor any state securities
    commission has approved or disapproved of these securities or
    passed upon the adequacy or accuracy of this prospectus. Any
    representation to the contrary is a criminal offense.
Thomas
    Weisel Partners LLC
BB&T
    Capital Markets
Signal
    Hill
The
    date of this prospectus
    is          ,
    2010.
TABLE OF
    CONTENTS
Page
Prospectus Summary
1
The Offering
7
Risk Factors
10
Cautionary Note Regarding Forward-Looking
    Statements
25
Use of Proceeds
26
Dividend Policy
26
Capitalization
27
Dilution
29
Selected Historical Consolidated Financial and
    Other Data
31
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
32
Business
42
Management
61
Executive Compensation
67
Principal Stockholders
90
Related Party Transactions
93
Description of Capital Stock
96
Shares Eligible for Future Sale
101
Material U.S. Federal Income and Estate Tax
    Considerations For
Non-U.S.
Holders of Our Common Stock
104
Underwriting
108
Legal Matters
111
Experts
111
Change In Independent Registered Accounting
    Firm
111
Where You Can Find More Information
111
Index to Financial Statements
F-1
EX-16.1
EX-23.1
You should rely only on the information contained in this
    prospectus. We have not, and the underwriters have not,
    authorized anyone to provide you with information that is
    different from that contained in this prospectus. This
    prospectus is not an offer to sell, nor is it seeking an offer
    to buy, these securities in any state where the offer or sale is
    not permitted. The information in this prospectus speaks only as
    of the date of this prospectus unless the information
    specifically indicates that another date applies, regardless of
    the time of delivery of this prospectus or of any sale of our
    common stock.
Primo
®
,

    Taste
    Perfection
®
,

    Zero Waste. Perfect
    Taste
tm
,
www.primowater.com
, the Primo logo and other trademarks
    or service marks of Primo Water Corporation appearing in this
    prospectus are the property of Primo Water Corporation. Trade
    names, trademarks and service marks of other companies appearing
    in this prospectus are the property of the respective owners.
Industry
    and Market Data
We obtained the industry and market data used throughout this
    prospectus through our research, surveys and studies conducted
    by third-parties and industry and general publications. While we
    believe the data is reliable, we have not independently verified
    this industry and market data from third-party sources, and
    investors should not place undue reliance on this information.
    Some data are also based on our good faith estimates, which are
    derived from our review of internal surveys, as well as
    independent industry publications, government publications,
    reports by market research firms or other published sources.
    None of the independent industry publications referred to in
    this prospectus were prepared on our behalf or at our expense.
    The foregoing discussion does not, in any manner, disclaim our
    responsibilities with respect to the disclosures contained in
    this prospectus.
Dealer
    Prospectus Delivery Obligation
Until          ,
    2010 (25 days after the date of this prospectus), all
    dealers that effect transactions in these securities, whether or
    not participating in this offering, may be required to deliver a
    prospectus. This is in addition to the dealers' obligation
    to deliver a prospectus when acting as underwriters and with
    respect to their unsold allotments or subscriptions.
Table of Contents
PROSPECTUS
    SUMMARY
This summary highlights information about our Company and
    this offering contained elsewhere herein and is qualified in its
    entirety by the more detailed information and financial
    statements included elsewhere in this prospectus. You should
    read this entire prospectus carefully, including "Risk
    Factors," "Management's Discussion and Analysis
    of Financial Condition and Results of Operations" and our
    financial statements and related notes included elsewhere
    herein, before making an investment decision. In this
    prospectus, unless otherwise specified or the context otherwise
    requires, the terms "Primo," "we,"
    "us," "our," "our Company," or
    "ours" refer to Primo Water Corporation and its
    consolidated subsidiaries but do not refer to or include
    information about our former subsidiary, Prima Bottled Water,
    Inc., which was spun off to our stockholders effective
    December 31, 2009.
Our
    Business
We are a rapidly growing provider of three- and five-gallon
    purified bottled water and water dispensers sold through major
    retailers nationwide. We believe the market for purified water
    is growing due to evolving taste preferences, perceived health
    benefits and concerns regarding the quality of municipal tap
    water. Our products provide an environmentally friendly,
    economical, convenient and healthy solution for consuming
    purified water. We offer "razor-razorblade" products
    designed to generate recurring demand for Primo purified bottled
    water (the razorblade) through the initial sale of our
    innovative water dispensers (the razor). Once our bottled water
    is consumed using a water dispenser, empty bottles are exchanged
    at our recycling center displays where consumers receive a
    recycling ticket that offers a discount toward the purchase of a
    full bottle of Primo purified water. Primo consumers purchase an
    average of 35 bottles of water annually and each bottle can be
    sanitized and reused up to 40 times before being taken out of
    use, crushed and recycled, substantially reducing landfill waste
    compared to consumption of equivalent volumes of single-serve
    bottled water. Our sales and recycling center displays are
    prominently located at major retailers nationwide in spaces that
    are often underutilized. As of December 31, 2009, our water
    bottle exchange service and water dispensers were offered in
    each of the contiguous United States and located in
    approximately 7,000 and 5,500 retail locations respectively,
    including Lowe's Home Improvement, Sam's Club, Costco,
    Walmart, Target, Kroger, Winn-Dixie, Albertsons and Walgreens.
We have created a new nationwide single-vendor water bottle
    exchange solution for our retail customers, addressing a market
    demand that was previously unmet. Our water bottle exchange
    solution is easy for retailers to implement, requires minimal
    management supervision and store-based labor and provides
    centralized billing and detailed performance reports. Retailers
    benefit from year-round, high-margin, highly-predictable
    revenue, the potential to increase customer traffic and the
    ability to optimize retail space.
We deliver our solution to retailers utilizing our national
    network of primarily independent bottlers and distributors.
    These bottlers and distributors make a significant portion of
    the capital investment required to deliver our solution,
    including investment in bottling facilities and storage and
    distribution assets. We focus our capital expenditures on
    developing new store locations, raising brand awareness,
    developing new products and managing our national network
    utilizing our management information system ("MIS")
    tools. We are able to manage our national network on a real-time
    basis through our MIS tools, which provide resource planning and
    delivery schedule tracking, thus enabling us to optimize our
    network's assets and respond to customer needs. In
    addition, our national network of bottlers and distributors
    benefits from a year-round product that optimizes utilization of
    their existing production and distribution assets. We believe
    our solution and national network provide us a significant
    competitive advantage in servicing our retail customers.
We benefit significantly from management experience gained over
    the last 15 years in exchange-based businesses, which
    enables us to implement best practices and develop and maintain
    key business relationships. Prior to founding Primo, our Chief
    Executive Officer founded Blue Rhino Corporation, a propane
    cylinder exchange business, in 1994 and, with several of our
    other key executive officers, led its initial public offering in
    1998 and successful sale in 2004. At the time of the sale, Blue
    Rhino was the market leader in propane grill cylinder exchange
    with over 29,000 retail locations in 49 states.
1
Table of Contents
Industry
    Overview
We believe there are several trends that support consumer demand
    for our water bottle exchange service and water dispensers,
    including the following:
Emphasis
    on Health and Wellness
As part of a desire to live a healthier lifestyle, we believe
    consumers are increasingly focused on drinking more water
    relative to consumption of high caloric beverages, carbonated
    soft drinks and beverages containing artificial sweeteners.
Concerns
    Regarding Quality of Municipal Tap Water
Many consumers purchase purified water not only due to better
    taste, but also because of concerns regarding municipal tap
    water quality. Municipal water is typically surface water that
    is treated centrally and pumped to homes, which can allow
    additional contaminants to dissolve into the water through
    municipal or household pipes impacting taste and quality.
Growing
    Preference for Purified Water
We believe consumer preference toward purified water relative to
    tap water continues to grow as purified water has become
    accepted on a mainstream basis. According to a June 2009 report
    by independent market analyst Datamonitor,
Bottled Water in
    the United States
, consumers spent $18.4 billion in
    2008 on bottled water and the bottled water industry is expected
    to grow at a compound annual growth rate of approximately 7.5%,
    reaching $26.5 billion by 2013.
Increasing
    Demand for Products with Lower Environmental Impact
We believe that consumers are increasingly favoring products
    with a lower environmental impact with a "reuse, recycle,
    reduce" mindset becoming a common driver of consumer
    behavior. Most single-serve polyethylene terephthalate
    ("PET") water bottles are produced using fossil fuels
    and contribute to landfill waste given that only 27% of PET
    bottles are recycled according to a November 2009 Environmental
    Protection Agency report. Governmental legislation also reflects
    these concerns with numerous initiatives enacted to either tax
    purchases of beverages in plastic bottles or prohibit their use
    within government facilities or disposal in community landfills.
Availability
    of an Economical Water Bottle Exchange Service and Innovative
    Water Dispensers
Based on estimates derived from industry data, we believe the
    current household penetration rate of multi-gallon water
    dispensers is approximately 4%, with the vast majority of these
    households utilizing traditional home delivery services. We
    believe the lack of innovation, design enhancement and
    functionality and the retail pricing structure of our
    competitors' dispenser models has prevented greater
    household adoption. Compounding these issues, there previously
    was no economical water bottle exchange service with major
    retailer relationships nationwide to promote dispenser usage
    beyond the traditional home delivery model. We believe our water
    bottle exchange service provides this alternative and we are
    currently the only provider delivering a solution nationally to
    retailers. We believe there are over 140,000 major retail
    locations nationwide that we can target to sell our dispensers
    or offer our water bottle exchange service.
2
Table of Contents
Our
    Competitive Strengths
We believe that our competitive strengths include the following:
Appeal to
    Consumer Preferences
•
Environmental Awareness.
Our water bottle exchange
    service incorporates reuse of existing bottles, recycles water
    bottles when their lifecycle is complete and reduces landfill
    waste and fossil fuel usage compared to alternative methods of
    bottled water consumption. We believe our water bottle exchange
    service has a lower environmental impact due to the reuse of
    existing bottles and the efficiencies associated with our
    bottling and distribution network.
•
Value.
We provide consumers the opportunity for cost
    savings when consuming our bottled water compared to both
    single-serve bottled water and typical home and office delivery
    services. Our water dispensers are sold at attractive retail
    prices in order to enhance consumer awareness and adoption of
    our water bottle exchange service, increase household
    penetration and drive sales of our bottled water.
•
Convenience.
Our water bottle exchange service and water
    dispensers are available at major retail locations nationwide.
    In addition, our water bottle exchange service provides
    consumers the convenience of exchanging empty bottles and
    purchasing full bottles at any participating retailer. We offer
    three- and five-gallon water bottle options to address different
    consumer volume preferences. We believe our water bottle
    exchange service provides a convenient way to consume purified
    water compared to self-service refill machines and home and
    office delivery services. Our water bottle sales displays are
    fully stocked and ready for consumer purchases, eliminating
    refill time. In addition, our exchange service permits consumers
    to purchase only the number of water bottles they need without
    the water bottle purchase minimums or bottle deposits often
    charged by home and office delivery providers.
•
Taste.
We have dedicated significant time and effort to
    develop our water purification process and formulate the
    proprietary blend of mineral ingredients included in Primo
    purified water. We believe that Primo purified water has a silky
    smooth taste and in an independent taste test that we
    commissioned, four out of five participants preferred Primo
    purified water over municipal tap water and three out of four
    participants preferred Primo purified water over their
    region's market-leading bottled water.
•
Health and Wellness.
As part of a desire to live a
    healthier lifestyle, we believe that consumers are increasingly
    focused on drinking more water relative to consumption of other
    beverages. As we raise our brand awareness, we believe consumers
    will recognize that our water bottle exchange service is an
    effective option for their purified water consumption needs.
Key
    Retail Relationships Served by National Single-Vendor
    Solution
We are the only water bottle exchange provider with a
    single-vendor solution for retailers nationwide. Our national
    network of 55 bottlers and 27 distributors utilize our MIS tools
    and processes to optimize their production and distribution
    assets while servicing our retail customers. We believe the
    combination of our major retail relationships, unique
    single-vendor solution for retail customers, national network of
    independent bottlers and distributors and our MIS tools is
    difficult to replicate. We anticipate these factors will
    facilitate our introduction of new purified water-related
    products in the future.
Ability
    to Attract and Retain Consumers
We offer "razor-razorblade" products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of our innovative water
    dispensers (the razor), which include a coupon for a free three-
    or five-gallon bottle of Primo purified water. We acquire new
    consumers and enhance recycling efforts by accepting most
    dispenser-compatible water bottles in exchange for a recycle
    ticket discount toward the purchase
3
Table of Contents
of a full bottle of Primo purified water. Our water bottle
    exchange service is attractive to retailers as our consumers
    purchase an average of 35 bottles of Primo purified water per
    year, which facilitates repeat consumer traffic in our
    retailers' stores. In addition, we believe our offering
    high-quality water dispensers enhances consumer awareness and
    adoption of our water bottle exchange service, increases
    household penetration and drives sales of our bottled water.
Efficient
    Business Model
Our business model allows us to efficiently offer our solution
    to our retail partners and centrally manage our national network
    of bottlers and distributors without a substantial capital
    investment. Our business processes and MIS tools enable us to
    manage the bottling and distribution of our water, our product
    quality, retailer inventory levels and the return of used
    bottles on a centralized basis, leveraging our invested capital
    and personnel. Our water bottle exchange service is unique in
    that we are not required to make a significant portion of the
    capital investment required to operate our exchange service
    nationwide. Participation in our water bottle exchange service
    does not typically require independent bottlers and distributors
    to make substantial new investments because they often are able
    to augment their current production capacity and leverage their
    existing bottling and distribution assets. In addition, the flow
    of payments between the retailer and our bottlers and
    independent distributors is a critical component of our overall
    relationship with our major retail accounts that we control
    efficiently through electronic data interchange.
Benefit
    from Management's Proven Track Record
We benefit greatly from management experience gained over the
    last 15 years in exchange businesses to implement and
    refine best practices and develop and maintain key business
    relationships. In addition to our Chief Executive Officer, our
    Chief Financial Officer, Vice President of Operations, Vice
    President of Products and Vice President of National Accounts
    all held comparable positions within the Blue Rhino organization
    during its rapid sales and location growth.
Growth
    Strategy
We seek to increase our market share and drive further growth in
    our business by pursuing the following strategies:
Increase
    Penetration with Existing Retail Relationships and Develop New
    Retail Relationships
We believe we have significant opportunities to increase store
    penetration with our existing retail relationships and develop
    new retail relationships based on our competitive strengths. As
    of December 31, 2009, our water bottle exchange service was
    offered at approximately 6,000 of our top ten retailers'
    nationwide locations. Such retailers present an opportunity of
    approximately 7,500 additional nationwide locations. We intend
    to further penetrate our other existing retailers, which
    collectively provide us the opportunity to be present in an
    additional 22,400 locations nationwide. Our long-term strategy
    targets a total of approximately 40,000 retail store locations
    (which includes new locations with our existing retail
    customers) within our primary retail categories of home centers,
    hardware stores, mass merchants, membership warehouses and
    grocery and drug stores.
Drive
    Consumer Adoption Through Innovative Water Dispenser
    Models
We intend to continue to develop and sell innovative water
    dispensers at attractive retail prices, which we believe is
    critical to increasing consumer awareness and driving consumer
    adoption of our water bottle exchange service. We believe our
    water dispensers have appealing features, such as stainless
    steel finishes, adjustable hot and cold temperature controls and
    hidden bottom-loading bottle features for convenience. Since we
    first began selling our water dispensers in 2005, we have sold
    over 460,000 units and have expanded our retail network
    from four locations as of December 31, 2007, to our current
    network of approximately 5,500 locations. Our long term
4
Table of Contents
strategy is to provide multiple purified water-based-beverages
    from a single Primo water dispenser, with consistent promotion
    of our water bottle exchange service to supply the purified
    water.
Increase
    Same Store Sales
We offer "razor-razorblade" products that are designed
    to generate recurring demand for Primo purified bottled water
    (the razorblade) through the initial sale of water dispensers
    (the razor). We sell our water dispensers at minimal margin and
    provide a free three- or five-gallon bottle of water with every
    water dispenser sold to drive consumer demand for our water
    bottle exchange service.
We believe increasing unit sales of Primo purified bottled water
    is dependent on generating greater consumer awareness of the
    environmentally friendly and economical aspects of and the
    convenience associated with both our purified bottled water and
    our water bottle exchange service. We expect that our branding,
    marketing and sales efforts will result in greater usage of our
    water bottle exchange service. In addition, as consumers
    exchange dispenser-compatible water bottles, we encourage the
    use of our water bottle exchange service by providing them a
    recycling ticket that provides a discount on a full bottle of
    Primo purified water.
Develop
    and Install Other Hydration Solutions
We believe we have significant opportunities to leverage our
    national bottling and distribution network and our systems and
    processes to offer other environmentally friendly, economical,
    convenient and healthy hydration solutions to our retail
    partners without significant increases in our centralized costs.
    For example, we intend to offer our retail partners self-service
    refill vending machines that dispense purified water into
    bottles and other containers. We believe this offering will
    cater to a more price-sensitive consumer. In addition, we intend
    to offer our retail partners automated, self-bagging purified
    ice dispensers. These purified ice dispensers will provide a
    simplified method of acquiring ice in customized offering sizes
    without the extensive manufacturing and storage networks typical
    of the ice dispensing industry.
Pursue
    Strategic Acquisitions to Augment Geographic and Retail
    Relationships
We believe opportunities exist to expand through selective
    acquisitions, including smaller water bottle exchange businesses
    with established retail accounts, on-premises self-service water
    refill vending machine networks and retail accounts, ice
    dispenser machine networks and retail accounts and water
    dispenser companies.
Risk
    Factors
Our business is subject to numerous risks, as more fully
    described in the section entitled "Risk Factors"
    beginning on page 10. You should carefully consider these
    risks before deciding to invest in our common stock. These risks
    include, among others:
•
We have incurred operating losses in the past and may incur
    operating losses in the future.
•
We depend on a small number of large retailers for most of our
    consumer sales. Our arrangements with these retailers for our
    bottled water exchange services and sales of our water
    dispensers are nonexclusive and may be terminated at will.
•
The success of our business depends on retailer and consumer
    acceptance of our water bottle exchange service and water
    dispensers.
•
In our bottled water business, we depend on independent
    bottlers, distributors and suppliers for our business to operate.
5
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•
In our bottled water business, if our distributors do not
    perform to our retailers' expectations, if we encounter
    difficulties in managing our distributor operations or if we or
    our distributors are not able to manage growth effectively, our
    retail relationships may be adversely impacted and our business
    may suffer.
•
We operate in a highly competitive industry, face competition
    from companies with far greater resources than we have and could
    encounter significant competition from these companies in our
    niche market of water bottle exchange services and related
    products.
•
If our bottled water became contaminated, our business could be
    seriously harmed.
•
While many members of our senior management have experience as
    executives of a products and exchange services business, there
    can be no assurances that this experience and past success will
    result in our business becoming profitable.
Our
    Corporate Information
We were incorporated as a Delaware corporation on
    October 20, 2004. Our headquarters are located at 104
    Cambridge Plaza Drive, Winston-Salem, North Carolina 27104 and
    our telephone number is
(336) 331-4000.
Our website is
www.primowater.com
. Information on, or
    accessible through, our website is not a part of and is not
    incorporated into this prospectus and the inclusion of our
    website address in this prospectus is an inactive textual
    reference only.
6
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THE
    OFFERING
Issuer
Primo Water Corporation
Common stock offered by us
shares
    (          
    shares if the underwriters' over-allotment option is
    exercised in full)
Common stock to be outstanding after this offering
shares
    (          shares
    if the underwriters' over-allotment option is exercised in
    full)
Use of proceeds
We estimate that the net proceeds to us from this offering will
    be approximately $      million
    (or approximately $      million
    if the underwriters' over-allotment option is exercised in
    full), assuming an initial public offering price of
    $      per share, the midpoint of the
    range set forth on the cover page of this prospectus. We intend
    to use the net proceeds from this offering to repay our
    14% subordinated convertible notes due March 31, 2011
    and for working capital and general corporate purposes. See
    "Use of Proceeds."
Dividend policy
We currently do not intend to pay any cash dividends on our
    common stock.
Risk factors
You should carefully read and consider the information set forth
    under "Risk Factors," together with all of the other
    information set forth in this prospectus, before deciding to
    invest in shares of our common stock.
Proposed Nasdaq Global Market symbol
We intend to apply to list our common stock on the Nasdaq Global
    Market under the symbol
    "     ".
The number of shares of our common stock that will be
    outstanding after this offering is based
    on           shares
    of common stock outstanding as
    of          ,
    2010. Unless otherwise indicated, all information in this
    prospectus, including the number of shares that will be
    outstanding after this offering and other share-related
    information:
•
reflects
    a     -for-     
    reverse stock split of our common stock that will occur
    immediately prior to the closing of this offering;
•
reflects the conversion of our Series A convertible
    preferred stock and our Series C convertible preferred
    stock into common stock immediately prior to the closing of this
    offering;
•
excludes           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series B preferred stock and Series C convertible
    preferred stock that will
    expire          
    days after the closing of this offering;
•
excludes          shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire      days after the closing
    of this offering;
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Table of Contents
•
excludes           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    14% subordinated convertible notes due March 31, 2011
    that will expire December 30, 2019;
•
excludes an aggregate
    of           shares
    of common stock issuable under our 2004 Stock Plan;
•
excludes an aggregate
    of           shares
    of common stock issuable under our 2010 Omnibus Long-Term
    Incentive Plan, which we have adopted in connection with this
    offering;
•
excludes an aggregate
    of           shares
    of common stock issuable under our 2010 Employee Stock Purchase
    Plan, which we have adopted in connection with this
    offering; and
•
assumes no exercise of the underwriters' over-allotment
    option to purchase up to     
    additional shares of our common stock.
8
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SUMMARY
    HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables summarize our historical consolidated
    financial data and other information for the periods indicated.
    We prepared the summary historical consolidated financial data
    using our audited consolidated financial statements that are
    included elsewhere in this prospectus. You should read this
    summary historical consolidated financial data in conjunction
    with such audited consolidated financial statements and related
    notes. See "Selected Historical Consolidated Financial and
    Other Data" and "Management's Discussion and
    Analysis of Financial Condition and Results of Operations."
    The summary historical consolidated financial data are not
    necessarily indicative of future results.
Year Ended December 31,
2007
2008
2009
(in thousands, except per share data)
Consolidated statements of operations data:
Net sales
$
13,453
$
34,647
$
46,981
Cost of sales
11,969
30,776
38,771
Gross profit
1,484
3,871
8,210
Selling, general and administrative expenses
13,719
17,409
14,127
Loss from operations
(12,235
)
(13,538
)
(5,917
)
Interest (expense) and other income, net
65
(70
)
(2,257
)
Loss from continuing operations before income taxes
(12,170
)
(13,608
)
(8,174
)
Provision for income taxes
—
—
—
Loss from continuing operations
(12,170
)
(13,608
)
(8,174
)
Loss from discontinued operations, net of income taxes
(1,904
)
(5,738
)
(3,650
)
Net loss
(14,074
)
(19,346
)
(11,824
)
Preferred dividends
(2,147
)
(2,327
)
(3,042
)
Net loss attributable to common stockholders
$
(16,221
)
$
(21,673
)
$
(14,866
)
Basic and diluted loss per common share:
Loss from continuing operations attributable to common
    stockholders
$
$
$
Loss from discontinued operations attributable to common
    stockholders
Net loss attributable to common stockholders
$
$
$
Basic and diluted weighted average common shares outstanding:
The unaudited pro forma consolidated balance sheet data set
    forth below gives effect to the conversion of all of our
    outstanding Series A convertible preferred stock and
    Series C convertible preferred stock into shares of our
    common stock. The unaudited pro forma as adjusted consolidated
    balance sheet data gives effect to our receipt of the net
    proceeds from the sale
    of           shares
    of common stock offered by us at an assumed initial public
    offering price of $      per share, the
    midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    commissions and estimated expenses payable by us and the
    application of a portion of such net proceeds to repay our
    14% subordinated convertible notes due March 31, 2011.
As of December 31, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(in thousands)
(Unaudited)
Consolidated balance sheet data:
Cash
$
—
Total assets
22,368
Long-term debt, less current maturities
14,403
Year Ended December 31,
2007
2008
2009
(in thousands, except location data)
(Unaudited)
Other information:
Water bottle exchange locations at year end
4,700
6,400
7,000
Water bottle units sold
1,994
3,215
3,853
Water dispenser units sold
12
177
272
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RISK
    FACTORS
An investment in our common stock involves a high degree of
    risk. You should read and consider carefully each of the risks
    and uncertainties described below together with the financial
    and other information contained in this prospectus before you
    decide to invest in our common stock. The risks described below
    are not the only ones we face and additional risks that we are
    not presently aware of or that we currently believe are
    immaterial may also impair our business. Our business, financial
    condition, results of operations, cash flows and prospects may
    be materially and adversely affected by any of these risks. As a
    result, the market price of our common stock could decline and
    you could lose all or part of your investment.
Risks
    Relating to Our Business and Industry
We have
    incurred operating losses in the past and may incur operating
    losses in the future.
We have incurred operating losses in the past and expect to
    incur operating losses in the future. As of December 31,
    2009, our accumulated deficit was approximately
    $91.0 million. Our losses from continuing operations were
    $12.2 million for the year ended December 31, 2007,
    $13.6 million for the year ended December 31, 2008,
    and $8.2 million for the year ended December 31, 2009.
    We have not been profitable since our inception, and we may not
    become profitable in the future. While we anticipate being
    profitable in 2011, our losses may nonetheless continue as we
    incur additional costs and expenses related to branding and
    marketing, expansion of operations, product development and
    development of relationships with strategic business partners.
    If our operating expenses exceed our expectations, our financial
    performance will be adversely affected. If our sales do not grow
    to offset these increased expenses, we may not become
    profitable. If we do not achieve sustained profitability, we may
    be unable to continue operations.
In both
    our bottled water and water dispenser businesses, we depend on a
    small number of large retailers for most of our consumer sales.
    Our arrangements with these retailers for our bottled water
    exchange services and sales of our water dispensers are
    nonexclusive and may be terminated at will.
Certain retailers make up a significant percentage of our retail
    sales volume, such that if one or more of these retailers were
    to materially reduce or terminate its business with us, our
    sales would suffer. For 2009, Lowe's Home Improvement,
    Sam's Club and Walmart represented approximately 33%, 19%
    and 15% of our consolidated net sales, respectively. While we
    sell a small percentage of our dispensers directly to consumers
    through our online store, the vast majority of our sales for
    both of our water bottle exchange service and of our water
    dispensers are made through our retail partners.
While we have arrangements with certain retailers for our
    products and services, we cannot provide any assurance of any
    future sales. None of our significant retail accounts are
    contractually bound to offer our water dispensers or bottle
    exchange service. As a result, retailers can discontinue our
    products or services at any time and offer a competitor's
    products or services, or none at all. Continued positive
    relations with a retailer depend upon various factors, including
    price, customer service, consumer demand and competition. In
    addition, certain of our retailers have multiple vendor policies
    and may seek to offer a competitor's products or services
    at new or existing locations. If any significant retailer
    materially reduces, terminates or is unwilling to expand its
    relationship with us, or requires price reductions or other
    adverse modifications in our selling terms, our sales would
    suffer.
The
    success of our business depends on retailer and consumer
    acceptance of our water bottle exchange service and water
    dispensers.
We are a consumer products and services company operating in the
    highly-competitive bottled water market and rely on continued
    consumer demand or preference for our products and services. To
    generate sales and profits, we must sell products that appeal to
    retailers and to consumers. Our future success depends on
    consumer acceptance, particularly at the household level, of our
    bottled water products, water bottle exchange service and water
    dispensers. There is no guarantee that there will be significant
    market acceptance of our water bottle
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exchange service or that we will be successful in selling our
    water dispensers on a scale necessary to achieve sustained
    profitability.
The market for bottled water related products and services is
    evolving rapidly and we may not be able to accurately assess the
    size of the market or trends that may emerge and affect our
    business. Consumer preferences can change due to a variety of
    factors, including social trends, negative publicity and
    economic changes. If we are unable to convince current and
    potential retail customers and individual consumers of the
    advantages of our products and services, our ability to sell our
    bottled water products and water dispensers will be limited.
    Consumer acceptance also will affect, and be affected by, our
    existing retail partners' and potential new retail
    partners' decision to sell our products and services and
    their perception of the likelihood of consumers purchasing our
    products and services. Even if retail customers purchase our
    products or services, there is no guarantee that they will be
    successful in selling our products or services to consumers on a
    scale necessary for us to achieve sustained profitability. Any
    significant changes in consumer preferences for purified bottled
    water could result in reduced demand for our water bottle
    exchange service and our water dispensers and erosion of our
    competitive and financial position.
In our
    bottled water business, we depend on independent bottlers,
    distributors and suppliers for our business to
    operate.
We are and will continue to be for the foreseeable future,
    substantially dependent on independent bottlers, distributors
    and suppliers to bottle and deliver our bottled water products
    and provide our water bottle exchange service to our retail
    customers. We do not have our own manufacturing facilities to
    produce bottled water products. We are and will continue to be
    for the foreseeable future, entirely dependent on third parties
    to supply the bottle pre-forms, bottles, water and other
    materials necessary to operate our bottled water business. We
    rely on third-party supply companies to manufacture our three-
    and five-gallon water bottles and deliver them to our bottlers.
    In turn, we rely on bottlers to properly purify the water,
    include our mineral enhancements and bottle the finished product
    without contamination and pursuant to our quality standards and
    preparation procedures. Finally, we rely upon our distributors
    to deliver bottled water to our retail partners in a timely
    manner, accurately enter information regarding the delivery of
    the bottles into our management information system, manage our
    recycling center displays and return used bottles to the
    bottlers to be sanitized or crushed and recycled.
We can make no assurance that we will be able to maintain these
    third-party relationships or establish additional relationships
    as necessary to support growth and profitability of our business
    on economically viable terms. As independent companies, these
    bottlers, distributors and suppliers make their own business
    decisions. Suppliers may choose not to do business with us for a
    variety of reasons, including competition, brand identity,
    product standards and concerns regarding our economic viability.
    They may have the right to determine whether, and to what
    extent, they produce and distribute our products, our
    competitors' products and their own products. Some of the
    business for these bottlers, distributors and suppliers comes
    from producing or selling our competitors' products. These
    bottlers, distributors and suppliers may devote more resources
    to other products or take other actions detrimental to our
    brands. In addition, their financial condition could also be
    adversely affected by conditions beyond our control and our
    business could suffer. In addition, we will face risks
    associated with any bottler's or distributor's failure
    to adhere to quality control and service guidelines we establish
    or failure to ensure an adequate and timely supply of product
    and services at retail locations. Any of these factors could
    negatively affect our business and financial performance. If we
    are unable to obtain and maintain a source of supply for
    bottles, water and other materials, our business will be
    materially and adversely affected.
In our
    bottled water business, if our distributors do not perform to
    our retailers' expectations, if we encounter difficulties
    in managing our distributor operations or if we or our
    distributors are not able to manage growth effectively, our
    retail relationships may be adversely impacted and business may
    suffer.
We rely on our distributors to deliver our three- and
    five-gallon bottled water and provide our water bottle exchange
    service to retailers. Accordingly, our success depends on our
    ability to manage our retail relationships through the
    performance of our distributor partners. The majority of our
    current distributors are independent and we exercise only
    limited influence over the resources they devote to delivery and
    exchange of our three- and five-
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gallon water bottles. Our success depends on our ability to
    establish and maintain distributor relationships and on the
    distributors' ability to operate viable businesses. We can
    provide no assurance that we will be able to maintain such
    relationships or establish additional relationships as necessary
    to support growth and profitability of our business on
    economically viable terms. Our retailers impose demanding
    service requirements on us and we could suffer a loss of
    consumer or retailer goodwill if our distributors do not adhere
    to our quality control and service guidelines or fail to ensure
    an adequate and timely supply of bottled water at retail
    locations. The poor performance of a single distributor to a
    national retailer could jeopardize our entire relationship with
    that retailer and cause our bottled water sales and exchange
    service to suffer. In addition, the number of retail locations
    offering our water bottle exchange service and our corresponding
    sales, have grown significantly over the past several years
    along with our national distributor network
.
Accordingly,
    our distributors must be able to adequately service an
    increasing number of retail accounts. If we or our distributors
    fail to manage our growth effectively, our bottled water sales
    and exchange service may suffer.
We
    operate in a highly competitive industry, face competition from
    companies with far greater resources than we have and could
    encounter significant competition from these companies in our
    niche market of water bottle exchange services and related
    products.
We participate in the highly competitive bottled water segment
    of the nonalcoholic beverage industry. While the industry is
    dominated by large and well-known international companies,
    numerous smaller firms are also seeking to establish market
    niches. In our business model, we not only offer three- and
    five-gallon bottled water but also provide consumers the ability
    to exchange their used containers as part of our exchange
    service. While we are aware of a few direct competitors that
    operate water bottle exchange networks at retail, we believe
    they operate on a much smaller scale than we do and we believe
    they do not have equivalent MIS tools or bottling and
    distribution capabilities to effectively support major retailers
    nationwide. Competitive factors with respect to our business
    include pricing, taste, advertising, sales promotion programs,
    product innovation, increased efficiency in production and
    distribution techniques, the introduction of new packaging and
    brand and trademark development and protection.
Our primary competitors in our bottled water business include
    Nestlé, The
Coca-Cola
Company, PepsiCo, Dr Pepper Snapple Group and DS Waters of
    America. None of these companies currently offer a nationwide
    water bottle exchange service at retail. However, many of these
    competitors are leading consumer products companies, have
    substantially greater financial and other resources than we do,
    have established a strong brand presence with consumers and have
    established relationships with retailers, manufacturers,
    bottlers and distributors necessary to start an exchange
    business at retail locations nationwide should they decide to do
    so. In addition to competition between companies within the
    bottled water industry, the industry itself faces significant
    competition from other non-alcoholic beverages, including
    carbonated and non-carbonated soft drinks and waters, juices,
    sport and energy drinks, coffees, teas and spring and tap water.
We also compete directly and indirectly in the water dispenser
    marketplace. While we have had recent success in our sales of
    water dispensers to retailers, there are many large consumer
    products companies with substantially greater financial and
    other resources than we do, a larger brand presence with
    consumers and established relationships with retailers that
    could decide to enter the marketplace. Should any of these
    consumer products companies so decide to enter the water
    dispenser marketplace, sales of our water dispensers could be
    materially and adversely impacted, which, in turn, could
    materially and adversely affect our sales of bottled water.
    Finally, our water bottle exchange service faces competition
    from other methods of purified water consumption such as
    countertop filtration systems, faucet mounted filtration
    systems, in-line whole-house filtration systems, water
    filtration dispensing products such as pitchers and jugs,
    standard and advanced feature water coolers and
    refrigerator-dispensed filtered and unfiltered water.
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If we are
    unable to build and maintain our brand image and corporate
    reputation, our business may suffer.
We are a relatively new company, having been formed in late 2004
    and commenced operations in June 2005. Our success depends on
    our ability to build and maintain the brand image for our
    existing bottled water products and services and effectively
    build the brand image for any new products. We cannot assure
    you, however, that any additional expenditures on advertising
    and marketing will have the desired impact on our products'
    brand image and on consumer preferences. Actual or perceived
    product quality issues or allegations of product contamination,
    even if false or unfounded, could tarnish the image of our brand
    and may cause consumers to choose other products. Allegations of
    product defects or product contamination, even if untrue, may
    require us from time to time to recall a product from all of the
    markets in which the affected product was distributed. Product
    recalls would negatively affect our profitability and brand
    image. Also, adverse publicity surrounding water usage and any
    campaigns by activists attempting to connect our system to
    environmental issues, water shortages or workplace or human
    rights violations in certain developing countries in which we or
    our business partners operate, could negatively affect our
    overall reputation and our products' acceptance by
    consumers.
Interruption
    or disruption of our supply chain, distribution channels or
    service network could adversely affect our business, financial
    condition and results of operations.
Our ability and that of our business partners, including
    suppliers, bottlers, distributors and retailers, to manufacture,
    sell and deliver products and services is critical to our
    success. Interruption or disruption of our supply chain,
    distribution channels or service network due to unforeseen
    events, including war, terrorism and other international
    conflicts, public health issues, natural disasters such as
    earthquakes, fires, hurricanes or other adverse weather and
    climate conditions, strikes and other labor disputes, whether
    occurring in the United States or abroad, could impair our
    ability to manufacture, sell or deliver our products and
    services.
If our
    bottled water became contaminated, our business could be
    seriously harmed.
We have adopted various quality, environmental, health and
    safety standards. However, our products may still not meet these
    standards or could otherwise become contaminated. A failure to
    meet these standards or contamination could occur in our
    operations or those of our bottlers, distributors or suppliers.
    Such a failure or contamination could result in expensive
    production interruptions, recalls and liability claims.
    Moreover, negative publicity could be generated even from false,
    unfounded or nominal liability claims or limited recalls. Any of
    these failures or occurrences could negatively affect our
    business and financial performance.
In our
    water dispenser business, because all of our dispensers are
    manufactured by two manufacturers in China, a significant
    disruption in the operations of these manufacturers or political
    unrest in China could materially adversely affect us.
We have only two manufacturers of water dispensers. Any
    disruption in production or inability of our manufacturers to
    produce quantities of water dispensers adequate to meet our
    needs could significantly impair our ability to operate our
    water dispenser business on a
day-to-day
basis. Our manufacturers are located in China, which exposes us
    to the possibility of product supply disruption and increased
    costs in the event of changes in the policies of the Chinese
    government, political unrest or unstable economic conditions in
    China or developments in the U.S. that are adverse to
    trade, including enactment of protectionist legislation. In
    addition, our dispensers are shipped directly from the
    manufacturer to our retail partners. Although we routinely
    inspect and monitor our manufacturing partners' activities
    and products, we rely heavily upon their quality controls when
    producing and delivering the dispensers to our retail partners.
    Any of these matters could materially adversely affect our water
    dispenser business and, as a result, our profitability.
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If we
    lose key personnel or are unable to recruit qualified personnel,
    our ability to implement our business strategies could be
    delayed or hindered. In addition, we may not be able to attract
    and retain the highly skilled employees we need to support our
    planned growth.
We are highly dependent upon the services of our senior
    management because of their experience, industry relationships
    and knowledge of the business. We are particularly dependent on
    the services of Billy D. Prim, our Chairman, President and Chief
    Executive Officer. We do not have a formal succession plan in
    place for Mr. Prim. While our employment agreements with members
    of our senior management include customary confidentiality,
    non-competition and non-solicitation covenants, there can be no
    assurance that such provisions will be enforceable or adequately
    protect us. The loss of one or more of our key employees could
    seriously harm our business and we may not be able to attract
    and retain individuals with the same or similar level of
    experience or expertise. We face competition for qualified
    employees from numerous sources and there can be no assurance
    that we will be able to attract and retain qualified personnel
    on acceptable terms. Our ability to recruit and retain such
    personnel will depend upon a number of factors, such as our
    results of operations, prospects and the level of competition
    then prevailing in the market for qualified personnel. Failure
    to recruit and retain such personnel could materially adversely
    affect our business, financial condition and results of
    operations.
While
    many members of our senior management have experience as
    executives of a products and exchange services business, there
    can be no assurances that this experience and past success will
    result in our business becoming profitable.
Many members of our senior management have had experience as
    senior managers of a company engaged in the supply, distribution
    and exchange of propane gas cylinders. While the business model
    for that company and the model for our business are similar, the
    propane gas industry and the bottled water industry are very
    different. For example, there are no assurances that consumer
    demand will exist for our bottled water products, water bottle
    exchange service or water dispensers sufficient to enable us to
    be profitable. While we believe our business model will be
    successful, any similarity between our business model and that
    of our senior management's predecessor employer should not
    be viewed as an indication that we will be profitable.
The
    consolidation of retail customers may adversely impact our
    operating margins and profitability.
Our customers, such as mass merchants, supermarkets, warehouse
    clubs, food distributors and drug and pharmacy stores, have
    consolidated in recent years and consolidation may continue. As
    a result of these consolidations, our large retail customers may
    seek lower pricing or increased promotions from us. If we fail
    to respond to these trends in our industry, our volume growth
    could slow or we may need to lower prices or increase trade
    promotions and consumer marketing for our products and services,
    both of which would adversely affect our financial results.
    These retailers may use floor or shelf space currently used for
    our products and services for their own private label products
    and services. In addition, retailers are increasingly carrying
    fewer brands in any one category and our results of operations
    will suffer if we are not selected by our significant customers
    to remain a vendor
.
In the event of consolidation
    involving our current retailers, we may lose key business if the
    surviving entities do not continue to purchase products or
    services from us.
Adverse
    weather conditions could negatively impact our
    business.
Unseasonable or unusual weather may negatively impact demand for
    our products. The sales of our bottled water products and water
    dispensers are influenced to some extent by weather conditions
    in the markets in which we operate. Unusually cool or rainy
    weather may reduce temporarily the demand for our products and
    contribute to lower sales, which would have an adverse effect on
    our results of operations for such periods.
We depend
    on key management information systems and third party service
    providers.
We depend on our management information systems (MIS) to process
    orders, manage inventory and accounts receivable, maintain
    distributor and customer information, maintain cost-efficient
    operations and assist distributors
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in delivering products and services on a timely basis. Any
    disruption in the operation of our MIS tools, the loss of
    employees knowledgeable about such systems, the termination of
    our relationships with third-party MIS partners or our failure
    to continue to effectively modify such systems as business
    expands could require us to expend significant additional
    resources or to invest additional capital to continue to manage
    our business effectively, and could even affect our compliance
    with public reporting requirements. Additionally, our MIS tools
    are vulnerable to interruptions or other failures resulting
    from, among other things, natural disasters, terrorist attacks,
    software, equipment or telecommunications failures, processing
    errors, computer viruses, hackers, other security issues or
    supplier defaults. Security, backup and disaster recovery
    measures may not be adequate or implemented properly to avoid
    such disruptions or failures. Any disruption or failure of these
    systems or services could cause substantial errors, processing
    inefficiencies, security breaches, inability to use the systems
    or process transactions, loss of customers or other business
    disruptions, all of which could negatively affect our business
    and financial performance.
Water
    scarcity and poor quality could negatively impact our long-term
    profitability.
Water is a limited resource facing unprecedented challenges from
    overexploitation, population growth, increasing pollution, poor
    management and climate change. As demand for water continues to
    increase and as water becomes scarcer and the quality of
    available water deteriorates, our business may incur increasing
    costs or face capacity constraints which could adversely affect
    our profitability or net sales in the long run.
We may
    pursue acquisitions and investments in new product lines,
    businesses or technologies that involve numerous risks, which
    could disrupt our business or adversely affect our financial
    condition and results of operations.
In the future, we may acquire or invest in new product lines,
    businesses or technologies to expand our current bottled water
    products and services. Acquisitions present a number of
    potential risks and challenges that could disrupt our business
    operations, increase our operating costs or capital expenditure
    requirements and reduce the value of the acquired product line,
    business or technology. For example, if we identify an
    acquisition candidate, we may not be able to successfully
    negotiate or finance the acquisition on favorable terms or at
    all. The process of negotiating acquisitions and integrating
    acquired products, services, technologies, personnel or
    businesses might result in significant transaction costs,
    operating difficulties or unexpected expenditures and might
    require significant management attention that would otherwise be
    available for ongoing development of our business. If we are
    successful in consummating an acquisition, we may not be able to
    integrate the acquired product line, business or technology into
    our existing business and products and we may not achieve the
    anticipated benefits of any acquisition
.
Furthermore,
    potential acquisitions and investments may divert our
    management's attention, require considerable cash outlays
    and require substantial additional expenses that could harm our
    existing operations and adversely affect our results of
    operations and financial condition. To complete future
    acquisitions, we may issue equity securities, incur debt, assume
    contingent liabilities or incur amortization expenses and
    write-downs of acquired assets, any of which could dilute the
    interests of our stockholders or adversely affect our
    profitability or cash flow.
Changes
    in taxation requirements could affect our financial
    results.
We are subject to income tax in the numerous jurisdictions in
    which we generate net sales. In addition, our water dispensers
    are subject to certain import duties and sales taxes in certain
    jurisdictions in which we operate. Increases in income tax rates
    could reduce our after-tax income from affected jurisdictions,
    while increases in indirect taxes could affect our
    products' and services' affordability and therefore
    reduce demand for our products and services.
Our
    ability to use net operating loss carryforwards in the United
    States may be limited.
As of December 31, 2009, we had net operating losses of
    approximately $55.0 million for federal income tax
    purposes, which expire at various dates through 2029. To the
    extent available and not otherwise utilized, we intend
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to use any net operating loss carryforwards to reduce the
    U.S. corporate income tax liability associated with our
    operations. Section 382 of the Internal Revenue Code of
    1986, as amended, generally imposes an annual limitation on the
    amount of net operating loss carryforwards that may be used to
    offset taxable income when a corporation has undergone certain
    changes in stock ownership. Our ability to utilize net operating
    loss carryforwards may be limited, under this section or
    otherwise, by the issuance of common stock in this offering. To
    the extent our use of net operating loss carryforwards is
    significantly limited, our income could be subject to
    U.S. corporate income tax earlier than it would if we were
    able to use net operating loss carryforwards, which could result
    in lower profits.
Our
    financial results may be negatively impacted by the recent
    global financial events.
The recent global financial events have resulted in the
    consolidation, failure or near failure of a number of
    institutions in the banking, insurance and investment banking
    industries and have substantially reduced the ability of
    companies to obtain financing. These events also led to a
    substantial reduction in stock market valuations during 2008 and
    the first few months of 2009, although stock market valuations
    rebounded significantly in the latter half of 2009. These events
    could have a number of different effects on our business,
    including:
•
a reduction in consumer spending, which could result in a
    reduction in our sales volume;
•
a shift in the purchasing habits of our target consumers;
•
a negative impact on the ability of our retail customers to
    timely pay their obligations to us, thus reducing our cash flow;
•
a negative impact on the ability of our vendors to timely supply
    materials; and
•
an increased likelihood that our lender may be unable to honor
    its commitments under our revolving credit facility.
Other events or conditions may arise directly or indirectly from
    the global financial events that could negatively impact our
    business.
Risks
    Relating to Regulatory and Legal Issues
Our
    products and services are heavily regulated at both the state
    and federal level. If we are unable to continue to comply with
    applicable regulations and standards in any jurisdiction, we
    might not be able to sell our products in that jurisdiction or
    they could be recalled, and our business could be seriously
    harmed.
The production, distribution and sale in the United States of
    our products are subject to the Federal Food, Drug and Cosmetic
    Act; the Occupational Safety and Health Act; the Americans with
    Disabilities Act (the "ADA"); the Lanham Act; various
    environmental statutes; and various other federal, state and
    local statutes and regulations applicable to the production,
    transportation, sale, safety, advertising, promotion, labeling
    and ingredients of such products. For example, measures have
    been enacted in various localities and states that require a
    deposit to be charged for certain non-refillable beverage
    containers. The precise requirements imposed by these measures
    vary. Other deposit, recycling or product stewardship proposals
    have been introduced in various jurisdictions. We anticipate
    that similar legislation or regulations may be proposed in the
    future at the local, state and federal levels.
The U.S. Food and Drug Administration (the "FDA")
    regulates bottled water as a food under the federal Food, Drug
    and Cosmetic Act. Our bottled water must meet FDA requirements
    of safety for human consumption, identity, quality and labeling.
    Further, any claims we make in marketing our products, such as
    claims related to the beneficial health effects of drinking
    water, are subject to FDA's advertising and promotion
    requirements and restrictions. In addition, the FDA has
    established current good manufacturing practices, regulations
    which govern the facilities, methods, practices and controls
    used for the processing, bottling and distribution of bottled
    drinking
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water. We and our third-party bottling and distribution partners
    are subject to these requirements
.
In addition, all
    public drinking water must meet Environmental Protection Agency
    standards established under the Safe Drinking Water Act for
    mineral and chemical concentration and drinking water quality
    and treatment. We also must comply with overlapping and, in some
    cases, inconsistent state regulations in a variety of areas.
    These state-level regulations, among other things, set standards
    for approved water sources and the information that must be
    provided and the basis on which any therapeutic claims for water
    may be made. We must expend resources to continuously monitor
    state legislative and regulatory activities in order to identify
    and ensure compliance with laws and regulations that apply to
    our bottled water business in each state in which we operate.
Additionally, the manufacture, sale and use of resins used to
    make water bottles are subject to regulation by the FDA. These
    regulations relate to substances used in food packaging
    materials, not with specific finished food packaging products.
    Our beverage containers are deemed to be in compliance with FDA
    regulations if the components used in the containers:
    (i) are approved by the FDA as indirect food additives for
    their intended uses and comply with the applicable FDA indirect
    food additive regulations; or (ii) are generally recognized
    as safe for their intended uses and are of suitable purity for
    those intended uses.
The Consumer Product Safety Commission, FDA or other applicable
    regulatory bodies may require the recall, repair or replacement
    of our products if those products are found not to be in
    compliance with applicable standards or regulations. The failure
    of our third party manufacturers or bottlers to produce
    merchandise that adheres to our quality control standards could
    damage our reputation and lead to customer litigation against
    us. If our manufacturers or distributors are unable or unwilling
    to recall products failing to meet our quality standards, we may
    be required to remove merchandise or recall those products at a
    substantial cost to us. We may be unable to recover costs
    related to product recalls.
We believe that our self-imposed standards meet or exceed those
    set by federal, state and local regulations. Nevertheless, our
    failure or the failure of our suppliers, bottlers or
    distributors to comply with federal or state laws, rules or
    regulations could subject us to potential governmental
    enforcement action for violation of such regulations, which
    could result in warning letters, fines, product recalls or
    seizures, civil or criminal penalties
and/or
temporary or permanent injunctions, each of which could
    materially harm our business, financial condition and results of
    operations. In addition, our failure, or even our perceived
    failure, to comply with applicable laws, rules or regulations
    could cause retailers and others to determine not to do business
    with us or reduce the amount of business they do with us.
In
    January 2010, the U.S. Food and Drug Administration issued an
    updated report regarding bisphenol A, or BPA, a chemical used in
    food and beverage packaging and other products that can possibly
    have adverse health effects on consumers, particularly on young
    children. The three- and five- gallon polycarbonate plastic
    bottles that we use to bottle our water contain BPA. Any
    significant change in perception by our customers or government
    regulation of polycarbonate plastic in food and beverage
    products could adversely affect our operations and financial
    results.
In January 2010, the U.S. Food and Drug Administration
    issued an updated report regarding its current perspective on
    the safety of BPA in food packaging materials, asserting the
    need for additional studies on BPA and issuing its interim
    public health recommendations. BPA is an industrial chemical
    used to make hard, clear plastic known as polycarbonate, which
    is currently used in our three- and five-gallon water bottles.
    BPA is regulated by the FDA as an indirect food additive. While
    the FDA notes that studies employing standardized toxicity tests
    support the safety of human exposure to BPA at the low levels
    currently experienced by consumers, the FDA's report
    additionally acknowledges the results of certain recent studies
    which suggest some concern regarding potential developmental and
    behavioral effects of BPA exposure, particularly on infants and
    young children.
The FDA indicated that it plans to continue to evaluate these
    low dose toxicity studies, as well as other recent peer-reviewed
    studies related to BPA while, at the same time, soliciting
    public comment and inter-agency scientific input before updating
    its formal assessment of the safety of BPA for use in food
    contact applications. In the interim, the FDA's public
    health recommendations include taking reasonable steps to reduce
    exposure of infants to
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BPA in the food supply and working with industry to support and
    evaluate manufacturing practices and alternative substances that
    could reduce exposure in other populations. Further, the FDA
    indicates that it plans to review its existing authority to
    shift to a more robust regulatory framework for oversight of BPA.
Consistent with the findings of numerous international
    regulatory bodies, we believe that the scientific evidence
    suggests that polycarbonate plastic made with BPA is a safe
    packing material for all consumers. Nonetheless, media reports
    and the FDA report have prompted concern in our marketplace
    among existing and potential customers. It is possible that
    developments surrounding this issue could lead to adverse
    effects on our business. Such developments could include:
•
Increased publicity that changes public or regulatory perception
    regarding packaging that uses BPA, so that significant numbers
    of consumers stop purchasing products that are packaged in
    polycarbonate plastic.
•
The emergence of new scientific evidence that suggests that the
    low doses of BPA to which consumers may be exposed when using
    polycarbonate plastic is unsafe.
•
Interpretations of existing evidence by the FDA or other
    regulatory agencies that lead to prohibitions on the use of
    polycarbonate plastic as packaging for consumable products.
•
The inability of sellers of consumable products to find an
    adequate supply of alternative packaging if polycarbonate
    plastic containing BPA becomes an undesirable or prohibited
    packaging material.
If any of these events were to occur, our sales and operating
    results could be materially adversely affected.
Our
    inability to protect our intellectual property, or our
    involvement in damaging and disruptive intellectual property
    litigation, could adversely affect our business, results of
    operations and financial condition or result in the loss of use
    of products or services.
We have filed certain patent applications and trademark
    registration applications and intend to seek additional patents,
    to develop additional trademarks and seek federal registrations
    for such trademarks and to develop other intellectual property.
    We consider our Primo name and related trademarks and our other
    intellectual property to be valuable to our business and the
    establishment of a national branded bottled water exchange
    program. We rely on a combination of patent, copyright,
    trademark and trade secret laws and other arrangements to
    protect our proprietary rights and could incur substantial
    expense to enforce our rights under such laws. A number of other
    companies, however, use trademarks similar or identical to the
    Primo
®
mark to identify their products, and we may not be able to stop
    these other companies from using such trademarks. The
    requirement to change any of our trademarks, service marks or
    trade names could entail significant expense and result in the
    loss of any goodwill associated with that trademark, service
    mark or trade name. While we have filed, and intend to file in
    the future, patent applications, where appropriate, and to
    pursue such applications with the patent authorities, we cannot
    be sure that patents will be issued on such applications or that
    any issued patents will not be successfully contested by third
    parties. Also, since issuance of a patent does not prevent other
    companies from using alternative, non-infringing technology or
    designs, we cannot be sure that any issued patents, or patents
    that may be issued to others and licensed to us, will provide
    significant or any commercial protection, especially as new
    competitors enter the market.
In addition to patent protection, we also rely on trade secrets
    and other non-patented proprietary information relating to our
    product development, business processes and operating
    activities. We seek to protect this information through
    appropriate efforts to maintain its secrecy, including
    confidentiality agreements. We cannot be sure that these efforts
    will be successful or that confidentiality agreements will not
    be breached. We also cannot be sure that we would have adequate
    remedies for any breach of such agreements or other
    misappropriation of our trade secrets, or that our trade secrets
    and proprietary know-how will not otherwise become known or be
    independently discovered by others. Where necessary, we may
    initiate litigation to enforce our patent or other intellectual
    property rights. Any such litigation may require us to spend a
    substantial amount of time and money
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and could distract management from its
day-to-day
operations
.
Moreover, there is no assurance that we will
    be successful in any such litigation or that such litigation
    will not result in successful counterclaims or challenges to the
    validity of our intellectual property rights. Our failure to
    successfully develop intellectual property, or to successfully
    obtain, maintain and enforce patents, trademarks and other
    intellectual property, could affect our ability to distinguish
    our products and services from those of our competitors and
    could cause our sales to suffer.
Our business and our ability to provide products and services
    may be impaired by claims that we infringe the intellectual
    property rights of others. Vigorous protection and pursuit of
    intellectual property rights characterize the consumer products
    industry. These traits can result in significant, protracted and
    materially expensive litigation. In addition, parties making
    infringement and other claims may be able to obtain injunctive
    or other equitable relief that could effectively block our
    ability to provide our products, services or utilize our
    business methods and could cause us to pay substantial damages.
    In the event of a successful claim of infringement, we may need
    to obtain one or more licenses from third parties, which may not
    be available at a reasonable cost, or at all. It is possible
    that our intellectual property rights may not be valid or that
    we may infringe existing or future proprietary rights of others.
    Any successful infringement claims could subject us to
    significant liabilities, require us to seek licenses on
    unfavorable terms, prevent us from manufacturing or selling
    products, providing services and utilizing business methods and
    require us to redesign or, in the case of trademark claims,
    re-brand our Company, products or services, any of which could
    have a material adverse effect on our business, results of
    operations or financial condition.
Legislative
    and executive action in state and local governments enacting
    local taxes on bottled water to include multi-gallon bottled
    water could adversely affect our business and financial
    results.
Regulations have been enacted or proposed in some localities
    where we operate to enact local taxes on bottled water. These
    actions are purportedly designed to discourage the use of
    bottled water due in large part to concerns about the
    environmental effects of producing and discarding large numbers
    of plastic bottles. While we have not to date directly
    experienced any adverse effects from these concerns, and we
    believe that our products are sufficiently different from those
    affected by recent enactments, there is no assurance that our
    products will not be subject to future legislative and executive
    action by state and local governments, which could have a
    material adverse effect on our business, results of operations
    or financial condition.
Litigation
    or legal proceedings could expose us to significant liabilities,
    including product liability claims, and damage our
    reputation.
We are from time to time party to various litigation claims and
    legal proceedings. We evaluate these claims and proceedings to
    assess the likelihood of unfavorable outcomes and estimate, if
    possible, the amount of potential losses. If our products are
    not properly manufactured or designed, personal injuries or
    property damage could result, which could subject us to claims
    for damages. The costs associated with defending product
    liability and other claims, and the payment of damages, could be
    substantial. Our reputation could also be adversely affected by
    such claims, whether or not successful.
We may establish a reserve as appropriate based upon assessments
    and estimates in accordance with our accounting policies. We
    base our assessments, estimates and disclosures on the
    information available to us at the time and rely on legal and
    management judgment. Actual outcomes or losses may differ
    materially from assessments and estimates. Actual settlements,
    judgments or resolutions of these claims or proceedings may
    negatively affect our business and financial performance. A
    successful claim against us that is not covered by insurance or
    is in excess of our available insurance limits could require us
    to make significant payments of damages and could materially
    adversely affect our results of operations and financial
    condition.
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Risks
    Relating to This Offering and Our Common Stock
There has
    not been a public market for our shares and an active market may
    not develop or be maintained, which could limit your ability to
    sell shares of our common stock.
Prior to this offering, there has been no public market for our
    common stock. Although we intend to apply to list the common
    stock on The Nasdaq Global Market, an active public market for
    our shares may not develop or be sustained after this offering.
    The initial public offering price for our common stock will be
    determined through our negotiations with the underwriters and
    may not be indicative of the market price of our common stock
    after this offering. If you purchase shares of our common stock,
    you may not be able to resell those shares at or above the
    initial public offering price, or at all. We cannot predict the
    extent to which investor interest in our Company will lead to
    the development of an active trading market on The Nasdaq Global
    Market or otherwise or how liquid that market might become. An
    active public market for our common stock may not develop or be
    sustained after this offering. If an active public market does
    not develop or is not sustained, it may be difficult for you to
    sell your shares of common stock at a price that is attractive
    to you, or at all.
The value
    of our common stock could be volatile.
The overall market and the price of our common stock may
    fluctuate greatly. The trading price of our common stock may be
    significantly affected by various factors, including:
•
quarterly fluctuations in our operating results;
•
changes in investors' and analysts' perception of the
    business risks and conditions of our business;
•
our ability to meet the earnings estimates and other performance
    expectations of financial analysts or investors;
•
unfavorable commentary or downgrades of our stock by equity
    research analysts;
•
termination of
lock-up
agreements or other restrictions on the ability of our existing
    stockholders to sell their shares after this offering;
•
fluctuations in the stock prices of our peer companies or in
    stock markets in general; and
•
general economic or political conditions.
If
    securities or industry analysts do not publish research or
    publish inaccurate or unfavorable research about our business,
    our stock price and trading volume could decline.
The trading market for our common stock will depend in part on
    the research and reports that securities or industry analysts
    publish about us or our business. We do not currently have and
    may never obtain research coverage by securities and industry
    analysts. If no securities or industry analysts commence
    coverage of our Company, the trading price for our stock would
    be negatively impacted. If we obtain securities or industry
    analyst coverage and if one or more of the analysts who covers
    us downgrades our stock or publishes inaccurate or unfavorable
    research about our business, our stock price would likely
    decline. If one or more of these analysts ceases coverage of us
    or fails to publish reports on us regularly, demand for our
    stock could decrease, which could cause our stock price and
    trading volume to decline.
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Future
    sales of our common stock, or the perception in the public
    markets that these sales may occur, may depress our stock
    price.
Sales of a large number of our shares of common stock in the
    public market after this offering, or the perception that such
    sales could occur, could adversely affect the market price of
    our common stock and could impair our ability to sell equity
    securities in the future at a time and at a price that we deem
    appropriate. After the closing of this offering, we will
    have           shares
    of common stock
    (           shares
    if the underwriters exercise their option to purchase additional
    shares in full) outstanding. The shares of common stock offered
    in this offering will be freely tradable without restriction
    under the Securities Act of 1933, as amended (the
    "Securities Act"), except for any shares of our common
    stock that may be held or acquired by our directors, executive
    officers and other affiliates, as that term is defined in the
    Securities Act, which will be restricted securities under the
    Securities Act. Restricted securities may not be sold in the
    public market unless the sale is registered under the Securities
    Act or an exemption from registration is available.
We, our executive officers, directors and certain stockholders
    have agreed, subject to certain exceptions, with the
    underwriters not to offer, sell, contract to sell or otherwise
    dispose of any common stock or securities convertible into or
    exchangeable for shares of common stock during the period from
    the date of this prospectus continuing through the date
    180 days after the date of this prospectus. These shares
    will represent     % of our outstanding
    common stock after this offering
    (or     % if the underwriters exercise
    their option to purchase additional shares in full). As
    restrictions on resale end, the market price of our common stock
    could decline if the holders of the restricted shares sell them
    or are perceived by the market as intending to sell them. Thomas
    Weisel Partners LLC may, in its sole discretion, release any of
    these shares from these restrictions at any time without notice.
    See "Shares Eligible for Future Sale" and
    "Underwriting."
All of our shares of common stock outstanding as of the date of
    this prospectus may be sold in the public market by existing
    stockholders 180 days after the date of this prospectus,
    subject to applicable volume and other limitations imposed under
    federal securities laws. See "Shares Eligible for
    Future Sale" for a more detailed description of the
    restrictions on selling shares of our common stock after this
    offering.
In the future, we may also issue our securities in connection
    with investments or acquisitions or in order to raise capital
    for other purposes. The amount of shares of our common stock
    issued in connection with these matters could constitute a
    material portion of our then-outstanding shares of our common
    stock.
Purchasers
    in this offering will experience immediate and substantial
    dilution in net tangible book value.
The initial public offering price per share is expected to be
    substantially higher than the net tangible book value per share
    of our outstanding common stock. Purchasers of shares in this
    offering will experience immediate dilution in the net tangible
    book value of their shares. Based on an assumed initial public
    offering price of $      per share, the
    mid-point of the range set forth on the cover of this
    prospectus, dilution per share in this offering will be
    $      per share
    (or     % of the price). Further, if we
    issue additional equity securities to raise additional capital,
    your ownership interest in our Company may be diluted and the
    value of your investment may be reduced. See
    "Dilution."
Concentration
    of ownership among our existing executive officers, directors
    and their affiliates may prevent new investors from influencing
    significant corporate decisions.
Upon completion of this offering, our executive officers,
    directors and their affiliates will beneficially own, in the
    aggregate, approximately     % of our
    outstanding shares of common stock. In particular, Billy D.
    Prim, our Chairman, Chief Executive Officer and President, will
    beneficially own approximately     % of
    our outstanding shares of common stock upon completion of this
    offering. As a result, these stockholders will be able to
    exercise a significant level of control over all matters
    requiring stockholder approval, including the election of
    directors, amendment of our certificate of incorporation and
    approval of significant corporate transactions. This control
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could have the effect of delaying or preventing a change of
    control of our Company or changes in management and will make
    the approval of certain transactions difficult or impossible
    without the support of these stockholders.
Anti-takeover
    provisions in our charter documents and Delaware law might
    discourage or delay acquisition attempts for us that you might
    consider favorable.
Our amended and restated certificate of incorporation and
    amended and restated bylaws will contain provisions that may
    make the acquisition of our Company more difficult without the
    approval of our Board of Directors. These provisions:
•
authorize the issuance of undesignated preferred stock, the
    terms of which may be established and the shares of which may be
    issued without stockholder approval, and which may include super
    voting, special approval, dividend, or other rights or
    preferences superior to the rights of the holders of common
    stock;
•
eliminate the ability of our stockholders to act by written
    consent;
•
establish advance notice requirements for nominations for
    elections to our Board of Directors or for proposing matters
    that can be acted upon by stockholders at stockholder meetings;
•
provide that the Board of Directors is expressly authorized to
    make, alter or repeal our amended and restated bylaws; and
•
establish a classified board of directors the members of which
    will serve staggered three-year terms.
As a Delaware corporation, we are also subject to provisions of
    Delaware law, including Section 203 of the Delaware General
    Corporation Law, which prevents some stockholders holding more
    than 15% of our outstanding common stock from engaging in
    certain business combinations without approval of the holders of
    substantially all of our outstanding common stock.
These anti-takeover provisions and other provisions under
    Delaware law could discourage, delay or prevent a transaction
    involving a change in control of our Company, including actions
    that our stockholders may deem advantageous, or negatively
    affect the trading price of our common stock. These provisions
    could also discourage proxy contests and make it more difficult
    for you and other stockholders to elect directors of your
    choosing and to cause us to take other corporate actions you
    desire.
Since we
    have no current plans to pay cash dividends on our common stock
    for the foreseeable future, you may not receive any return on
    investment unless you sell your common stock for a price greater
    than that which you paid for it.
We do not anticipate paying any dividends to our stockholders
    for the foreseeable future. The agreements governing our
    indebtedness also restrict our ability to pay dividends. Any
    determination to pay dividends in the future will be made at the
    discretion of our Board of Directors and will depend on our
    results of operations, financial conditions, contractual
    restrictions, restrictions imposed by applicable law and other
    factors our Board of Directors deems relevant. Accordingly, you
    may have to sell some or all of your common stock in order to
    generate cash flow from your investment. You may not receive a
    gain on your investment when you sell our common stock and may
    lose some or all of the amount of your investment. Investors
    seeking cash dividends in the foreseeable future should not
    purchase our common stock.
We will
    incur increased costs as a result of being a publicly-traded
    company.
As a company with publicly-traded securities, we will incur
    significant legal, accounting and other expenses not presently
    incurred. In addition, the Sarbanes-Oxley Act of 2002, as well
    as rules promulgated by the U.S. Securities and Exchange
    Commission, or SEC, and The Nasdaq Stock Market, require us to
    adopt corporate
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governance practices applicable to U.S. public companies
.
These rules and regulations may increase our legal and financial
    compliance costs.
If we do
    not timely satisfy the requirements of Section 404 of the
    Sarbanes-Oxley Act of 2002, the trading price of our common
    stock could be adversely affected.
As a company with publicly-traded securities, we will be subject
    to Section 404 of the Sarbanes-Oxley Act of 2002. This law
    requires us to document and test the effectiveness of our
    internal control over financial reporting in accordance with an
    established internal control framework and to report on our
    conclusion as to the effectiveness of our internal control over
    financial reporting. The cost to comply with this law will
    affect our net income adversely. Any delays or difficulty in
    satisfying the requirements of Section 404 could, among
    other things, cause investors to lose confidence in, or
    otherwise be unable to rely on, the accuracy of our reported
    financial information, which could adversely affect the trading
    price of our common stock. In addition, failure to comply with
    Section 404 could result in The Nasdaq Stock Market
    imposing sanctions on us, which could include the delisting of
    our common stock.
Risks
    Relating to Our Indebtedness
Restrictive
    covenants in our debt instruments restrict or prohibit our
    ability to engage in or enter into a variety of transactions,
    which could adversely restrict our financial and operating
    flexibility and subject us to other risks.
Our senior revolving credit facility contains various
    restrictive covenants that limit our and our subsidiaries'
    ability to take certain actions. In particular, these agreements
    limit our and our subsidiaries' ability to, among other
    things:
•
incur additional indebtedness;
•
make restricted payments (including paying dividends on,
    redeeming or repurchasing capital stock);
•
make certain investments or acquisitions;
•
create liens on our assets to secure debt;
•
engage in certain types of transactions with affiliates;
•
engage in
sale-and-leaseback
or similar transactions; and
•
transfer or sell assets, merge, liquidate or
wind-up.
Any or all of these covenants could have a material adverse
    effect on our business by limiting our ability to take advantage
    of financing, merger and acquisition or other corporate
    opportunities and to fund our operations. Any future debt could
    also contain financial and other covenants more restrictive than
    those imposed under our current senior revolving credit facility.
A breach of a covenant or other provision in any debt instrument
    governing our current or future indebtedness could result in a
    default under that instrument and, due to customary
    cross-default and cross-acceleration provisions, could result in
    a default under any other debt instrument that we may have. If
    the lenders under our current or future indebtedness were to so
    accelerate the payment of the indebtedness, we cannot assure you
    that our assets or cash flow would be sufficient to repay in
    full our outstanding indebtedness, in which event we likely
    would seek reorganization or protection under bankruptcy or
    other, similar laws.
23
Table of Contents
Global
    capital and credit market issues could negatively affect our
    liquidity, increase our costs of borrowing and disrupt the
    operations of our suppliers, bottlers, distributors and
    customers.
The global capital and credit markets have experienced increased
    volatility and disruption over the past two years, making it
    more difficult for companies to access those markets. There can
    be no assurance that continued or increased volatility and
    disruption in the capital and credit markets will not impair our
    liquidity or increase our costs of borrowing. Our business could
    also be negatively impacted if our suppliers, bottlers,
    distributors or retail customers experience disruptions
    resulting from tighter capital and credit markets or a slowdown
    in the general economy.
We may be
    unable to generate sufficient cash flow to service our debt
    obligations. In addition, our inability to generate sufficient
    cash flows to support operations and other activities without
    debt financing could prevent future growth and
    success.
Our ability to generate cash, make scheduled payments or
    refinance our obligations depends on our successful financial
    and operating performance. Our financial and operating
    performance, cash flow and capital resources depend upon
    prevailing economic conditions and various financial, business
    and other factors, many of which are beyond our control. If our
    cash flow and capital resources are insufficient to fund our
    debt service obligations, we may be forced to reduce or delay
    capital expenditures, sell material assets or operations, obtain
    additional capital or restructure our debt, any or all of which
    could have a material adverse effect on our business, financial
    condition and results of operations. In addition, we cannot
    assure you that we would be able to take any of these actions on
    terms acceptable to us, or at all, that these actions would
    enable us to continue to satisfy our capital requirements or
    that these actions would be permitted under the terms of our
    various debt agreements.
If we are unable to generate sufficient cash flows to support
    capital expansion, business acquisition plans and general
    operating activities, and are unable obtain the necessary
    funding for these items through debt financing, our business
    could be negatively affected and we may be unable to expand into
    existing and new markets. Our ability to generate cash flows is
    dependent in part upon obtaining necessary financing at
    favorable interest rates. Interest rate fluctuations and other
    capital market conditions may prevent us from doing so.
24
Table of Contents
CAUTIONARY
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are
    based on current expectations, estimates, forecasts and
    projections regarding management's beliefs and assumptions
    about the industry in which we operate. Such statements include,
    in particular, statements about our plans, strategies and
    prospects under the headings "Prospectus Summary,"
    "Risk Factors," "Use of Proceeds,"
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" and
    "Business." When used in this prospectus, the words
    "anticipate," "believe," "could,"
    "estimate," "expect," "intend,"
    "may," "plan," "potential,"
    "predict," "project," "should,"
    "will," "would," and similar expressions
    identify forward-looking statements.
Forward-looking statements are not a guarantee of future
    performance or results, and will not necessarily be accurate
    indications of the times at, or by, which such performance or
    results will be achieved. Forward-looking statements are based
    on information available at the time the statements are made and
    involve known and unknown risks, uncertainties and other factors
    that may cause actual outcomes and results to differ materially
    from what is expressed or forecasted in such forward-looking
    statements. These forward-looking statements include, but are
    not limited to, statements relating to:
•
our expectations regarding the use of proceeds from this
    offering;
•
growth in the market for purified water and increased consumer
    preference toward purified water relative to tap water or other
    beverages;
•
consumer recognition of our brand and our water bottle exchange
    service and water dispenser products;
•
the use of our retail relationships, single-vendor solution,
    national network of independent bottlers and distributors and
    MIS tools to facilitate our introduction of new purified
    water-related products in the future;
•
our opportunities to increase store penetration with our
    existing retail relationships and develop new retail
    relationships;
•
the continuing development, innovation and sale of our water
    dispensers;
•
our intention to offer new products and services, including
    self-service refill vending machines and automated, self-bagging
    purified ice dispensers;
•
our expectations regarding our business strategy, anticipated
    profitability, liquidity position, future financial performance,
    inflation and expense levels;
•
our ability to use any net operating loss carryforwards;
•
our dividend policy;
•
our ability to attract and retain key personnel;
•
our expectations regarding additional costs connected to the
    growth of our business and costs related to becoming a public
    company; and
•
our policies regarding our executive compensation program and
    the level of executive compensation.
We have included important factors in the cautionary statements
    included in this prospectus, particularly in the section
    entitled "Risk Factors," that we believe could cause
    actual results or events to differ materially from the
    forward-looking statements we make. Except as required by
    applicable law, we assume no obligation to update any
    forward-looking statements publicly or to update the reasons why
    actual results could differ materially from those anticipated in
    any forward looking statements, even if new information becomes
    available in the future.
25
Table of Contents
USE OF
    PROCEEDS
We estimate that the net proceeds to us from this offering will
    be approximately $      million
    (approximately $      million if
    the underwriters' over-allotment option is exercised in
    full). This estimate is based upon an assumed initial public
    offering price of $      per share,
    less estimated underwriting discounts and commissions and
    offering expenses payable by us. A $1.00 increase (decrease) in
    the assumed initial public offering price of
    $      per share would increase
    (decrease) the net proceeds to us from this offering by
    approximately $      million,
    assuming the number of shares offered by us, as set forth on the
    cover page of this prospectus, remains the same and after
    deducting estimated underwriting discounts and commissions and
    estimated offering expenses payable by us.
We intend to use the net proceeds from this offering as follows:
•
$      to repay our
    14% subordinated convertible notes due March 31, 2011
    ("2011 Notes"); and
•
the remaining $      for working
    capital and general corporate purposes.
As
    of          ,
    2010, we had $15.0 million principal amount of 2011 Notes
    outstanding that bear interest at 14% per annum and mature on
    March 31, 2011. We issued the 2011 Notes on
    December 30, 2009 and used the proceeds of the 2011 Notes
    to retire $8.0 million principal amount of subordinated
    debt and to repay approximately $7.0 million of borrowings
    under our revolving credit facility.
Pending use of the net proceeds of this offering, we intend to
    invest such net proceeds in short-term, interest-bearing
    investment grade securities.
DIVIDEND
    POLICY
We have never paid or declared cash dividends on our common
    stock. We currently intend to retain all available funds and any
    future earnings to finance the development and expansion of our
    business. We do not expect to pay any dividends on our common
    stock in the foreseeable future. Any future determination to pay
    dividends will be at the discretion of our Board of Directors
    and will depend upon various factors, including our results of
    operations, financial condition, capital requirements,
    investment opportunities and other factors that our Board of
    Directors deems relevant. Our senior credit agreement currently
    limits our ability to pay cash dividends.
26
Table of Contents
CAPITALIZATION
The following table sets forth our capitalization as of
    December 31, 2009:
•
on an actual basis (without giving effect to
    the  -for-   reverse stock split of our
    common stock);
•
on a pro forma basis to give effect to
    the  -for-   reverse stock split of our
    common stock and to the conversion of all outstanding
    Series A and Series C convertible preferred stock into
    common stock, as if both the reverse stock split and the
    conversion had occurred as of December 31, 2009; and
•
on a pro forma as adjusted basis to reflect the reverse stock
    split and conversion described above, as well as our sale of
    shares in this offering at an assumed initial public offering
    price of $      per share, which is the
    midpoint of the range set forth on the cover page of this
    prospectus, after deducting estimated underwriting discounts and
    commissions and offering expenses payable by us, and the
    application of a portion of the net proceeds from such sale of
    common stock to repay our 2011 Notes, as if each had occurred as
    of December 31, 2009.
You should read this table in conjunction with "Use of
    Proceeds," "Selected Historical Consolidated Financial
    and Other Data," "Management's Discussion and
    Analysis of Financial Condition and Results of Operations"
    and our consolidated financial statements and the notes thereto
    included elsewhere in this prospectus.
As of December 31, 2009
Pro Forma
Actual
Pro Forma
as Adjusted
(in thousands, except par value data) (Unaudited)
Cash
$
—
Current liabilities
7,326
Long-term liabilities
15,451
Preferred stock, $0.001 par value, 100,000 shares
    authorized
Series A convertible preferred stock, 18,780 shares
    issued and outstanding, actual, and no shares issued or
    outstanding, pro forma and pro forma as adjusted
19
Series B preferred stock, 23,280 shares issued and
    outstanding, actual and pro forma, and no shares issued or
    outstanding, pro forma as adjusted
23
Series C convertible preferred stock, 12,520 shares
    issued and outstanding, actual, and no shares issued or
    outstanding, pro forma and pro forma as adjusted
13
Common stock ($0.001 par value, 200,000 shares
    authorized and 15,158 shares issued and outstanding,
    actual;           shares
    authorized
    and           shares
    issued and outstanding, pro forma,
    and           shares
    issued and outstanding pro forma as adjusted)
15
Additional paid-in capital
86,723
Common stock warrants
3,797
Accumulated deficit
(90,999
)
Total stockholders' equity (deficit)
(409
)
Total capitalization
$
22,368
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Table of Contents
The shares outstanding data in the preceding table as of
    December 31, 2009:
•
excludes           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series B preferred stock and Series C convertible
    preferred stock that will expire     
    days after the closing of this offering;
•
excludes           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire      days after the closing
    of this offering;
•
excludes           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our 2011 Notes
    that will expire December 30, 2019;
•
excludes an aggregate
    of           shares
    of common stock issuable under our 2004 Stock Plan;
•
excludes an aggregate
    of           shares
    of common stock available for issuance under our 2010 Omnibus
    Long-Term Incentive Plan, which we have adopted in connection
    with this offering;
•
excludes an aggregate
    of           shares
    of common stock available for issuance under our 2010 Employee
    Stock Purchase Plan, which we have adopted in connection with
    this offering; and
•
assumes no exercise of the underwriters' over-allotment
    option to purchase up
    to          
    additional shares of our common stock.
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Table of Contents
DILUTION
If you invest in our common stock, your ownership interest will
    be diluted to the extent of the difference between the initial
    public offering price per share of our common stock and the pro
    forma as adjusted net tangible book value per share of our
    common stock immediately after the closing of this offering. Pro
    forma net tangible book value per share represents total
    tangible assets less total liabilities, divided by the number of
    shares of common stock outstanding, after giving effect to
    the     -for-     reverse
    stock split of our common stock and the conversion of all of our
    outstanding Series A and Series C convertible
    preferred stock into an aggregate
    of           shares
    of our common stock as if both the reverse stock split and the
    conversion had occurred as of December 31, 2009. The pro
    forma net tangible book value of our common stock as of
    December 31, 2009, was approximately
    $      million, or approximately
    $      per share.
After giving effect to our sale of shares at an assumed initial
    public offering price of $      per
    share, which is the midpoint of the range set forth on the cover
    page of this prospectus, deducting estimated underwriting
    discounts and commissions and offering expenses payable by us,
    and applying the net proceeds from this sale, the pro forma as
    adjusted net tangible book value of our common stock, as of
    December 31, 2009, would have been approximately
    $      million, or
    $      per share. This amount
    represents an immediate increase in net tangible book value to
    our existing stockholders of $      per
    share and an immediate dilution to new investors of
    $      per share. The following table
    illustrates this per share dilution:
Initial public offering price per share
$
Pro forma net tangible book value per share as of
    December 31, 2009
$
Increase in pro forma net tangible book value per share
    attributable to new investors in this offering
$
Pro forma as adjusted net tangible book value per share after
    giving effect to this offering
$
Dilution per share to new investors
$
If the underwriters exercise their over-allotment option in
    full, there will be an increase in pro forma as adjusted net
    tangible book value per share to existing stockholders of
    $      per share and an immediate
    dilution in pro forma as adjusted net tangible book value per
    share to new investors of $      per
    share based upon the assumed initial public offering price of
    $      per share. A $1.00 increase or
    decrease in the assumed initial public offering price per share
    would increase or decrease, respectively, the pro forma as
    adjusted net tangible book value per share of common stock after
    this offering by $      per share and
    increase or decrease, respectively, the pro forma as adjusted
    dilution per share of common stock to new investors in this
    offering by $      per share, in each
    case calculated as described above and assuming that the number
    of shares offered by us, as set forth on the cover page of this
    prospectus, remains the same.
The following table summarizes, as of December 31, 2009, on
    a pro forma as adjusted basis, the number of shares of common
    stock purchased from us, the total consideration paid to us and
    the average price per share paid by our existing stockholders
    and by new investors, based upon an assumed initial public
    offering price of $      per share and
    before deducting estimated underwriting discounts and
    commissions and offering expenses payable by us.
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
Per Share
Existing stockholders
%
$
%
$
New investors
%
$
%
$
Total
100%
$
100%
$
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Table of Contents
The discussion and tables above are based
    on           shares
    of common stock outstanding as of December 31, 2009, on a
    pro forma as adjusted basis and:
•
reflect
    a     -for-     
    reverse stock split of our common stock that will occur
    immediately prior to the closing of this offering;
•
reflect the conversion of our Series A and Series C
    convertible preferred stock into common stock immediately prior
    to the closing of this offering;
•
exclude           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with our
    Series B preferred stock and Series C convertible
    preferred stock that will
    expire          
    days after the closing of this offering;
•
exclude          
    shares of common stock issuable upon the exercise of warrants to
    purchase common stock issued to a third party that will
    expire      days after the closing
    of this offering;
•
exclude           shares
    of common stock issuable upon the exercise of warrants to
    purchase common stock issued in connection with 2011 Notes that
    expire December 30, 2019;
•
exclude an aggregate
    of           shares
    of common stock issuable under our 2004 Stock Plan;
•
exclude an aggregate
    of           shares
    of common stock issuable under our 2010 Omnibus Long-Term
    Incentive Plan, which we have adopted in connection with this
    offering;
•
exclude an aggregate
    of           shares
    of common stock issuable under our 2010 Employee Stock Purchase
    Plan, which we have adopted in connection with this
    offering; and
•
assume no exercise of the underwriters' over-allotment
    option to purchase up
    to           additional
    shares of our common stock.
If the underwriters' over-allotment option is exercised in
    full, the number of shares held by the existing stockholders
    after this offering would be reduced
    to     % of the total number of shares
    of our common stock outstanding after this offering, and the
    number of shares held by new investors would increase
    to     % of the total number of shares
    of our common stock outstanding after this offering.
30
Table of Contents
SELECTED
    HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth our selected historical
    consolidated financial and other data for the periods indicated.
    We prepared the selected historical consolidated financial data
    using our consolidated financial statements for each of the
    years presented. The selected historical consolidated financial
    data for each year in the three-year period ended
    December 31, 2009, were derived from our audited historical
    consolidated financial statements appearing elsewhere in this
    prospectus, and the selected historical consolidated financial
    data for each year in the two-year period ended
    December 31, 2006, were derived from our audited historical
    consolidated financial statements not appearing in this
    prospectus. You should read this selected historical
    consolidated financial data in conjunction with such audited
    historical consolidated financial statements and related notes
    and "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" included elsewhere in
    this prospectus. The selected historical consolidated financial
    data are not necessarily indicative of future results.
Year Ended December 31,
2005
2006
2007
2008
2009
(in thousands, except per share amounts)
Consolidated statements of operations data:
Net sales
$
158
$
6,589
$
13,453
$
34,647
$
46,981
Cost of sales
220
6,141
11,969
30,776
38,771
Gross profit
(62
)
448
1,484
3,871
8,210
Selling, general and administrative expenses
6,684
11,172
13,719
17,409
14,127
Loss from operations
(6,746
)
(10,724
)
(12,235
)
(13,538
)
(5,917
)
Interest (expense) and other income, net
175
116
65
(70
)
(2,257
)
Loss from continuing operations before income taxes
(6,571
)
(10,608
)
(12,170
)
(13,608
)
(8,174
)
Provision for income taxes
—
—
—
—
—
Loss from continuing operations
(6,571
)
(10,608
)
(12,170
)
(13,608
)
(8,174
)
Loss from discontinued operations, net of income taxes
—
—
(1,904
)
(5,738
)
(3,650
)
Net loss
(6,571
)
(10,608
)
(14,074
)
(19,346
)
(11,824
)
Preferred dividends
(851
)
(1,563
)
(2,147
)
(2,327
)
(3,042
)
Net loss attributable to common stockholders
$
(7,422
)
$
(12,171
)
$
(16,221
)
$
(21,673
)
$
(14,866
)
Basic and diluted loss per common share:
Loss from continuing operations attributable to common
    stockholders
$
$
$
$
$
Loss from discontinued operations attributable to common
    stockholders
Net loss attributable to common stockholders
$
$
$
$
$
Basic and diluted weighted average common shares outstanding
As of December 31,
2005
2006
2007
2008
2009
(in thousands)
Consolidated balance sheet data:
Cash
$
5,606
$
7,638
$
5,776
$
516
$
—
Total assets
12,107
20,904
21,909
30,570
22,368
Long-term debt, less current maturities
43
13
—
5
14,403
Other long-term obligations
4
—
—
481
1,048
Year Ended December 31,
2005
2006
2007
2008
2009
(in thousands, except location amounts)
(Unaudited)
Other information:
Water bottle exchange locations at year end
300
2,300
4,700
6,400
7,000
Water bottle units sold
14
745
1,994
3,215
3,853
Water dispenser units sold
—
—
12
177
272
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Table of Contents
MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
    condition and results of operations should be read in
    conjunction with the section titled "Selected Historical
    Consolidated Financial and Other Data" and our financial
    statements and related notes appearing elsewhere in this
    prospectus. Our actual results could differ materially from
    those anticipated in the forward-looking statements included in
    this discussion as a result of certain factors, including, but
    not limited to, those discussed in the section of this
    prospectus titled "Risk Factors."
Overview
Primo Water Corporation is a rapidly growing provider of three-
    and five-gallon purified bottled water and water dispensers sold
    through major retailers nationwide. Our business is designed to
    generate recurring demand for Primo purified bottled water
    through the sale of our innovative water dispensers. Once our
    bottled water is consumed using a water dispenser, empty bottles
    are exchanged at our recycling center displays, which provide a
    recycling ticket that offers a discount toward the purchase of a
    new bottle of Primo purified water. We have created a nationwide
    single-vendor water bottle exchange service for our retail
    customers that requires minimal customer management supervision
    and store-based labor and provides centralized billing and
    detailed performance reports. We deliver this service utilizing
    our national network of primarily independent bottlers and
    distributors. As of December 31, 2009, our water bottle
    exchange service and water dispensers were offered in each of
    the contiguous United States and located in approximately 7,000
    and 5,500 retail locations, respectively. For 2007, 2008 and
    2009, we generated net sales of $13.5 million,
    $34.6 million and $47.0 million, respectively.
In this Management's Discussion and Analysis of Financial
    Condition and Results of Operations, when we refer to "same
    store sales" for our Exchange segment, we are comparing
    retail locations at which our water bottle exchange service had
    been available for at least 12 months at the beginning of
    the relevant period.
Business
    Segments
We manage our business primarily through two reporting segments:
    Primo Bottled Water Exchange ("Exchange") and Primo
    Products ("Products").
Our Exchange segment sells three- and five-gallon purified
    bottled water through retailers in each of the contiguous United
    States. We currently offer our exchange service at approximately
    7,000 locations through point of purchase display racks and
    recycling centers that are prominently located at major
    retailers in space that is often underutilized. We service these
    retail locations through our national network of primarily
    independent bottlers and distributors.
Our Products segment sells water dispensers that are designed to
    dispense Primo and other dispenser-compatible bottled water. Our
    Products sales are primarily generated through major
    U.S. retailers. Our water dispensers are sold primarily
    through a direct-import model, where we recognize revenues for
    the sale of the water dispensers when title is transferred to
    our retailer customers. We support retail sell-through with
    limited domestic inventory.
We evaluate the financial results of these segments focusing
    primarily on segment net sales and segment income (loss) from
    operations before depreciation and amortization ("segment
    income (loss) from operations"). We utilize segment net
    sales and segment income (loss) from operations because we
    believe they provide useful information for effectively
    allocating our resources between business segments, evaluating
    the health of our business segments based on metrics that
    management can actively influence and gauging our investments
    and our ability to service, incur or pay down debt.
Operating segments that do not meet quantitative thresholds for
    segment reporting are included in Other.
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Table of Contents
Cost of sales for Exchange consists of costs for bottling and
    related packaging materials and distribution costs for our
    bottled water. Cost of sales for Products consists of contract
    manufacturing, freight, duties and warehousing costs of our
    water dispensers.
Selling, general and administrative expenses for both segments
    consist primarily of personnel costs for sales, marketing,
    operations support and customer service, as well as other
    supporting costs for operating each segment.
Expenses not specifically related to operating segments are
    shown separately as Corporate. Corporate expenses are comprised
    mainly of compensation and other related expenses for corporate
    support, information systems, and human resources and
    administration. Corporate expenses also include certain
    professional fees and expenses and compensation of our Board of
    Directors.
Recent
    Transactions
In December 2009, we completed the divesture of our former
    subsidiary, Prima Bottled Water, Inc. ("Prima"), by
    distributing the stock in Prima to our existing stockholders on
    a pro rata basis based upon each such stockholder's
    proportionate ownership of our common stock, Series A
    preferred stock and Series C preferred stock on an
    as-converted basis. The assets, liabilities and results of
    operations of Prima are accounted for as discontinued
    operations. For 2007, 2008 and 2009, we recognized losses from
    discontinued operations of $1.9 million, $5.7 million
    and $3.7 million, respectively.
Results
    of Operations
The following table sets forth our results of operations for the
    periods indicated:
Years Ended December 31,
2007
2008
2009
(in thousands)
Consolidated statements of operations data:
Net sales
$
13,453
$
34,647
$
46,981
Cost of sales
11,969
30,776
38,771
Gross profit
1,484
3,871
8,210
Selling, general and administrative expenses
13,719
17,409
14,127
Loss from operations
(12,235
)
(13,538
)
(5,917
)
Interest (expense) and other income, net
65
(70
)
(2,257
)
Loss from continuing operations before income taxes
(12,170
)
(13,608
)
(8,174
)
Provision for income taxes
—
—
—
Loss from continuing operations
(12,170
)
(13,608
)
(8,174
)
Loss from discontinued operations, net of income taxes
(1,904
)
(5,738
)
(3,650
)
Net loss
(14,074
)
(19,346
)
(11,824
)
Preferred dividends
(2,147
)
(2,327
)
(3,042
)
Net loss attributable to common stockholders
$
(16,221
)
$
(21,673
)
$
(14,866
)
33
Table of Contents
The following table sets forth our results of operations
    expressed as a percentage of net sales for the periods indicated:
Years Ended December 31,
2007
2008
2009
Consolidated statements of operations data:
Net sales
100.0
%
100.0
%
100.0
%
Cost of sales
89.0
88.8
82.5
Gross profit
11.0
11.2
17.5
Selling, general and administrative expenses
102.0
50.3
30.1
Loss from operations
(91.0
)
(39.1
)
(12.6
)
Interest (expense) and other income, net
0.5
(0.2
)
(4.8
)
Loss from continuing operations before income taxes
(90.5
)
(39.3
)
(17.4
)
Provision for income taxes
—
—
—
Loss from continuing operations
(90.5
)
(39.3
)
(17.4
)
Loss from discontinued operations, net of income taxes
(14.1
)
(16.5
)
(7.8
)
Net loss
(104.6
)%
(55.8
)%
(25.2
)%
The following table sets forth our segment net sales and segment
    income (loss) from operations presented on a segment basis and
    reconciled to our consolidated loss from operations.
Years Ended December 31,
2007
2008
2009
(in thousands)
Segment Net Sales
Exchange
$
10,875
$
19,237
$
22,638
Products
949
13,758
22,824
Other
1,818
1,874
1,611
Inter-company elimination
(189
)
(222
)
(92
)
Total net sales
$
13,453
$
34,647
$
46,981
Segment Income (Loss) from Operations
Exchange
$
(2,834
)
$
(1,267
)
$
3,374
Products
(631
)
(1,447
)
(272
)
Other
(175
)
(116
)
(34
)
Inter-company elimination
—
(13
)
9
Corporate
(5,229
)
(7,077
)
(4,789
)
Depreciation and amortization
(3,366
)
(3,618
)
(4,205
)
Loss from operations
$
(12,235
)
$
(13,538
)
$
(5,917
)
Year
    Ended December 31, 2009 Compared to Year Ended
    December 31, 2008
Net Sales.
Net sales for 2009 increased
    $12.3 million or 35.6% to $47.0 million from
    $34.6 million in 2008. The increase in sales resulted
    primarily from a 65.9% increase in Products sales and a 17.7%
    increase in Exchange sales.
Exchange.
Exchange net sales increased $3.4 million
    or 17.7% to $22.6 million in 2009, representing 48.2% of
    our total net sales in 2009. The increase was due to an increase
    in water bottle units sold of approximately 0.6 million
    units or 19.8% to 3.9 million units sold in 2009. The
    increase in units sold was driven by a same store sales increase
    of 7.9% as well as an 8.3% increase in selling locations to
    approximately 7,000 at December 31, 2009. The average price
    per unit decreased 1.7% in 2009 compared to 2008 as a result of
    a shift in mix of transactions to 70.9% exchange and 29.1%
    initial purchase transactions in 2009 compared to 63.2% exchange
    and 36.8% initial purchase transactions in 2008. We recognize
    approximately twice as much revenue on initial purchase
    transactions as we do on exchange transactions. Adding new
    locations at which our water bottle
34
Table of Contents
exchange service is offered is important to our strategy of
    penetrating more homes with our water dispensers as expanded
    locations and increased water bottle availability enhance the
    convenience of our service to consumers.
Products.
Products net sales increased $9.1 million
    or 65.9% to $22.8 million in 2009, representing 48.6% of
    our total net sales in 2009. The increase was due to the
    successful launch of new water dispenser models and the
    increased number of retailers that offered our products in 2009.
    Dispenser sales increased 95,000 units or 53% to
    approximately 272,000 units in 2009. We anticipate
    continuing to introduce and offer new water dispenser models.
    Water dispenser home penetration is critical to the success of
    our strategy of increasing sales of our complementary
    recurring-revenue bottled water exchange service.
Gross Margin.
Our overall gross margin as a percentage of
    net sales increased to 17.5% for 2009 from 11.2% for 2008.
Exchange
. Gross margin as a percentage of net sales in
    our Exchange segment increased to 26.6% for 2009 from 15.2% in
    2008 due primarily to decreased freight costs as a result of the
    addition of bottling and distribution capabilities during 2008
    for which we received a full-year benefit in 2009. With these
    additions we believe we have sufficient bottling and
    distribution capabilities to service our continued growth. We
    anticipate slight improvements in gross margin for our Exchange
    segment for 2010 as we further benefit from improvements in our
    supply chain and realize efficiencies from our business model in
    which many of our variable costs are fixed.
Products
. Gross margin as a percentage of net sales in
    our Products segment improved to 5.6% for 2009 from 0.5% in 2008
    due primarily to improved pricing from retailers. Our strategy
    is to sell our water dispensers at minimal operating profit in
    order to increase home penetration, which we believe will lead
    to increased recurring-revenue, higher margin Exchange sales.
Selling, General and Administrative Expenses.
Selling,
    general and administrative expenses for 2009 decreased
    $3.3 million or 18.9% to $14.1 million from
    $17.4 million and, as a percentage of net sales, decreased
    to 30.1% for 2009 from 50.3% for 2008. The decrease is due to
    lower employee-related costs as a result of a reduction in
    headcount of 17 employees as well as reduced levels of
    consulting fees and related travel and benefit costs resulting
    in about $2.6 million of the overall reduction in selling,
    general and administrative expenses. The additional personnel
    resources were related to our efforts in 2008 to expand our
    supply chain with more bottling and distribution capacity and
    information system infrastructure as well as our efforts to
    establish new business segments. During 2009 we were able to
    reduce these personnel resources when our supply chain reached
    what we believe to be an appropriate size. We were able to
    significantly grow our business and expand our gross margins in
    2009 despite the reduction in selling, general and
    administrative expenses. While we do not expect to incur
    significant additional costs connected to the growth of our
    business in 2010, we do expect to incur about $1.0 million
    in additional costs as a public company related to compliance,
    reporting and insurance.
Interest (Expense) and Other Income, Net.
Net interest
    expense for 2009 increased to $2.3 million from $70,000 in
    2008 as a result of increased use of debt to fund business
    operations. We expect the proceeds from this offering to repay
    debt and lower future interest cost relative to that experienced
    during 2009.
Preferred Stock Dividends.
Dividends on our Series B
    preferred stock increased $0.7 million to $3.0 million
    in 2009 from $2.3 million in 2008. In January 2009, we
    offered holders of our Series B preferred stock the option
    to suspend their current cash dividend payment of 10% in
    exchange for a dividend accrual of 15% for 2009. Cash dividends
    paid on our Series B preferred stock during 2009 and 2008
    were $1.3 million and $2.3 million, respectively. At
    December 31, 2009 and 2008 the accrued and unpaid dividends
    on our Series B preferred stock were $2.4 million and
    $0.6 million, respectively, which is included in accrued
    expenses and other current liabilities in the consolidated
    balance sheet.
Year
    Ended December 31, 2008 Compared to Year Ended
    December 31, 2007
Net Sales.
Net sales for 2008 increased
    $21.2 million or 157.5% to $34.6 million from
    $13.5 million in 2007. The increase in net sales resulted
    primarily from a 1,349.7% increase in Products sales and a 76.9%
    increase in Exchange sales.
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Table of Contents
Exchange.
Exchange net sales increased $8.3 million
    to $19.2 million in 2008, representing 55.5% of our total
    net sales in 2008. The increase was due to an increase in water
    bottle units sold of 1.2 million or 61.2% to
    3.2 million units sold in 2008. The increase in units was
    driven by a same store sales increase of 22.0% as well as a
    36.1% increase in selling locations to approximately 6,400
    selling locations at December 31, 2008. The average price
    per unit increased 9.7% in 2008 primarily as a result of a price
    increase implemented in mid-2008.
Products.
Products net sales increased $12.8 million
    to $13.8 million, representing 39.7% of our total net sales
    in 2008. The increase is due to the successful launch of our
    Products business segment in late 2007. Product sales increased
    by approximately 165,000 units to approximately
    177,000 units sold in 2008.
Gross Margin.
Our overall gross margin as a percentage of
    net sales increased to 11.2% for 2008 from 11.0% for 2007.
Exchange
. Gross margin as a percentage of net sales in
    our Exchange segment increased to 15.2% for 2008 from 6.1% in
    2007 due primarily to decreased freight costs as a result of the
    addition of 28 bottlers and ten distributors in 2008.
Products
. Gross margin as a percentage of net sales in
    our Products segment improved to 0.5% for 2008 from (23.2)% in
    2007 due primarily to limited sales volume in 2007.
Selling, General and Administrative Expenses.
Selling,
    general and administrative expenses, excluding impairment
    charges, for 2008 increased $3.7 million or 26.2% to
    $17.4 million from $13.7 million and, as a percentage
    of net sales, decreased to 50.0% for 2008 from 102.0% for 2007.
    The increase is primarily due to higher employee-related costs
    as a result of headcount additions, consulting fees and related
    travel and benefit costs resulting in about $3.1 million of
    the overall expense increase. The additional personnel resources
    were related to our efforts to expand our supply chain with more
    bottling and distribution capacity, enhance information system
    infrastructure and establish new business segments. Selling,
    general and administrative expenses as a percentage of net sales
    decreased significantly as we grew net sales at a faster rate
    than our expense growth.
Interest Expense and Other Income, Net.
Net interest and
    other income for 2008 decreased to an expense of $70,000 from
    income of $65,000 in 2007 as a result of the use of debt to fund
    business operations, which were primarily funded with equity in
    2007.
Preferred Stock Dividends.
Dividends on our Series B
    preferred stock increased $0.2 million to $2.3 million
    in 2008 from $2.1 million in 2007. At both
    December 31, 2008 and 2007, the accrued and unpaid
    dividends on our Series B preferred stock were
    $0.6 million, which is included in accrued expenses and
    other current liabilities in the consolidated balance sheet.
Liquidity
    and Capital Resources
Since inception, we have financed our operations primarily
    through the sale of preferred stock, the issuance of long term
    debt and borrowings under credit facilities. At
    December 31, 2009, our principal sources of liquidity were
    accounts receivable, net of allowance for doubtful accounts, of
    $1.9 million compared to cash of $0.5 million and
    accounts receivable, net of allowance for doubtful accounts, of
    $3.2 million at December 31, 2008. As of
    December 31, 2009, we had a working capital deficit of
    $2.5 million compared to a working capital deficit of
    $2.6 million as of December 31, 2008.
During 2009, the primary source of capital was proceeds from the
    issuance of long term debt and, as of December 31, 2009, we
    had an outstanding debt balance of $14.8 million, net of a
    $0.6 million discount. During 2008 and 2007, our primary
    source of capital was the proceeds of preferred stock issuances
    of $19.6 million and $14.1 million, respectively.
    Additionally, during 2008 we made borrowings under our credit
    facilities, which had a balance of $7.0 million at
    December 31, 2008.
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Table of Contents
Net Cash
    Flows from Operating Activities
Net cash used in operating activities was $2.0 million for
    2009, $11.8 million for 2008 and $6.8 million for
    2007. For 2009, net cash used in operations was primarily the
    result of $8.2 million of loss from continuing operations,
    partially offset by non-cash depreciation and amortization of
    $4.2 million, non-cash interest expense of
    $0.7 million related to our long term debt issuances and
    reduction in working capital components of $0.8 million.
For 2008, net cash used in operations was primarily the result
    of $13.6 million of loss from continuing operations,
    partially offset by depreciation and amortization of
    $3.6 million. Additional working capital for accounts
    receivable and inventory due to revenue growth resulted in a use
    of cash of $1.9 million and $1.3 million, respectively
    and was partially offset by an increase in accounts payable of
    $1.1 million.
For 2007, net cash used in operations was primarily the result
    of $12.2 million of loss from continuing operations,
    partially offset by depreciation and amortization of
    $3.4 million and the increase of accounts payable and
    accrued expenses of $1.0 million and $1.3 million,
    respectively.
Net Cash
    Flows from Investing Activities
Cash flows from investing activities included capital
    expenditures for property and equipment and bottles of
    $2.4 million in 2009, $9.4 million in 2008 and
    $5.0 million for 2007, which were our primary investing
    activities for all periods. Our capital expenditures in the past
    have been primarily for the installation of our recycle centers
    and display racks at new locations that offer our water bottle
    exchange service as well as related transportation racks and
    bottles. We also invest in technology infrastructure to manage
    our network of independent bottlers and distributors.
Net Cash
    Flows from Financing Activities
Cash provided by financing activities was $6.3 million for
    2009, $24.4 million for 2008 and $12.5 million for
    2007. For 2009, financing activities were primarily the issuance
    of long term debt of $20.4 million that was partially
    offset by payments of $6.6 million on our senior revolving
    credit facility, payments of $5.4 million related to other
    long-term debt, Series B preferred stock dividend payments
    of $1.3 million and payment of debt issuance costs of
    $0.6 million. The cash component of our Series B
    preferred stock dividends was partially reduced in 2009 and
    accrued as opposed to paid currently. Additionally, the cash
    dividends paid will be further reduced for 2010 to approximately
    $0.2 million.
For 2008, financing activities were primarily the issuance of
    preferred stock of $19.6 million and borrowings of
    $7.0 million on our revolving credit facility that were
    partially offset by payments of $2.3 million of
    Series B preferred stock dividends.
For 2007, financing activities were primarily the issuance of
    preferred stock of $14.1 million that was partially offset
    by $1.6 million of Series B Preferred Stock dividend
    payments.
Credit
    Facility
We originally entered into a revolving credit facility with
    Wachovia Bank National Association in June 2005 and in June 2008
    we amended the facility to extend the term to June 30,
    2010. The current facility commitment is $10.0 million and
    is subject to a customary borrowing base calculation for
    advances. Interest on the outstanding borrowings under the
    revolving credit facility is payable quarterly at our option at
    (i) the LIBOR Market Index Rate (LMIR) plus the applicable
    margin or (ii) the greater of (A) the Federal Funds
    Rate plus 0.50% or (B) the bank's prime rate plus the
    applicable margin. At December 31, 2009 and 2008, the
    interest rate on the outstanding balance under the facility was
    at the bank's prime rate plus 2.50% and 0.75%, respectively
    (5.75% at December 31, 2009 and 4.00% at December 31,
    2008). Beginning in January 2010 and effective with the December
    2009 amendment, the applicable margin for both the prime rate
    and the federal funds rate options was decreased to 1.00%. The
    availability under the Revolver was $5.9 million and
    $1.5 million at December 31, 2009 and 2008,
    respectively.
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Table of Contents
We are required to pay a fee per annum equal to 3.50% of the
    outstanding amount of letters of credit issued under the
    revolving credit facility. In addition, there is a fee of 0.50%
    on the unused portion of the revolver lending commitment. At
    December 31, 2009 and 2008, there were outstanding letters
    of credit totaling approximately $0.4 million and
    $0.3 million, respectively.
The revolving credit facility contains various conditions for
    extensions of credit and restrictive covenants including minimum
    quarterly EBITDA and gross revenue requirements. Substantially
    all of our assets are pledged as collateral to borrowings under
    the revolving credit facility.
14%
    Subordinated Convertible Notes due March 31, 2011
In December 2009, we issued our 14% subordinated
    convertible notes due March 31, 2011 ("2011
    Notes") to 28 investors, including existing stockholders,
    affiliates of existing stockholders and senior management. The
    2011 Notes have a total face value of $15.0 million and are
    subordinated to our bank revolving credit facility. The 2011
    Notes pay quarterly interest at a rate of 14% per annum. We
    intend to use proceeds of this offering to repay the 2011 Notes.
Warrants to purchase 1,111,109 shares of our common stock
    were issued in connection with the 2011 Notes. The initial fair
    value of the warrants is $0.6 million and resulted in an
    original issue discount on the 2011 Notes which will be
    amortized as interest expense over the term of the 2011 Notes.
    The fair value of the warrants is included in other long-term
    liabilities in the consolidated balance sheet and will be
    adjusted periodically until such time as the exercise price
    becomes fixed at which time the then fair value will be
    reclassified as a component of stockholders' equity
    (deficit).
Adequacy
    of Capital Resources
Our future capital requirements may vary materially from those
    now anticipated and will depend on many factors, including the
    rate of growth in new locations and related display and rack
    costs, cost to develop new water dispensers, sales and marketing
    resources needed to further penetrate our markets, the expansion
    of our operations in the United States, the response of
    competitors to our solutions and products and any acquisitions
    of other businesses. Historically, we have experienced increases
    in our capital expenditures consistent with the growth in our
    operations and personnel, and we anticipate that our
    expenditures will continue to increase as we grow our business.
We believe our cash, the proceeds from this offering, funds
    available under our revolving credit facility and future cash
    flows from our operations will be sufficient to meet our
    currently anticipated working capital and capital expenditure
    requirements for at least the next twelve months.
Off-Balance
    Sheet Arrangements
We do not have any off-balance sheet arrangements, investments
    in special purpose entities or undisclosed borrowings or debt.
    Additionally, we are not a party to any derivative contracts or
    synthetic leases.
Contractual
    and Commercial Commitment Summary
Our contractual obligations and commercial commitments as of
    December 31, 2009 are summarized below:
Payments Due by Period
Less Than
More Than
Contractual Obligations
Total
1 Year
1-3 Years
3-5 Years
5 Years
(in thousands)
Long-term debt obligations
$
15,000
$
—
$
15,000
$
—
$
—
Capital lease obligations
7
4
3
—
—
Operating lease obligations
2,008
691
841
394
82
Revolving credit facility
423
423
—
—
—
Total
$
17,438
$
1,118
$
15,844
$
394
$
82
38
Table of Contents
Inflation
During the last three years, inflation and changing prices have
    not had a material effect on our business and we do not expect
    that inflation or changing prices will materially affect our
    business in the foreseeable future.
Quantitative
    and Qualitative Disclosures About Market Risk
For fixed rate debt, interest rate changes affect the fair value
    of financial instruments but do not impact earnings or cash
    flows. Conversely, for floating rate debt, interest rate changes
    generally do not affect the fair market value but do impact
    future earnings and cash flows, assuming other factors are held
    constant. The recorded carrying amounts of cash and cash
    equivalents approximate fair value due to their short maturities.
We are exposed to market risk related to changes in interest
    rates on borrowings under our revolving credit facility. Our
    credit facility bears interest based on LIBOR and the prime
    rate, plus an applicable margin. To quantify our exposure to
    interest rate risk, a 100 basis point increase in interest
    rates would have increased interest expense for the years ended
    December 31, 2007, 2008, and 2009 by approximately $8,000,
    $29,000 and $132,000, respectively. Actual changes in interest
    rates may differ materially from the hypothetical assumptions
    used in computing this exposure.
Seasonality
We have experienced and expect to continue to experience
    seasonal fluctuations in our sales and operating income. Our
    sales and operating income have been highest in the spring and
    summer, and lowest in the fall and winter. Our Exchange segment,
    which generally enjoys higher margins than our Products segment,
    experiences higher sales and operating income in the spring and
    summer. Our Products segment had historically experienced higher
    sales and operating income in spring and summer, however, we
    believe the seasonality of this segment will be more dependent
    on retailer inventory management and purchasing cycles and not
    correlated to weather. Sustained periods of poor weather,
    particularly in the spring and summer, can negatively impact our
    sales in our higher margin Exchange segment. Accordingly, our
    results of operations in any quarter will not necessarily be
    indicative of the results that we may achieve for a fiscal year
    or any future quarter.
Critical
    Accounting Policies and Estimates
Our discussion and analysis of our financial condition and
    results of operations is based upon our consolidated financial
    statements and related notes, which have been prepared in
    accordance with accounting principles generally accepted in the
    United States of America ("GAAP"). The preparation of
    our financial statements in conformity with GAAP requires us to
    make certain estimates, judgments and assumptions. We believe
    that the estimates, judgments and assumptions used to determine
    certain amounts that affect the financial statements are
    reasonable, based on information available at the time they are
    made. To the extent there are material differences between these
    estimates, judgments and assumptions and actual results, our
    consolidated financial statements may be affected. Some of the
    more significant estimates include allowances for doubtful
    accounts, valuation of inventories, depreciation, valuation of
    deferred taxes and allowance for sales returns.
Revenue Recognition.
We recognize revenue when title to
    the product has transferred to the buyer, collectability of a
    fixed and determinable sales price is reasonably assured and we
    have no further obligations to assist in the resale of the
    products. Exchange revenue is recognized for the sale of three-
    and five-gallon purified bottled water upon either the delivery
    of inventory to the retail stores or the purchase by the
    consumer. Our water dispensers are procured primarily through a
    direct-import model, where we recognize revenue when title is
    transferred to our retail customers. Cash consideration provided
    for discounts and sales incentives, as well as provisions for
    returns and other adjustments are recorded as a reduction to
    sales.
Allowance for Doubtful Accounts.
We maintain an allowance
    for doubtful accounts for estimated losses resulting from our
    retail customers' inability to pay us. The allowance for
    doubtful accounts is based on a review of specifically
    identified accounts in addition to an overall aging analysis.
    Judgments are made with respect to the collectability of
39
Table of Contents
accounts receivable based on historical experience and current
    economic trends. Actual losses could differ from those estimates.
Long-Lived Assets.
We review long-lived assets for
    impairment whenever events or changes in circumstances indicate
    that the carrying amount may not be recoverable. The carrying
    amount of a long-lived asset is not recoverable if it exceeds
    the sum of the undiscounted cash flows expected to result from
    the use and eventual disposition of the asset at the date it is
    tested for recoverability, whether in use or under development.
    An impairment loss is measured as the amount by which the
    carrying amount of a long-lived asset exceeds its fair value. We
    recorded an impairment charge in 2008 of $98,000, related to
    display racks no longer in use and to be disposed.
Income Taxes.
We account for income taxes using the asset
    and liability method, which requires recognition of deferred tax
    assets and liabilities for the expected future tax consequences
    of events that have been included in the financial statements.
    Under this method, deferred tax assets and liabilities are
    determined based on the difference between the financial
    statement and tax bases of assets and liabilities, using enacted
    tax rates in effect for the year in which the differences are
    expected to reverse. Deferred tax assets are reduced by a
    valuation allowance to the extent that utilization is not
    presently more likely than not.
Effective January 1, 2007, we adopted the provisions of
    Accounting Standards Codification ("ASC")
740-10,
Income Taxes
. Previously, we had accounted for tax
    contingencies in accordance with ASC
450-10,
Contingencies
. As required by ASC
740-10,
we
    recognize the financial statement benefit of a tax position only
    after determining that the relevant tax authority would more
    likely than not sustain the position following an audit. For tax
    positions meeting the more-likely-than-not threshold, the amount
    recognized in the financial statements is the largest benefit
    that has a greater than 50 percent likelihood of being
    realized upon ultimate settlement with the relevant tax
    authority. At the adoption date, we applied ASC
740-10
to
    all tax positions for which the statute of limitations remained
    open. The implementation of ASC
740-10
did
    not have a material impact on our consolidated financial
    statements.
Stock-Based Compensation.
We account for our stock-based
    employee and director compensation plans in accordance with ASC
    718,
Compensation-Stock Compensation
. ASC 718 requires
    recognition of the cost of employee services received in
    exchange for an award of equity instruments in the financial
    statements over the period the employee is required to perform
    the services in exchange for the award (presumptively the
    vesting period). In 2007, 2008 and 2009 compensation expense
    related to stock options was approximately $157,000, $215,000
    and $298,000 and is included in selling, general and
    administrative expenses from continuing operations,
    respectively, and approximately $25,000, $61,000 and $80,000 is
    included in discontinued operations, respectively.
The fair value of each option is estimated on the date of grant
    using the Black-Scholes method with the following assumptions
    used for grants:
Year Ended December 31,
2007
2008
2009
Risk-free interest rate
4.6
%
3.2
%
2.0
%
Expected life of options in years
6.3
5.9
5.5
Estimated volatility
45.0
%
39.0
%
39.0
%
Dividend yield
—
—
—
The risk-free interest rate is based on the implied yield
    available on U.S. Treasury zero-coupon issues with a
    remaining term approximately equal to the expected life of our
    stock options. The estimated pre-vesting forfeiture rate is
    based on our historical experience. The expected term of the
    options is based on evaluations of historical and expected
    future employee exercise behavior. As a non-public entity,
    historic volatility is not available for our shares. As a
    result, we estimated volatility based on a peer group of
    companies, which we believe collectively provide a reasonable
    basis for estimating volatility. We intend to continue to
    consistently use the same group of publicly traded peer
    companies to determine volatility in the future until sufficient
    information regarding volatility
40
Table of Contents
of our share price becomes available or the selected companies
    are no longer suitable for this purpose. We do not expect to
    declare dividends on our common stock in the foreseeable future.
Significant Factors Used in Determining Fair Value of Our
    Common Stock.
The fair value of the shares of common stock
    that underlie the stock options we have granted has historically
    been determined by our board of directors based upon information
    available to it at the time of grant. Because, prior to this
    offering, there has been no public market for our common stock,
    our board of directors has determined the fair value of our
    common stock by utilizing, among other things, recent or
    contemporaneous valuation information from negotiated equity
    transactions with third parties or third party valuations. The
    valuation information included reviews of our business and
    general economic, market and other conditions that could be
    reasonably evaluated at that time, including our financial
    results, business agreements, intellectual property and capital
    structure. These valuation approaches are based on a number of
    assumptions, including our future sales and industry, general
    economic, market and other conditions that could reasonably be
    evaluated at the time of the valuation.
Recent
    Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
    ("FASB") issued authoritative guidance which
    established the Accounting Standards Codification
    ("ASC" or "Codification") as the source of
    authoritative GAAP recognized by the FASB to be applied to
    nongovernmental entities, and rules and interpretive releases of
    the SEC as authoritative GAAP for SEC registrants. The
    Codification supersedes all existing non-SEC accounting and
    reporting standards upon its effective date and, subsequently,
    the FASB will not issue new standards in the form of Statements,
    FASB Staff Positions or Emerging Issues Task Force Abstracts.
    The guidance is not intended to change or alter existing GAAP.
    The guidance became effective in our fourth quarter of 2009. The
    guidance did not have an impact on our consolidated financial
    position, results of operations or cash flows.
In May 2009, the FASB issued authoritative guidance on the
    accounting for and disclosure of events that occur after the
    balance sheet date. This guidance was effective for interim and
    annual financial periods ending after June 15, 2009. This
    guidance was amended in February 2010. It requires an entity
    that is a SEC filer to evaluate subsequent events through the
    date that the financial statements are issued. The adoption did
    not impact our consolidated financial position, results of
    operations or cash flows.
In January 2010, the FASB issued guidance, which clarifies that
    the stock portion of a distribution to stockholders that allows
    them to receive cash or stock with a potential limitation on the
    total amount of cash that all stockholders can elect to receive
    in the aggregate is considered a share issuance that is
    reflected in earnings per share prospectively and is not a stock
    dividend. This update is effective for our first quarter of
    2010. The adoption is not expected to have a material impact on
    our consolidated financial position results of operations or
    cash flows.
In January 2010, the FASB issued guidance that clarifies ASC 810
    implementation issues relating to a decrease in ownership of a
    subsidiary that is a business or non-profit activity. This
    amendment affects entities that have previously adopted ASC
810-10.
This
    update is effective for our first quarter of 2010. The adoption
    is not expected to have a material impact on our consolidated
    financial position, results of operations or cash flows.
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BUSINESS
Overview
We are a rapidly growing provider of three- and five-gallon
    purified bottled water and water dispensers sold through major
    retailers nationwide. We believe the market for purified water
    is growing due to evolving taste preferences, perceived health
    benefits and concerns regarding the quality of municipal tap
    water. Our products provide an environmentally friendly,
    economical, convenient and healthy solution for consuming
    purified water. We offer "razor-razorblade" products
    designed to generate recurring demand for Primo purified bottled
    water (the razorblade) through the initial sale of our
    innovative water dispensers (the razor). Once our bottled water
    is consumed using a water dispenser, empty bottles are exchanged
    at our recycling center displays where consumers receive a
    recycling ticket that offers a discount toward the purchase of a
    full bottle of Primo purified water. Primo consumers purchase an
    average of 35 bottles of water annually and each bottle can be
    sanitized and reused up to 40 times before being taken out of
    use, crushed and recycled, substantially reducing landfill waste
    compared to consumption of an equivalent volume of single-serve
    bottled water. Our sales and recycling center displays are
    prominently located at major retailers nationwide in spaces that
    are often underutilized. As of December 31, 2009, our water
    bottle exchange service and water dispensers were offered in
    each of the contiguous United States and located in
    approximately 7,000 and 5,500 retail locations respectively,
    including Lowe's Home Improvement, Sam's Club, Costco,
    Walmart, Target, Kroger, Winn-Dixie, Albertsons and Walgreens.
We have created a new nationwide single-vendor water bottle
    exchange solution for our retail customers, addressing a market
    demand that was previously unmet. Our water bottle exchange
    solution is easy for retailers to implement, requires minimal
    management supervision and store-based labor and provides
    centralized billing and detailed performance reports. Retailers
    benefit from year-round, high-margin, highly-predictable
    revenue, the potential to increase customer traffic and the
    ability to optimize retail space.
We deliver our solution to retailers utilizing our national
    network of primarily independent bottlers and distributors.
    These bottlers and distributors make a significant portion of
    the capital investment required to deliver our solution,
    including investment in bottling facilities and storage and
    distribution assets. We focus our capital expenditures on
    developing new store locations, raising brand awareness,
    developing new products and managing our national network
    utilizing our MIS tools. We are able to manage our national
    network on a real-time basis
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through our MIS tools, which provide resource planning and
    delivery schedule tracking, thus enabling us to optimize our
    network's assets and respond to customer needs. In
    addition, our national network of bottlers and distributors
    benefits from a year-round product that optimizes utilization of
    their existing production and distribution assets. In addition,
    our national network benefits from our MIS tools that assist
    resource planning and delivery schedule optimization. We believe
    our solution and national network provide us a significant
    competitive advantage in servicing our retail customers.
We benefit significantly from management experience gained over
    the last 15 years in exchange-based businesses, which
    enables us to implement best practices and develop and maintain
    key business relationships. Prior to founding Primo, our Chief
    Executive Officer founded Blue Rhino Corporation, a propane
    cylinder exchange business, in 1994 and, with several of our
    other key executive officers, led its initial public offering in
    1998 and successful sale in 2004. At the time of the sale, Blue
    Rhino was the market leader in propane grill cylinder exchange
    with over 29,000 retail locations in 49 states.
Industry
    Background
We believe there are several trends that support consumer demand
    for our water bottle exchange service and water dispensers,
    including the following:
Emphasis
    on Health and Wellness
The majority of the human body is comprised of water and nearly
    all critical body functions rely on proper hydration. As part of
    a desire to live a healthier lifestyle, we believe consumers are
    increasingly focused on drinking more water relative to
    consumption of high caloric beverages, carbonated soft drinks
    and beverages containing artificial sweeteners.
Concerns
    Regarding Quality of Municipal Tap Water
Many consumers purchase purified water not only due to better
    taste, but also because of concerns regarding municipal tap
    water quality. Municipal water is typically surface water that
    is treated centrally and pumped to homes, which can allow
    additional contaminants to dissolve into the water through
    municipal or household pipes impacting taste and quality. There
    have been many recent publications highlighting pollution and
    quality issues with municipal water in the United States.
    Additionally, due to budgetary deficits, municipalities are
    increasingly privatizing their water treatment and distribution
    systems, and there have been many compliance and quality issues
    documented in connection with privatized municipal water systems.
Growing
    Preference for Purified Water
We believe consumer preference toward purified water relative to
    tap water continues to grow. With increasing availability in
    recent years, purified water has become accepted on a mainstream
    basis and preferred by many over municipal tap water. While it
    is difficult to quantify purified water consumption in all of
    its forms, we believe the growth of bottled water consumption
    reflects this trend. According to a June 2009 report by
    independent market analyst Datamonitor,
Bottled Water in the
    United States
, consumers spent $18.4 billion in 2008 on
    bottled water and the industry is expected to grow at a compound
    annual growth rate of approximately 7.5%, reaching
    $26.5 billion by 2013.
Increasing
    Demand for Products with Lower Environmental Impact
We believe that consumers are increasingly favoring products
    with a lower environmental impact with a "reuse, recycle,
    reduce" mindset becoming a common driver of consumer
    behavior. Areas of concern include products' packaging
    materials, carbon footprint and crude oil usage in production
    and distribution and the impact on landfills when disposed. Most
    single-serve PET water bottles are produced using fossil fuels
    and contribute to landfill waste given that only 27% of PET
    bottles are recycled according to a November 2009 Environmental
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Protection Agency report. Additionally, according to the
    December 2008 report,
Bottled Water-U.S.,
by Mintel
    International Group Limited, the incidence of people who do not
    drink single-serve PET bottled water because of environmental
    concerns nearly doubled from 18.0% in 2007 to 35.0% in 2008.
    Governmental legislation also reflects these concerns with the
    passage of "bottle bills" in many jurisdictions that
    tax the purchase of plastic water bottles, require deposits with
    the purchase of certain plastic bottles, prohibit the use of
    government funds to purchase plastic water bottles and ban
    certain plastic bottles from landfills.
Source: National Association for PET Container Resources 2005
    and 2008 Reports on Postconsumer PET Container Recycling
    Activity.
Availability
    of an Economical Water Bottle Exchange Service and Innovative
    Water Dispensers
According to 2007 United States census data, there are
    approximately 112 million households. Based on estimates
    derived from industry data, we believe the current household
    penetration rate of
multi-gallon
water dispensers is approximately 4%, with the vast majority of
    these households utilizing traditional home delivery services.
    Until recently, there has been little innovation, design
    enhancement and functionality improvement in water dispensers to
    meet modern household needs and competing water dispensers have
    traditionally retailed at prices we believe are unlikely to
    support greater household adoption. Compounding these issues,
    there previously was no viable provider of an economical water
    bottle exchange service with major retailer relationships
    nationwide to promote dispenser usage beyond the traditional
    home delivery model. We believe our water bottle exchange
    service provides this alternative and we are currently the only
    provider delivering a solution nationally to retailers. We
    believe there are over 140,000 major retail locations nationwide
    that we could target to sell our dispensers or offer our water
    bottle exchange service.
Our
    Competitive Strengths
We believe that our competitive strengths include the following:
Appeal to
    Consumer Preferences
•
Environmental Awareness.
Our water bottle exchange
    service incorporates reuse of existing bottles, recycles water
    bottles when their lifecycle is complete and reduces landfill
    waste and fossil fuel usage compared to alternative methods of
    bottled water consumption. Our three- and five-gallon water
    bottles are exchanged, sanitized and reused up to 40 times
    before being taken out of service, crushed and recycled. Given
    its typical exchange lifecycle, one Primo five-gallon water
    bottle provides consumers with water in an amount equivalent to
    approximately 1,200 16 ounce single-serve PET bottles. When used
    as an alternative for consuming purified water, based on current
    recycling rates, one Primo five-gallon water bottle can prevent
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approximately 875 16 ounce single-serve PET bottles from
    contributing to landfill waste. In addition, we believe our
    water bottle exchange service uses less fossil fuel in the
    distribution process and has a lower carbon footprint than
    alternative methods of bottled water consumption. Our
    geographically dispersed national network of independent
    bottlers and distributors are closer to major retailers than our
    centralized single-serve bottled water competitors. In addition,
    our exchange service is utilized by consumers as part of their
    ordinary shopping patterns, compared to separate, non-optimized
    deliveries typically associated with traditional home delivery
    providers, generally by less fuel efficient vehicles.
•
Value.
We provide consumers the opportunity for cost
    savings when consuming our bottled water compared to both
    single-serve bottled water and typical home and office delivery
    services. We believe our five-gallon bottles of purified water
    typically cost a consumer between $4.69 and $7.99, after giving
    effect to the discount provided by our recycling ticket. We
    believe this compares favorably to the cost of single-serve PET
    bottles, case pack water and most home and office delivery
    services. The cost savings provided by our recycle ticket also
    provides consumers an incentive to remain a user of our water
    bottle exchange service. Finally, our water dispensers are sold
    at attractive retail prices in order to enhance consumer
    awareness and adoption of our water bottle exchange service,
    increase household penetration and drive sales of our bottled
    water.
•
Convenience.
Our water bottle exchange service and water
    dispensers are available at major retail locations nationwide.
    In addition, our water bottle exchange service provides
    consumers the convenience of exchanging empty bottles and
    purchasing full bottles at any participating retailer. We offer
    three- and five-gallon water bottle options to address different
    consumer volume preferences. We believe our water bottle
    exchange service provides a convenient way to consume purified
    water compared to self-service refill machines and home and
    office delivery services. Our water bottle sales displays are
    fully stocked and ready for consumer purchases, eliminating
    refill time. In addition, our exchange service permits consumers
    to purchase only the number of water bottles they need without
    the water bottle purchase minimums or bottle deposits often
    charged by home and office delivery providers.
•
Taste.
We have dedicated significant time and effort in
    developing our water purification process and formulating the
    proprietary blend of mineral ingredients included in Primo
    purified water that we believe has a silky smooth taste. In an
    independent taste test that we commissioned and was conducted in
    six regions throughout the United States in 2007, four out of
    five participants on average preferred Primo purified water over
    municipal tap water and three out of four participants on
    average preferred Primo purified water over their region's
    market-leading bottled water.
•
Health and Wellness.
As part of a desire to live a
    healthier lifestyle, we believe that consumers are increasingly
    focused on drinking more water relative to consumption of other
    beverages. As we raise our brand awareness, we believe consumers
    will recognize that our water bottle exchange service is an
    effective option for their purified water consumption needs.
Key
    Retail Relationships Served by National Single-Vendor
    Solution
We are the only water bottle exchange provider with a
    single-vendor solution for retailers nationwide. Our solution is
    easy to implement and supervise for national and regionally
    concentrated major retailers. We manage a national network of
    primarily independent bottlers and distributors to service our
    retail customers. This network of 55 bottlers and 27
    distributors utilize our MIS tools and processes to optimize
    their production and distribution assets while servicing our
    retail customers. We believe the combination of our major retail
    relationships, unique single-vendor solution for retail
    customers, national network of independent bottlers and
    distributors and our MIS tools is difficult to replicate. We
    anticipate these factors will facilitate our introduction of new
    purified water-related products in the future.
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Ability
    to Attract and Retain Consumers
We offer "razor-razorblade" products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of our innovative water
    dispensers (the razor), which include a coupon for a free three-
    or five-gallon Primo bottle of water. We acquire new consumers
    and enhance recycling efforts by accepting most
    dispenser-compatible water bottles in exchange for a recycle
    ticket discount toward the purchase of a full bottle of Primo
    purified water. Our water bottle exchange service is attractive
    to retailers as our consumers purchase an average of 35 bottles
    of Primo purified water per year, which facilitates repeat
    consumer traffic in our retailers' stores. In addition, we
    believe we are the leading provider of water dispensers to
    retailers, a status we believe we achieved within less than two
    years of entering the market. We believe this rapid success is
    due to the innovative features, design elements and attractive
    retail prices of our water dispensers. We further believe our
    offering high-quality water dispensers enhances consumer
    awareness and adoption of our water bottle exchange service,
    increases household penetration and drives sales of our bottled
    water.
Efficient
    Business Model
Our business model allows us to efficiently offer our solution
    to our retail partners and centrally manage our national network
    of bottlers and distributors without a substantial capital
    investment. Our business processes and MIS tools enable us to
    manage the bottling and distribution of our water, our product
    quality, retailer inventory levels and the return of used
    bottles on a centralized basis, leveraging our invested capital
    and personnel. We own the bottles, transportation racks, mineral
    injectors and sales and recycling displays to ensure product
    quality and proper positioning of the Primo brand. We focus our
    capital expenditures on developing new store locations, raising
    brand awareness, developing new products and optimizing our MIS
    tools. Our water bottle exchange service is unique in that we
    are not required to make a significant portion of the capital
    investment required to operate our exchange service nationwide.
    Participation in our water bottle exchange service does not
    typically require independent bottlers and distributors to make
    substantial new investments because they often are able to
    augment their current production capacity and leverage their
    existing bottling and distribution assets. In addition, the flow
    of payments between the retailer and our bottlers and
    independent distributors is a critical component of our overall
    relationship with our major retail accounts that we control
    efficiently through electronic data interchange.
Benefit
    from Management's Proven Track Record
We benefit greatly from management experience gained over the
    last 15 years in exchange businesses, which enables us to
    implement and refine best practices and develop and maintain key
    business relationships. Our Chief Executive Officer, Billy D.
    Prim, founded Blue Rhino Corporation, a propane cylinder
    exchange business, in 1994 and led its IPO in 1998 and its
    successful sale in 2004. At the time of the sale, Blue Rhino was
    the market leader of propane grill cylinder exchange with over
    29,000 retail locations in 49 states. In addition to our
    Chief Executive Officer, our Chief Financial Officer, Vice
    President of Operations, Vice President of Products and Vice
    President of National Accounts all held comparable positions
    within the Blue Rhino organization during its rapid sales and
    location growth.
Growth
    Strategy
We seek to increase our market share and drive further growth in
    our business by pursuing the following strategies:
Increase
    Penetration with Existing Retail Relationships and Develop New
    Retail Relationships
We believe we have significant opportunities to increase store
    penetration with our existing retail relationships and develop
    new retail relationships based on our competitive strengths. As
    of December 31, 2009, our water bottle exchange service was
    offered at 6,000 of our top ten retailers' nationwide
    locations. Such retailers present us an opportunity of
    approximately 7,500 additional nationwide locations. We intend
    to further penetrate our other existing retailers, which
    collectively provide us the opportunity to be present in an
    additional 22,400 locations nationwide. Our long-term strategy
    includes targeting up to approximately 40,000 total retail store
    locations
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(which includes new locations with our existing retail
    customers) within our primary retail categories of home centers,
    hardware stores, mass merchants, membership warehouses and
    grocery and drug stores.
Within two years of our inception, we expanded our retail
    presence from 13 states to our current locations within each of
    the contiguous United States. In addition, from 2005 through
    2009, we increased our water bottle exchange locations from
    approximately 300 to 7,000, representing a compound annual
    growth rate of approximately 120%.
Drive
    Consumer Adoption Through Innovative Water Dispenser
    Models
We intend to continue to develop and sell innovative water
    dispensers at attractive retail prices, which we believe is
    critical to increasing consumer awareness and driving consumer
    adoption of our water bottle exchange service. We believe our
    water dispensers have appealing features, such as stainless
    steel finishes, adjustable hot and cold temperature controls and
    hidden bottle bottom-loading features for convenience. As a
    result of our strategy of developing innovative water
    dispensers, we believe we became the leading seller of water
    dispensers to retailers within less than two years of our entry
    into the market. Since we began selling our water dispensers in
    2005, we have sold over 460,000 units, and have expanded
    our retail network from four locations as of December 31,
    2007, to our current network of approximately 5,500 locations.
    We plan to continue introducing new dispenser models at
    attractive retail price points to meet the evolving needs of
    consumers, enhance consumer awareness and adoption of our water
    bottle exchange service, and increase household penetration. Our
    long term strategy is to provide multiple purified water-based
    beverages from a single Primo water dispenser, with consistent
    promotion of our water bottle exchange service to supply the
    purified water.
Increase
    Same Store Sales
We offer "razor-razorblade" products designed to
    generate recurring demand for Primo purified bottled water (the
    razorblade) through the initial sale of water dispensers (the
    razor). We sell our water dispensers at minimal margin and
    provide a free three- or five-gallon bottle of water with every
    water dispenser sold to drive consumer demand for our water
    bottle exchange service.
We believe increasing unit sales of Primo purified bottled water
    is dependent on generating greater consumer awareness of the
    environmentally friendly and economical aspects of and the
    convenience associated with both our purified bottled water and
    our water bottle exchange service. We expect that our branding,
    marketing and sales efforts will result in greater usage of our
    water bottle exchange service. We are also increasing our public
    relations initiatives associated with new market launches,
    developing additional cooperative advertising programs with
    retail distribution partners and increasing our field marketing
    activities. In addition, as consumers exchange
    dispenser-compatible water bottles, we encourage the use of our
    water bottle exchange service by providing them a recycling
    ticket that provides a discount on a full bottle of Primo
    purified water.
Develop
    and Install Other Hydration Solutions
We believe we have significant opportunities to leverage our
    national bottling and distribution network and our systems and
    processes to offer other environmentally friendly, economical,
    convenient and healthy hydration solutions to our retail
    partners without significant increases in our centralized costs.
    For example, we intend to offer our retail partners self-service
    refill vending machines that dispense purified water into
    bottles and other containers. We believe this offering will
    cater to a more price-sensitive consumer. In addition, we intend
    to offer to our retail partners automated, self-bagging purified
    ice dispensers. These purified ice dispensers will provide a
    simplified method of acquiring ice in customized offering sizes
    without the extensive manufacturing and storage networks typical
    of the ice dispensing industry.
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Pursue
    Strategic Acquisitions to Augment Geographic and Retail
    Relationships
We believe opportunities exist to expand through selective
    acquisitions, including smaller water bottle exchange businesses
    with established retail accounts, on-premises self-service water
    refill vending machine networks and retail accounts, ice
    dispenser machine networks and retail accounts and water
    dispenser companies.
Product
    Overview
Water
We have dedicated significant time and effort in developing our
    water purification process and formulating the proprietary blend
    of mineral ingredients included in our purified water. Our
    proprietary blend of mineral ingredients was developed with the
    assistance of consultants and several months of lab work and
    taste tests and has what we believe to be a silky smooth taste.
    In an independent taste test that we commissioned and was
    conducted in six regions throughout the United States in 2007,
    four out of five participants on average preferred Primo
    purified bottled water over tap water and three out of four
    participants on average preferred Primo over their region's
    market-leading bottled water brand. We believe it is important
    that each bottle of Primo purified water has consistent taste
    and each production lot is tested to ensure it meets our
    standards. In addition, to ensure that our safety standards are
    met and FDA and industry standards are met or exceeded, each
    production lot of our purified water undergoes chemical and
    microbiological testing and all facilities bottling Primo
    purified water undergo regular hygiene audits.
Water
    Bottles
We currently source three- and five-gallon water bottles from
    multiple vendors for use in our exchange service. Each of our
    Primo water bottles includes a handle designed for easy
    transportation and lifting when installing the bottle onto or
    into one of our water dispensers. Our bottles also include a
    specially designed cap that prevents spills when carrying or
    installing.
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Water
    Dispensers
We currently source and market three lines of water dispensers
    comprised of 15 models:
Our dispensers are designed to dispense Primo and other
    dispenser-compatible bottled water. Our dispensers have
    manufacturer suggested retail prices that range from $199.99 for
    our
top-of-the-line
bottom-loading model with a stainless steel finish to $14.99 for
    a simple pump that can be installed on a bottle and operated by
    hand.
Currently, more than 95% of our dispenser sales are attributable
    to our bottom- and top-loading products. Consistent with our
    environmental focus, our electric dispensers are Energy
    Star
®
rated, and, we believe, utilize less energy than competing water
    dispensers without this industry rating. In addition, some of
    our dispenser models feature power switches to individually
    control the hot and cold tanks of the dispenser, saving
    additional energy when not in use and providing a child-safety
    feature. We believe both our bottom- and top-loading models
    dispense water twice as fast as competing products and have the
    fastest recovery time for heating and cooling water. In
    addition, certain models of our bottom- and top-loading
    dispensers come equipped with adjustable hot and cold
    temperature controls conveniently located on the top of the
    dispenser.
We believe our bottom loading dispensers are attractive to
    consumers and will drive the greatest increase in household
    penetration as a result of their innovative styling and
    features. Water bottles are loaded and concealed inside our
    bottom-loading dispensers by a hinged door for ease of use and a
    clean aesthetic appearance.
Currently, all of our water dispensers are manufactured by
    independent suppliers in China. Our dispensers are shipped
    directly to our retailer partners and we do not use distributors
    in connection with our water dispensers. We also provide private
    label water dispensers to Target that are branded as
    Black & Decker products pursuant to a license
    agreement with The Black & Decker Corporation.
Primo
    Water Marketing
Our marketing efforts focus primarily on developing and
    maintaining a brand identity synonymous with an environmentally
    friendly, economical, convenient and healthy solution for
    purified water consumption. We direct our marketing efforts as
    close as possible to the point of sale to strengthen our brand
    and promote consumer
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awareness of our water bottle exchange service. We believe our
    water bottle exchange service develops consumer loyalty through
    the use of our recycling tickets. Our marketing efforts include
    the following initiatives:
Primo
    Water Packaging
Our three- and five-gallon water bottles, sales and recycling
    center displays, water dispensers and certain distributor
    delivery vehicles prominently display our Primo logo and
    distinctive four-bubble design.
Primo
    Water Displays
Our sales and recycling center displays are typically located
    near the front of a store, providing
point-of-sale
advertising and branding. We believe our displays enhance
    consumer awareness of the Primo brand and reinforce the
    association of our water with an environmentally friendly,
    economical, convenient and healthy solution for purified water
    consumption. Our displays include Primo graphics, slogans and
    instructions on the exchange process that simply attach to the
    displays. We have the ability to quickly replace, customize or
    introduce new marketing materials on our displays throughout our
    retail network. In addition, we work with retailers to customize
    in-store solutions to best promote our brand.
Promotions
Our promotional activities target new customers by:
•
Accepting third-party dispenser-compatible water bottles in the
    exchange process (which we believe is unique in the industry);
•
Providing attractive pricing on our water dispensers;
•
Offering a free bottle of water with the purchase of a water
    dispenser;
•
Advertising in retailers' weekly circulars; and
•
Providing samples of our purified water and water dispensers
on-site
at
    our retailers' locations and educating consumers on the
    benefits of our purified bottled water and dispensers.
We promote our brand through social media, our website
    (
www.primowater.com
) and other public relations efforts.
    We also maintain a blog (
www.breakfree411.com
) that is
    styled as a third-party website and provides updates on the
    water industry. In addition, we seek to raise awareness of our
    brand and products through blogs and related periodicals that
    target women as well as household and kitchen matters. We
    believe that women often significantly influence household and
    kitchen appliance decisions and concentrating our efforts in
    this manner is designed to improve the effectiveness of our
    advertising campaigns and improve household penetration.
Our promotional activities have evolved from our "Taste
    Perfection" campaign to our "Zero Waste. Perfect
    Taste," campaign emphasizing our environmental efforts
    while simultaneously focusing on the taste of our purified
    water. We plan to increase our promotional activity as we expand
    our business.
The Primo
    Water Bottle Exchange Supply Chain
Water
    Purification and Bottling
Our bottling process begins with either spring water or water
    from a public source that is processed through a pre-filtration
    stage to remove large particles. The water is then passed
    through polishing filters to catch smaller particles followed by
    a carbon filtration process that removes odors, tastes,
    sanitization by-products and pharmaceutical chemicals. A
    microfiltration process then removes microbes before the water
    is passed through a softener to
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increase the purification efficiency. The water next passes
    through the last phase of reverse osmosis or distillation,
    completing the purification process. After the purification
    process is complete, our proprietary blend of mineral
    ingredients is injected into the water followed by the final
    ozonation process to sanitize the water. A bottle is filled with
    Primo purified water only after the inspection and sanitization
    steps outlined below are completed. Each of our production lots
    is placed on a
48-hour
hold
    to allow for testing and to ensure successful compliance with
    chemical and microbiological standards. We have the ability to
    trace each bottle of Primo water to its bottling and distributor
    sources, and we regularly perform recall tests to ensure our
    ability to react to a contamination event should it occur. In
    comparison, municipal water is generally treated at a
    centralized processing facility and then distributed throughout
    the pipeline network. As the water flows to the point of use,
    contaminants and other foreign objects may be dissolved into the
    water, and household piping and faucets may collect sediment
    that over time reduces the quality of municipally supplied water.
Our distributors are responsible for collecting empty Primo
    bottles and other dispenser-compatible bottles that are
    deposited into our recycling center displays. At the completion
    of the delivery cycle, a distributor inspects the exchanged
    bottles for reusability and coordinates the recycling efforts
    with our operations personnel to ensure that reuse of each water
    bottle we receive in the exchange process is being optimized.
    Our water bottles can be sanitized and reused up to 40 times
    before being taken out of use, crushed and recycled,
    substantially reducing landfill waste compared to consumption of
    similar amounts of single-serve PET bottled water. Bottles that
    pass a distributor's initial inspection are subject to
    three washing cycles to remove particles. Bottles are then
    passed through two sanitization stages before a final rinse with
    hyper-ozonated water to kill or inactivate any microbes that
    remain at that point in the sanitation process. The water
    bottles are then ready to be filled with our purified water.
Distribution
    Network
We rely on a national network of independent distributors and,
    to a lesser degree, a company-operated distribution system. Our
    water bottle exchange process begins when a distributor is
    directed through our proprietary MIS tool, Routeview, to stock
    or replenish a Primo bottled water retail location. Routeview
    enables our distributors to review delivery quantities and
    tentative scheduling requirements in their territory. Our
    systems provide anticipated demand based on historical sales
    and, to the extent available, retailer point of sale
    ("POS") data. Each distributor is provided information
    to enable the distributor to load a truck with the appropriate
    inventory to stock or restock the water bottle sales displays on
    its route, including a tailored amount of excess bottles as
    safety stock. Upon arrival at each retail location, the driver
    first visits the recycling center display to collect empty Primo
    and other dispenser-compatible bottles. The driver enters data
    related to empty bottles on a handheld device to collect
    exchange efficiency information and potential customer
    conversion data and then loads empty bottles onto the truck. The
    driver next checks the in-store sales display to compare the
    number of remaining bottles of water with the anticipated demand
    report generated by our MIS tools. After entering current stock
    levels,
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the driver is instructed by our MIS tools through the handheld
    device and based on proprietary algorithms, to replenish the
    sales display with an appropriate quantity of bottles.
At the completion of the delivery cycle and after inspection of
    the bottles, our distributors typically are responsible for
    coordinating the sanitization and bottling process with our
    bottlers. In addition, distributors must run
end-of-day
reports on their handheld devices which transmit crucial data
    points into our databases and validate daily activity. Our
    handheld devices also capture electronic signatures,
    significantly reducing paper exchange. This greatly improves our
    verification procedures and enhances our environmental efforts.
We have the ability to test and refine procedures through our
    Company-operated distribution system before implementing them
    with our independent distributors nationwide. In addition, we
    regularly solicit feedback from our independent distributors to
    improve processes.
Flow of
    Payments and Capital Requirements
We control the flow of payments between our retail customers and
    our bottlers and distributors through electronic data
    interchange. Our distributors are responsible for handling
    distribution and servicing our sales and recycling center
    displays. Through our handheld devices, distributors report
    their deliveries which are received by our systems and verified
    by data integrity checks. Depending on the retailer, our
    distributors either present the store manager with an invoice
    for the bottles delivered or our systems electronically bill the
    retailer. We compensate our distributors with a fixed payment
    per delivered water bottle on the fifteenth day of the month
    following the delivery activity. Our fixed payment is a gross
    amount from which the distributor must typically pay the
    bottler. In order to maximize their returns and profitability,
    our distributors increasingly are becoming vertically
    integrated, using their capital to build bottling facilities.
    Due to the high degree of automation during our billing and
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inventory management procedures, we are able to leverage our
    centralized personnel and believe we will be able to
    significantly expand our business with minimal increases in
    variable cost.
We focus our capital expenditures on developing new store
    locations, raising brand awareness, developing new products and
    optimizing our MIS tools. We are also responsible for the
    centralized operations and personnel, sales and recycling
    displays, bottles, transportation racks, mineral packets and
    mineral injectors and handheld devices. We rely on our national
    network of independent bottlers and distributors to make a
    significant portion of capital investment required to operate
    our exchange service nationwide, including a majority of the
    capital expenditures related to the bottling, sanitization and
    refill process and the distribution assets such as delivery
    trucks and warehouse storage. Participation in our water bottle
    exchange service does not typically require the independent
    bottlers and distributors to make substantial new investments
    because they often are able to augment their current production
    capacity and leverage their existing bottling and distribution
    assets. In addition, many of our major retail customers have
    invested their capital to expand store locations and generate
    customer traffic.
Flow of
    Payments and Capital Requirements
Retailer
    Relationships
We target major retailers with either a national footprint or a
    significant regional concentration. Our relationships are
    diversified among the following retail categories and major
    accounts:
Retail Category
Major Accounts
Home Centers / Hardware Stores
Lowe's Home Improvement, Ace Hardware, True Value
Mass Merchants
Walmart, Target, Kmart
Grocery Stores
Kroger, Winn-Dixie, Albertsons, Food Lion
Membership Warehouses
Sam's Club, Costco
Drug Stores
Walgreens, CVS
Retailer
    Opportunity
We offer retailers a single-vendor solution. Our water bottle
    exchange service provides retailers with a year-round consumer
    product and an opportunity to increase sales and profits with
    minimal labor and financial investment. Through our primarily
    independent network of bottlers and distributors, we are able to
    service major retailers nationwide. Retailers benefit from our
    water bottle exchange service that offers high margin and
    generates productivity from often underutilized interior and
    exterior retail space. In addition, our water bottle exchange
    service has the potential to increase retailers' sales of
    ancillary products through increased traffic from repeat water
    bottle exchange consumers, who purchase an average of 35 water
    bottles annually.
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Account
Set-Up
We actively pursue headquarters-based retail relationships to
    better serve our retail partners and minimize layers of approval
    and decision-making with regard to the roll-out of our water
    bottle exchange service to multiple locations. Upon confirmation
    of new retail locations, we coordinate with the retailer and
    distributor to schedule openings in a timely manner. We actively
    assist retailers in developing site plans for the setup of our
    sales and recycling center displays. While retailer setup
    preferences may vary, retailers often like to locate the
    recycling center display prominently on the exterior of their
    store to ease the transaction process, showcase their recycling
    and environmental efforts and conserve inside floor space while
    at the same time promoting the Primo brand.
Account
    Service
Our water bottle exchange service is a turn-key program for
    retailers in which we and our distributors actively service each
    retail account. After the retail location is established, our
    distributors complete
on-site
training and have an economic interest in supporting and growing
    the business relationship to increase product throughput.
    Distributors deliver three- and five-gallon Primo bottled water
    directly to retail locations and maintain the sales and
    recycling center displays.
Sales
    Support
While distributors service our retail accounts, the customer
    relationship is "owned" and maintained by our
    experienced retail sales organization, which allows us to
    develop strong brand affinity and maintain key
    headquarters-based relationships to secure and maintain our
    national retail network. Our retail relationships are divided
    into regions and managed by our sales personnel. In addition, we
    leverage our national network of primarily independent
    distributors that typically employ their own sales
    representatives. This combined team is responsible for selling
    and supporting our water bottle exchange service to targeted
    retailers.
Systems
    Support
We supply each major retail customer with a customized sales and
    business update on a monthly basis. The monthly update consists
    of a graphical dashboard highlighting sales trends and
    location-based information as well as qualitative commentary to
    assist store and headquarters personnel in their business
    decisions. We believe our reports help retail personnel monitor
    the success of our water bottle exchange service and highlight
    our analytical and customer support capabilities as a retail
    partner. In many cases, our retail customers do not have
    internal reporting capabilities to develop comparable analyses.
Customer
    Service
We maintain a single 1-800 number for all distributors,
    retailers and customers to contact us directly with questions
    regarding our bottled water, water bottle exchange process and
    customer service inquires. In addition, we maintain a separate
    1-800 number for our water dispensers. We believe maintaining
    our own customer service numbers allows us to effectively
    monitor all aspects of our business and receive feedback on
    issues first-hand that we can direct to our distributors or
    dispenser suppliers.
Significant
    Customers
For the year ended December 31, 2009, Lowe's Home
    Improvement, Sam's Club and Walmart represented
    approximately 33%, 19% and 15% of our total sales, respectively.
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National
    Bottler and Distributor Network
In an effort to build a market-leading single-vendor national
    water bottle exchange service, we have sought to attract
    experienced and well-capitalized bottlers and distributors to
    support our network. As of December 31, 2009, we had 55
    bottlers and 27 independent distributors.
Bottler
    and Distributor Opportunity
We provide bottlers and distributors with an attractive business
    opportunity, complementing many of their existing operations. We
    continually pursue new relationships and additional locations
    with existing retail partners to increase the production at each
    bottler's manufacturing facility and the retail customer
    density within each distributor's territory.
Bottler
    and Distributor Standards
We work very closely with our national network of primarily
    independent bottlers and distributors to ensure their production
    and storage standards meet or exceed the requirements of the
    United States Food and Drug Administration and other industry
    regulations. As we seek to promote our brand, we believe it is
    critical to provide bottled water that has consistent taste and
    is produced in a manner that exceeds current industry
    requirements. We regularly monitor, test and arrange for
    third-party hygiene audits of each bottling facility.
In addition, we regularly monitor our distributors'
    performance to ensure a high level of account service.
    Distributors are generally required to develop an infrastructure
    sufficient to:
•
Complete customer installations within 30 days of the
    notification of a newly established account;
•
Monitor and maintain inventory levels with assigned retail
    accounts; and
•
Resolve water bottle stock-outs within 36 hours.
Bottler
    and Distributor Selection Process
We have selectively identified and pursued high quality
    independent bottlers and distributors that can support our major
    retailers nationwide. We screen all bottler and distributor
    candidates by reviewing credit reports, safety records and
    manufacturing compliance reports, and conducting management
    reference checks. As a result of this thorough selection
    process, we have established what we believe to be a highly
    dependable national network of independent bottlers and
    distributors. We currently maintain three distributor or bottler
    relationships that have relatively high customer concentrations
    in the geographic areas they serve. None of these distributors
    or bottlers, however, had responsibility for more than 8.0% of
    the bottling or more than 12.6% of the distribution with respect
    to our water bottle exchange volume for the year ended
    December 31, 2009. We believe we have a positive
    relationship with each of these parties and our senior
    executives have maintained a business relationship with each
    such party since they were managing operations at Blue Rhino
    Corporation.
Bottler
    and Distributor Services
We currently employ raw material procurement and supply chain
    personnel who perform periodic inventory audits and month-end
    review procedures. In addition we have operations personnel who
    manage our independent bottler and distributor relationships,
    including training and monitoring personnel and activities. We
    also employ customer service personnel who handle bottler,
    distributor, retailer and end-user phone calls.
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Company
    Owned Distribution Operations
We have distribution responsibilities for certain regions that
    are relatively near our primary facilities. We distribute our
    bottled water to major retailers in portions of North Carolina,
    South Carolina, Florida and Virginia. We believe distributing
    our bottled water in these areas is an important way for us to
    better understand the bottled water exchange process and
    provides us the necessary feedback to enhance our independent
    bottler and distributor relationships. In addition, distributing
    our bottled water in these areas should assist us in validating
    the economic arrangements we offer our bottlers and distributors
    and developing industry knowledge that we can deploy throughout
    our system. For the year ended December 31, 2009, our
    Company-owned distribution operations accounted for
    approximately 23.5% of our water bottle exchange volume.
Bottler
    and Distributor Agreements
We have entered into bottler and distributor agreements with
    each of our 55 bottlers and 27 independent distributors on
    substantially similar terms. While individual agreements contain
    variances and exceptions, the material terms of such agreements
    are described generally below. No individual bottler or
    distributor is material to our overall financial condition or
    results of operations.
Bottler
    Agreement
In our bottler agreement, we appoint a bottler as a
    non-exclusive supplier of our purified drinking water. The
    bottler is restricted from competing with us during the term of
    the agreement and for a specified period after the term in a
    specified geography.
The bottler is required to bottle and deliver product in
    conformance with our specifications, including our proprietary
    mineral formula. The bottler must ensure that our bottled water
    products comply with applicable laws, rules and regulations
    (including those of the FDA), industry standards (including
    those of the International Bottled Water Association) and our
    quality requirements. The agreement also imposes requirements on
    the bottler with respect to the maintenance of its facilities
    and equipment that are intended to ensure the quality of our
    products.
We provide the necessary bottles, caps, labels, transportation
    racks, mineral injectors and formula minerals at no charge to
    the bottler to support the bottling and supply of our bottled
    water products. The bottler is required to maintain inventory
    levels necessary to satisfy our production requirements. Product
    may not be released for shipment until the bottler meets all
    applicable quality requirements.
Pricing is set forth in the agreement, and we have the right to
    modify pricing on thirty days notice to the bottler. The
    agreements generally have a three-year term, and if not
    otherwise terminated, automatically renew for successive
    one-year periods after the initial term. Either party may
    terminate the agreement in the event of an uncured material
    breach by the other party.
Distributor
    Agreement
In our distributor agreement, we grant a distributor the right
    to serve as our exclusive delivery and service agent and
    representative with respect to our bottled water exchange
    service for a specified term in a specified geographic
    territory. The distributor is restricted from competing with us
    during the term of the agreement and for a specified period
    after the term in the specified geography. We have the right, at
    any time, to purchase a distributor's rights under the
    agreement, along with related distribution equipment, for an
    amount based on the distributor's revenues under the
    agreement for the prior twelve-month period and the fair market
    value of the equipment being purchased.
The distributor must perform its services under the agreement in
    conformance with our distributor manual and all applicable laws
    and regulations, including those of the FDA.
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We compensate a distributor for its services while maintaining a
    direct relationship with and collecting payments from our
    retailer customers within the distributor's service
    territory. Pricing is set forth in the agreement, and we have
    the right to modify pricing and payment terms on thirty days
    notice to the distributor.
The agreements generally have a ten-year term, and if not
    otherwise terminated, automatically renew for successive
    one-year terms after the initial ten-year term. Either party may
    terminate the agreement for, among other reasons, an uncured
    material breach by the other party.
Management
    Information Systems
We have made a substantial investment in MIS tools which enhance
    our ability to process orders, manage inventory and accounts
    receivable, maintain distributor and customer information,
    maintain cost-efficient operations and assist distributors in
    delivering products and services on a timely basis. Our
    technology utilizes highly integrated, scalable software
    applications that cost-effectively support our growing retail
    network. Our MIS tools also allow us to analyze historical
    trends and data to further enhance the execution, service and
    identification of new markets and marketing opportunities. The
    primary components of our systems include the following:
Sales and
    Marketing Support Systems
We operate a single customer relationship management database
    that integrates all financial and transaction-based data with
    respect to each retail account. Our MIS tools provide our
    account managers and customer service representatives access to
    crucial data to effectively manage each bottler, distributor and
    retail relationship.
Bottler
    and Distributor Level Technology
Our distribution process is highly automated and scalable. Our
    technology allows bottlers and distributors timely access to
    information for customer support needs and provides access to
    real-time data to enhance decisions. In addition, each
    distributor is electronically linked to our systems with our
    proprietary Routeview software. Routeview enables distributors
    to review delivery quantities and tentative scheduling
    requirements across our entire national network. In addition,
    our MIS tools allow drivers to update delivery, inventory and
    invoicing information through handheld devices. This technology
    provides retailers with accurate and timely inventory and
    invoices and assists each distributor in managing its
    responsibilities.
Financial
    Integration
We utilize Microsoft's Dynamics GP software as our core
    platform which interfaces with all of our systems. Each handheld
    device is based on Microsoft's operating system and ensures
    integration within our reporting and financial databases. All
    delivery transactions are validated and data is imported into
    our database tables and mapped to corresponding accounting
    ledgers.
Manufacturing
    and Sourcing
Our manufacturing strategy is to utilize third-party
    manufacturers to produce empty water bottles, sales displays and
    recycle centers and water dispensers at a reasonable cost. We
    believe that using contract manufacturers has several advantages
    over our manufacturing these items directly, including
    (i) decreased capital investment in manufacturing plants
    and equipment and working capital, (ii) the ability to
    leverage contract manufacturers' purchasing relationships
    for lower materials costs, (iii) minimal fixed costs of
    maintaining unused manufacturing capacity and (iv) the
    ability to utilize our suppliers' broad technical and
    process expertise.
Currently, the majority of our water dispensers are assembled by
    a single manufacturer in China, which utilizes several
sub-suppliers
to provide components and subassemblies. We have the sole North
    American rights to develop products with this manufacturer and
    each dispenser unit is produced to our design specifications.
    Each unit is inspected and tested for quality by the
    manufacturer's personnel prior to shipment and any units
    returned
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by consumers or retailers are sent directly to the manufacturer
    for a credit, replacement or refund issued by the manufacturer.
    Our units generally are shipped directly from Hong Kong to the
    retailer. For the year ended December 31, 2009, this
    manufacturer produced water dispenser units that accounted for
    more than 95% of our water dispenser billings.
Our water bottles and caps are produced by multiple vendors
    throughout the United States. We select suppliers based on
    price, quality and geographic proximity to our bottlers. We only
    purchase water bottles with handles as a convenience feature for
    consumers.
Our sales displays and recycle centers are made to our design.
    We frequently request bids from multiple manufacturers to
    achieve optimal pricing.
Product
    Design and Development
A primary focus of our product research and development efforts
    is developing innovative water dispensers as part of our
    strategy to enhance consumer awareness and adoption of our water
    bottle exchange service, increase household penetration and
    drive sales of our bottled water. We continually work to improve
    water dispenser features, seek to lower manufacturing costs so
    that our innovative products are more affordable and introduce
    new models. Innovative improvements developed in cooperation
    with our manufacturing partners include bottom-loading
    dispensers, adjustable hot and cold temperature controls and
    faster water dispensing capabilities. Our water dispenser models
    are designed to appeal to consumers of diverse demographic
    audiences. We are currently working with our manufacturing
    partners to develop new product lines that include self-bagging
    automated purified ice dispensers and purified water refill
    dispensers to be located
on-site
at
    our retail customers. We expect to introduce these new product
    lines in 2010. We are also in the early development stage of
    creating a water dispenser product that provides consumers the
    ability to dispense multiple purified water-based beverages,
    including traditional hot drink products and flavored and
    carbonated beverages.
Competition
We participate in the highly competitive bottled water segment
    of the nonalcoholic beverage industry. While the industry is
    dominated by large and well-known international companies,
    numerous smaller firms are also seeking to establish market
    niches. We have a unique business model in the bottled water
    market in the United States in that we not only offer three- and
    five-gallon bottled water on a nationwide basis but also provide
    consumers the ability to exchange their used containers as part
    of our water bottle exchange service. We believe that we are one
    of the first companies to provide a national water bottle
    exchange service at retail. While we are aware of a few direct
    competitors that operate similar networks, we believe they
    operate on a much smaller scale than we do and do not have
    equivalent MIS tools or bottler and distributor capabilities to
    effectively support major retailers nationwide. Competitive
    factors with respect to our business include pricing, taste,
    advertising, sales promotion programs, product innovation,
    efficient production and distribution techniques, introduction
    of new packaging, and brand and trademark development and
    protection.
Our primary competitors in our bottled water business include
    Nestlé, The
Coca-Cola
Company, PepsiCo, Dr Pepper Snapple Group and DS Waters of
    America. None of these companies currently offer a nationwide
    water bottle exchange service at retail. However, many of these
    competitors are leading consumer products companies, have
    substantially greater financial and other resources than we do,
    have established a strong brand presence with consumers and have
    established relationships with retailers, manufacturers,
    bottlers and distributors necessary to start an exchange
    business at retail locations nationwide should they decide to do
    so. In addition to competition between firms within the bottled
    water industry, the industry itself faces significant
    competition from other non-alcoholic beverages, including
    carbonated and non-carbonated soft drinks and waters, juices,
    sport and energy drinks, coffees, teas and spring and tap water.
We also compete directly and indirectly in the water dispenser
    marketplace. This marketplace is diverse and faces competition
    from other methods of purified water consumption such as
    countertop filtration systems, faucet
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mounted filtration systems, in-line whole-house filtration
    systems, water filtration dispensing products such as pitchers
    and jugs, standard and advanced feature water coolers and
    refrigerator-dispensed filtered and unfiltered water.
Intellectual
    Property and Trademarks
We believe that our intellectual property provides a competitive
    advantage and we have invested substantial time, effort and
    capital in establishing and protecting our intellectual property
    rights. We have filed certain patent applications and trademark
    registration applications and intend to seek additional patents,
    to develop additional trademarks and seek federal registrations
    for such trademarks and to develop other intellectual property.
    We consider our Primo name and related trademarks and our other
    intellectual property to be valuable to our business and the
    establishment of a national branded bottled water exchange
    service. We rely on a combination of patent, copyright,
    trademark and trade secret laws and other arrangements to
    protect our proprietary rights. We own ten United States federal
    trademark registrations, including registrations for our
    Primo
®
and Taste
    Perfection
®
trademarks, our
    Primo
®
logo and our distinctive four bubble design. We also own a
    pending application to register our Zero Waste. Perfect
    Taste
tm
trademark in the United States for use in association with
    drinking water dispensers, bottled drinking water and a variety
    of other non-alcoholic beverages. In addition, the design of our
    recycling center displays is protected by four United States
    design patents and two Canadian industrial design registrations.
    We own three pending utility patent applications in the United
    States for our bottled water distribution method and bottle
    return apparatus (or our recycling center displays).
In addition to patent protection, we also rely on trade secrets
    and other non-patented proprietary information relating to our
    product development, business processes and operating
    activities. We regard portions of our proprietary MIS tools,
    various algorithms used in our business and the composition of
    our mineral formula to be valuable trade secrets of the Company.
    We seek to protect this information through appropriate efforts
    to maintain its secrecy, including confidentiality agreements.
Governmental
    Regulation
The conduct of our businesses and the production, distribution,
    advertising, promotion, labeling, safety, transportation, sale
    and use of our products are subject to various laws and
    regulations administered by federal, state and local
    governmental agencies in the United States. It is our policy to
    abide by the laws and regulations that apply to us, and we
    require our bottling, manufacturing, and distributing partners
    to comply with all laws and regulations applicable to them.
We are required to comply with:
•
federal laws, such as the Federal Food, Drug and Cosmetic Act,
    the Occupational Safety and Health Act and the Americans with
    Disabilities Act;
•
customs and foreign trade laws and regulations;
•
state consumer protection laws;
•
federal, state and local environmental, health and safety laws;
•
laws governing equal employment opportunity and workplace
    activities; and
•
various other federal, state and local statutes and regulations.
We maintain environmental, health and safety policies and a
    quality, environmental, health and safety program designed to
    ensure compliance with applicable laws and regulations.
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The United States Food and Drug Administration (the
    "FDA") regulates bottled water as a food under the
    federal Food, Drug and Cosmetic Act. Our bottled water must meet
    FDA requirements of safety for human consumption, identity,
    quality and labeling. Further, the sale and marketing of our
    products is subject to FDA's advertising and promotion
    requirements and restrictions. In addition, FDA has established
    current "good manufacturing practice" regulations,
    which govern the facilities, methods, practices and controls
    used for the processing, bottling and distribution of bottled
    drinking water. We and our third-party supply, bottling and
    distribution partners are subject to these requirements. We also
    must comply with overlapping and sometimes inconsistent state
    regulations in various jurisdictions. As a result, we must
    expend resources to continuously monitor state legislative and
    regulatory activities for purposes of identifying and ensuring
    compliance with the laws and regulations that apply to our
    bottled water business in each state in which we operate. While
    we must meet the government-mandated standards, we believe that
    our self-imposed standards meet or exceed those set by federal,
    state and local regulations.
Additionally, the manufacture, sale and use of resins used to
    make water bottles is subject to regulation by the FDA. Those
    regulations are concerned with substances used in food packaging
    materials, not with specific finished food packaging products.
    We believe our beverage containers are in compliance with FDA
    regulations. Additionally, the use of polycarbonates in food
    containers used by children under three years of age is subject
    to certain state and local restrictions.
Measures have been enacted in various localities and states that
    require a deposit or tax to be charged for certain
    non-refillable beverage containers. The precise requirements
    imposed by these measures vary. Other deposit, recycling or
    product stewardship proposals have been introduced in various
    jurisdictions. We anticipate that similar legislation or
    regulations may be proposed in the future at the local, state
    and federal levels.
Legal
    Proceedings
From time to time, we are a party to various lawsuits, claims
    and other legal proceedings arising from our normal business
    activities. We have not had, and we do not believe that we have
    currently, any proceedings that, individually or in the
    aggregate, would be expected to have a material adverse effect
    on our business, results of operations or financial condition.
Facilities
Our corporate headquarters, including our principal
    administrative, marketing, sales, technical support and research
    and development facilities, are located in Winston-Salem, North
    Carolina where we lease approximately 14,200 square feet
    under an agreement that expires on May 31, 2011.
In addition we lease warehouse space in Winston-Salem, North
    Carolina, Lakeland, Florida and Petersburg, Virginia to support
    our Company-owned operations in these regions. These facilities
    have lease expirations that vary from May 2010 to November 2010.
We believe that our current facilities are suitable and adequate
    to meet our current needs, and that suitable additional or
    substitute space will be available as needed to accommodate
    expansion of our operations.
Employees
As of December 31, 2009, we had 75 employees. We
    believe that our continued success will depend on our ability to
    continue to attract and retain skilled personnel. We have never
    had a work stoppage and none of our employees are represented by
    a labor union. We believe our relationship with our employees is
    good.
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MANAGEMENT
Set forth below are our executive officers and directors,
    together with their positions and ages as of March 1, 2010.
Name
Age
Position
Billy D. Prim
54
Chairman, Chief Executive Officer, President and Director
Mark Castaneda
45
Chief Financial Officer
Michael S. Gunter
41
Senior Vice President, Operations
Duane G. Goodwin
51
Senior Vice President, Business Development
Richard A. Brenner
46
Director
David W. Dupree
55
Director
Malcolm McQuilkin
63
Director
David L. Warnock
51
Director
Set forth below is a brief description of the business
    experience of our directors and executive officers.
Billy D. Prim — Chairman, Chief Executive
    Officer, President and Director.
Mr. Prim has been
    our Chairman, Chief Executive Officer and President since he
    founded the Company in 2004. Mr. Prim has also served on
    our Board of Directors since 2004. Prior to founding the
    Company, Mr. Prim founded Blue Rhino Corporation (a
    provider of propane cylinder exchange and complementary propane
    and non-propane products) in March 1994 and served as its Chief
    Executive Officer and Chairman of the Board. He led Blue
    Rhino's initial public offering in May 1998 and remained
    its Chief Executive Officer until April 2004, when Blue Rhino
    was acquired by Ferrellgas Partners, L.P., at which time he was
    elected to the Ferrellgas board of directors on which he served
    until November 2008. Mr. Prim also previously served
    on the board of directors of Southern Community Bank and Trust
    from 1996 until 2005. Mr. Prim brings extensive business,
    managerial and leadership experience to our Board of Directors.
    Mr. Prim's service as an executive and a Director of
    Primo provide our Board of Directors with a vital understanding
    and appreciation of our business. In addition,
    Mr. Prim's leadership abilities, his experience at
    Blue Rhino and his extensive knowledge of the bottled water
    industry position him well for service on our Board of Directors.
Mark Castaneda — Chief Financial
    Officer.
Mr. Castaneda has served as our Chief
    Financial Officer since March 2008. Prior to joining our
    Company, he served as Chief Financial Officer for Tecta America,
    Inc. (a private national roofing contractor) from October 2007
    until March 2008, as Chief Financial Officer for Interact Public
    Safety (a private software company) from September 2006 until
    October 2007 and as Chief Financial Officer for Pike Electric
    Corporation (a publicly-traded energy solutions provider) from
    October 2004 until August 2006, where he helped lead its initial
    public offering in July 2005. Mr. Castaneda served Blue
    Rhino Corporation as its Chief Financial Officer from November
    1997 until October 2004 and as a Director from September 1998
    until April 2004. Mr. Castaneda helped lead Blue Rhino's
    initial public offering with Mr. Prim in May 1998.
    Mr. Castaneda began his career with Deloitte &
    Touche in 1988 and is a certified public accountant.
Michael S. Gunter — Senior Vice President,
    Operations.
Mr. Gunter has served as our Senior
    Vice President of Operations since March 2010 and previously
    served as our Vice President of Operations from our founding in
    October 2004 through February 2010. Prior to joining our
    Company, he served as the Senior Director of Strategy and
    Financial Analysis as well as the Director of Information
    Technology for Blue Rhino Corporation from 2000 until October
    2004. Mr. Gunter served as an Artillery Officer in the
    United States Marine Corps from 1990 to 1996.
Duane G. Goodwin — Senior Vice President,
    Business Development.
Mr. Goodwin has served as our
    Senior Vice President of Business Development since February
    2010. Prior to joining our Company, he served as Chief Supply
    Chain Officer for BlueLinx Corporation (a distributor of
    building products) from December 2005 until April 2009, as
    Senior Operations Consultant for Cerberus Capital Management (a
    private investment firm) from June 2005 until December 2005 and
    in various management roles for The Home Depot (a home
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improvement retailer) from 1994 until January 2005. Before
    joining The Home Depot Mr. Goodwin was with Walmart Stores, Inc.
    (a mass merchant retailer), where he served in a variety of
    roles from 1985 through 1994.
Richard A. Brenner — Director.
Mr. Brenner has served on our Board of Directors since
    2005. He has been the Chief Executive Officer of Amarr Garage
    Doors (a manufacturer and distributor of garage doors) since
    July 2002 and was its President from July 1993 until June 2002.
    Mr. Brenner also serves on several boards of private and
    nonprofit entities, including ABC of North Carolina, Idealliance
    and Wake Forest University Health Sciences, and was a member of
    the board of directors of Blue Rhino Corporation from 1998 to
    2004. Mr. Brenner's significant executive and board
    service experience qualify him for service on our Board of
    Directors.
David W. Dupree — Director.
Mr. Dupree has served on our Board of Directors since April
    2008. As a founder of The Halifax Group (a private equity group)
    in 1999, he serves as the Chief Executive Officer and Managing
    Director of Halifax. Prior to co-founding Halifax, Mr. Dupree
    was a Managing Director and Partner with The Carlyle Group,
    where he was primarily responsible for investments in healthcare
    and related sectors. Mr. Dupree is also a Director Emeritus
    of Whole Foods Markets, Inc. where he served as a director from
    1997 until 2008 and served on the Audit Committee and was
    Chairman of the Nominating and Governance Committee.
    Mr. Dupree also serves on several boards of private and
    non-profit organizations, including the Wake Forest University
    Board of Trustees. Mr. Dupree's business, financial,
    executive and managerial experience as well as service on the
    boards of various entities position him well to serve as a
    member of our Board of Directors.
Malcolm McQuilkin — Director.
Mr. McQuilkin has served on our Board of Directors since
    2005. Since 1990, he has been Chief Executive Officer of Blue
    Rhino Global Sourcing, LLC (an import and design company and a
    wholly owned subsidiary of Ferrellgas Propane Partners). As the
    current Chief Executive Officer of Blue Rhino Global Sourcing,
    Mr. McQuilkin provides our Board of Directors with
    significant leadership and executive experience.
    Mr. McQuilkin's leadership abilities, his
    international business expertise (particularly with respect to
    outsourcing) and his extensive knowledge of complex financial
    and operational issues facing large companies qualify him to
    serve as a member of our Board of Directors.
David L. Warnock — Director.
Mr. Warnock has served on our Board of Directors since
    2005. He is a founder and managing member of Camden Partners
    Holdings, LLC (a private investment management firm established
    in 1995 and formerly known as Cahill Warnock &
    Company, LLC). Mr. Warnock serves on the board of National
    American University, Inc., New Horizons Worldwide, Inc., Nobel
    Learning Communities, Inc., Questar Assessment, Inc., Towne Park
    Ltd., Ranir LLC, and CIBT School of Business and Technology
    Corp., and was a member of the board of directors of Blue Rhino
    Corporation from 2000 to 2004. Mr. Warnock brings to our
    Board of Directors a unique and valuable perspective from his
    years of experience in private investment management.
    Mr. Warnock's business acumen and his financial,
    managerial, leadership and board service experience qualify him
    to serve on our Board of Directors.
Our executive officers are elected by, and serve at the
    discretion of, our Board of Directors.
Board of
    Directors
Immediately following the closing of this offering, our Board of
    Directors will consist of five members. Our amended and restated
    bylaws that will be in effect immediately following the closing
    of this offering permit our Board of Directors to establish the
    authorized number of directors, and five directors are currently
    authorized. These amended and restated bylaws also provide that
    any vacancies or newly-created directorships may be filled only
    by the remaining members of our Board of Directors.
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As of the closing of this offering, our amended and restated
    certificate of incorporation and amended and restated bylaws
    will provide for a classified board of directors consisting of
    three classes of directors, each serving staggered three-year
    terms, as follows:
•
the Class I directors will be Billy D. Prim and David W.
    Dupree, and their terms will expire at the annual meeting of
    stockholders to be held in 2011;
•
the Class II directors will be David L. Warnock and Malcolm
    McQuilkin, and their terms will expire at the annual meeting of
    stockholders to be held in 2012; and
•
the Class III director will be Richard A. Brenner, and his
    term will expire at the annual meeting of stockholders to be
    held in 2013.
Upon expiration of the term of a class of directors, directors
    for that class will be elected for a three-year term at the
    annual meeting of stockholders in the year in which that term
    expires. Each director's term continues until the election
    and qualification of that director's successor, or that
    director's earlier death, resignation or removal. Any
    increase or decrease in the number of directors will be
    distributed among the three classes so that, as nearly as
    possible, each class will consist of one-third of the directors.
    This classification of our Board of Directors may have the
    effect of delaying or preventing changes in control of our
    Company.
Director
    Independence
Upon the closing of this offering, we anticipate that our common
    stock will be listed on the Nasdaq Global Market. Under the
    applicable Nasdaq listing standards, independent directors must
    comprise a majority of a listed company's Board of
    Directors within a specified period following the closing of its
    initial public offering. In addition, Nasdaq's rules
    require that, subject to specific exceptions, each member of a
    listed company's audit committee and those members of the
    board of directors determining executive compensation and
    director nominations be independent. Audit committee members
    also must satisfy the independence criteria set forth in
rule 10A-3
under the Securities Exchange Act of 1934. Under the Nasdaq
    rules, a director will only qualify as an "independent
    director" if, in the opinion of the company's board of
    directors, that person does not have a relationship that would
    interfere with the exercise of independent judgment in carrying
    out the responsibilities of a director.
In order to be considered independent for purposes of
rule 10A-3
under the Securities Exchange Act of 1934, a member of an audit
    committee of a listed company may not, other than in his or her
    capacity as a member of the audit committee, the board of
    directors or any other board committee: (1) accept,
    directly or indirectly, any consulting, advisory or other
    compensatory fee from the listed company or any of its
    subsidiaries; or (2) be an affiliated person of the listed
    company or any of its subsidiaries.
In          
    2010, our Board of Directors undertook a review of its
    composition, the composition of its committees and the
    independence of each director. Based upon information requested
    from and provided by each director concerning his background,
    employment and affiliations, including family relationships, our
    Board of Directors has determined that none of
    Messrs.                    ,
    representing      of our five current
    directors, has a relationship that would interfere with the
    exercise of independent judgment in carrying out the
    responsibilities of a director and that each of these directors
    is "independent" as that term is defined under Nasdaq
    rules. Our Board of Directors also determined that
    Messrs.                    ,
    who comprise our audit committee, Messrs., who comprise our
    compensation committee, and
    Messrs.                    ,
    who comprise our nominating and governance committee, satisfy
    the independence standards for those committees established by
    applicable SEC rules and the rules of Nasdaq. In making these
    determinations, our Board of Directors considered the
    relationships that each non-employee director has with our
    Company and all other facts and circumstances our Board of
    Directors deemed relevant in determining their independence,
    including the beneficial ownership of our capital stock by each
    non-employee director. There is no family relationship between
    any director, executive officer or person nominated to become a
    director or executive officer.
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Board
    Committees
Our Board of Directors has established an audit committee, a
    compensation committee and a nominating and governance
    committee. Our Board of Directors may establish other committees
    from time to time to facilitate our corporate governance.
Audit Committee.
Our audit committee is comprised of
    Messrs. Brenner, Dupree and Warnock, with Mr. Dupree
    acting as chair. The principal responsibilities and functions of
    our audit committee are to assist the Board of Directors in
    fulfilling its oversight of (i) the integrity of our
    financial statements, (ii) the effectiveness of our
    internal controls over financial reporting, (iii) our
    compliance with legal and regulatory requirements, (iv) the
    qualifications and independence of our registered public
    accounting firm, and (v) the performance of our registered
    public accounting firm. In carrying out its oversight
    responsibilities and functions, our audit committee, among other
    things, oversees and interacts with our independent auditors
    regarding the auditors' engagement
and/or
dismissal, duties, compensation, qualifications and performance;
    reviews and discusses with our independent auditors the scope of
    audits and our accounting principles, policies and practices;
    reviews and discusses our audited annual financial statements
    with our independent auditors and management; and reviews and
    approves or ratifies (if appropriate) related party
    transactions. Our audit committee also is directly responsible
    for the appointment, compensation, retention and oversight of
    our independent auditors.
Our Board of Directors has determined
    that          
    is an audit committee financial expert, as defined under the
    applicable rules of the SEC, and that all members of the audit
    committee are "independent" within the meaning of the
    applicable Nasdaq listing standards and the independence
    standards of
rule 10A-3
of the Securities Exchange Act of 1934. Each of the members of
    the audit committee meets the requirements for financial
    literacy under the applicable rules and regulations of the SEC
    and The Nasdaq Stock Market.
Compensation Committee.
Our compensation committee is
    comprised of Messrs. Dupree, McQuilkin and Warnock, with
    Mr. Warnock acting as the chair. The principal functions of
    our compensation committee include (i) reviewing our
    compensation practices and policies, (ii) reviewing and
    approving the compensation for our senior executives,
    (iii) evaluating the performance of our senior executives,
    and (iv) assisting in the Company's compliance with
    the regulations of the SEC regarding executive compensation
    disclosure. Our Board of Directors has determined that all
    members of the compensation committee are
    "independent" within the meaning of the applicable
    Nasdaq listing standards.
Nominating and Governance Committee.
Our nominating and
    governance committee is comprised of Messrs. Brenner,
    Dupree, McQuilkin and Warnock, with Mr. Brenner acting as
    the chair. The principal functions of our nominating and
    corporate governance committee are, among other things, to
    (i) establish membership criteria for our Board of
    Directors, (ii) establish and communicate to stockholders a
    method of recommending potential director nominees for the
    committee's consideration, (iii) identify individuals
    qualified to become directors consistent with such criteria and
    select the director nominees, (iv) plan for continuity on
    our Board of Directors, (v) recommend action to our Board
    of Directors upon any vacancies on our Board of Directors,
    (vi) facilitate the annual evaluation of the performance of
    our Board of Directors and its committees,
    (vii) periodically review management succession plans, and
    (viii) consider and recommend to our Board of Directors
    other actions relating to our Board of Directors, its members
    and its committees. Our Board of Directors has determined that
    all members of the nominating and governance committee are
    "independent" within the meaning of the applicable
    Nasdaq listing standards.
Code of
    Conduct
Our Board of Directors has adopted a Code of Business Conduct
    and Ethics that will become effective upon the closing of this
    offering. This code will apply to all of our employees,
    officers, and directors, including our principal executive,
    financial and accounting officers and all persons performing
    similar functions. A copy of our Code of Business Conduct and
    Ethics will be available upon the closing of this offering on
    our corporate website
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(
www.primowater.com
). We expect that any amendments to
    the code, or any waivers of its requirements, will be disclosed
    on our website.
Director
    Compensation
We have not historically had any policy regarding compensation
    payable to our directors. Instead, we have from time to time in
    the past made awards of stock options to our non-employee
    directors. We made no such awards in 2008 or 2009 and we have
    not otherwise compensated our directors for services. In
    February 2010, we awarded each of our non-employee directors
    60,000 shares of restricted common stock that vest in equal
    annual installments over a three-year period.
After giving effect to these awards, our non-employee directors
    hold the following equity awards received as director
    compensation:
Name
Stock Options
    (#)
(1)
Restricted Stock
    (#)
(2)
Richard A. Brenner
24,000
60,000
David W. Dupree
—
60,000
Malcolm McQuilkin
12,000
60,000
David L. Warnock
24,000
60,000
(1)
These stock options were granted
    prior to 2008, are vested in their entirety and have an exercise
    price of $1.25 per share. As of December 31, 2009, the only
    outstanding equity awards were the stock options listed above.
(2)
These shares of restricted stock
    were granted on February 18, 2010 and vest in equal annual
    installments over a three-year period.
In connection with this offering, our Board of Directors
    approved and adopted our Non-Employee Director Compensation
    Policy. Under the Non-Employee Director Compensation Policy,
    each non-employee director will receive an annual retainer of
    $25,000, to be paid one-half in restricted common stock and
    one-half in options to purchase common stock, granted on the
    first business day following each annual meeting of our
    stockholders. Additionally, non-employee directors will receive
    the following cash awards: (i) a $5,000 retainer for
    directors who also serve as committee chairs and a $2,500
    retainer for other directors; (ii) $2,500 for each
    regularly scheduled Board of Directors meeting attended in
    person ($1,000 if attended telephonically); (iii) $1,000
    for each ad hoc telephonic special Board of Directors meeting
    attended; (iv) $1,000 for each regularly scheduled
    committee meeting attended; and (v) $500 for each ad hoc
    telephonic committee meeting attended. Grants made under the
    Non-Employee Director Compensation Policy will be made pursuant
    to the 2010 Omnibus Long-Term Incentive Plan and will vest in
    full on the day immediately following the first anniversary of
    the grant date.
Compensation
    Committee Interlocks and Insider Participation
Upon the closing of this offering, our compensation committee
    will consist of Messrs. Dupree, McQuilkin and Warnock.
    During 2009, Messrs. Prim, Brenner, McQuilkin and Warnock
    served on our compensation committee. Mr. Filipowski, a
    former member of our Board of Directors, also served on our
    compensation committee through the end of January 2009.
Interlocks
With the exception of Mr. Prim who served on our
    compensation committee through the end of 2009, none of the
    members of our current compensation committee or our
    compensation committee during 2009 is or has at any time during
    the past year been an officer or employee of ours. None of our
    executive officers has served as a member of the board of
    directors, or as a member of the compensation or similar
    committee, of any entity that has one or more executive officers
    who served on our Board of Directors or compensation committee
    during 2009.
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Sale of
    Subordinated Convertible Notes and Warrants
Messrs. Prim, Dupree, McQuilkin and Warnock (either
    individually or through an affiliated entity) purchased an
    aggregate of $3.04 million of our 2011 Notes and an
    aggregate of 225,185 warrants to purchase shares of our common
    stock in a private placement on December 30, 2009. We
    issued a total of $15.0 million of 2011 Notes and a total
    of 1,111,109 warrants in that private placement. The exercise
    price of these warrants is either (a) $1.25 per share or
    (b) following a public offering in which we realize at
    least $30.0 million in net proceeds, 80% of the per share
    price of the shares issued in the offering. The following table
    sets forth certain information regarding such persons'
    purchase of the 2011 Notes and the related warrants.
Principal
Amount of Notes
Purchased
Warrants
Name
Affiliated Investor
($)
(#)
Billy D. Prim
—
540,000
40,000
David W. Dupree
—
100,000
7,407
Malcolm McQuilkin
Malcolm McQuilkin Living Trust
1,000,000
74,074
David L. Warnock
Camden Partners Strategic Fund III, LP
1,344,140
99,566
David L. Warnock
Camden Partners Strategic Fund III-A, LP
55,860
4,138
Sale of
    Series C Convertible Preferred Stock and Warrants
Messrs. Prim, Dupree, McQuilkin and Warnock (either
    individually or through an affiliated entity) purchased an
    aggregate of 5,826,947 shares of Series C convertible
    preferred stock and warrants to purchase an aggregate of
    582,695 shares of common stock at an exercise price of
    $1.98 per share in private placement transactions between
    December 14, 2007 and May 20, 2008. We issued a total
    of 12,520,001 shares of Series C convertible preferred stock and
    warrants to purchase 1,252,001 shares of common stock in
    connection with these private placement transactions. The
    following table sets forth certain information regarding such
    persons' ownership of those shares and warrants.
Shares
Warrants
Amount Paid for
Purchased
Purchased
Shares and Warrants
Name
Affiliated Investor
(#)
(#)
($)
Billy D. Prim
—
512,363
51,237
1,229,671
David W. Dupree
Primo Investors, L.P.
4,281,250
428,125
10,275,000
Malcolm McQuilkin
Malcolm McQuilkin Living Trust
200,000
20,000
480,000
David L. Warnock
Camden Partners Strategic Fund III, LP
800,084
80,008
1,920,202
David L. Warnock
Camden Partners Strategic Fund III-A, LP
33,250
3,325
79,800
Sale of
    Series B Preferred Stock and Warrants
Messrs. Prim, McQuilkin, Warnock and Filipowski (either
    individually or through or with an affiliated entity or person)
    purchased an aggregate of 8,999,691 shares of Series B
    preferred stock and warrants to purchase an aggregate of
    2,402,916 shares of common stock at an exercise price of
    $1.25 per share in private placement transactions between
    April 28, 2006 and June 30, 2007. We issued a total of
    23,280,221 shares of Series B preferred stock and
    warrants to purchase a total of 6,215,813 shares of common
    stock in these private placement transactions. The following
    table sets forth certain information regarding such
    persons' ownership of those shares.
Shares
Warrants
Amount Paid for
Purchased
Purchased
Shares and Warrants
Name
Affiliated Investor
(#)
(#)
($)
Billy D. Prim
—
5,164,846
1,379,013
5,164,846
Billy D. Prim
Deborah Prim
70,000
18,690
70,000
Malcolm McQuilkin
Malcolm McQuilkin Living Trust
600,000
160,200
600,000
David L. Warnock
Camden Partners Strategic Fund III, LP
2,880,300
769,040
2,880,300
David L. Warnock
Camden Partners Strategic Fund III-A, LP
119,700
31,959
119,700
Andrew J. Filipowski
—
164,845
44,014
164,845
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EXECUTIVE
    COMPENSATION
Compensation
    Discussion and Analysis
The following discussion and analysis of compensation
    arrangements of our (1) principal executive officer (Billy
    D. Prim), (2) principal financial officer (Mark Castaneda)
    and (3) three most highly compensated executive officers
    other than our principal executive officer and principal
    financial officer who were serving as executive officers on
    December 31, 2009 (Michael S. Gunter, Richard E. Belmont
    and Brent C. Boydston, and collectively with Messrs. Prim
    and Castaneda, our NEOs) should be read together with the
    compensation tables and related disclosures set forth below.
    This discussion contains forward-looking statements that are
    based on our current considerations, expectations and
    determinations regarding future compensation programs. The
    actual amount and form of compensation and the compensation
    programs that we adopt may differ materially from current or
    planned programs as summarized in this discussion.
Introduction
Our compensation discussion and analysis discusses the total
    compensation for our NEOs, and it describes our overall
    compensation philosophy, objectives and practices. Our
    compensation philosophy and objectives generally apply to all of
    our employees and all of our employees are eligible to
    participate in the main components our compensation program
    consisting of:
•
base salary;
•
annual cash bonus; and
•
equity compensation.
The relative value of each of these components for individual
    employees varies based on job role and responsibility, as well
    as our financial performance.
Compensation
    Philosophy and Objectives
Our compensation approach is necessarily tied to our stage of
    development. Our compensation philosophy is to offer our
    executive officers, including our NEOs, compensation and
    benefits that are competitive and meet our goals of attracting,
    retaining and motivating highly skilled management, which is
    necessary to achieve our financial and strategic objectives and
    create long-term value for our stockholders. Accordingly, our
    executive officer compensation program is designed to link
    annual and long-term cash and stock incentives to the
    achievement of Company and individual performance goals and to
    align the interests of executive officers with the creation of
    stockholder value.
We believe compensation should be determined within a framework
    that is intended to reward individual contribution and the
    achievement of Company objectives. Within this overall
    philosophy, our objectives are to:
•
attract, retain and motivate our executives by providing a total
    compensation program that takes into consideration competitive
    market requirements and strategic business needs;
•
align the financial interests of executive officers with those
    of our stockholders, both in the short and long term;
•
provide incentives for achieving and exceeding annual and
    long-term performance goals; and
•
appropriately reward executive officers for creating long-term
    stockholder value.
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Each of Messrs. Prim, Castaneda and Gunter is entering into
    an employment agreement with the Company in connection with this
    offering. We are also entering into an employment agreement in
    connection with this offering with Duane G. Goodwin who joined
    our Company as Senior Vice President, Business Development in
    February 2010. The material terms of those employment agreements
    are described below.
Role of
    Directors and Executive Officers in Setting
    Compensation
Prior to this offering, we were a privately-held company. As a
    result, we have not been subject to any stock exchange listing
    or SEC rules requiring a majority of our Board of Directors to
    be independent or relating to the formation and functioning of
    Board committees, including our compensation committee.
    Historically, we have informally considered the competitive
    market for corresponding positions within comparable geographic
    areas and companies of similar size and stage of development,
    including other small, high-growth public companies. This
    consideration was based on the general knowledge possessed by
    members of our compensation committee and also included
    consultations with our Chief Executive Officer. As we gain
    experience as a public company, we expect that the specific
    direction, emphasis and components of our executive compensation
    program will continue to evolve. For example, over time, we
    expect to reduce our reliance upon subjective determinations in
    favor of a more empirically based approach that could involve,
    among other practices, benchmarking the compensation paid to our
    NEOs against peer companies that we identify and the use of
    clearly defined, objective targets to determine incentive
    compensation awards.
The compensation committee typically considers, but is not
    required to accept, our Chief Executive Officer's
    evaluation regarding the performance and recommendation
    regarding proposed base salary and bonus and equity awards for
    the other NEOs, as well as himself. The compensation committee
    may also request the assistance of our Chief Financial Officer
    in evaluating the financial, accounting and tax implications of
    various compensation awards paid to the NEOs. However, our Chief
    Financial Officer does not recommend or determine the amounts or
    types of compensation paid to the NEOs. Our Chief Executive
    Officer and certain of our other NEOs may attend compensation
    committee meetings, as requested by the chairman of the
    compensation committee. Our NEOs, including our Chief Executive
    Officer, typically do not attend any portion of the compensation
    committee meetings during which their compensation is
    established and approved.
We believe the levels of compensation we provide should be
    competitive, reasonable and appropriate for our business needs
    and circumstances. To date, the compensation committee has not
    engaged a compensation consultant. Rather, the compensation
    committee and our Chief Executive Officer applied subjective
    discretion to make compensation decisions and they have not used
    a specific formula or matrix to set compensation in relation to
    compensation paid by other companies. To date, our compensation
    committee has not established any percentile targets for the
    levels of compensation provided to our NEOs. Similarly, the
    compensation committee has not performed competitive reviews of
    our compensation programs with those of similarly-situated
    companies, nor have we engaged in benchmarking of compensation
    paid to our NEOs. Our historical approach has been to consider
    competitive compensation practices and other factors such as how
    much compensation was necessary to recruit and retain an
    executive and individual performance rather than establishing
    compensation at specific benchmark percentiles. This approach
    has enabled us to respond to dynamics in the labor market and
    provided us with flexibility in maintaining and enhancing our
    NEOs' engagement, focus, motivation and enthusiasm for our
    future. However, as mentioned above, we expect to build some of
    these practices into our compensation approach over time as we
    review, evaluate and refine our compensation policies and
    practices as a public company.
The amount of past compensation, including annual discretionary
    bonus awards and amounts realizable from prior stock option
    awards, is generally not a significant factor in the
    compensation committee's considerations because these
    awards would have been earned based on performance in prior
    years. The compensation committee does, however, consider prior
    awards when considering the retention aspects of our
    compensation program.
Our NEOs are not subject to mandated stock ownership or stock
    retention guidelines. It is the belief of the compensation
    committee that the equity component of our executive
    compensation program ensures that our
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NEOs are also owners and those components work to align the
    NEOs' goals with the best interests of our stockholders.
Elements
    of Our Executive Compensation Program
The principal elements of our executive compensation program
    have to date been base salary, a discretionary annual cash bonus
    and long-term equity compensation in the form of stock options.
    Each of these compensation elements satisfies one or more of our
    compensation objectives.
We have not adopted any policies with respect to long-term
    versus currently-paid compensation, but feel that both elements
    are necessary for achieving our compensation objectives.
    Currently-paid salary compensation provides financial stability
    for each of our NEOs and annual increases in base salary provide
    a reward for short-term Company and individual performance.
    Annual cash bonuses likewise provide a reward for short-term
    Company and individual performance. Long-term equity
    compensation rewards achievement of strategic long-term
    objectives and contributes toward overall stockholder value.
    Similarly, while we have not adopted any policies with respect
    to cash versus non-cash compensation (or among different forms
    of non-cash compensation), we feel that it is important to
    encourage or provide for a meaningful amount of equity ownership
    by our NEOs to help align their interests with those of
    stockholders, one of our compensation objectives. We have also
    used equity compensation in order to preserve the Company's
    cash to the extent practicable in order to facilitate our growth
    and development. We combine the compensation elements for each
    NEO in a manner that the compensation committee believes, in its
    discretion and judgment, is consistent with the executive's
    contributions to our Company and our overall goals with respect
    to executive compensation.
Base
    Salary
We believe that a competitive base salary is an important
    component of compensation as it provides a degree of financial
    stability for our NEOs and is critical to recruiting and
    retaining our executives. Base salary is also designed to
    recognize the scope of responsibilities placed on each NEO and
    reward each executive for his or her unique leadership skills,
    management experience and contributions. We make a subjective
    determination of base salary after considering such factors
    collectively.
Annual
    Bonuses
Our cash bonus compensation is designed to reward achievement of
    goals that support our objective of enhancing stockholder value
    and motivating executives to achieve superior performance in
    their areas of responsibility. We generally utilize incentive
    plans that tie payment of cash bonuses to the Company's
    achievement of certain objectives, including revenue targets,
    EBITDA targets and new selling locations. Our incentive plans
    also base a portion of the bonus payment on the achievement of
    individual initiatives that are determined by the Chief
    Executive Officer, or, in the case of the Chief Executive
    Officer, by the compensation committee. We determined not to
    establish an annual incentive plan for 2009 given our desire to
    reduce expenses in the face of uncertain U.S. economic
    conditions. As a result, we paid no bonuses to our NEOs with
    respect to the 2009 performance year.
We have, however, established such an annual incentive plan for
    2010, which includes an opportunity for a cash award and an
    equity award as follows:
•
Cash award:
o
A cash incentive pool will be created based upon the amount by
    which the Company's actual earnings before interest, taxes,
    depreciation and amortization ("EBITDA") for 2010
    exceeds target EBITDA (based on the Company's 2010 budget).
    This cash pool with be funded as follows:
n
50% of the first $1.0 million of actual EBITDA in excess of
    target EBITDA; plus
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n
30% of the next $1.0 million of actual EBITDA in excess of
    target EBITDA; plus
n
20% of any actual EBITDA more than $2.0 million in excess
    of target EBITDA.
o
Each participant in the annual incentive plan for 2010 will be
    entitled to a portion of the cash incentive pool equal to that
    participant's individual 2010 salary over the total 2010
    salaries of all the participants in the 2010 annual incentive
    plan multiplied by the total amount in the cash incentive pool.
•
Equity award:
o
Target amounts are based on Company and employee-specific
    performance;
o
50% of the award will be payable in stock options and 50% will
    be payable in restricted stock; and
o
Actual awards will be based on the compensation committee's
    subjective evaluation of the Company's and each
    individual's performance.
Long-Term
    Equity Compensation
Historically, we have provided long-term equity compensation
    primarily through grants of stock options. However, no such
    equity compensation was paid in 2009 other than certain awards
    that were made with respect to 2008 performance. Beginning in
    2010, we intend to use a combination of stock options and
    restricted stock.
We have granted stock options and intend to grant stock options
    and restricted stock through annually-adopted executive
    incentive plans, initial grants to new employees and, on
    occasion, through additional grants approved by our Board of
    Directors or the compensation committee. We believe that such
    grants further our compensation objectives of aligning the
    interests of our NEOs with those of our stockholders,
    encouraging long-term performance, and providing a simple and
easy-to-understand
form of equity compensation that promotes executive retention.
    We view such grants both as incentives for future performance
    and as compensation for past accomplishments.
We generally have used stock options in the past, rather than
    other forms of long-term incentives, because they create value
    for the executive only if stockholder value is increased through
    appreciation of our share price. Prior to this offering, all
    stock option grants were made pursuant to our 2004 Stock Plan.
    Historically, the exercise price of our stock options has been
    at least equal to the fair market value of our common stock on
    the date of grant. Prior to this offering, the fair market value
    of our common stock has been established by our Board of
    Directors using factors it considered appropriate for a
    reasonable valuation. Following this offering, the fair market
    value of our common stock will be the closing price of our
    common stock on the Nasdaq Global Market on the date of the
    grant, provided our shares are approved for listing on the
    Nasdaq Global Market. As a privately owned company prior to the
    date of this offering, we have not established a program, plan
    or practice pertaining to the timing of stock option grants to
    executive officers coinciding with the release of material
    non-public information. We have adopted a policy, to take effect
    upon completion of this offering, that provides for our
    compensation committee to approve stock option grants up to four
    times per year at its regularly scheduled quarterly meetings,
    and further provides that such grants will be effective on the
    third trading day following the date of the next public
    disclosure of our financial results following the date of each
    such meeting.
Following this offering, we anticipate that we will continue to
    use stock option grants, as well as restricted stock and other
    forms of equity compensation. We believe restricted stock aligns
    the interests of our executive officers with those of our
    stockholders and serves as a retention tool as it will typically
    be subject to a multi-year vesting period. Following this
    offering, all equity award grants will be made pursuant to our
    2010 Omnibus Long-Term Incentive Plan. The exercise price of
    stock options will be based on the fair market value of our
    common stock on the grant date as described above.
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Our Chief Executive Officer received an initial stock option
    grant to purchase 100,000 shares of our common stock in
    2004 in connection with the formation of the Company. Our other
    NEOs received stock option grants in connection with their
    initial hire. The number of stock options granted to our NEOs in
    connection with their initial hire was determined based upon
    negotiations with each executive, represented the number
    necessary to recruit each executive from his then-current
    position and reflected our Board of Directors' subjective
    evaluation of the executive's experience and potential for
    future performance.
We have made additional discretionary grants of equity
    compensation to all of our executive officers from time to time,
    as determined by our Board of Directors or the compensation
    committee taking into consideration factors such as individual
    performance and competitive market conditions.
Perquisites
    and Other Benefits
As a general matter, we do not intend to offer perquisites or
    other benefits to any executive officer, including the NEOs,
    with an aggregate value in excess of $10,000 annually, because
    we believe we can provide better incentives for desired
    performance with compensation in the forms described above. We
    recognize that, from time to time, it may be appropriate to
    provide some perquisites or other benefits in order to attract,
    motivate and retain our executives, with any such decision to be
    reviewed and approved by the compensation committee as needed.
Our executive officers are eligible to participate in standard
    employee benefit plans, including medical, dental, vision, life
    and any other employee benefit or insurance plan made available
    to employees. We maintain a 401(k) plan, which is intended to be
    a tax-qualified defined contribution plan under
    Section 401(k) of the Internal Revenue Code of 1986, as
    amended, or the Code. In general, all of our employees are
    eligible to participate in this plan. The 401(k) plan includes a
    salary deferral arrangement pursuant to which participants may
    elect to reduce their current compensation by up to 90% or the
    statutory limit, $16,500 in 2009, whichever is less, and have
    the amount of the reduction contributed to the 401(k) plan. We
    made no matching contributions during 2009; however, in 2010 our
    Board of Directors established a Company match of up to 50% of
    employee contributions up to 6% of their salaries, with 50% of
    the matching amount being contingent upon our achievement of
    certain objectives to be determined by our Board of Directors.
Employment
    and Severance and Change of Control Benefits
We believe that a strong, experienced management team is
    essential to the best interests of the Company and our
    stockholders. We recognize that the possibility of a change of
    control could arise and that such a possibility could result in
    the departure or distraction of members of the management team
    to the detriment of our Company and our stockholders. We are
    entering into new employment agreements with certain of our NEOs
    in connection with this offering, which are intended to minimize
    employment security concerns arising in the course of
    negotiating and completing a change of control transaction. A
    more detailed description of the change of control provisions
    provided in these employment agreements is available under the
    section captioned "Employment Agreements and Change of
    Control Arrangements" below, and the change of control
    benefits are quantified in the section captioned "Potential
    Payments Upon Termination or Change of Control."
Analysis
    of 2009 Compensation for Named Executive Officers
Base
    Salary
In light of the uncertain U.S. economic conditions, we did
    not increase the base salaries of our NEOs for 2009 compared to
    2008.
During 2008 and 2009, the base salary of our Chief Executive
    Officer, Billy D. Prim, was $400,000 per year.
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Mark Castaneda, our Chief Financial Officer, became an employee
    of the Company in 2008. At that time, our Board of Directors set
    his base salary at $225,000 per year. Mr. Castaneda's
    2009 base salary remained at $225,000 per year.
During 2008 and 2009, the base salary of Michael S. Gunter, our
    Senior Vice President, Operations, was $173,363.
Richard E. Belmont, our Vice President, Products, became an
    employee of the Company in 2008. At that time, our Board of
    Directors set his base salary at $183,195 per year.
    Mr. Belmont's 2009 base salary remained at $183,195
    per year.
During 2008 and 2009, the base salary of Brent C. Boydston, our
    former Vice President, Business Development and current Vice
    President, National Accounts, was $217,350.
In February 2010, we approved base salaries for our NEOs as
    follows:
Name
Amount ($)
Billy D. Prim
400,000
Mark Castaneda
250,000
Michael S. Gunter
225,000
Richard E. Belmont
190,000
Brent C. Boydston
150,000
Annual
    Cash Bonuses
We did not make any cash bonus payments to NEOs for 2009. The
    compensation committee decided not to establish an annual
    incentive plan for 2009 given its desire to reduce expenses in
    the face of uncertain U.S. economic conditions. We
    paid the following cash bonuses to our NEOs for 2008:
Name
Amount ($)
Billy D. Prim
—
Mark Castaneda
30,000
Michael S. Gunter
22,000
Richard E. Belmont
15,300
Brent C. Boydston
14,000
Long-Term
    Equity Compensation
We did not make any equity awards to NEOs for 2009 because, as
    noted above, the compensation committee determined not to
    establish an annual incentive plan for 2009. We awarded our NEOs
    options to purchase the following number of shares (at an
    exercise price of $1.25 per share) in 2009 for 2008 performance:
Number
Name
of Options
Billy D. Prim
—
Mark Castaneda
40,000
Michael S. Gunter
—
Richard E. Belmont
23,800
Brent C. Boydston
21,000
Tax
    Considerations
Other than our Chief Executive Officer, we have not provided any
    executive officer or director with a
gross-up
or
    other reimbursement for tax amounts the executive might pay
    pursuant to Section 280G or Section 409A of the
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Internal Revenue Code. As described in the section below
    captioned "Employment Agreements and Change of Control
    Arrangements," any payments our Chief Executive Officer
    receives in connection with a change of control may be subject
    to increase to cover any excise tax imposed by Section 280G
    of the Internal Revenue Code.
Section 280G and related Code sections provide that
    executive officers, directors who hold significant stockholder
    interests and certain other service providers could be subject
    to significant additional taxes if they receive payments or
    benefits in connection with a change of control that exceed
    certain limits, and that we or our successor could lose a
    deduction on the amounts subject to the additional tax.
    Section 409A also imposes additional significant taxes on
    the individual in the event that an executive officer, director
    or service provider receives "deferred compensation"
    that does not meet the requirements of Section 409A.
Because of the limitations of Internal Revenue Code
    Section 162(m), our federal income tax deduction for
    compensation paid to our Chief Executive Officer and to certain
    other highly compensated executive officers (other than our
    Chief Financial Officer) may be limited if the compensation
    exceeds $1,000,000 per person during any fiscal year, unless it
    is "performance-based" under Code Section 162(m)
    or meets another exception to the deduction limits. In addition
    to salary and bonus compensation, upon the exercise of stock
    options that are not treated as incentive stock options, the
    excess of the current market price over the option price, or the
    option spread, is treated as compensation and accordingly, in
    any year, such exercise may cause an officer's total
    compensation to exceed $1,000,000. However, option compensation
    will not be subject to the $1,000,000 cap on deductibility if
    the options meet certain requirements, and in the past we have
    granted options that we believe met those requirements.
    Additionally, under a special Code Section 162(m)
    transition rule, any compensation paid pursuant to a
    compensation plan in existence before the effective date of this
    public offering will not be subject to the $1,000,000 limitation
    until the first meeting of stockholders at which directors are
    elected after the close of the third calendar year following the
    year in which the public offering occurs, unless the
    compensation plan is materially modified. While the compensation
    committee cannot predict how the deductibility limit may impact
    our compensation programs in future years, the compensation
    committee intends to maintain an approach to executive
    compensation that links pay to performance. In addition, while
    the compensation committee has not adopted a formal policy
    regarding tax deductibility of compensation paid to our NEOs,
    the compensation committee intends to consider tax deductibility
    under Code Section 162(m) as a factor in compensation
    decisions.
Risk
    Analysis of Compensation Program
The compensation committee has reviewed the Company's
    compensation program and does not believe that it encourages
    excessive or unnecessary risk taking. Base salaries are fixed in
    amount and thus do not encourage risk taking. By utilizing
    annual cash bonuses that are tied to individual and Company-wide
    performance measures and long-term equity compensation as a
    significant portion of total compensation, the compensation
    committee believes that it has aligned our executive
    officers' objectives with those of our long-term
    stockholders.
Conclusion
The compensation committee believes that our executive
    leadership is a key element to our success and that the
    compensation package offered to our NEOs is a key element in
    attracting and retaining the appropriate personnel.
The compensation committee believes it has maintained
    compensation for our NEOs at levels that are reflective of the
    talent and success of the individuals being compensated, and
    with the inclusion of additional compensation directly tied to
    performance, the compensation committee believes executive
    compensation will be sufficiently comparable to its industry
    peers to allow us to retain our key personnel at costs which are
    appropriate for us.
The compensation committee will continue to develop, analyze and
    review its methods for aligning our executive officers'
    long-term compensation with the benefits generated for
    stockholders. The compensation committee believes the idea of
    creating ownership helps align management's interests with
    the interests of stockholders. The compensation committee has no
    pre-determined timeline for implementing new or ongoing
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long-term incentive plans. New plans are reviewed, discussed and
    implemented as the compensation committee believes it is
    necessary or appropriate as a measure to incentivize, retain and
    reward our NEOs.
Summary
    Compensation Table for 2009
The following table sets forth information regarding the
    compensation earned in 2009 for our NEOs.
Option
All Other
Salary
Awards
Compensation
Total
Name and Principal Position
Year
($)
(#)
(1)
($)
(2)
($)
Billy D. Prim
Chairman, Chief Executive
Officer and President
2009
400,000
—
138
400,138
Mark Castaneda
Chief Financial Officer
2009
225,000
19,399
93
244,492
Michael S. Gunter
Senior Vice President, Operations
2009
173,363
—
62
173,425
Richard E. Belmont
Vice President, Products
2009
183,195
11,542
143
194,880
Brent C. Boydston
Vice President, Business
Development
(3)
2009
217,350
10,184
62
227,596
(1)
Represents the aggregate grant date
    fair value of stock options awarded in 2009 calculated in
    accordance with Financial Accounting Standards Board Accounting
    Standards Codification 718 (formerly referred to as
    SFAS 123(R)). For a description of the assumptions used in
    estimating the grant date fair value of the option awards as
    reported in this column, see note 9 to our consolidated
    financial statements for the year ended December 31, 2009.
(2)
Amounts shown in this column
    consist of life insurance premiums paid on behalf of each NEO.
(3)
Mr. Boydston served as Vice
    President, Business Development through February 15, 2010.
    Mr. Boydston currently serves the Company as Vice
    President, National Accounts.
Grants of
    Plan-Based Awards for 2009
The following table sets forth certain information regarding
    grants of plan-based awards to our NEOs in 2009.
All Other
Option Awards:
Number of
Exercise or
Grant Date
Securities
Base Price of
Fair Value of
Underlying
Option
Option
Grant
Options
Awards
Awards
Name
Date
(#)
(1)
($/Sh)
($)
(2)
Billy D. Prim
—
—
—
—
Mark Castaneda
1/29/2009
40,000
1.25
19,399
Michael S. Gunter
—
—
—
—
Richard E. Belmont
1/29/2009
23,800
1.25
11,542
Brent C. Boydston
1/29/2009
21,000
1.25
10,184
(1)
We granted the stock options listed
    in this column under our 2004 Stock Plan in 2009 for 2008
    performance. The vesting schedule applicable to each award is
    set forth below in the section entitled "Outstanding Equity
    Awards at December 31, 2009."
(2)
Represents the aggregate grant date
    fair value calculated in accordance with Financial Accounting
    Standards Board Accounting Standards Codification 718
    (formerly referred to as SFAS 123(R)). For a description of
    the assumptions used in estimating such fair value, see
    note 9 to our consolidated financial statements for the
    year ended December 31, 2009.
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Outstanding
    Equity Awards at December 31, 2009
The following table sets forth information regarding outstanding
    equity awards held by our NEOs as of December 31, 2009.
Option Awards
Number of Shares
Number of Shares
Underlying
Underlying
Unexercised
Unexercised
Option
Option
Options (#)
Options (#)
Exercise Price
Expiration
Name
Exercisable
Unexercisable
($)
Date
Billy D. Prim
100,000
—
1.00
11/01/14
225,000
—
1.00
01/01/16
10,000
10,000
(1)
1.25
01/25/17
100,000
—
1.98
05/01/18
Mark Castaneda
37,500
112,500
(2)
1.98
05/01/18
—
40,000
(3)
1.25
01/29/19
Michael S. Gunter
100,000
—
1.00
11/01/14
90,000
—
1.00
01/01/16
4,187
4,188
(1)
1.25
01/25/17
—
53,125
(4)
1.25
01/25/17
Richard E. Belmont
75,000
25,000
(5)
1.25
09/11/16
4,425
4,425
(1)
1.25
01/25/17
33,188
—
1.98
05/01/18
—
23,800
(3)
1.25
01/29/19
Brent C. Boydston
100,000
—
1.00
11/01/14
82,500
—
1.00
01/01/16
5,250
5,250
(1)
1.25
01/25/17
—
18,750
(4)
1.25
01/25/17
39,375
—
1.98
05/01/18
—
21,000
(3)
1.25
01/29/19
(1)
These options vest in two equal
    annual installments on January 1, 2010 and January 1,
    2011.
(2)
These options vest in three equal
    annual installments on May 1, 2010, May 1, 2011 and
    May 1, 2012.
(3)
These options vested in their
    entirety on January 30, 2010.
(4)
These options vested in their
    entirety on January 1, 2010.
(5)
These options vest in their
    entirety on September 11, 2010.
Option
    Exercises and Stock Vested for 2009
No stock options held by our NEOs were exercised during 2009. As
    of December 31, 2009, none of our NEOs held any unvested
    restricted stock.
Employment
    Agreements and Change of Control Arrangements
The following summaries of the employment agreements of
    Messrs. Prim, Castaneda and Gunter describe the new
    employment agreements with such individuals that are being
    entered into in connection with this offering.
Employment
    Agreement with Mr. Prim
Mr. Prim's employment agreement provides for a base
    annual salary of $400,000, which may be adjusted up but not down
    by our Board of Directors. Mr. Prim will also be eligible
    to receive bonuses and awards of equity and non-equity
    compensation as approved by our Board of Directors. The
    employment agreement entitles Mr. Prim to participate in
    all other Company benefits generally available to other senior
    executives. Mr. Prim's employment
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agreement also provides for: (i) an annual automatic cost
    of living increase to base salary based on the Consumer Price
    Index; (ii) long-term disability coverage at 100% of base
    annual salary; (iii) an annual physical paid for by the
    Company; and (iv) Company's payment of certain
    attorneys fees incurred in the event Mr. Prim has to take
    action to enforce his rights under the employment agreement. We
    have agreed to maintain insurance coverage for and indemnify
    Mr. Prim in connection with his capacity as our director
    and officer.
Our employment agreement with Mr. Prim provides for an
    initial three-year employment term
    commencing          
    and automatically extending for additional one-year periods
    unless terminated by Mr. Prim or us upon at least
    90 days prior written notice of intention not to renew. The
    agreement may also be terminated by us or Mr. Prim for
    other reasons and, subject to the conditions set forth in the
    employment agreement, provides for certain payments to
    Mr. Prim upon a termination of his employment or a change
    of control of the Company, as described below.
If Mr. Prim's employment is terminated for any reason,
    he will be entitled to continued coverage under our
    directors' and officers' insurance policy and to
    continued rights to corporate indemnification, each as offered
    to (and on the same terms as) other executive officers for six
    years following his termination date. Unless Mr. Prim is
    terminated for Cause or he resigns without Good Reason (each as
    defined below), he will be entitled to any applicable prorated
    annual bonus for such year and any accrued but unpaid annual
    bonus for the immediately preceding year. Additionally, if
    Mr. Prim is terminated without Cause, resigns for Good
    Reason or we do not renew his employment agreement at the end of
    its term, Mr. Prim will be entitled to (a) severance
    payments in an amount equal to (i) his highest annual base
    salary in effect during the 12 months immediately prior to
    his termination date plus (ii) the average annual bonus
    earned by him for the most recent two fiscal years ending prior
    to his termination date; (b) coverage under health, dental,
    life, accident, disability and similar benefit plans offered to
    (and on the same terms as) other executive officers for
    12 months following his termination date; and (c) the
    immediate vesting of any restricted stock, stock option or other
    equity compensation awards scheduled to vest within six months
    after his termination date.
If Mr. Prim is terminated without Cause or if he resigns
    for Good Reason within two years following a Change of Control
    (as defined in the employment agreement), he will be entitled to
    (a) any applicable prorated annual bonus for such year and
    any accrued but unpaid annual bonus for the immediately
    preceding year; (b) severance payments in an amount equal
    to two times the sum of (i) his highest annual base salary
    in effect during the 12 months immediately prior to his
    termination date plus (ii) the average annual bonus earned
    by Mr. Prim for the most recent two fiscal years ending
    prior to his termination date; and (c) coverage under
    health, dental, life, accident, disability and similar benefit
    plans offered to (and on the same terms as) the other executive
    officers for the 24 months following his termination date.
    In addition, any restricted stock, stock option or other equity
    compensation awards will immediately vest as of the date of the
    Change of Control.
As defined in Mr. Prim's employment agreement,
    "Cause" means (a) continued willful failure to
    substantially perform his duties with the Company,
    (b) willful engaging in misconduct materially and
    demonstrably injurious to the Company or (c) his uncured
    material breach of the agreement. Mr. Prim may terminate
    his employment for "Good Reason" (i) if there is
    a material reduction in his duties or responsibilities,
    (ii) if he is required to relocate to an employment
    location more than 50 miles from his initial employment
    location, or (iii) upon our uncured material breach of the
    agreement.
If Mr. Prim becomes subject to excise taxes under
    Section 4999 of the Internal Revenue Code, we will make a
    tax
gross-up
payment to him in an amount sufficient to cover such excise
    taxes and any interest or penalties thereon.
Mr. Prim's employment agreement also contains
    confidentiality provisions and non-competition and
    non-solicitation covenants prohibiting, among other things,
    Mr. Prim's competition with us or his solicitation of
    our customers, suppliers or employees for the
12-month
period following the termination of his employment.
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Employment
    Agreements with Messrs. Castaneda and Gunter
The Company's employment agreements with
    Messrs. Castaneda and Gunter are substantially similar to
    our employment agreement with Mr. Prim, except that the
    economic terms differ among the agreements and their agreements
    do not provide for: (i) an annual automatic cost of living
    increase to base salary; (ii) additional long-term
    disability coverage; (iii) a Company-paid annual physical;
    (iv) Company payment of certain attorney fees; and
    (v) a Section 4999 excise tax
gross-up
payment to cover certain taxes and penalties.
    Mr. Castaneda's employment agreement provides for a
    base annual salary of $250,000 and Mr. Gunter's
    employment agreement provides for a base annual salary of
    $225,000, which base salaries may be adjusted up but not down by
    our Board of Directors. Messrs. Castaneda and Gunter will
    also each be eligible to receive bonuses and awards of equity
    and non-equity compensation as approved by our Board of
    Directors. The employment agreements entitle each of
    Messrs. Castaneda and Gunter to participate in all other
    Company benefits generally available to other senior executives.
    We have agreed to maintain insurance coverage for and indemnify
    each of Messrs. Castaneda and Gunter in connection with
    their respective capacities as officers.
Our employment agreements with each of Messrs. Castaneda
    and Gunter provide for initial three-year employment terms
    commencing          
    and automatically extending for additional one-year periods
    unless terminated by the NEO or us upon at least 90 days
    prior written notice of intention not to renew. The agreement
    may also be terminated by us or the NEO for other reasons and,
    subject to the conditions set forth in the employment agreement,
    provides for certain payments to be made to such NEO upon a
    termination of his employment or a change of control of the
    Company, as described below.
If either of Messrs. Castaneda or Gunter is terminated for
    any reason, he will be entitled to continued coverage under our
    directors' and officers' insurance policy and
    continued rights to corporate indemnification, each as offered
    to (and on the same terms as) other executive officers for six
    years following his termination date. Unless either of
    Messrs. Castaneda or Gunter is terminated for Cause or
    resigns without Good Reason (each as defined above with respect
    to Mr. Prim's employment agreement), he will be
    entitled to any applicable prorated annual bonus for such year
    and any accrued but unpaid annual bonus for the immediately
    preceding year. Additionally, if either of
    Messrs. Castaneda or Gunter is terminated without Cause,
    resigns for Good Reason or we do not renew his employment
    agreement at the end of its term, he will be entitled to
    (a) severance payments in an amount equal to (i) his
    highest annual base salary in effect during the 12 months
    immediately prior to his termination date plus (ii) the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date;
    (b) coverage under health, dental, life, accident,
    disability and similar benefit plans offered to (and on the same
    terms as) other executive officers for 12 months following
    his termination date; and (c) the immediate vesting of any
    restricted stock, stock option or other equity compensation
    awards scheduled to vest within six months after his termination
    date.
If either of Messrs. Castaneda or Gunter is terminated
    without Cause or resigns for Good Reason within two years
    following a Change of Control (as defined in the employment
    agreements), he will be entitled to (a) any applicable
    prorated annual bonus for such year and any accrued but unpaid
    annual bonus for the immediately preceding year;
    (b) severance payments in an amount equal to 1.5 times the
    sum of (i) his highest base salary in effect during the
    12 months immediately prior to his termination date plus
    (ii) the average annual bonus earned by him for the most
    recent two fiscal years ending prior to his termination date;
    and (c) coverage under health, dental, life, accident,
    disability and similar benefit plans offered to (and on the same
    terms as) the other executive officers for the 18 months
    following his termination date. In addition, any restricted
    stock, stock option or other equity compensation awards will
    immediately vest as of the date of the Change of Control.
If either of Messrs. Castaneda or Gunter becomes subject to
    excise taxes under Section 4999 of the Internal Revenue
    Code, or any interest or penalty is incurred by any of them with
    respect to such excise taxes, then the payments owed under the
    applicable employment agreement will be reduced to avoid such
    taxes, interest or penalties if doing so will result in greater
    after tax payments to the executive.
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The employment agreements also contain confidentiality
    provisions and non-competition and non-solicitation covenants
    prohibiting Messrs. Castaneda and Gunter from, among other
    things, competing with us or soliciting our customers, suppliers
    or employees for the
12-month
period following the termination of their respective employment.
Potential
    Payments Upon Termination or Change of Control
Arrangements
    in Effect Prior to this Offering
Until Messrs. Prim, Castaneda and Gunter entered into the new
    employment agreements discussed below in connection with this
    offering, no NEO was party to any change of control agreement or
    employee agreement that would provide benefits to that NEO upon
    his termination or upon a change of control of the Company. The
    NEOs are entitled to certain benefits payable by our insurance
    carrier under our current insurance policies in the case of a
    termination resulting from death or disability. Certain option
    award agreements with our NEOs provide for accelerated vesting
    upon a change of control.
The following table sets forth the amounts payable to
    Messrs. Prim, Castaneda, Gunter, Belmont and Boydston upon
    a "Change in Control" as defined in such NEO's
    option award agreement, assuming the Change of Control occurred
    on December 31, 2009. As of December 31, 2009, no such
    NEO was entitled to any other compensation or benefits in
    connection with his termination or upon a change of control.
Number of Shares Underlying
Unvested Options Subject
Amount Payable Upon a
to Vesting Upon a Change
Change of Control
Name
of Control (#)
($)
(1)
Billy D. Prim
—
—
Mark Castaneda
112,500
Michael S. Gunter
—
—
Richard E. Belmont
—
—
Brent C. Boydston
—
—
(1)
Represents the value of unvested
    stock options held at December 31, 2009, based upon the
    amount by which the fair market value on December 31, 2009
    ($      ) of the shares of common stock
    underlying those options exceeded the $1.98 exercise price of
    such options. The fair market value on December 31, 2009
    represents the midpoint range of the initial public offering
    price set forth on the cover page of this prospectus.
New
    Employment Agreements
In connection with this offering, we are entering into new
    employment agreements with each of Messrs. Prim, Castaneda and
    Gunter. Under these new agreements, these NEOs will be entitled
    to certain benefits upon their termination or upon a Change of
    Control (as defined in the employment agreement). A more
    detailed description of the terms of these employment agreements
    and the definitions of "Cause" and "Good
    Reason" are available under the section captioned
    "Employment Agreements and Change of Control
    Arrangements" above.
Unless any of Messrs. Prim, Castaneda or Gunter is terminated
    for Cause or resigns without Good Reason, he will be entitled to
    any applicable prorated annual bonus for that year and any
    accrued but unpaid annual bonus for the immediately preceding
    year.
Under these new employment agreements, if any of Messrs. Prim,
    Castaneda or Gunter is terminated without Cause or if any of
    Messrs. Prim, Castaneda or Gunter resigns for Good Reason, then
    such individual will be entitled to the following benefits:
•
severance payments in an amount equal to (i) his highest
    annual base salary in effect during the 12 months
    immediately prior to his termination date plus (ii) the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date;
•
coverage under health, dental, life, accident, disability and
    similar benefit plans offered to (and on the same terms as) the
    other executive officers for the 12 months following his
    termination date; and
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•
the immediate vesting of any restricted stock, stock option or
    other equity compensation awards scheduled to vest within six
    months his termination date.
Under these new employment agreements, if any of
    Messrs. Prim, Castaneda or Gunter is terminated without
    Cause or if any such individual resigns for Good Reason within
    two years following a Change of Control, then he will be
    entitled to the following benefits under his employment
    agreement:
•
severance payments in an amount equal to 1.5 times (two times in
    the case of Mr. Prim) the sum of (i) his highest
    annual base salary in effect during the 12 months
    immediately prior to his termination date plus (ii) the
    average annual bonus earned by him for the most recent two
    fiscal years ending prior to his termination date; and
•
coverage under health, dental, life, accident, disability and
    similar benefit plans offered to (and on the same terms as) the
    other executive officers for the 18 months (24 months
    in the case of Mr. Prim) following his termination date.
In addition, any restricted stock, stock option or other equity
    compensation awards that are unvested will immediately vest as
    of the date of the Change of Control.
The following table sets forth the amounts payable to
    Messrs. Prim, Castaneda and, Gunter upon termination of
    employment or a "Change in Control" as defined in
    their employment agreements, assuming each of the events
    occurred on December 31, 2009 and assuming that the
    employment agreements that such individuals are entering into in
    connection with this offering were in effect as of
    December 31, 2009. As described in "Arrangements in
    Effect Prior to this Offering," neither Mr. Belmont
    nor Mr. Boydston is entitled to any compensation or
    benefits in connection with his termination or upon Change of
    Control.
Termination
Termination
Termination
for Cause or
Without Cause
Without Cause or
Termination
Termination
Change of
Benefits and Payments
Without Good
or for Good
for Good Reason
Due to
Due to
Control (No
Upon Termination
Reason ($)
Reason ($)
Following a Change of Control ($)
Disability
    ($)
(1)
Death
    ($)
(2)
Termination)
    ($)
(3)
Billy D. Prim:
Base
    Salary
(4)
—
400,000
800,000
—
—
—
Annual Cash Bonus
—
—
—
—
—
—
Unvested Stock Options
—
(5)
(6)
—
—
Health
    Insurance
(7)
—
5,500
11,000
—
—
—
Life
    Insurance
(7)
—
204
408
—
—
—
Disability
    Coverage
(7)
—
923
1,846
—
—
—
Total:
—
—
—
Mark Castaneda:
Base
    Salary
(8)
—
250,000
375,000
—
—
—
Annual Cash
    Bonus
(9)
—
15,000
22,500
—
—
—
Unvested Stock Options
—
(5)
(6)
—
—
Health
    Insurance
(10)
—
7,672
11,508
—
—
—
Life
    Insurance
(10)
—
204
306
—
—
—
Disability
    Coverage
(10)
—
923
1,385
—
—
—
Total:
—
—
—
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Termination
Termination
Termination
for Cause or
Without Cause
Without Cause or
Termination
Termination
Change of
Benefits and Payments
Without Good
or for Good
for Good Reason
Due to
Due to
Control (No
Upon Termination
Reason ($)
Reason ($)
Following a Change of Control ($)
Disability
    ($)
(1)
Death
    ($)
(2)
Termination)
    ($)
(3)
Michael S. Gunter:
Base
    Salary
(8)
—
225,000
337,500
—
—
—
Annual Cash
    Bonus
(9)
—
26,703
40,055
—
—
—
Unvested Stock Options
—
(5)
(6)
—
—
Health
    Insurance
(10)
—
7,672
11,508
—
—
—
Life
    Insurance
(10)
—
204
306
—
—
—
Disability
    Coverage
(10)
—
846
1,296
—
—
—
Total:
—
—
—
(1)
Excludes amounts payable to the
    executive by our insurance carrier upon termination resulting
    from the disability of such executive under disability insurance
    policies maintained for the benefit of the executive.
(2)
Excludes amounts payable to the
    executive by our insurance carrier upon termination resulting
    from the death of such executive under life insurance policies
    maintained for the benefit of the executive.
(3)
Represents the value of unvested
    stock options subject to vesting in connection with a Change of
    Control (as defined in the executive's option award
    agreement) held at December 31, 2009, based upon the amount
    by which the fair market value on December 31, 2009
    ($  ) of the shares of common stock underlying those
    options exceeded the exercise price of such options. The fair
    market value on December 31, 2009 represents the midpoint
    range of the initial public offering price set forth on the
    cover page of this prospectus.
(4)
Represents a payment equal to
    Mr. Prim's highest base salary in effect during the
    12 months immediately prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to two times Mr. Prim's highest base
    salary in effect during the 12 months immediately prior to
    the termination date in the case of a termination without Cause
    or for Good Reason in connection with a Change of Control.
(5)
Represents the value of unvested
    stock options held at December 31, 2009 which are scheduled
    to vest within six month of such date, based upon the amount by
    which the fair market value on December 31, 2009
    ($          )
    of the shares of common stock underlying those options exceeded
    the exercise price of such options. The fair market value on
    December 31, 2009 represents the midpoint range of the
    initial public offering price set forth on the cover page of
    this prospectus.
(6)
Represents the value of all
    unvested stock options held at December 31, 2009, based
    upon the amount by which the fair market value on
    December 31, 2009
    ($          )
    of the shares of common stock underlying those options exceeded
    the exercise price of such options. The fair market value on
    December 31, 2009 represents the midpoint range of the
    initial public offering price set forth on the cover page of
    this prospectus.
(7)
In the case of a termination
    without Cause or for Good Reason, represents the estimated
    incremental cost to maintain coverage under the applicable
    policy for 12 months. In the case of a termination without
    Cause or for Good Reason in connection with a Change of Control,
    represents the estimated incremental cost to us maintain
    coverage under the applicable policy for 24 months.
(8)
Represents a payment equal to such
    executive's highest base salary in effect during the
    12 months immediately prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to 1.5 times such executive's highest base
    salary in effect during the 12 months immediately prior to
    the termination date in the case of a termination without Cause
    or for Good Reason in connection with a Change of Control.
(9)
Represents a payment equal to the
    average annual bonus earned by the executive for the most recent
    two fiscal years ending prior to the termination date in the
    case of a termination without Cause or for Good Reason and a
    payment equal to 1.5 times the average annual bonus earned by
    the executive for the most recent two fiscal years ending prior
    to the termination date in the case of a termination without
    Cause or for Good Reason in connection with a Change of Control.
(10)
In the case of a termination
    without Cause or for Good Reason, represents the estimated
    incremental cost to maintain coverage under the applicable
    policy for 12 months. In the case of a termination without
    Cause or for Good Reason in connection with a Change of Control,
    represents the estimated incremental cost to us maintain
    coverage under the applicable policy for 18 months.
Equity
    and Stock Option Plans
2010
    Omnibus Long-Term Incentive Plan
In March 2010 our Board of Directors adopted and
    in                2010
    our stockholders approved the Primo Water Corporation 2010
    Omnibus Long-Term Incentive Plan, which we refer to as the 2010
    Omnibus Plan
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and which will be effective prior to the closing of this
    offering. The material terms of the 2010 Omnibus Plan are
    summarized below.
Administration of the Plan.
Our Board of Directors has
    such powers and authorities related to the administration of the
    2010 Omnibus Plan as are consistent with our corporate
    governance documents and applicable law. The Board of Directors
    may (and in some cases under applicable law, our governance
    documents or regulatory requirements, must) delegate to a
    committee (the "committee") administration of all or
    some parts of the 2010 Omnibus Plan. Following the initial
    public offering and to the extent required by applicable law,
    the committee or a
sub-committee,
as applicable, to which administrative responsibility will be
    delegated will be comprised of directors who (i) qualify as
    "outside directors" within the meaning of
    Section 162(m) of the Internal Revenue Code of 1986, as
    amended (the "Code"), (ii) meet such other
    requirements as may be established from time to time by the SEC
    for plans intended to qualify for exemption under
Rule 16b-3
(or its successor) under the Securities Exchange Act of 1934, as
    amended, and (iii) comply with the independence
    requirements of the stock exchange on which our common stock is
    listed.
Number of Authorized Shares.
The initial number of shares
    of our common stock reserved for issuance under the 2010 Omnibus
    Plan is 7,500,000. In addition, any shares of our stock which
    are subject to stock options granted under the 2004 Stock Plan
    and are canceled, expired, forfeited, settled in cash or
    otherwise terminated without delivery of shares, will be
    available for issuance under the 2010 Omnibus Plan. Subject to
    the terms of the 2010 Omnibus
    Plan,                of
    the reserved shares may be issued pursuant to incentive stock
    options ("ISOs"). Following the end of the Transition
    Period (as defined herein) and subject to adjustment as
    described below, the maximum number of each type of award
    granted to any grantee in any
36-month
period and intended to constitute "performance-based
    compensation" under Section 162(m) will not exceed the
    following:
•
options — 1,000,000;
•
stock appreciation rights — 1,000,000;
•
restricted stock — 1,000,000;
•
restricted stock units — 1,000,000; and
•
other stock-based performance awards — 1,000,000.
Any shares covered by an award that are forfeited, expired,
    cancelled, settled in cash, settled by issuance of fewer shares
    than the amount underlying the award, or otherwise terminated
    without delivery of shares to the grantee, will be available for
    future grants under the 2010 Omnibus Plan. The number and class
    of shares available under the 2010 Omnibus Plan
and/or
subject to outstanding awards may be equitably adjusted by our
    Board of Directors in the event of various changes in the
    capitalization of the Company.
Eligibility and Participation.
Eligibility to participate
    in the 2010 Omnibus Plan is limited to such employees, officers,
    non-employee directors, consultants and advisors of the Company,
    or of any affiliate, as our Board of Directors may determine and
    designate from time to time.
Type of Awards.
The following types of awards are
    available for grant under the 2010 Omnibus Plan: ISOs,
    non-qualified stock options ("NSOs"), stock
    appreciation rights ("SARs"), restricted stock,
    restricted stock units, cash- or stock-based performance awards
    and other stock-based awards.
Stock
    Options and SARs
Grant of Options and SARs.
Our Board of Directors may
    award ISOs, NSOs (together, "Options"), and SARs to
    grantees. Our Board of Directors is authorized to grant SARs
    either in tandem with or as a component of other awards or alone.
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Exercise Price of Options and SARs.
The exercise price
    per share of an Option will be at least 100% of the fair market
    value per share of our stock underlying the award on the grant
    date and in no case will the exercise price of any Option be
    less than the par value of a share of our stock. A SAR will
    confer on the grantee a right to receive, upon exercise, a
    payment of the excess of (i) the fair market value of one
    share of our stock on the date of exercise over (ii) the
    grant price of the SAR as determined by our Board of Directors.
    The grant price will be fixed at the fair market value of a
    share of stock on the date of grant. SARs granted in tandem with
    an outstanding Option following the grant date of such Option
    will have a grant price that is equal to the Option's
    exercise price; provided, however, that the SAR's grant
    price may not be less than the fair market value of a share of
    stock on the grant date of the SAR.
Vesting of Options and SARs.
Our Board of Directors will
    determine the terms and conditions (including any performance
    requirements) under which an Option or SAR will become
    exercisable and will include such information in the award
    agreement.
Special Limitations on ISOs.
In the case of a grant of an
    Option intended to qualify as an ISO to a grantee that owns more
    than ten percent of the total combined voting power of all
    classes of our outstanding stock (a "Ten Percent
    Stockholder"), the exercise price of the Option will not be
    less than 110% of the fair market value of a share of our stock
    on the grant date. Additionally, an Option will constitute an
    ISO only (i) if the grantee is an employee of the Company
    or a subsidiary of the Company, (ii) to the extent such
    Option is specifically designated as an ISO in the related award
    agreement, and (iii) to the extent that the aggregate fair
    market value (determined at the time the option is granted) of
    the shares of stock with respect to which all ISOs held by such
    grantee become exercisable for the first time during any
    calendar year (under the 2010 Omnibus Plan and all other plans
    of the grantee's employer and its affiliates) does not
    exceed $100,000.
Exercise of Options and SARs.
An Option may be exercised
    by the delivery to us of written notice of exercise and payment
    in full of the exercise price (plus the amount of any taxes
    which we may be required to withhold). The minimum number of
    shares with respect to which an Option may be exercised, in
    whole or in part, at any time will be the lesser of (i) the
    number set forth in the applicable award agreement and
    (ii) the maximum number of shares available for purchase
    under the Option at the time of exercise. Our Board of Directors
    has the discretion to determine the method or methods by which a
    SAR may be exercised.
Expiration of Options and SARs.
Options and SARs will
    expire at such time as our Board of Directors determines;
    provided, however, that no Option may be exercised more than ten
    years from the date of grant, or in the case of an ISO held by a
    Ten Percent Stockholder, not more than five years from the date
    of grant.
Restricted
    Stock and Restricted Stock Units
Restricted Stock.
At the time a grant of restricted stock
    is made, our Board of Directors may, in its sole discretion,
    establish the applicable "restricted period" and
    prescribe restrictions in addition to or other than the
    expiration of the restricted period, including the satisfaction
    of corporate or individual performance objectives. Unless our
    Board of Directors otherwise provides in an award agreement,
    holders of restricted stock will have the right to vote such
    stock and the right to receive any dividends declared or paid
    with respect to such stock. Our Board of Directors may provide
    that any such dividends paid must be reinvested in shares of
    stock, which may or may not be subject to the same vesting
    conditions and restrictions applicable to such restricted stock.
    All distributions, if any, received by a grantee with respect to
    restricted stock as a result of any stock split, stock dividend,
    combination of shares, or other similar transaction will be
    subject to the restrictions applicable to the original grant.
The grantee will be required, to the extent required by
    applicable law, to purchase the restricted stock at a price
    equal to the greater of (i) the aggregate par value of the
    shares of stock represented by such restricted stock or
    (ii) the price, if any, specified in the award agreement
    relating to such restricted stock. If specified in the award
    agreement, the price may be deemed paid by services already
    rendered.
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Restricted Stock Units.
At the time a grant of restricted
    stock units is made, our Board of Directors may, in its sole
    discretion, establish the applicable "restricted
    period" and prescribe restrictions in addition to or other
    than the expiration of the restricted period, including the
    satisfaction of corporate or individual performance objectives.
    Holders of restricted stock units will have no rights as
    stockholders of the Company. Our Board of Directors may provide
    that the holder of restricted stock units will be entitled to
    receive dividend equivalent rights, which may be deemed
    reinvested in additional restricted stock units.
Cash- and
    Stock-Based Performance Awards
The right of a grantee to exercise or receive a grant or
    settlement of any award, and the timing thereof, may be subject
    to such performance conditions as may be specified by our Board
    of Directors. Our Board of Directors may use such business
    criteria and other measures of performance as it may deem
    appropriate in establishing any performance conditions, and may,
    subject to certain limitations in the case of a performance
    award intended to qualify under Section 162(m) of the Code
    ("Section 162(m)"), exercise its discretion to
    reduce the amounts payable under any award subject to
    performance conditions.
Following the completion of the Transition Period (as defined
    herein), we intend that performance awards granted to persons
    who are designated by our Board of Directors as likely to be
    "Covered Employees" within the meaning of
    Section 162(m) and regulations thereunder will, if so
    designated by our Board of Directors, constitute "qualified
    performance-based compensation" within the meaning of
    Section 162(m) and regulations thereunder. The grant,
    exercise
and/or
settlement of such performance awards will be contingent upon
    achievement of pre-established performance goals which will
    consist of one or more business criteria and a targeted level or
    levels of performance with respect to each of such criterion.
    Performance goals will be objective and will otherwise meet the
    requirements of Section 162(m) and regulations thereunder.
    In addition, after the Transition Period, the maximum amount of
    each cash-based performance award intended to constitute
    "performance-based compensation" under
    Section 162(m) granted to a grantee in any
12-month
period will not exceed $2,000,000.
One or more of the following business criteria for the Company
    will be used exclusively by our Board of Directors in
    establishing performance goals for such awards: net sales;
    revenue; revenue growth or product revenue growth; operating
    income (before or after taxes); pre-or after-tax income (before
    or after allocation of corporate overhead and bonuses); net
    earnings; earnings per share; net income (before or after
    taxes); return on equity; total stockholder return; return on
    assets or net assets; appreciation in
and/or
maintenance of, share price; market share; gross profits;
    earnings (including earnings before taxes, earnings before
    interest and taxes or earnings before interest, taxes
    depreciation and amortization); economic value-added models or
    equivalent metrics; comparisons with various stock market
    indices; reduction in costs; cash flows or cash flows per share
    (before or after dividends); return on capital (including return
    on total capital or return on invested capital); cash flow
    return on investment; improvement in or attainment of expense
    levels or working capital levels; operating margins; gross
    margins or cash margin; year-end cash; debt reductions;
    stockholder equity; regulatory performance; implementation,
    completion or attainment of measurable objectives with respect
    to research, development, products or projects and recruiting
    and maintaining personnel; and, prior to the completion of the
    Transition Period (as defined herein), to the extent permitted
    by applicable law, any other business criteria as determined by
    our Board of Directors.
Other
    Stock-Based Awards
Our Board of Directors may, in its discretion, grant other
    stock-based awards, consisting of stock units or other awards,
    valued in whole or in part by reference to, or otherwise based
    upon, our common stock. The terms of such other stock-based
    awards will be set forth in the applicable award agreements.
Effect of Certain Transactions.
Except as otherwise
    provided in an award agreement, in the event of (a) the
    liquidation or dissolution of the Company or (b) a
    reorganization, merger, exchange or consolidation of the Company
    or involving the shares of our common stock (a
    "Transaction"), the 2010 Omnibus Plan and the awards
    issued pursuant to the plan shall continue in effect in
    accordance with their respective terms, except that following a
    Transaction either (i) each outstanding award will be
    treated as provided for in the agreement entered into in
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connection with the Transaction or (ii) if not so provided
    in such agreement, each grantee will be entitled to receive in
    respect of each share of our common stock subject to any
    outstanding awards, upon exercise or payment or transfer in
    respect of any award, the same number and kind of stock,
    securities, cash, property or other consideration that each
    holder of a share of our common stock was entitled to receive in
    the Transaction in respect of a share of common stock; provided,
    however, that, unless otherwise determined by our Board of
    Directors, such stock, securities, cash, property or other
    consideration shall remain subject to all of the conditions,
    restrictions and performance criteria which were applicable to
    the awards prior to such Transaction. Without limiting the
    generality of the foregoing, the treatment of outstanding
    Options and SARS in connection with a Transaction in which the
    consideration paid or distributed to our stockholders is not
    entirely shares of common stock of the acquiring or resulting
    corporation may include the cancellation of outstanding Options
    and SARS upon consummation of the Transaction as long as, at the
    election of our Board of Directors, (x) the holders of
    affected Options and SARs have been given a period of at least
    fifteen days prior to the date of the consummation of the
    Transaction to exercise the Options or SARs (whether or not they
    were otherwise exercisable) or (y) the holders of the
    affected Options and SARs are paid (in cash or cash equivalents)
    in respect of each share covered by the Option or SAR being
    canceled an amount equal to the excess, if any, of the per share
    price paid or distributed to our stockholders in the Transaction
    (the value of any non-cash consideration to be determined by our
    Board of Directors in its sole discretion) over the Option or
    SAR exercise price, as applicable. For avoidance of doubt,
    (1) the cancellation of Options and SARs as described in
    the preceding sentence may be effected notwithstanding anything
    to the contrary contained in the 2010 Omnibus Plan or any award
    agreement and (2) if the amount determined pursuant to the
    preceding sentence is zero or less, the affected Option or SAR
    may be cancelled without any payment therefor.
Change in Control.
Our Board of Directors will determine
    the effect of a change in control (as defined in the 2010
    Omnibus Plan) of the Company with respect to any Award or
    Awards, including but not limited to, acceleration of vesting,
    termination or assumption of Awards.
Deferral Arrangements.
Our Board of Directors may permit
    or require the deferral of any award payment into a deferred
    compensation arrangement.
Nontransferability of Awards.
Generally, during the
    lifetime of a grantee, only the grantee may exercise rights
    under the 2010 Omnibus Plan and no award will be assignable or
    transferable other than by will or laws of descent and
    distribution. If authorized in the award agreement, a grantee
    may transfer, not for value, all or part of an award (other than
    an ISO) to certain family members (including trusts and
    foundations for the benefit thereof). Neither restricted stock
    nor restricted stock units may be sold, transferred, assigned,
    pledged or otherwise encumbered or disposed of during the
    restricted period or prior to the satisfaction of any other
    restrictions prescribed by our Board of Directors.
Separation from Service.
Our Board of Directors may
    provide in the applicable award agreements for actions that will
    be taken upon a grantee's separation from service from the
    Company, including but not limited to, accelerated vesting or
    termination of awards.
Tax Withholding and Tax Offset Payments.
We will have the
    right to deduct from payments of any kind otherwise due to a
    grantee any federal, state, or local taxes of any kind required
    by law to be withheld with respect to the vesting of or other
    lapse of restrictions applicable to an award or upon the
    issuance of any shares of stock upon the exercise of an Option
    or pursuant to an award.
Term of Plan.
Unless earlier terminated by our Board of
    Directors, the authority to make grants under the 2010 Omnibus
    Plan will terminate on the date that is ten years after it is
    adopted by our Board of Directors.
Amendment and Termination.
Our Board of Directors may, at
    any time and from time to time, amend, suspend, or terminate the
    2010 Omnibus Plan as to any shares of stock as to which awards
    have not been made. An amendment will be contingent on approval
    of our stockholders to the extent stated by our Board of
    Directors, required by applicable law or required by applicable
    stock exchange listing requirements. No awards will be made
    after termination of the 2010 Omnibus Plan. No amendment,
    suspension, or termination of the 2010 Omnibus
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Plan will, without the consent of the grantee, impair rights or
    obligations under any award theretofore awarded under the 2010
    Omnibus Plan.
New Plan Benefits.
All grants of awards under the 2010
    Omnibus Plan will be discretionary. Therefore, in general, the
    benefits and amounts that will be received under the 2010
    Omnibus Plan are not determinable.
Federal Income Tax Consequences.
The following is a
    summary of the general federal income tax consequences to the
    Company and to U.S. taxpayers of awards granted under the
    2010 Omnibus Plan. Tax consequences for any particular
    individual or under state or
non-U.S. tax
laws may be different.
NSOs and SARs.
No taxable income is reportable when a NSO
    or SAR is granted. Upon exercise, generally, the recipient will
    have ordinary income equal to the fair market value of the
    underlying shares of stock on the exercise date minus the
    exercise price. Any gain or loss upon the disposition of the
    stock received upon exercise will be capital gain or loss to the
    recipient if the appropriate holding period under federal tax
    law is met for such treatment.
ISOs.
No taxable income is reportable when an ISO is
    granted or exercised (except for grantees who are subject to the
    alternative minimum tax, who may be required to recognize income
    in the year in which the ISO is exercised). If the recipient
    exercises the ISO and then sells the underlying shares of stock
    more than two years after the grant date and more than one year
    after the exercise date, the excess of the sale price over the
    exercise price will be taxed as long-term capital gain or loss.
    If the recipient exercises the ISO and sells the shares before
    the end of the two- or one-year holding periods, he or she
    generally will have ordinary income at the time of the sale
    equal to the fair market value of the shares on the exercise
    date (or the sale price, if less) minus the exercise price of
    the ISO.
Restricted Stock and Restricted Stock Units.
A recipient
    of restricted stock or restricted stock units will not have
    taxable income upon the grant unless, in the case of restricted
    stock, he or she elects to be taxed at that time. Instead, he or
    she will have ordinary income at the time of vesting equal to
    the fair market value on the vesting date of the shares (or
    cash) received minus any amount paid for the shares.
Cash- and Stock-Based Performance Awards and Other
    Stock-Based Awards.
Typically, a recipient will not have
    taxable income upon the grant of cash or stock-based performance
    awards or other stock-based awards. Subsequently, when the
    conditions and requirements for the grants have been satisfied
    and the payment determined, any cash received and the fair
    market value of any common stock received will constitute
    ordinary income to the recipient.
Tax Effect for the Company.
We generally will receive a
    tax deduction for any ordinary income recognized by a grantee in
    respect of an award under the 2010 Omnibus Plan (for example,
    upon the exercise of a NSO). In the case of ISOs that meet the
    holding period requirements described above, the grantee will
    not recognize ordinary income; therefore, we will not receive a
    deduction.
Once we become a public company, special rules limit the
    deductibility of compensation paid to our CEO and to each of our
    three most highly compensated executive officers whose
    compensation is required to be reported annually in our proxy.
    Under Section 162(m), the annual compensation paid to each
    of these executives may not be deductible to the extent that it
    exceeds $1 million. However, we intend to rely on Treas.
    Reg.
Section 1.162-27(f)
which provides that the deduction limit of Section 162(m)
    does not apply to any remuneration paid pursuant to a
    compensation plan or agreement that existed during the period in
    which the company was not publicly held. Subject to certain
    requirements, we may rely on this "grandfather"
    provision until the first meeting of stockholders at which
    directors are elected that occurs after the end of the third
    calendar year following the calendar year in which the offering
    occurs (the "Transition Period"). Additionally, after
    the expiration of the grandfather period, we can preserve the
    deductibility of compensation over $1 million if certain
    conditions of Section 162(m) are met. These conditions
    include stockholder approval of the 2010 Omnibus Plan, setting
    limits on the number of awards that any individual may receive
    and, for awards other than Options and SARs,
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establishing performance criteria that must be met before the
    award will actually be granted, be settled, vest or be paid. The
    2010 Omnibus Plan has been designed to permit our Board of
    Directors to grant awards that qualify as performance-based for
    purposes of satisfying the conditions of Section 162(m).
Registration of Shares.
Following the closing of this
    offering we intend to file a registration statement on
Form S-8
under the Securities Act to register the full number of shares
    of our common stock which will be reserved for issuance under
    the 2010 Omnibus Plan, as described in the section titled
    "
Number of Authorized Shares
" above (plus such
    number of shares reserved under the 2004 Stock Plan that become
    available for issuance under the 2010 Omnibus Plan), as well as
    registration statements on
Form S-8
to register shares of common stock reserved for issuance under
    the 2004 Stock Plan.
2004
    Stock Plan
On November 1, 2004, our Board of Directors adopted the
    Primo Water Corporation 2004 Stock Plan, which we refer to as
    the 2004 Stock Plan. The material terms of the 2004 Stock Plan
    are summarized below.
Administration of the Plan.
Our Board of Directors has
    such powers and authorities related to the administration of the
    2004 Stock Plan as are consistent with our corporate governance
    documents and applicable law and may delegate to a committee
    administration of all or some parts of the 2004 Stock Plan. Our
    Board of Directors has the authority to, among other things,
    interpret the plan, terminate or amend the plan, determine
    individuals eligible to participate in the plan and determine
    the size and terms of awards granted under the plan.
Number of Authorized Shares.
A total of
    4,500,000 shares of our common stock are reserved for
    issuance under the 2004 Stock Plan. As of March 1, 2010,
    options to purchase a total of 3,247,587 shares of our
    common stock with a weighted average exercise price of $1.26
    were outstanding under our 2004 Stock Plan. In addition,
    1,102,500 shares of restricted stock have been issued
    pursuant to the 2004 Stock Plan. We do not intend to issue any
    additional awards under the 2004 Stock Plan following the
    closing of this offering. All awards outstanding under the 2004
    Stock Plan will remain in effect and will continue to be
    governed by their existing terms.
Eligibility and Participation.
Eligibility to participate
    in the 2004 Stock Plan is limited to such key employees,
    non-employee directors and consultants of the Company, or of any
    parent or subsidiary, as our Board of Directors may determine
    and designate from time to time.
Types of Awards.
The following types of awards are
    available for grant under the 2004 Stock Plan: incentive stock
    options ("ISOs"), non-qualified stock options
    ("NSOs", and together with ISOs, "Options")
    and rights to purchase restricted shares of our common stock
    ("Purchase Rights").
Stock Options
Grant of Options.
Our Board of Directors may award ISO
    and NSOs to grantees under the 2004 Stock Plan. The exercise
    price per share of an Option is determined by our Board of
    Directors; provided, however, in no event will the exercise
    price of an ISO be less than 100% of the fair market value per
    share of our stock underlying the award on the grant date. In
    the case of a grant of an Option intended to qualify as an ISO
    to a grantee that owns more than ten percent of the total
    combined voting power of all classes of our outstanding stock,
    the exercise price of the Option will not be less than 110% of
    the fair market value of a share of our stock on the grant date.
    Additionally, an Option will constitute an ISO only (i) if
    the grantee is an employee of the Company or a subsidiary of the
    Company, (ii) to the extent specifically provided in the
    related award agreement, and (iii) to the extent that the
    aggregate fair market value (determined at the time the option
    is granted) of the shares of stock with respect to which all
    ISOs held by such grantee become exercisable for the first time
    during any calendar year (under the 2004 Stock Plan and all
    other plans of the grantee's employer and its affiliates)
    does not exceed $100,000.
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Stock Option
    Vesting and Exercise.
Our Board of Directors will determine
    the vesting terms of all Options and will include such
    information in the award agreement. An Option may be exercised
    by the delivery to us of written notice of exercise and payment
    in full of the exercise price (plus the amount of any taxes
    which we may be required to withhold). The exercise price may be
    paid in cash or, at the discretion of our Board of Directors, in
    shares of the Company's stock having a fair market value
    equal to the exercise price or by a combination of cash and
    stock. Once vested, Options granted under the 2004 Stock Plan
    remain exercisable for the term of the Option, which may not
    exceed ten years, provided that the Options may terminate prior
    to the end of the term if the grantee's service
    relationship with us terminates.
Transferability of
    Options.
A grantee of an Option under the 2004 Stock Plan
    may not transfer such Option except by will or the laws of
    descent or distribution.
Stock
    Purchase Rights
Our Board of Directors may award Purchase Rights evidenced by
    restricted stock agreements
and/or
subscription agreements under the 2004 Stock Plan. Our Board of
    Directors will determine the number of shares subject to the
    Purchase Right and the purchase price for each share to be
    purchased pursuant to the Purchase Right and set forth this
    information in the grantee's award agreement. Our Board of
    Directors will also determine any transfer restrictions on
    shares purchased pursuant to a Purchase Right and may, in their
    sole discretion, provide for a right of the Company to
    repurchase any shares purchased pursuant to a Purchase Right in
    the grantee's award agreement. Upon the exercise of a
    Purchase Right, the grantee will possess all rights of a
    stockholder of the Company.
Change in Control.
The 2004 Stock Plan does not specify
    any particular effect of a change in control of the Company on
    awards granted under the 2004 Stock Plan. A majority of the
    Option awards currently outstanding under the 2004 Stock Plan
    will be deemed 100% vested and exercisable upon a "Transfer
    of Control" (as defined in the Option award agreements) of
    the Company. This offering will not qualify as a Transfer of
    Control for purposes of the Option award agreements under the
    2004 Stock Plan.
Corporate Event.
In the event of a merger or
    consolidation of the Company, a sale of all or substantially all
    of our assets or a dissolution or liquidation of the Company,
    our Board of Directors may make such adjustments to the awards
    granted under the 2004 Stock Plan as it deems appropriate and
    equitable to prevent substantial dilution or enlargement of the
    rights granted under the 2004 Stock Plan.
Term of Plan.
Unless earlier terminated by our Board of
    Directors, the authority to make grants under the 2004 Stock
    Plan will terminate on October 31, 2014. However, we do not
    intend to issue any additional awards under the 2004 Stock Plan
    following the closing of this offering.
Federal Income Tax Consequences.
The following is a
    summary of the general federal income tax consequences to the
    Company and to U.S. taxpayers of awards granted under the
    2004 Stock Plan. Tax consequences for any particular individual
    or under state or
non-U.S. tax
laws may be different.
NSOs.
No taxable income is reportable when a NSO is
    granted. Upon exercise, generally, the recipient will have
    ordinary income equal to the fair market value of the underlying
    shares of stock on the exercise date minus the exercise price.
    Any gain or loss upon the disposition of the stock received upon
    exercise will be capital gain or loss to the recipient if the
    appropriate holding period under federal tax law is met for such
    treatment.
ISOs.
No taxable income is reportable when an ISO is
    granted or exercised (except for grantees who are subject to the
    alternative minimum tax, who may be required to recognize income
    in the year in which the ISO is exercised). If the recipient
    exercises the ISO and then sells the underlying shares of stock
    more than two years after the grant date and more than one year
    after the exercise date, the excess of the sale price over the
    exercise price will be taxed as long-term capital gain or loss.
    If the recipient exercises the ISO and sells the shares before
    the end of the two- or one-year holding periods, he or she
    generally will have ordinary income at the time
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of the sale equal to the fair market value of the shares on the
    exercise date (or the sale price, if less) minus the exercise
    price of the ISO.
Purchase Rights.
A recipient of a Purchase Right will
    recognize ordinary income on the later of the date the Purchase
    Right is exercised and the date any applicable vesting
    conditions with respect to the Purchase Rights have been met.
    The amount of taxable income recognized by the recipient will be
    the difference between the fair market value of the stock on the
    exercise or vesting date, as applicable, and the purchase price
    paid for the shares.
Tax Effect for the Company.
We generally will receive a
    tax deduction for any ordinary income recognized by a grantee in
    respect of an award under the 2004 Stock Plan (for example, upon
    the exercise of a NSO). In the case of ISOs that meet the
    holding period requirements described above, the grantee will
    not recognize ordinary income; therefore, we will not receive a
    deduction.
Once we become a public company, special rules limit the
    deductibility of compensation paid to our CEO and to each of our
    three most highly compensated executive officers (other than our
    Chief Financial Officer) whose compensation is required to be
    reported annually in our proxy. Under Section 162(m), the
    annual compensation paid to each of these executives may not be
    deductible to the extent that it exceeds $1 million.
    However, we intend to rely on Treas. Reg.
Section 1.162-27(f)
which provides that the deduction limit of Section 162(m)
    does not apply to any remuneration paid pursuant to a
    compensation plan or agreement that existed during the period in
    which the company was not publicly held. Subject to certain
    requirements, we may rely on this "grandfather"
    provision until the first meeting of stockholders at which
    directors are elected that occurs after the end of the third
    calendar year following the calendar year in which the offering
    occurs (the "Transition Period"). Additionally, after
    the expiration of the grandfather period, we can preserve the
    deductibility of compensation over $1 million if certain
    conditions of Section 162(m) are met. These conditions
    include stockholder approval of the 2004 Stock Plan, setting
    limits on the number of awards that any individual may receive
    and, for awards other than Options, establishing performance
    criteria that must be met before the award will actually be
    granted, be settled, vest or be paid.
Registration of Shares.
Following the closing of this
    offering we intend to file a registration statement on
Form S-8
under the Securities Act to register
    the           shares
    of common stock reserved for issuance pursuant to outstanding
    awards under the 2004 Stock Plan.
2010
    Employee Stock Purchase Plan
In March 2010 our Board of Directors adopted and
    in          2010
    our stockholders approved the 2010 Employee Stock Purchase Plan,
    or the ESPP. Our ESPP is intended to qualify as an
    "employee stock purchase plan" as defined under
    Section 423 of the Code and will become effective on the
    day preceding the consummation of this offering.
Administration of the ESPP.
The compensation committee of
    our Board has authority to interpret and implement the terms of
    the ESPP. The committee will have the discretion to set the
    terms of each offering in accordance with the provisions of the
    ESPP, to make all determinations regarding the ESPP, including
    eligibility, and otherwise administer the ESPP.
Number of Authorized Shares.
A total of
    250,000 shares of our common stock will be made available
    for sale under our ESPP, subject to adjustment in the event of
    any significant change in our capitalization, such as a stock
    split, a combination or exchange or shares, or a stock dividend
    or other distribution.
Eligibility and Participation.
All of our employees
    generally are eligible to participate if they are customarily
    employed by us or any participating subsidiary for at least
    20 hours per week and more than five months in any calendar
    year. The committee may exclude from an offering period
    highly-compensated employees or employees
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who have not satisfied a minimum period of employment with us
    which may not exceed a period of two years. In addition, an
    employee may not be granted rights to purchase stock under our
    ESPP if such employee would:
•
immediately after any grant of purchase rights, own stock
    possessing 5% or more of the total combined voting power or
    value of all classes of our capital stock; or
•
hold rights to purchase stock under all of our employee stock
    purchase plans that would accrue at a rate that exceeds $25,000
    worth of our stock for each calendar year.
Offer Periods and Purchase Periods.
The ESPP provides for
    offering periods of up to 27 months. The initial offering
    period under the ESPP will begin on the effective date of this
    offering and will end on December 31, 2010. Subsequent
    offerings are expected to consist of
12-month
offering periods, with a new offering period beginning every
    January 1 and separate purchases taking place every
    6 months during each offering period. However, we may
    change the timing and duration of offering periods and the
    frequency of purchases, as long as such changes comply with the
    terms of the ESPP. Unless otherwise specified by the committee,
    a participant may purchase a maximum of 50,000 shares of
    common stock during an offering period. No grant of purchase
    rights will be made under the ESPP prior to the consummation of
    this offering.
Payroll Deductions.
Our ESPP permits participants to
    exercise their stock purchase rights under the ESPP through
    payroll deductions of up to 15% of their eligible compensation,
    which includes a participant's gross base compensation from
    the Company, excluding overtime payments, sales commissions,
    incentive compensation, bonuses, expense reimbursements, fringe
    benefits and other special payments.
Exercise of Purchase Rights.
Amounts deducted and
    accumulated by the participant are used to purchase shares of
    our common stock at the end of each purchase period during an
    offering period. The purchase price of the shares will not be
    less than 85% of the fair market value of our common stock on
    the first trading day of the offering period or on the last day
    of the applicable purchase period, whichever is lower.
    Participants may withdraw from participation in the ESPP at any
    time during an offering period, and will be paid their accrued
    payroll deductions that have not yet been used to purchase
    shares of common stock. Participation ends automatically upon
    termination of employment with us.
Change in Control.
In the event of a "Change in
    Control" (as defined in the ESPP), the committee may
    provide for the successor corporation to assume or substitute
    each outstanding purchase right, cashout of the
    participant's purchase right, acceleration of the next
    purchase date or termination of the current offering period
    without a purchase.
Amendment and Termination.
The ESPP will automatically
    terminate in 2020, unless we terminate it sooner. In addition,
    our Board of Directors has the authority to amend, suspend or
    terminate our ESPP, except that, subject to certain exceptions
    described in the ESPP, no such action may adversely affect any
    outstanding rights to purchase stock under our ESPP.
Registration of Shares.
Following the completion of this
    offering we intend to file a registration statement on
Form S-8
under the Securities Act to register the full number of shares
    of our common stock which will be reserved for issuance under
    the ESPP, as described in the section titled "
Number of
    Authorized Shares
" above.
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PRINCIPAL
    STOCKHOLDERS
The following table sets forth certain information regarding the
    beneficial ownership of our common stock as of March 1,
    2010, and as adjusted to reflect the sale of our common stock
    offered by this prospectus, by:
•
each of our named executive officers;
•
each of our directors;
•
all of our directors and current executive officers as a group;
    and
•
each person (or group of affiliated persons) known to us to be
    the beneficial owner of more than 5% of our common stock.
Beneficial ownership is determined in accordance with the rules
    of the SEC and includes any shares over which a person exercises
    sole or shared voting or investment power. Under these rules,
    beneficial ownership also includes any shares as to which the
    individual or entity has the right to acquire beneficial
    ownership of within 60 days of March 1, 2010 through
    the exercise of any warrant, stock option or other right. Except
    as noted by footnote, and subject to community property laws
    where applicable, we believe that the stockholders named in the
    table below have sole voting and investment power with respect
    to all shares of common stock shown as beneficially owned by
    them.
Beneficial ownership is based upon 59,054,196 shares of
    common stock outstanding as of March 1, 2010, and assumes
    the conversion of all of our issued and outstanding
    Series A and Series C convertible preferred stock into
    shares of common stock effective upon such date. The information
    in the table below has not been adjusted to reflect our
    anticipated reverse stock split.
Except as set forth below, the address of all stockholders
    listed under "Directors and named executive officers"
    and "5% or greater stockholders" is
c/o 104
Cambridge Plaza Drive, Winston-Salem, North Carolina 27104.
Percentage Ownership
After Offering
After Offering
(Assuming No
(Assuming Full
Number of
Prior to
Exercise of Over-
Exercise of Over-
Shares (#)
Offering (%)
Allotment) (%)
Allotment) (%)
Directors and named executive officers
Billy D.
    Prim
(1)
17,949,276
29.4
Richard A.
    Brenner
(2)
506,676
*
David W.
    Dupree
(3)
8,715,532
14.7
Malcolm
    McQuilkin
(4)
1,785,274
3.0
David L.
    Warnock
(5)
5,672,037
9.4
Richard E.
    Belmont
(6)
356,632
*
Brent C.
    Boydston
(7)
513,164
*
Mark
    Castaneda
(8)
686,298
1.2
Michael S.
    Gunter
(9)
422,561
*
All directors and current executive officers as a group
    (8 individuals)
35,737,654
56.5
5% or greater stockholders
Primo Investors,
    L.P.
(10)
8,648,125
14.5
Camden Partners Strategic Fund III,
    L.P.
(11)
5,365,075
8.9
Andrew J.
    Filipowski
(12)
5,965,014
10.1
Craig J. Duchossois Revocable
    Trust
(13)
4,935,003
8.3
Charles
    Ergen
(14)
4,263,149
7.2
Edward A. Fortino
    Trust
(15)
3,230,190
5.4
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*
Indicates less than 1%.
(1)
Consists of
    (a) 15,320,336 shares of common stock held directly;
    (b) shares issuable upon the exercise of warrants to
    purchase 1,470,250 shares of common stock held directly;
    (c) shares issuable upon the exercise of options to
    purchase 440,000 shares of common stock held directly;
    (d) 50,000 shares of common stock held by
    Mr. Prim's spouse; (e) shares issuable upon the
    exercise of warrants to purchase 18,690 shares of common
    stock held by Mr. Prim's spouse;
    (f) 50,000 shares of common stock held by BD Prim,
    LLC, of which Mr. Prim is the sole manager;
    (g) 250,000 shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Sarcanda Westmoreland
    Bellissimo, of which Mr. Prim is the sole trustee;
    (h) 250,000 shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Anthony Gray Westmoreland,
    of which Mr. Prim is the sole trustee;
    (i) 50,000 shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Jager Grayln Dean
    Bellissimo, of which Mr. Prim is the sole trustee;
    (j) 50,000 shares of common stock held by the Billy
    Dean Prim 2010 Irrevocable Trust fbo Joseph Alexander
    Bellissimo, of which Mr. Prim is the sole trustee.
    Mr. Prim may be deemed to have voting and investment power
    with respect to securities held by his spouse, BD Prim, LLC or
    the aforementioned irrevocable trusts and expressly disclaims
    beneficial ownership of any such securities, except to the
    extent of his pecuniary interest therein, if any.
(2)
Consists of
    (a) 410,000 shares of common stock held directly,
    which includes 60,000 shares of restricted common stock
    over which Mr. Brenner has voting but not dispositive
    power; (b) shares issuable upon the exercise of warrants to
    purchase 71,194 shares of common stock held directly;
    (c) shares issuable upon the exercise of options to
    purchase 24,000 shares of common stock held directly;
    (d) shares issuable upon the exercise of warrants to
    purchase 741 shares of common stock held by the ALB-3
    Trust, of which he is the trustee; and (e) shares issuable
    upon the exercise of warrants to purchase 741 shares of
    common stock held by the ALB-5 Trust, of which he is the
    trustee. Mr. Benner may be deemed to have voting and
    investment power with respect to securities held by the ALB-3
    Trust or the ALB-5 Trust and expressly disclaims beneficial
    ownership of any such securities, except to the extent of his
    pecuniary interest therein, if any.
(3)
Consists of
    (a) 60,000 shares of restricted common stock over
    which Mr. DuPree has voting but not dispositive power;
    (b) shares issuable upon the exercise of warrants to
    purchase 7,407 shares of common stock held directly;
    (c) 8,220,000 shares of common stock held by Primo
    Investors, L.P.; and (d) shares issuable upon the exercise
    of warrants to purchase 428,125 shares of common stock held
    by Primo Investors, L.P. Mr. Dupree is the managing member
    of GenPar Primo, L.L.C., the general partner of Primo Investors,
    L.P., and as such, he may be deemed to have voting and
    investment power with respect to all securities beneficially
    owned by Primo Investors, L.P. Mr. Dupree disclaims
    beneficial ownership of any such securities held by Primo
    Investors, L.P. except to the extent of his pecuniary interest
    therein, if any.
(4)
Consists of
    (a) 60,000 shares of restricted common stock over
    which Mr. McQuilken has voting but not dispositive power;
    (b) shares issuable upon the exercise of options to
    purchase 87,000 shares of common stock held directly;
    (c) 1,384,000 shares of common stock held by the
    Malcolm McQuilkin Living Trust; and (d) shares issuable
    upon the exercise of warrants to purchase 254,274 shares of
    common stock held by the Malcolm McQuilkin Living Trust.
    Mr. McQuilkin is a co-trustee of the Malcolm McQuilkin
    Living Trust and as such, he may be deemed to have shared voting
    and investment power with respect to such shares.
    Mr. McQuilken expressly disclaims beneficial ownership of
    any such securities held in the trust, except to the extent of
    his pecuniary interest therein, if any.
(5)
Consists of
    (a) 60,000 shares of restricted common stock over
    which Mr. Warnock has voting but not dispositive power;
    (b) shares issuable upon the exercise of options to
    purchase 24,000 shares of common stock held directly;
    (c) 4,416,461 shares of common stock held by Camden
    Partners Strategic Fund III, L.P.; (d) shares issuable
    upon the exercise of warrants to purchase 948,614 shares of
    common stock held by Camden Partners Strategic Fund III,
    L.P.; (e) 183,540 shares of common stock held by
    Camden Partners Strategic
Fund III-A,
L.P.; and (f) shares issuable upon the exercise of warrants
    to purchase 39,422 shares of common stock held by Camden
    Partners Strategic
Fund III-A,
L.P. Mr. Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund III, L.P.
    and Camden Partners Strategic
Fund III-A,
L.P., and as such, he may be deemed to have voting and
    investment power with respect to all securities beneficially
    owned by such entities. Mr. Warnock expressly disclaims
    beneficial ownership of any such securities held by Camden
    Partners Strategic Fund III, L.P. and Camden Partners
    Strategic
Fund III-A,
L.P. except to the extent of his pecuniary interest therein, if
    any.
(6)
Consists of (a) shares
    issuable upon the exercise of warrants to purchase
    7,407 shares of common stock held directly; (b) shares
    issuable upon the exercise of options to purchase
    138,625 shares of common stock held directly; (c) 150,000
    restricted shares of common stock over which Mr. Belmont has
    voting but not dispositive power; (d) 19,200 shares of
    common stock held by Mr. Belmont's spouse;
    (e) shares issuable upon the exercise of warrants to
    purchase 1,000 shares of common stock held by
    Mr. Belmont's spouse; (f) 19,200 shares of
    common stock held by Mr. Belmont's son;
    (g) warrants to purchase 1,000 shares of common stock
    held by Mr. Belmont's son; (h) 19,200 shares
    of common stock held by Mr. Belmont's daughter; and
    (i) shares issuable upon the exercise of warrants to
    purchase 1,000 shares of common stock held by
    Mr. Belmont's daughter. Mr. Belmont may be deemed
    to have voting and investment power with respect to securities
    held by his spouse or children and expressly disclaims
    beneficial ownership of any such securities, except to the
    extent of his pecuniary interest therein, if any.
(7)
Consists of
    (a) 241,998 shares of common stock held directly;
    (b) shares issuable upon the exercise of warrants to
    purchase 1,666 shares of common stock held directly; and
    (c) shares issuable upon the exercise of options to
    purchase 269,500 shares of common stock held directly.
(8)
Consists of
    (a) 524,056 shares of common stock held directly,
    which includes 250,000 shares of restricted common stock
    over which Mr. Castaneda has voting but not dispositive
    power; (b) shares issuable upon the exercise of warrants to
    purchase 47,242 shares of common stock held directly; and
    (c) shares issuable upon the exercise of options to
    purchase 115,000 shares of common stock held directly.
(9)
Consists of
    (a) 170,000 shares of common stock held directly,
    which includes 150,000 shares of restricted common stock
    over which Mr. Gunter has voting but not dispositive power;
    (b) shares issuable upon the exercise of warrants to
    purchase 3,155 shares of common stock held directly; and
    (c) shares issuable upon the exercise of options to
    purchase 249,406 shares of common stock held directly.
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(10)
Consists of
    (a) 8,220,000 shares of common stock; and
    (b) shares issuable upon the exercise of warrants to
    purchase 428,125 shares of common stock.
(11)
Consists of
    (a) 4,416,461 shares of common stock; and
    (b) shares issuable upon the exercise of warrants to
    purchase 948,614 shares of common stock.
(12)
Consists of
    (a) 5,900,000 shares of common stock; (b) shares
    issuable upon the exercise of warrants to purchase
    44,014 shares of common stock; and (c) shares issuable
    upon the exercise of options to purchase 21,000 shares of
    common stock.
(13)
Consists of
    (a) 4,474,999 shares of common stock; and
    (b) shares issuable upon the exercise of warrants to
    purchase 460,004 shares of common stock.
(14)
Consists of
    (a) 4,000,001 shares of common stock held directly;
    and (b) shares issuable upon the exercise of warrants to
    purchase 263,148 shares of common stock held directly.
(15)
Consists of
    (a) 2,875,000 shares of common stock held directly;
    and (b) shares issuable upon the exercise of warrants to
    purchase 355,190 shares of common stock held directly.
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RELATED
    PARTY TRANSACTIONS
Our Audit Committee Charter that we are adopting in connection
    with this offering will require our Audit Committee to review
    and approve or ratify any transaction that is required to be
    disclosed under Item 404 of
Regulation S-K.
In the course of its review or approval of a transaction, our
    Audit Committee will consider:
•
the nature of the related person's interest in the
    transaction, including the actual or apparent conflict of
    interest of the related person;
•
the material terms of the transaction and their commercial
    reasonableness;
•
the significance of the transaction to the related person;
•
the significance of the transaction to us and the benefit and
    perceived benefits, or lack thereof, to us;
•
opportunity costs of alternate transactions;
•
whether the transaction would impair the judgment of a director
    or executive officer to act in the best interest of the
    Company; and
•
any other matters the Committee deems appropriate.
Our audit committee will not approve or ratify a related person
    transaction unless it determines that, upon consideration of all
    relevant information, the transaction is in, or is not
    inconsistent with, the best interests of our Company and
    stockholders. No related person transaction will be consummated
    without the approval or ratification of our audit committee, and
    directors interested in a related person transaction will recuse
    themselves from any vote relating to a related person
    transaction in which they have an interest.
Set forth below are certain transactions that have occurred
    since January 1, 2007, and through the date of this
    prospectus with our directors, executive officers, holders of
    more than five percent of our voting securities and affiliates
    of our directors, executive officers and five percent
    stockholders. We did not have a formal review and approval
    policy for related party transactions at the time of any
    transaction described in this "Certain Relationships and
    Related Party Transactions" section. Based on our
    experience in the business sectors in which we participate and
    the terms of our transactions with unaffiliated third persons,
    we believe that all of the transactions set forth below were on
    terms and conditions that were not materially less favorable to
    us than could have been obtained from unaffiliated third parties.
Sale of
    Subordinated Convertible Notes and Warrants
Messrs. Prim, Castaneda, Belmont, Brenner, Dupree,
    McQuilkin and Warnock (either individually or through an
    affiliated entity) purchased an aggregate of $3.52 million
    of our 2011 Notes with an aggregate of 260,740 warrants to
    purchase shares of our common stock in a private placement
    transaction on December 30, 2009. We issued a total of
    $15.0 million of 2011 Notes and a total of 1,111,109
    warrants in this private placement transaction. The exercise
    price of these warrants after giving effect to this offering
    will
    be          
    per share. The following table sets forth certain information
    regarding such persons' ownership of the 2011 Notes and the
    related warrants.
Maximum
Amount Owned at
Amount Owned
December 31, 2009
Principal Paid in
Interest Paid in
Name
in 2009 ($)
($)
2009 ($)
2009 ($)
Warrants (#)
Billy D. Prim
540,000
540,000
—
—
40,000
Mark Castaneda
300,000
300,000
—
—
22,222
Rick E. Belmont
100,000
100,000
—
—
7,407
Richard A.
    Brenner
(1)
80,000
80,000
—
—
5,926
David W. Dupree
100,000
100,000
—
—
7,407
Malcolm
    McQuilkin
(2)
1,000,000
1,000,000
—
—
74,074
David L.
    Warnock
(3)
1,400,000
1,400,000
—
—
103,704
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(1)
Consists of $60,000 in 2011 Notes
    and 4,444 warrants held by Mr. Brenner individually,
    $10,000 in 2011 Notes and 741 warrants held by the ALB-3 Trust
    and $10,000 in 2011 Notes and 741 warrants held by the ALB-5
    Trust. Mr. Brenner is the trustee of both the ALB-3 Trust
    and the ALB-5 Trust. Mr. Brenner disclaims beneficial
    ownership of 2011 Notes owned by the ALB-3 Trust and the ALB-5
    Trust except to the extent of his pecuniary interest therein.
(2)
Consists of $1,000,000 in 2011
    Notes and 74,074 warrants held by the Malcolm McQuilkin Living
    Trust. Mr. McQuilkin is a co-trustee of the Malcolm
    McQuilkin Living Trust.
(3)
Consists of $1,344,140 in 2011
    Notes and 99,566 warrants held by Camden Partners Strategic
    Fund III, L.P. and $55,860 in 2011 Notes and 4,138 warrants
    held by Camden Partners Strategic
Fund III-A,
L.P. Mr. Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund III, L.P.
    and Camden Partners Strategic
Fund III-A,
L.P. Mr. Warnock disclaims beneficial ownership of 2011
    Notes owned by Camden Partners Strategic Fund III, L.P. and
    Camden Partners Strategic
Fund III-A,
L.P. except to the extent of his pecuniary interest therein.
Sale of
    Series C Convertible Preferred Stock and Warrants
Messrs. Prim, Castaneda, Belmont, Boydston, Dupree,
    McQuilkin, Warnock, Ergen and Duchossois (either individually or
    through an affiliated entity) purchased an aggregate of
    8,906,976 shares of Series C convertible preferred
    stock and warrants to purchase an aggregate of
    890,697 shares of common stock at an exercise price of
    $1.98 per share in private placement transactions between
    December 14, 2007 and May 20, 2008. We issued a total
    of 12,520,001 shares of Series C convertible preferred
    stock and warrants to purchase 1,252,001 shares of common
    stock during in connection with these private placement
    transactions. The following table sets forth certain information
    regarding such persons' ownership of those shares and
    warrants.
Amount Paid for
Shares and Warrants
Name
Shares Purchased (#)
Warrants Purchased (#)
($)
Billy D. Prim
512,363
51,237
1,229,671
Mark Castaneda
116,696
11,670
280,070
Rick E.
    Belmont
(1)
30,000
3,000
72,000
Brent C. Boydston
16,666
1,666
39,998
David W.
    Dupree
(2)
4,281,250
428,125
10,275,000
Malcolm
    McQuilkin
(3)
200,000
20,000
480,000
David L.
    Warnock
(4)
833,334
83,333
2,000,002
Charles Ergen
2,083,334
208,333
5,000,002
Craig J.
    Duchossois
(5)
833,333
83,333
1,999,999
(1)
Consists of: (a) 10,000 shares
    of Series C convertible preferred stock and warrants to purchase
    1,000 shares of common stock purchased by
    Mr. Belmont's spouse; (b) 10,000 shares of
    Series C convertible preferred stock and warrants to
    purchase 1,000 shares of common stock purchased by Mr.
    Belmont's son; and (c) 10,000 shares of Series C
    convertible preferred stock and warrants to purchase
    1,000 shares of common stock purchased by
    Mr. Belmont's daughter.
(2)
Consists of 4,281,250 shares
    of Series C convertible preferred stock and warrants to
    purchase 428,125 shares of common stock purchased by Primo
    Investors, L.P. Mr. Dupree is the managing member of GenPar
    Primo, L.L.C., the general partner of Primo Investors, L.P.
    Mr. Dupree disclaims beneficial ownership of the
    Series C convertible preferred stock and warrants owned by
    Primo Investors, L.P. except to the extent of his pecuniary
    interest therein.
(3)
Consists of 200,000 shares of
    Series C convertible preferred stock and warrants to
    purchase 20,000 shares of common stock purchased by the
    Malcolm McQuilkin Living Trust. Mr. McQuilkin is a
    co-trustee of the Malcolm McQuilkin Living Trust.
(4)
Consists of 800,084 shares of
    Series C convertible preferred stock and warrants to
    purchase 80,008 shares of common stock purchased by Camden
    Partners Strategic Fund III, L.P. and 33,250 shares of
    Series C convertible preferred stock and warrants to
    purchase 3,325 shares of common stock purchased by Camden
    Partners Strategic
Fund III-A,
L.P. Mr. Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund III, L.P.
    and Camden Partners Strategic
Fund III-A,
L.P. Mr. Warnock disclaims beneficial ownership of the
    Series C convertible preferred stock and warrants owned by
    Camden Partners Strategic Fund III, L.P. and Camden
    Partners Strategic
Fund III-A,
L.P. except to the extent of his pecuniary interest therein.
(5)
Consists of 833,333 shares of
    Series C convertible preferred stock and warrants to
    purchase 83,333 shares of common stock purchased by Craig
    J. Duchossois Revocable Trust UAD 9/11/1989. Mr. Duchossois
    is trustee of the Craig J. Duchossois Revocable Trust UAD
    9/11/1989.
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Sale of
    Series B Preferred Stock and Warrants
Messrs. Prim, Brenner, McQuilkin, Warnock, Castaneda,
    Gunter, Filipowski, Duchossois and Fortino (either individually
    or through an affiliated entity) purchased an aggregate of
    11,561,511 shares of Series B preferred stock and
    warrants to purchase an aggregate of 3,086,921 shares of
    common stock at an exercise price of $1.25 per share in
    private placement transactions between April 28, 2006 and
    June 30, 2007. We issued a total of 23,280,221 shares of
    Series B preferred stock and warrants to purchase a total
    of 6,215,813 shares of common stock in these private
    placement transactions. The following table sets forth certain
    information regarding such persons' ownership of those
    shares and warrants.
Amount Paid for Shares
Name
Shares Purchased (#)
Warrants Purchased (#)
and Warrants ($)
Billy D.
    Prim
(1)
5,234,846
1,397,703
5,234,846
Richard Brenner
250,000
66,750
250,000
Malcolm
    McQuilkin
(2)
600,000
160,200
600,000
David L.
    Warnock
(3)
3,000,000
800,999
3,000,000
Mark Castaneda
50,000
13,350
50,000
Michael S. Gunter
11,820
3,155
11,820
Andrew J. Filipowski
164,845
44,014
164,845
Craig J.
    Duchossois
(4)
1,125,000
300,375
1,125,000
Edward A
    Fortino
(5)
1,125,000
300,375
1,125,000
(1)
Consists of 5,164,846 shares of
    Series B preferred stock and warrants to purchase 1,379,013
    shares of common stock purchased by Mr. Prim and 70,000
    shares of Series B preferred stock and warrants to purchase
    18,690 shares of common stock purchased by Mr. Prim's
    spouse.
(2)
Consists of 600,000 shares of
    Series B preferred stock and warrants to purchase 160,200
    shares of common stock purchased by the Malcolm McQuilkin Living
    Trust. Mr. McQuilkin is a co-trustee of the Malcolm
    McQuilkin Living Trust.
(3)
Consists of 2,880,300 shares
    of Series B preferred stock and warrants to purchase
    769,040 shares of common stock purchased by Camden Partners
    Strategic Fund III, L.P. and 119,700 shares of
    Series B preferred stock and warrants to purchase 31,959
    shares of common stock purchased by Camden Partners Strategic
Fund III-A,
L.P. Mr. Warnock is the managing member of the general
    partner of both Camden Partners Strategic Fund III, L.P.
    and Camden Partners Strategic
Fund III-A,
L.P. Mr. Warnock disclaims beneficial ownership of the
    Series B preferred stock and warrants to purchase common
    stock owned by Camden Partners Strategic Fund III, L.P. and
    Camden Partners Strategic
Fund III-A,
L.P. except to the extent of his pecuniary interest therein.
(4)
Consists of 1,125,000 shares
    of Series B preferred stock and warrants to purchase
    300,375 shares of common stock purchased by the Craig J.
    Duchossois Revocable Trust UAD 9/11/1989.
    Mr. Duchossois is trustee of the Craig J. Duchossois
    Revocable Trust UAD 9/11/1989.
(5)
Consists of 1,125,000 shares of
    Series B preferred stock and warrants to purchase 300,375 shares
    of common stock purchased by the Edward A. Fortino Trust UAD
    12/15/1994. Mr. Fortino is trustee of the Edward A. Fortino
    Trust UAD 12/15/1994.
PWC
    Leasing, LLC
On March 29, 2006 we entered into a Master Equipment Lease
    Agreement with PWC Leasing, LLC (the "Lease
    Agreement"), pursuant to which we leased certain equipment
    used in our water bottle exchange service. Primier, LLC, a
    company wholly-owned by Mr. Prim, was a one third owner of
    PWC Leasing, LLC. We made payments to PWC Leasing, LLC pursuant
    to the Lease Agreement that totaled approximately $693,000 and
    $318,000 in 2007 and the first six months of 2008, respectively.
    On June 30, 2008, we purchased the leased assets from PWC
    Leasing, LLC at their fair value of $3,500,000 and terminated
    the Lease Agreement. Our Board of Directors authorized and
    approved this transaction after obtaining an independent,
    third-party evaluation of a fair and reasonable price for the
    assets.
Spin-Off
    of Prima Bottled Water, Inc. and Related Transactions
On December 31, 2009, we distributed all of the shares of
    our wholly-owned subsidiary, Prima Bottle Water, Inc.
    ("Prima"), to all of the holders of our Series A
    and Series C preferred stock and common stock on a pro rata
    basis assuming the conversion of all Series A and
    Series C preferred stock into common stock (the
    "Spin-Off"). Recipients of the Prima shares included
    our directors, officers and holders of more than five percent of
    our voting securities, but only in direct proportion to each
    individual's ownership of our Series A and
    Series C preferred stock and common stock at the time of
    the Spin-Off.
    On                    
    , 2010, we entered into a license agreement with Prima pursuant
    to which we license the
    Prima
®
trademark to Prima in exchange for a license fee based upon the
    number of bottles manufactured from bioresin by Prima, an
    affiliate of Prima and certain third parties.
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DESCRIPTION
    OF CAPITAL STOCK
The following is a description of the material provisions of
    our capital stock, as well as other material terms of our
    amended and restated certificate of incorporation and amended
    and restated bylaws as they will be in effect as of the
    completion of this offering. This description is only a summary.
    For more detailed information, you should refer to our amended
    and restated certificate of incorporation and amended and
    restated bylaws filed as exhibits to the registration statement,
    of which this prospectus is a part.
Authorized
    Capital
Prior to the closing of this offering, our authorized capital
    stock consists of: (1) 200,000,000 shares of common
    stock (15,158,305 of which were outstanding at March 1,
    2010) and (2) 100,000,000 shares of preferred
    stock, including 18,780,000 authorized shares of Series A
    convertible preferred stock (18,755,000 of which were
    outstanding at March 1, 2010), 30,000,000 authorized shares
    of Series B preferred stock (23,280,221 of which were
    outstanding at March 1, 2010) and 14,000,000
    authorized shares of Series C convertible preferred stock
    (12,520,001 of which were outstanding at March 1, 2010).
    Each share of Series A convertible preferred stock is
    convertible into one share of common stock and each share of
    Series C convertible preferred stock is convertible into
    1.92 shares of common stock. As of March 1, 2010,
    there were 18 holders of record of our common stock, 37 holders
    of record of our Series A convertible preferred stock, 41
    holders of record of our Series B preferred stock and 38
    holders of record of our Series C convertible preferred
    stock.
Upon the closing of this offering, we will amend and restate our
    certificate of incorporation to provide that our authorized
    capital stock will consist of
    (1)           shares
    of common stock, $0.01 par value per share and
    (2)           shares
    of preferred stock, par value $0.01 per share. Immediately prior
    to the closing of this offering, all outstanding shares of our
    Series A and Series C preferred stock will be
    converted into shares of common stock and
    a          
    -for-          reverse
    stock split of our common stock will occur. Following the sale
    of shares of common stock in this offering, we expect to
    have           shares
    of common stock and no shares of preferred stock outstanding
    (or           shares
    of common stock and no shares of preferred stock outstanding if
    the underwriters exercise in full their option to purchase
    additional shares to cover overallotments, if any).
Common
    Stock
Voting.
Except as otherwise required by Delaware law, at
    every annual or special meeting of stockholders, every holder of
    common stock is entitled to one vote per share. There is no
    cumulative voting in the election of directors.
Dividend Rights.
Subject to preferences that may be
    applicable to any outstanding series of preferred stock, the
    holders of our common stock will receive ratably any dividends
    declared by our Board of Directors out of funds legally
    available for the payment of dividends. We have never paid or
    declared cash dividends on our common stock. We currently intend
    to retain all available funds and any future earnings to finance
    the development and expansion of our business. We do not expect
    to pay any dividends on our common stock in the foreseeable
    future. Any future determination to pay dividends will be at the
    discretion of our Board of Directors and will depend upon
    various factors, including our results of operations, financial
    condition, capital requirements, investment opportunities and
    other factors that our Board of Directors deems relevant. Our
    senior revolving credit agreement currently limits our ability
    to pay cash dividends. See "Dividend Policy."
Liquidation and Preemptive Rights.
In the event of our
    liquidation, dissolution or
winding-up,
the holders of our common stock are entitled to share ratably in
    all assets remaining after payment of liabilities, subject to
    prior distribution rights of our preferred stock, if any, then
    outstanding. The holders of our common stock have no preemptive
    or other subscription rights.
Our outstanding shares of common stock are, and the shares
    offered by us in this offering will be, when issued and paid
    for, fully paid and nonassessable. The rights, preferences and
    privileges of holders of common
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stock are subject to, and may be adversely affected by, the
    rights of the holders of shares of any series of preferred stock
    that we may designate and issue in the future.
Preferred
    Stock
Following the closing of this offering, there will be no shares
    of preferred stock outstanding. Upon the closing of this
    offering and the effectiveness of our amended and restated
    certificate of incorporation, our Board of Directors will be
    authorized to issue from time to time up
    to      million shares of
    preferred stock in one or more series without stockholder
    approval. Our Board of Directors will have the discretion to
    determine the rights, preferences, privileges and restrictions,
    including voting rights, dividend rights, conversion rights,
    redemption privileges and liquidation preferences, of each
    series of preferred stock. It is not possible to state the
    actual effect of the issuance of any shares of preferred stock
    on the rights of holders of common stock until our Board of
    Directors determines the specific rights associated with that
    preferred stock. Although we have no current plans to issue
    shares of preferred stock, the effects of issuing preferred
    stock could include one or more of the following:
•
decreasing the amount of earnings and assets available for
    distribution to holders of common stock;
•
restricting dividends on the common stock;
•
diluting the voting power of the common stock;
•
impairing the liquidation rights of the common stock; or
•
delaying, deferring or preventing changes in our control or
    management.
We believe that the ability of our Board of Directors to issue
    one or more series of preferred stock will provide us with
    flexibility in structuring possible future financings and
    acquisitions, and in meeting other corporate needs that may
    arise. The authorized shares of preferred stock, as well as
    authorized and unissued shares of common stock, will be
    available for issuance without action by our stockholders,
    unless such action is required by applicable law or the rules of
    any stock exchange or automated quotation system on which our
    securities may be listed or traded.
Our Board of Directors may authorize, without stockholder
    approval, the issuance of preferred stock with voting and
    conversion rights that could adversely affect the voting power
    and other rights of holders of common stock. Although our Board
    of Directors has no current intention of doing so, it could
    issue a series of preferred stock that could, depending on the
    terms of such series, impede the completion of a merger, tender
    offer or other takeover attempt of our Company. Our Board of
    Directors could also issue preferred stock having terms that
    could discourage an acquisition attempt through which an
    acquirer may be able to change the composition of our Board of
    Directors, including a tender offer or other transaction that
    some, or a majority, of our stockholders might believe to be in
    their best interests or in which stockholders might receive a
    premium for their stock over the then-current market price. Any
    issuance of preferred stock therefore could have the effect of
    decreasing the market price of our common stock.
Our Board of Directors will make any determination to issue such
    shares based on its judgment as to the best interests of our
    Company and its stockholders. We have no current plan to issue
    any preferred stock after this offering.
Stock
    Options and Restricted Stock
As of March 1, 2010, we had granted options to purchase a
    total of 3,247,587 shares of common stock at a weighted
    average exercise price of $1.26 per share. Of this total,
    2,615,145 options have vested and 632,442 remain unvested. As of
    March 1, 2010, we had also granted 1,102,500 shares of
    restricted stock, all of which are unvested. As of March 1,
    2010, an additional 16,608 shares of common stock were
    available for future awards
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under our 2004 Stock Plan. Upon the closing of this offering, an
    additional 7,500,000 shares of our common stock will be
    available for future awards under our 2010 Omnibus Long-Term
    Incentive Plan.
Warrants
As of March 1, 2010, we had issued warrants to purchase a
    total of 8,678,923 shares of common stock at a weighted
    average exercise price of $      per
    share.
Warrants to purchase a total of 1,111,109 shares of our
    common stock were issued in connection with our 2011 Notes.
    These warrants will remain outstanding after this offering, will
    expire December 30, 2019 and will have an exercise price of
    $      per share.
Warrants to purchase a total of 6,215,813 shares of our
    common stock were issued in connection with the private
    placement of our Series B preferred stock. The exercise
    price of these warrants is $1.25 per share and they will
    expire      days after the closing of
    this offering.
Warrants to purchase a total of 1,252,001 shares of our
    common stock were issued in connection with the private
    placement of our Series C convertible preferred stock. The
    exercise price of these warrants is $1.98 per share and they
    will expire      days after the closing
    of this offering.
A warrant to purchase a total of 100,000 shares of common
    stock was issued on June 4, 2008 to two individuals in
    connection with a potential business arrangement. The exercise
    price of the warrant is $1.98 per share and it will
    expire     days after the closing of
    this offering.
Anti-Takeover
    Provisions
Delaware law, our amended and restated certificate of
    incorporation and our amended and restated bylaws that will be
    effective upon the closing of this offering contain provisions
    that could delay or prevent a change of control of our Company
    or changes in our Board of Directors that our stockholders might
    consider favorable. The following is a summary of these
    provisions.
Delaware
    Law
We are subject to Section 203 of the Delaware General
    Corporation Law. Section 203 generally prohibits a public
    Delaware corporation from engaging in a "business
    combination" with an "interested stockholder" for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless:
•
prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or the
    transaction which resulted in the stockholder becoming an
    interested stockholder;
•
upon the consummation of the transaction which resulted in the
    stockholder becoming an interested stockholder, the interested
    stockholder owned at least 85% of the voting stock of the
    corporation outstanding at the time the transaction commenced,
    excluding for purposes of determining the voting stock
    outstanding (a) shares owned by persons who are directors
    and also officers, and (b) shares owned by employee stock
    plans in which employee participants do not have the right to
    determine confidentially whether shares held subject to the plan
    will be tendered in a tender or exchange offer; or
•
on or subsequent to the date of the transaction, the business
    combination is approved by the board of directors and authorized
    at an annual or special meeting of stockholders, and not by
    written consent, by the affirmative vote of at least two-thirds
    of the outstanding voting stock which is not owned by the
    interested stockholder.
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Section 203 defines a business combination to include:
•
any merger or consolidation involving the corporation and the
    interested stockholder;
•
any sale, lease, exchange, mortgage, transfer, pledge or other
    disposition involving the interested stockholder of 10% or more
    of the assets of the corporation;
•
subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder; and
•
the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
In general, Section 203 defines an interested stockholder
    as any entity or person beneficially owning 15% or more of the
    outstanding voting stock of the corporation and any entity or
    person affiliated with or controlling or controlled by the
    entity or person.
Amended
    and Restated Certificate of Incorporation and Amended and
    Restated Bylaws
Undesignated Preferred Stock.
Our Board of Directors has
    the ability to issue preferred stock with voting or other
    rights, preferences and privileges that could have the effect of
    deterring hostile takeovers or delaying changes in control of
    our Company or management.
Limits on Ability to Act by Written Consent or Call a Special
    Meeting.
We have provided in our amended and restated
    certificate of incorporation and our amended and restated bylaws
    that our stockholders may not act by written consent. This limit
    on the ability of our stockholders to act by written consent
    may, in the future, lengthen the amount of time required to take
    stockholder actions. As a result, a holder controlling a
    majority of our capital stock would not be able to amend our
    certificate of incorporation or bylaws or remove directors
    without holding a meeting of our stockholders called in
    accordance with our amended and restated bylaws.
In addition, our amended and restated certificate of
    incorporation and amended and restated bylaws provide that
    special meetings of the stockholders may be called only by our
    Board of Directors. A stockholder may not call a special
    meeting, which may delay the ability of our stockholders to
    force consideration of a proposal or for holders controlling a
    majority of our capital stock to take any action, including the
    removal of directors.
Requirements for Advance Notification of Stockholder
    Nominations and Proposals.
Our amended and restated bylaws
    establish advance notice procedures with respect to stockholder
    proposals and the nomination of candidates for election as
    directors, other than nominations made by or at the direction of
    our Board of Directors or a committee of our Board of Directors.
    Stockholders must notify our corporate secretary in writing
    prior to the meeting at which the matters are to be acted upon
    or directors are to be elected. The notice must contain the
    information specified in our amended and restated bylaws. To be
    timely, the notice must be received at our principal executive
    office not later than the 90th day nor earlier than the
    120th day prior to the first anniversary of the date of the
    prior year's annual meeting of stockholders. If the date of
    the annual meeting is more than 30 days before or after
    such anniversary date, or if no annual meeting was held in the
    preceding year, notice by the stockholder, to be timely, must be
    received not earlier than the 120th day prior to the annual
    meeting, and not later than the later of the 90th day prior
    to the annual meeting, or the 10th day following the day on
    which public announcement of the date of such meeting is first
    made or notice of the meeting date is mailed, whichever occurs
    first.
Our amended and restated bylaws may have the effect of
    precluding the conduct of certain business at a meeting if the
    proper procedures are not followed. These provisions may also
    discourage or deter a potential acquirer from conducting a
    solicitation of proxies to elect the acquirer's own slate
    of directors or otherwise attempting to obtain control of our
    Company.
Board of Directors.
Our Board of Directors may elect a
    director to fill a vacancy, including vacancies created by the
    expansion of our Board of Directors.
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Our amended and restated certificate of incorporation and the
    amended and restated bylaws will not provide for cumulative
    voting in the election of directors. The absence of cumulative
    voting may make it more difficult for stockholders who own an
    aggregate of less than a majority of our voting power to elect
    any directors to our Board of Directors.
Our amended and restated certificate of incorporation and the
    amended and restated bylaws provide that our Board of Directors
    is divided into three classes, with members of each class
    serving staggered three-year terms. Our classified Board of
    Directors could have the effect of delaying or discouraging an
    acquisition of us or a change in management.
Limitations
    of Directors' Liability and Indemnification
Our amended and restated certificate of incorporation will limit
    the liability of our directors to the fullest extent permitted
    by Delaware law. Delaware law provides that directors of a
    corporation will not be personally liable for monetary damages
    for breach of their fiduciary duties as directors, except for
    liability for any:
•
breach of their duty of loyalty to us or our stockholders;
•
act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
•
unlawful payment of dividends or redemption of shares as
    provided in Section 174 of the Delaware General Corporation
    Law; or
•
transaction from which the directors derived an improper
    personal benefit.
These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
Our amended and restated bylaws, in the form that will become
    effective upon the closing of this offering, provide that we
    will indemnify and advance expenses to our directors and
    officers to the fullest extent permitted by law or, if
    applicable, pursuant to indemnification agreements. They further
    provide that we may choose to indemnify other employees or
    agents of the corporation from time to time. Section 145(g)
    of the Delaware General Corporation Law and our amended and
    restated bylaws also permit us to secure insurance on behalf of
    any officer, director, employee or other agent for any liability
    arising out of his or her actions in connection with his or her
    services to us, regardless of whether our bylaws permit
    indemnification. We have obtained a directors' and
    officers' liability insurance policy.
We have entered into indemnification agreements with each of our
    directors that provide, in general, that we will indemnify them
    to the fullest extent permitted by law in connection with their
    service to us or on our behalf.
At present, there is no pending litigation or proceeding
    involving any of our directors or officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to our directors, officers and
    controlling persons pursuant to the foregoing provisions, or
    otherwise, we have been advised that in the opinion of the
    Securities and Exchange Commission this indemnification is
    against public policy as expressed in the Securities Act and is
    therefore unenforceable.
Transfer
    Agent and Registrar
The transfer agent and registrar for our common stock
    is                    .
Stock
    Market
We intend to apply to have our common stock listed on the Nasdaq
    Global Market under the symbol
    "     ".
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SHARES ELIGIBLE
    FOR FUTURE SALE
Prior to this offering, there has been no market for our common
    stock, and a liquid trading market for our common stock may not
    develop or be sustained after this offering. Future sales of
    amounts of our common stock in the public market, or the
    perception that such sales may occur, could adversely affect
    prevailing market prices of our common stock. Furthermore, since
    only a limited number of shares will be available for sale
    shortly after this offering because of certain contractual and
    legal restrictions on resale described below, sales of amounts
    of our common stock in the public market after the restrictions
    lapse could also adversely affect the market price of our common
    stock and our ability to raise equity capital in the future. See
    "Risk Factors."
Eligibility
    of Restricted Shares for Resale in the Public Markets
Upon the closing of this offering, based on our outstanding
    shares as of March 1, 2010, and assuming the conversion of
    our Series A and Series C convertible preferred stock
    and no exercise of options or warrants, we will have outstanding
    an aggregate
    of           shares
    of our common stock
    (           shares
    if the underwriters' over-allotment is exercised in full).
    Of these shares, all of the shares sold in this offering will be
    freely transferable without restriction or registration under
    the Securities Act, except for any shares purchased by one of
    our existing "affiliates," as that term is defined in
    Rule 144 under the Securities Act, who may sell only the
    volume of shares described below and whose sales would be
    subject to additional restrictions described below. The
    remaining           shares
    of common stock will be held by our existing stockholders and
    will be considered "restricted securities" as defined
    in Rule 144. Of these restricted
    securities,           shares
    will be subject to transfer restrictions for 180 days from
    the date of this prospectus pursuant to the
lock-up
agreements described below. Restricted securities may be sold in
    the public market only if registered or if they qualify for an
    exemption from registration under Rules 144 or 701 of the
    Securities Act, as described below. In addition, the shares
    underlying options and warrants will become available for resale
    into the public markets as described below under
    "— Options, Restricted Stock and Warrants."
Lock-up
Agreements
All of our officers and directors, holders
    of           shares
    of our common stock (after giving effect to the conversion of
    our Series A and Series C convertible preferred stock)
    and holders
    of           shares
    of our common stock issuable upon exercise of outstanding
    options and warrants have entered into
lock-up
agreements pursuant to which they have agreed, subject to
    certain exceptions, not to offer, sell, contract to sell,
    pledge, grant any option to purchase, make any short sale or
    otherwise dispose of any shares of common stock, or any
    securities convertible into, exchangeable for or that represent
    the right to receive shares of common stock for a period of
    180 days from the date of this prospectus without the prior
    written consent of Thomas Weisel Partners LLC. There are no
    contractually specified conditions for the waiver of
lock-up
restrictions and any waiver is at the sole discretion of Thomas
    Weisel Partners LLC, which may be granted by Thomas Weisel
    Partners LLC for any reason. The
180-day
lock-up
period will be automatically extended if (i) during the
    last 17 days of the
180-day
restricted period we issue an earnings release or announce
    material news or a material event or (ii) prior to the
    expiration of the
180-day
restricted period, we announce that we will release earnings
    results during the
15-day
period following the last day of the
180-day
period, in which case the restrictions described in this
    paragraph will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
    announcement of the material news or material event. After the
lock-up
period, these shares may be sold, subject to applicable
    securities laws. See "Underwriting."
Rule 144
In general, and beginning 90 days after the date of this
    prospectus, under Rule 144 as in effect on the date of this
    prospectus, a person who is not one of our affiliates at any
    time during the three months preceding a sale, and who has
    beneficially owned shares of our common stock for at least six
    months, would be entitled to sell an unlimited number of shares
    of our common stock provided current public information about us
    is available and, after owning such shares for at least one
    year, would be entitled to sell an unlimited number of shares of
    our
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common stock without restriction. Beginning 90 days after
    the date of this prospectus, our affiliates who have
    beneficially owned shares of our common stock for at least six
    months are entitled to sell within any three-month period a
    number of shares that does not exceed the greater of:
•
1% of the number of shares of our common stock then
    outstanding; or
•
the average weekly trading volume of our common stock on the
    Nasdaq Global Market during the four calendar weeks preceding
    the filing of a notice on Form 144 with respect to the sale.
Sales under Rule 144 by our affiliates are also subject to
    manner of sale provisions and notice requirements and to the
    availability of current public information about us.
Upon expiration of the
lock-up
period described
    above,          
    additional shares of our common stock will be eligible for sale
    under Rule 144, including shares eligible for resale
    immediately upon the closing of this offering as described
    above. We cannot estimate the number of shares of our common
    stock that our existing stockholders will elect to sell under
    Rule 144.
Rule 701
In general, under Rule 701, any of our employees,
    directors, officers, consultants or advisors who acquires common
    stock from us in connection with a compensatory stock or option
    plan or other written agreement before the effective date of
    this offering, to the extent not subject to a
lock-up
agreement, is entitled to resell such shares 90 days after
    the effective date of this offering in reliance on Rule 144.
The SEC has indicated that Rule 701 will apply to typical
    stock options granted by an issuer before it becomes subject to
    the reporting requirements of the Exchange Act, along with the
    shares acquired upon exercise of such options, including
    exercises after the date of this prospectus. Securities issued
    in reliance on Rule 701 are restricted securities and,
    subject to the
lock-up
agreements described above, beginning 90 days after the
    date of this prospectus, may be sold by persons other than
    affiliates, as defined in Rule 144, subject only to the
    manner of sale provisions of Rule 144 and by affiliates
    under Rule 144 without compliance with its minimum holding
    period requirement.
Options,
    Restricted Stock and Warrants
Upon the closing of this offering, options to purchase a total
    of 3,247,587 shares of our common stock will be outstanding
    with a weighted average per share exercise price of $1.26 and
    expiration dates between November 1, 2014 and
    January 29, 2019. As of March 1, 2010, we had also
    granted 1,102,500 shares of restricted stock, all of which
    are unvested. As of March 1, 2010, an additional
    16,608 shares of common stock were available for future
    awards under our 2004 Stock Plan. We have also reserved an
    additional 7,500,000 shares of common stock for issuance
    pursuant to our 2010 Omnibus Long-Term Incentive Plan and an
    additional 250,000 shares of common stock for issuance
    pursuant to our 2010 Employee Stock Purchase Plan, both of which
    we will adopt in connection with this offering.
Upon the closing of this offering, warrants to purchase a total
    of 8,678,923 shares of our common stock will be outstanding
    with a weighted average per share exercise price of
    $      per share.
Warrants to purchase a total of 1,111,109 shares of our
    common stock were issued in connection with our 2011 Notes.
    These warrants will remain outstanding after this offering, will
    expire December 30, 2019 and will have an exercise price of
    $      per share.
Warrants to purchase a total of 6,215,813 shares of our
    common stock were issued in connection with the private
    placement of our Series B preferred stock. The exercise
    price of these warrants is $1.25 per share and they will
    expire      days after the closing of
    this offering.
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Warrants to purchase a total of 1,252,001 shares of our
    common stock were issued in connection with the private
    placement of our Series C convertible preferred stock. The
    exercise price of these warrants is $1.98 per share and they
    will expire      days after the closing
    of this offering.
A warrant to purchase a total of 100,000 shares of common
    stock was issued on June 4, 2008 to two individuals in
    connection with a potential business arrangement. The exercise
    price of the warrant is $1.98 per share and it will
    expire     days after the closing of
    this offering.
In general, under Rule 701 of the Securities Act as
    currently in effect, any of our employees, consultants or
    advisors who purchase shares of our common stock from us
    pursuant to options granted prior to the closing of this
    offering under our 2004 Stock Plan or other written agreement is
    eligible to resell those shares 90 days after the effective
    date of this offering in reliance on Rule 144, but without
    compliance with some of the restrictions, including the holding
    period, contained in Rule 144.
Additionally, following the closing of this offering, we intend
    to file one or more registration statements on
Form S-8
under the Securities Act to register the sale of shares issued
    or issuable upon the exercise of our currently outstanding stock
    options as well as pursuant to our 2010 Omnibus Long-Term
    Incentive Plan and 2010 Employee Stock Purchase Plan. The
    registration statements will become effective upon filing.
    Subject to the exercise of issued and outstanding options and
    contractual restrictions, shares of our directors and executive
    officers to which Rule 701 is applicable or which are to be
    registered under the registration statement on
Form S-8
will be available for sale into the public market after the
    expiration of the
180-day
lock-up
agreements with the underwriters described under the caption
    "Underwriting."
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MATERIAL
    U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
FOR
NON-U.S.
HOLDERS OF OUR COMMON STOCK
The following discussion summarizes certain material
    U.S. federal income and estate tax considerations relating
    to the acquisition, ownership and disposition of our common
    stock purchased in this offering by a
non-U.S. holder
(as defined below). This discussion is based on the provisions
    of the Internal Revenue Code of 1986, as amended, final,
    temporary and proposed U.S. Treasury regulations
    promulgated thereunder and current administrative rulings and
    judicial decisions, all as in effect as of the date hereof. All
    of these authorities may be subject to differing interpretations
    or repealed, revoked or modified, possibly with retroactive
    effect, which could materially alter the tax consequences to
non-U.S. holders
described in this prospectus.
There can be no assurance that the IRS will not take a contrary
    position to the tax consequences described herein or that such
    position will not be sustained by a court. No ruling from the
    IRS has been obtained with respect to the U.S. federal
    income or estate tax consequences to a
non-U.S. holder
of the purchase, ownership or disposition of our common stock.
This discussion is for general information only and is not
    tax advice. All prospective
non-U.S. holders
of our common stock should consult their own tax advisors with
    respect to the U.S. federal, state, local and
non-U.S. tax
consequences of the purchase, ownership and disposition of our
    common stock.
As used in this discussion, the term
"non-U.S. holder"
means a beneficial owner of our common stock that is not any of
    the following for U.S. federal income tax purposes:
•
an individual who is a citizen or a resident of the United
    States;
•
a corporation or other entity taxable as a corporation for
    U.S. federal income tax purposes that was created or
    organized in or under the laws of the United States, any state
    thereof or the District of Columbia;
•
an estate whose income is subject to U.S. federal income
    taxation regardless of its source;
•
a trust (a) if a U.S. court is able to exercise
    primary supervision over the trust's administration and one
    or more U.S. persons have the authority to control all of
    the trust's substantial decisions or (b) that has a
    valid election in effect under applicable U.S. Treasury
    regulations to be treated as a U.S. person; or
•
an entity that is disregarded as separate from its owner for
    U.S. federal income tax purposes if all of its interests
    are owned by a single person described above.
An individual may be treated, for U.S. federal income tax
    purposes, as a resident of the United States in any calendar
    year by being present in the United States on at least
    31 days in that calendar year and for an aggregate of at
    least 183 days during a three-year period ending in the
    current calendar year. The
183-day
test
    is determined by counting all of the days the individual is
    treated as being present in the current year, one-third of such
    days in the immediately preceding year and one-sixth of such
    days in the second preceding year. Residents are subject to
    U.S. federal income tax as if they were U.S. citizens.
This discussion assumes that a prospective
non-U.S. holder
will hold shares of our common stock as a capital asset
    (generally, property held for investment). This discussion does
    not address all aspects of U.S. federal income and estate
    taxation that may be relevant to a particular
non-U.S. holder
in light of that
non-U.S. holder's
individual circumstances. In addition, this discussion does not
    address any aspect of U.S. federal alternative minimum,
    U.S. state or U.S. local or
non-U.S. taxes,
or the special tax rules applicable to particular
non-U.S. holders,
such as:
•
insurance companies and financial institutions;
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•
tax-exempt organizations;
•
partnerships or other pass-through entities;
•
regulated investment companies or real estate investment trusts;
•
pension plans;
•
persons who received our common stock as compensation;
•
brokers and dealers in securities;
•
owners that hold our common stock as part of a straddle, hedge,
    conversion transaction, synthetic security or other integrated
    investment; and
•
former citizens or residents of the United States subject to tax
    as expatriates.
If a partnership or other entity treated as a partnership for
    U.S. federal income tax purposes is an owner of our common
    stock, the treatment of a partner in the partnership generally
    will depend on the status of the partner and the activities of
    the partnership. We urge any owner of our common stock that is a
    partnership and partners in that partnership to consult their
    tax advisors regarding the U.S. federal income tax
    consequences of acquiring, owning and disposing of our common
    stock.
Distributions
    on Our Common Stock
Any distribution on our common stock paid to
non-U.S. holders
will generally constitute a dividend for U.S. federal
    income tax purposes to the extent paid from our current or
    accumulated earnings and profits, as determined under
    U.S. federal income tax principles. Distributions in excess
    of our current and accumulated earnings and profits will
    generally constitute a return of capital to the extent of the
non-U.S. holder's
adjusted tax basis in our common stock, and will be applied
    against and reduce the
non-U.S. holder's
adjusted tax basis. Any remaining excess will be treated as
    capital gain, subject to the tax treatment described below in
    "— Gain on Sale, Exchange or Other Disposition of
    Our Common Stock."
Dividends paid to a
non-U.S. holder
that are not treated as effectively connected with the
non-U.S. holder's
conduct of a trade or business in the United States generally
    will be subject to withholding of U.S. federal income tax
    at a rate of 30% on the gross amount paid, unless the
non-U.S. holder
is entitled to an exemption from or reduced rate of withholding
    under an applicable income tax treaty. In order to claim the
    benefit of a tax treaty, a
non-U.S. holder
must provide a properly executed IRS
Form W-8BEN
(or successor form) prior to the payment of dividends. A
non-U.S. holder
eligible for a reduced rate of withholding pursuant to an income
    tax treaty may be eligible to obtain a refund of any excess
    amounts withheld by timely filing an appropriate claim for a
    refund with the IRS.
Dividends paid to a
non-U.S. holder
that are treated as effectively connected with a trade or
    business conducted by the
non-U.S. holder
within the United States (and, if an applicable income tax
    treaty so provides, are also attributable to a permanent
    establishment or a fixed base maintained within the United
    States by the
non-U.S. holder)
are generally exempt from the 30% withholding tax if the
non-U.S. holder
satisfies applicable certification and disclosure requirements.
    To obtain the exemption, a
non-U.S. holder
must provide us with a properly executed IRS
Form W-8ECI
(or successor form) prior to the payment of the dividend.
    Dividends received by a
non-U.S. holder
that are treated as effectively connected with a U.S. trade
    or business generally are subject to U.S. federal income
    tax at rates applicable to U.S. persons. A
non-U.S. holder
that is a corporation may, under certain circumstances, be
    subject to an additional "branch profits tax" imposed
    at a rate of 30%, or such lower rate as specified by an
    applicable income tax treaty between the United States and such
    holder's country of residence.
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A
non-U.S. holder
who provides us with an IRS
Form W-8BEN,
Form W-8ECI
or other form must update the form or submit a new form, as
    applicable, if there is a change in circumstances that makes any
    information on such form incorrect.
Gain On
    Sale, Exchange or Other Disposition of Our Common
    Stock
In general, a
non-U.S. holder
will not be subject to any U.S. federal income tax or
    withholding on any gain realized from the
non-U.S. holder's
sale, exchange or other disposition of shares of our common
    stock unless:
•
the gain is effectively connected with a U.S. trade or
    business (and, if an applicable income tax treaty so provides,
    is also attributable to a permanent establishment or a fixed
    base maintained within the United States by the
non-U.S. holder),
in which case the gain will be taxed on a net income basis
    generally in the same manner as if the
non-U.S. holder
were a U.S. person, and, if the
non-U.S. holder
is a corporation, the additional branch profits tax described
    above in "Distributions on Our Common Stock" may also
    apply;
•
the
non-U.S. holder
is an individual who is present in the United States for
    183 days or more in the taxable year of the disposition and
    certain other conditions are met, in which case the
non-U.S. holder
will be subject to a 30% tax on the net gain derived from the
    disposition, which may be offset by
U.S.-source
capital losses of the
non-U.S. holder,
if any; or
•
we are, or have been at any time during the five-year period
    preceding such disposition (or the
non-U.S. holder's
holding period, if shorter), a "United States real property
    holding corporation."
Generally, we will be a "United States real property
    holding corporation" if the fair market value of our
    U.S. real property interests equals or exceeds 50% of the
    sum of the fair market values of our worldwide real property
    interests and other assets used or held for use in a trade or
    business, all as determined under applicable U.S. Treasury
    regulations. We believe that we have not been and are not
    currently, and do not anticipate becoming in the future, a
    "United States real property holding corporation" for
    U.S. federal income tax purposes.
Backup
    Withholding and Information Reporting
We must report annually to the IRS and to each
non-U.S. holder
the amount of distributions paid to such holder and the amount
    of tax withheld, if any. Copies of the information returns filed
    with the IRS to report the distributions and withholding may
    also be made available to the tax authorities in a country in
    which the
non-U.S. holder
is a resident under the provisions of an applicable income tax
    treaty or agreement.
The United States imposes a backup withholding tax on the gross
    amount of dividends and certain other types of payments.
    Dividends paid to a
non-U.S. holder
will not be subject to backup withholding if proper
    certification of foreign status (usually on IRS
Form W-8BEN)
is provided, and we do not have actual knowledge or reason to
    know that the
non-U.S. holder
is a U.S. person. In addition, no backup withholding or
    information reporting will be required regarding the proceeds of
    a disposition of our common stock made by a
non-U.S. holder
within the United States or conducted through certain
    U.S. financial intermediaries if the payor receives the
    certification of foreign status described in the preceding
    sentence and the payor does not have actual knowledge or reason
    to know that such
non-U.S. holder
is a U.S. person or the
non-U.S. holder
otherwise establishes an exemption.
Non-U.S. holders
should consult their own tax advisors regarding the application
    of the information reporting and backup withholding rules to
    them.
Backup withholding is not an additional tax. Amounts withheld
    under the backup withholding rules from a payment to a
non-U.S. holder
can be refunded or credited against the
non-U.S. holder's
U.S. federal income tax liability, if any, provided that
    certain required information is furnished to the IRS in a timely
    manner.
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U.S.
    Federal Estate Tax
An individual
non-U.S. holder
who is treated as the owner, or who has made certain lifetime
    transfers, of an interest in our common stock will be required
    to include the value of the common stock in his or her gross
    estate for U.S. federal estate tax purposes and may be
    subject to U.S. federal estate tax, unless an applicable
    estate tax treaty provides otherwise or no U.S. federal
    estate tax is in effect.
Proposed
    Legislation Relating to Foreign Accounts
Legislation has been introduced into the U.S. Congress that
    would impose withholding taxes on certain types of payments made
    to "foreign financial institutions" and certain other
non-U.S. entities.
A substantially similar proposal was also included as a part of
    President Obama's proposed budget plan for fiscal year
    2011. If this legislation or other similar legislation is
    enacted, the failure to comply with additional certification,
    information reporting and other specified requirements could
    result in withholding tax being imposed on payments of dividends
    and sales proceeds to foreign intermediaries and certain
non-U.S. holders.
Any such legislation could substantially change some of the
    rules discussed above relating to certification requirements,
    information reporting and withholding. The U.S. House of
    Representatives and the U.S. Senate have each passed, as
    parts of different bills, a version of this legislation that
    would apply to payments made after December 31, 2012. No
    assurances can be given whether, or in what form, this
    legislation will be enacted. Prospective investors should
    consult their own tax advisers regarding this legislation and
    similar proposals.
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UNDERWRITING
Subject to the terms and conditions set forth in the
    underwriting agreement, each of the underwriters named below has
    severally agreed to purchase from us the aggregate number of
    shares of common stock set forth opposite its name below:
Underwriters
Number of Shares
Thomas Weisel Partners LLC
BB&T Capital Markets, a division of Scott &
    Stringfellow, LLC
Signal Hill Capital Group LLC
Total
All of
    the           shares
    to be purchased by the underwriters will be purchased from us.
The underwriting agreement provides that the obligations of the
    several underwriters are subject to various conditions,
    including approval of legal matters by counsel. The underwriting
    agreement provides that the underwriters are obligated to
    purchase all the shares of common stock in the offering if any
    are purchased, other than those shares covered by the
    over-allotment option described below.
The underwriting agreement provides that we will indemnify the
    underwriters against liabilities specified in the underwriting
    agreement under the Securities Act, or will contribute to
    payments that the underwriters may be required to make relating
    to these liabilities.
The underwriters expect to deliver the shares of common stock to
    purchasers on or
    about          ,
    2010.
Over-Allotment
    Option
We have granted a
30-day
over-allotment option to the underwriters to purchase up to a
    total
    of          
    additional shares of our common stock from us at the initial
    public offering price, less the underwriting discount payable by
    us, as set forth on the cover page of this prospectus. If the
    underwriters exercise this option in whole or in part, then each
    of the underwriters will be separately committed, subject to the
    conditions described in the underwriting agreement, to purchase
    the additional shares of our common stock in proportion to their
    respective commitments set forth in the table above.
Determination
    of Offering Price
Prior to this offering, there has been no public market for our
    common stock. The initial public offering price will be
    determined through negotiations between us and the underwriters.
    In addition to prevailing market conditions, the factors to be
    considered in determining the initial public offering price will
    include the valuation multiples of publicly-traded companies
    that the representatives of the underwriters believe are
    comparable to us, our financial information, our history and
    prospects and the outlook for our industry, an assessment of our
    management, our past and present business operations and
    relationships, and the prospects for, and timing of, our future
    sales and an assessment of these factors in relation to market
    values and various valuation measures of other companies engaged
    in activities similar to ours.
We cannot assure you that an active or orderly trading market
    will develop for our common stock or that our common stock will
    trade in the public markets subsequent to this offering at or
    above the initial offering price.
Commissions
    and Discounts
The underwriters propose to offer the shares of common stock
    directly to the public at the public offering price set forth on
    the cover page of this prospectus, and at this price less a
    concession not in excess of $      per
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share of common stock to other dealers specified in a master
    agreement among underwriters who are members of the Financial
    Industry Regulatory Authority, Inc. The underwriters may allow,
    and the other dealers specified may re-allow, concessions not in
    excess of $      per share of common
    stock to these other dealers. After this offering, the offering
    price, concessions and other selling terms may be changed by the
    underwriters. Our common stock is offered subject to receipt and
    acceptance by the underwriters and to other conditions,
    including the right to reject orders in whole or in part.
The following table summarizes the compensation to be paid to
    the underwriters by us and the proceeds, before expenses,
    payable to us:
Total
Without
With
Per Share
Over-Allotment
Over-Allotment
($)
($)
($)
Public offering price
Underwriting discount
Proceeds, before expenses, to us
Indemnification
    of Underwriters
We will indemnify the underwriters against some civil
    liabilities, including liabilities under the Securities Act and
    liabilities arising from breaches of our representations and
    warranties contained in the underwriting agreement. If we are
    unable to provide this indemnification, we will contribute to
    payments the underwriters may be required to make in respect of
    those liabilities.
No Sales
    of Similar Securities
The underwriters will require all of our directors and officers
    and certain other of our stockholders to agree, subject to
    certain exceptions, not to offer, sell, contract to sell,
    pledge, grant any option to purchase, make any short sale or
    otherwise dispose of any shares of common stock, or any options
    or warrants to purchase any shares of common stock, or any
    securities convertible into, exchangeable for or that represent
    the right to receive shares of common stock without the prior
    written consent of Thomas Weisel Partners LLC for a period of
    180 days after the date of this prospectus.
We have agreed that for a period of 180 days after the date
    of this prospectus, we will not, without the prior written
    consent of Thomas Weisel Partners LLC, offer, sell, contract to
    sell or otherwise dispose of any securities that are
    substantially similar to the common stock, including but not
    limited to any securities that are convertible into or
    exchangeable for, or that represent the right to receive, common
    stock or any such substantially similar securities except for
    the shares of common stock offered in this offering, the shares
    of common stock issuable upon exercise of outstanding options
    and warrants on the date of this prospectus and the shares of
    our common stock that are issued under our 2010 Omnibus
    Long-Term Incentive Plan, which we will adopt in connection with
    this offering.
The
180-day
restricted period described in the preceding two paragraphs will
    be automatically extended if: (1) during the last
    17 days of the 180-day restricted period we release
    earnings results or announce material news or a material event
    or (2) prior to the expiration of the
180-day
restricted period, we announce that we will release earnings
    results during the
15-day
period following the last day of the
180-day
period, in which case the restrictions described in the
    preceding paragraph will continue to apply until the expiration
    of the
18-day
period beginning on the date of release of the earnings results
    or the announcement of the material news or material event.
Nasdaq
    Global Market Listing
We intend to apply to have our common stock listed on the Nasdaq
    Global Market under the symbol
    "    ".
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Table of Contents
Short
    Sales, Stabilizing Transactions and Penalty Bids
In order to facilitate this offering, persons participating in
    this offering may engage in transactions that stabilize,
    maintain or otherwise affect the price of our common stock
    during and after this offering. Specifically, the underwriters
    may engage in the following activities in accordance with the
    rules of the SEC.
Short sales.
Short sales involve the sales by the
    underwriters of a greater number of shares than they are
    required to purchase in the offering. Covered short sales are
    short sales made in an amount not greater than the
    underwriters' over-allotment option to purchase additional
    shares from us in this offering. The underwriters may close out
    any covered short position by either exercising their
    over-allotment option to purchase shares or purchasing shares in
    the open market. In determining the source of shares to close
    out the covered short position, the underwriters will consider,
    among other things, the price of shares available for purchase
    in the open market as compared to the price at which they may
    purchase shares through the over-allotment option. Naked short
    sales are any short sales in excess of such over-allotment
    option. The underwriters must close out any naked short position
    by purchasing shares in the open market. A naked short position
    is more likely to be created if the underwriters are concerned
    that there may be downward pressure on the price of the common
    stock in the open market after pricing that could adversely
    affect investors who purchase in this offering.
Stabilizing transactions.
The underwriters may make bids
    for or purchases of the shares for the purpose of pegging,
    fixing or maintaining the price of the shares, so long as
    stabilizing bids do not exceed a specified maximum.
Penalty bids.
If the underwriters purchase
    shares in the open market in a stabilizing transaction or
    syndicate covering transaction, they may reclaim a selling
    concession from the underwriters and selling group members who
    sold those shares as part of this offering. Stabilization and
    syndicate covering transactions may cause the price of the
    shares to be higher than it would be in the absence of these
    transactions. The imposition of a penalty bid might also have an
    effect on the price of the shares if it discourages presales of
    the shares.
The transactions above may occur on the Nasdaq Global Market or
    otherwise. Neither we nor the underwriters make any
    representation or prediction as to the effect that the
    transactions described above may have on the price of the
    shares. If these transactions are commenced, they may be
    discontinued without notice at any time.
Relationships
The underwriters may, from time to time, perform investment
    banking and advisory services for us or engage in transactions
    with us for which they may receive customary fees and expenses.
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Table of Contents
LEGAL
    MATTERS
The validity of the shares of common stock offered hereby and
    certain other legal matters will be passed upon for us by
    K&L Gates LLP, Raleigh, North Carolina. Certain legal
    matters in connection with this offering will be passed upon for
    the underwriters by Latham & Watkins LLP, Washington,
    DC.
EXPERTS
The financial statements of Primo Water Corporation and
    subsidiaries as of December 31, 2009 and 2008, and for each
    of the three years ended December 31, 2009 included in this
    prospectus and registration statement have been so included in
    reliance on the report of McGladrey & Pullen, LLP, an
    independent registered public accounting firm, as set forth in
    its report thereon appearing elsewhere herein, and are included
    in reliance upon such report given on the authority of such firm
    as experts in accounting and auditing.
CHANGE IN
    INDEPENDENT REGISTERED ACCOUNTING FIRM
On February 10, 2009, our Board of Directors approved the
    dismissal of Ernst & Young LLP ("E&Y"),
    as our independent registered public accounting firm, which was
    immediately effective, and appointed McGladrey &
    Pullen, LLP ("McGladrey") as our independent
    registered public accounting firm for the year ended
    December 31, 2008.
E&Y's report on our financial statements for the year
    ended December 31, 2007, did not contain an adverse opinion
    or a disclaimer of opinion and was not qualified or modified as
    to uncertainty, audit scope or accounting principles. During our
    two most recent fiscal years and any subsequent interim period
    preceding the dismissal of E&Y, there were no disagreements
    with E&Y on any matters of accounting principles or
    practices, financial statement disclosure or auditing scope or
    procedure, which, if not resolved to E&Y's
    satisfaction, would have caused E&Y to make reference to
    the matter in their report, and there have been no
    "reportable events" as defined in Item 304
    (a)(1)(v) of
Regulation S-K.
Prior to the engagement of McGladrey, we did not consult with
    such firm regarding the application of accounting principles to
    a specific completed or contemplated transaction, or any matter
    that was either the subject of a disagreement or a reportable
    event. We also did not consult with McGladrey regarding the type
    of audit opinion which might be rendered on our financial
    statements and no oral or written report was provided by
    McGladrey.
We have provided E&Y with a copy of this disclosure prior
    to its filing with the Commission and have requested E&Y to
    furnish us with a letter addressed to the Commission stating
    whether it agrees with the above statements regarding E&Y
    and, if not, stating the respects in which is does not agree. A
    copy of this letter, dated March 12, 2010, which states
    that E&Y agrees with these statements, is filed as
    Exhibit 16.1 to the registration statement of which this
    prospectus forms a part.
WHERE YOU
    CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the shares of common
    stock offered by this prospectus. This prospectus does not
    contain all of the information included in the registration
    statement, portions of which are omitted as permitted by the
    rules and regulations of the SEC. For further information
    pertaining to us and the common stock to be sold in this
    offering, you should refer to the registration statement and its
    exhibits. Whenever we make reference in this prospectus to any
    of our contracts, agreements or other documents, the references
    are not necessarily complete, and you should refer to the
    exhibits attached to the registration statement for copies of
    the actual contract, agreement or other document filed as an
    exhibit to the registration statement or such other document,
    each such statement being qualified in all
111
Table of Contents
respects by such reference. On the closing of this offering, we
    will be subject to the informational requirements of the
    Securities Exchange Act of 1934 and will be required to file
    annual, quarterly and current reports, proxy statements and
    other information with the SEC. We anticipate making these
    documents publicly available, free of charge, on our website
    (
www.primowater.com
) as soon as reasonably practicable
    after filing such documents with the SEC.
You can read the registration statement and our future filings
    with the SEC over the Internet at the SEC's website at
    www.sec.gov. You may request copies of the filing, at no cost,
    by telephone at
(336) 331-4000
or by mail at Primo Water Corporation, 104 Cambridge Plaza
    Drive, Winston-Salem, North Carolina 27104. You may also read
    and copy any document we file with the SEC at its public
    reference facility at 100 F Street, N.E.,
    Room 1580, Washington, D.C. 20549. You may also obtain
    copies of the documents at prescribed rates by writing to the
    Public Reference Section of the SEC. Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
    facilities.
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INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public
    Accounting Firm
F-2
Consolidated Balance Sheets as of
    December 31, 2008 and 2009
F-3
Consolidated Statements of Operations for the
    years ended December 31, 2007, 2008 and 2009
F-4
Consolidated Statements of Stockholders'
    Equity (Deficit) for the years ended December 31, 2007,
    2008 and 2009
F-5
Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2008 and 2009
F-6
Notes to Consolidated Financial Statements
F-7
F-1
Table of Contents
REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
    of Directors and Stockholders of
Primo Water Corporation
We have audited the accompanying consolidated balance sheets of
    Primo Water Corporation and subsidiaries (the
    "Company") as of December 31, 2009 and 2008, and
    the related consolidated statements of operations,
    stockholders' equity (deficit) and cash flows for each of
    the three years in the period ended December 31, 2009.
    These financial statements are the responsibility of the
    Company's management. Our responsibility is to express an
    opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. An audit includes examining, on a
    test basis, evidence supporting the amounts and disclosures in
    the financial statements. An audit also includes assessing the
    accounting principles used and significant estimates made by
    management, as well as evaluating the overall financial
    statement presentation. We believe that our audits provide a
    reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Primo Water Corporation and subsidiaries as of
    December 31, 2009 and 2008, and the results of their
    operations and their cash flows for each of the three years in
    the period ended December 31, 2009 in conformity with
    U.S. generally accepted accounting principles.
/s/ MCGLADREY & PULLEN, LLP
Raleigh, North Carolina
March 12, 2010
F-2
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value data)
December 31,
2008
2009
Assets
Current assets:
Cash
$
516
$
—
Accounts receivable, net
3,205
1,888
Inventories
2,818
1,849
Prepaid expenses and other current assets
281
1,083
Assets associated with discontinued operations
4,573
—
Total current assets
11,393
4,820
Bottles, net
2,069
1,997
Property and equipment, net
15,574
14,321
Intangible assets, net
1,427
1,077
Other assets
107
153
Total assets
$
30,570
$
22,368
Liabilities and equity
Current liabilities:
Accounts payable
$
2,704
$
2,756
Accrued expenses and other current liabilities
2,925
4,144
Current portion of long-term debt, capital leases and notes
    payable
7,006
426
Liabilities associated with discontinued operations
1,322
—
Total current liabilities
13,957
7,326
Long-term debt, capital leases and notes payable, net of current
    portion
5
14,403
Other long-term liabilities
481
1,048
Total liabilities
14,443
22,777
Commitments and contingencies
Stockholders' equity (deficit)
Common stock, $0.001 par value —
    200,000 shares authorized, 15,158 and 15,157 shares
    issued and outstanding at December 31, 2009 and 2008,
    respectively
15
15
Preferred stock, $0.001 par value —
    100,000 shares authorized
Series A preferred stock, 18,755 shares issued and
    outstanding
19
19
Series B preferred stock, 23,280 shares issued and
    outstanding
23
23
Series C preferred stock, 12,520 shares issued and
    outstanding
13
13
Additional paid-in capital
86,343
86,723
Common stock warrants
3,797
3,797
Accumulated deficit
(74,083)
(90,999)
Total stockholders' equity (deficit)
16,127
(409)
Total liabilities and stockholders' equity (deficit)
$
30,570
$
22,368
See accompanying notes.
F-3
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
CONSOLIDATED
    STATEMENTS OF OPERATIONS
(in
    thousands, except per share amounts)
Years Ended December 31,
2007
2008
2009
Net sales
$
13,453
$
34,647
$
46,981
Cost of sales
11,969
30,776
38,771
Gross profit
1,484
3,871
8,210
Selling, general and administrative expenses
13,719
17,409
14,127
Loss from operations
(12,235)
(13,538)
(5,917)
Interest expense
(29)
(153)
(2,258)
Other income, net
94
83
1
Loss from continuing operations before income taxes
(12,170)
(13,608)
(8,174)
Provision for income taxes
—
—
—
Loss from continuing operations
(12,170)
(13,608)
(8,174)
Loss from discontinued operations, net of income taxes
(1,904)
(5,738)
(3,650)
Net loss
(14,074)
(19,346)
(11,824)
Preferred dividends
(2,147)
(2,327)
(3,042)
Net loss attributable to common stockholders
$
(16,221)
$
(21,673)
$
(14,866)
Basic and diluted loss per common share:
Loss from continuing operations attributable to common
    stockholders
$
(0.95)
$
(1.05)
$
(0.74)
Loss from discontinued operations attributable to common
    stockholders
(0.12)
(0.38)
(0.24)
Net loss attributable to common stockholders
$
(1.07)
$
(1.43)
$
(0.98)
Basic and diluted weighted average common shares outstanding
15,114
15,150
15,158
See accompanying notes.
F-4
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
    EQUITY (DEFICIT)
(in
    thousands)
Preferred Stock
Preferred Stock
Additional
Common
Total
Common Stock
Series A
Series B
Series C
Subscriptions
Paid-in
Stock
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Receivable
Capital
Warrants
Deficit
Equity (Deficit)
Balance, December 31, 2006
15,085
$
15
18,755
$
19
23,274
$
23
—
$
—
$
(3,773)
$
39,404
$
2,742
$
(18,641)
$
19,789
Issuance of common stock
62
—
—
—
—
—
—
—
—
62
—
—
62
Issuance of preferred stock, Series B
—
—
—
—
6
—
—
—
3,773
(508)
—
—
3,265
Warrants attached to Series B Preferred Stock
—
—
—
—
—
—
—
—
—
—
510
—
510
Issuance of preferred stock, Series C
—
—
—
—
—
—
4,515
5
(489)
10,633
—
—
10,149
Warrants attached to Series C Preferred Stock
—
—
—
—
—
—
—
—
—
—
181
—
181
Stock-based compensation expense, net of forfeitures
—
—
—
—
—
—
—
—
—
181
—
—
181
Dividends accrued
—
—
—
—
—
—
—
—
—
—
—
(2,147)
(2,147)
Net loss
—
—
—
—
—
—
—
—
—
—
—
(14,074)
(14,074)
Balance, December 31, 2007
15,147
15
18,755
19
23,280
23
4,515
5
(489)
49,772
3,433
(34,862)
17,916
Issuance of common stock
10
—
—
—
—
—
—
—
—
12
—
—
12
Issuance of preferred stock, Series C
—
—
—
—
—
—
8,005
8
489
18,735
—
—
19,232
Warrants attached to Series C Preferred Stock
—
—
—
—
—
—
—
—
—
—
320
—
320
Warrants issued
—
—
—
—
—
—
—
—
—
—
44
—
44
Stock-based compensation expense, net of forfeitures
—
—
—
—
—
—
—
—
—
276
—
—
276
Beneficial conversion feature of Series C Preferred Stock
—
—
—
—
—
—
—
—
—
17,548
—
(17,548)
—
Dividends accrued
—
—
—
—
—
—
—
—
—
—
—
(2,327)
(2,327)
Net loss
—
—
—
—
—
—
—
—
—
—
—
(19,346)
(19,346)
Balance, December 31, 2008
15,157
15
18,755
19
23,280
23
12,520
13
—
86,343
3,797
(74,083)
$
16,127
Issuance of common stock
1
—
—
—
—
—
—
—
—
2
—
—
2
Stock-based compensation expense, net of forfeitures
—
—
—
—
—
—
—
—
—
378
—
—
378
Dividend of subsidiary stock
—
—
—
—
—
—
—
—
—
—
—
(2,050)
(2,050)
Dividends accrued
—
—
—
—
—
—
—
—
—
—
—
(3,042)
(3,042)
Net loss
—
—
—
—
—
—
—
—
—
—
—
(11,824)
(11,824)
Balance, December 31, 2009
15,158
$
15
18,755
$
19
23,280
$
23
12,520
$
13
$
—
$
86,723
$
3,797
$
(90,999)
$
(409)
See accompanying notes.
F-5
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
CONSOLIDATED
    STATEMENTS OF CASH FLOWS
(in
    thousands)
Years Ended December 31,
2007
2008
2009
Operating activities
Net loss
$
(14,074)
$
(19,346)
$
(11,824)
Less: Loss from discontinued operations
(1,904)
(5,738)
(3,650)
Loss from continuing operations
(12,170)
(13,608)
(8,174)
Adjustments to reconcile net loss from continuing operations to
    net cash used in operating activities:
Depreciation and amortization
3,366
3,618
4,205
Stock-based compensation expense
156
259
298
Non-cash interest expense
—
26
696
Bad debt expense
362
139
153
Other
20
120
15
Changes in operating assets and liabilities:
Accounts receivable
(427)
(1,943)
1,164
Inventories
(316)
(1,277)
969
Prepaid expenses and other assets
(89)
(93)
(782)
Accounts payable
1,004
1,140
198
Accrued expenses and other liabilities
1,342
(213)
(714)
Net cash used in operating activities
(6,752)
(11,832)
(1,972)
Investing activities
Purchases of property and equipment
(3,917)
(8,331)
(1,589)
Purchases of bottles, net of disposals
(1,076)
(1,089)
(835)
Proceeds from the sale of property and equipment
1
24
22
Additions to and acquisitions of intangible assets
—
(232)
(48)
Net cash used in investing activities
(4,992)
(9,628)
(2,450)
Financing activities
Net borrowings from revolving line of credit
—
7,004
(6,580)
Issuance of long term debt
—
—
20,350
Note payable and capital lease payments
(74)
(13)
(5,353)
Debt issuance costs
—
(134)
(636)
Prepaid equity issuance costs
—
—
(105)
Net change in book overdraft
—
266
(147)
Proceeds from issuance of common stock
62
13
2
Net proceeds from issuance of preferred stock
14,104
19,552
—
Dividends paid
(1,563)
(2,327)
(1,257)
Net cash provided by financing activities
12,529
24,361
6,274
Net increase in cash from continuing operations
785
2,901
1,852
Cash, beginning of year
7,638
5,776
516
Cash used in discontinued operations from:
Operating Activities
(2,269)
(6,764)
(1,514)
Investing Activities
(378)
(1,194)
(41)
Financing Activities
—
(203)
(813)
Cash used in discontinued operations
(2,647)
(8,161)
(2,368)
Cash, end of year
$
5,776
$
516
$
—
Supplemental cash flow information
Cash paid for interest
$
8
$
69
$
1,535
Assets acquired under capital lease
$
—
$
8
$
—
Preferred dividends accrued not paid
$
584
$
—
$
1,785
See accompanying notes.
F-6
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
(in
    thousands, except per share amounts)
1.
Description
    of Business and Significant Accounting Policies
Business
Primo Water Corporation (together with its consolidated
    subsidiaries, "Primo", "we",
    "our", the "Company") is a rapidly growing
    provider of three- and five-gallon purified bottled water and
    water dispensers sold through major retailers nationwide.
Principles
    of Consolidation
Our consolidated financial statements include the accounts of
    the Company and its wholly-owned subsidiaries. All intercompany
    amounts and transactions have been eliminated in consolidation.
    Our consolidated statements have been prepared in accordance
    with generally accepted accounting principles in the United
    States ("GAAP").
Operating
    Segments
We manage our business primarily through two reporting segments,
    Primo Bottled Water Exchange (Exchange) and Primo Products
    (Products). Our Exchange segment sells three- and five-gallon
    purified bottled water through retailers in the each of the
    contiguous United States. We service the retail locations
    through our national network of primarily independent bottlers
    and distributors. Our Products segment sells water dispensers
    that are designed to dispense Primo and other
    dispenser-compatible bottled water through major U.S. retailers.
    We design, market and arrange for certification and inspection
    of our products.
Unless otherwise indicated, information in these notes to
    consolidated financial statements relates to continuing
    operations. Certain of our operations have been presented as
    discontinued. See Note 13.
Use of
    Estimates
The preparation of our financial statements in conformity with
    GAAP requires us to make certain estimates, judgments and
    assumptions. We believe that the estimates, judgments and
    assumptions used to determine certain amounts that affect the
    financial statements are reasonable, based on information
    available at the time they are made. To the extent there are
    material differences between these estimates and actual results,
    our consolidated financial statements may be affected. Some of
    the more significant estimates include allowances for doubtful
    accounts, valuation of inventories, depreciation, valuation of
    deferred taxes and allowance for sales returns.
Revenue
    Recognition
We recognize revenue from the sale of our products when title to
    the product has transferred to the buyer, collectability of a
    fixed and determinable sales price is reasonably assured and we
    have no further obligations to assist in the resale of the
    products. Revenue is recognized for the sale of three- and
    five-gallon purified bottled water upon either the delivery of
    inventory to the retail stores or the purchase by the consumer.
    Our water dispensers are sold primarily through a direct-import
    model, where we recognize revenue when title is transferred to
    our retail customers. Cash consideration provided for discounts
    and sales incentives, as well as provisions for returns and
    other adjustments are recorded as a reduction to sales.
F-7
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Cash and
    Cash Equivalents
All highly liquid investments with an original maturity of three
    months or less at the date of purchase are considered to be cash
    equivalents.
Accounts
    Receivable
All trade accounts receivable are due from customers located
    within the United States. We maintain an allowance for doubtful
    accounts for estimated losses resulting from the inability of
    our customers to make required payments. The allowance for
    doubtful accounts is based on a review of specifically
    identified accounts in addition to an overall aging analysis.
    Judgments are made with respect to the collectability of
    accounts receivable based on historical experience and current
    economic trends. Actual losses could differ from those estimates.
The following table shows the changes in the allowance for
    doubtful accounts for the preceding three years:
Amounts
Charged to
Beginning
Sales, Costs
End
of Year
or Expense
Deductions
of Year
December 31, 2007
$
—
362,000
(58,000)
$
304,000
December 31, 2008
$
304,000
139,000
(18,000)
$
425,000
December 31, 2009
$
425,000
166,000
(479,000)
$
112,000
Inventories
Our inventories consist primarily of finished goods and are
    valued at the lower of cost or realizable value, with cost
    determined using the
first-in,
first-out (FIFO) method. Miscellaneous selling supplies such as
    labels are expensed when incurred.
Bottles
Bottles consist of three- and five- gallon refillable
    polycarbonate bottles used in our exchange business and are
    stated at cost, less accumulated depreciation. Depreciation is
    calculated using the straight-line method over the estimated
    useful life of three years.
Property
    and Equipment
Property and equipment are stated at cost, less accumulated
    depreciation and amortization. Depreciation and amortization are
    calculated using straight-line methods over estimated useful
    lives that range from two to 10 years.
Intangible
    Assets
Intangible assets consist of customer lists, patents, and
    trademarks. Intangible assets not subject to amortization are
    tested for impairment on an annual basis or more frequently if
    indicators of impairment are present. Patent costs are amortized
    using a straight-line basis over estimated lives of three years,
    while customer lists are amortized on an accelerated basis over
    an estimated useful life of 10 years.
F-8
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Long-Lived
    Assets
We review long-lived assets for impairment whenever events or
    changes in circumstances indicate that the carrying amount may
    not be recoverable. The carrying amount of a long-lived asset is
    not recoverable if it exceeds the sum of the undiscounted cash
    flows expected to result from the use and eventual disposition
    of the asset at the date it is tested for recoverability,
    whether in use or under development. An impairment loss is
    measured as the amount by which the carrying amount of a
    long-lived asset exceeds its fair value. We recorded an
    impairment charge in 2008 of $98, reflected in selling, general
    and administrative expenses of the Exchange segment in the
    statement of operations, related to display racks no longer in
    use and to be disposed.
Fair
    Value Measurements
Effective January 1, 2008, we adopted Accounting Standards
    Codification ("ASC") 820,
Fair Value Measurements
    and Disclosures,
for financial assets and liabilities. ASC
    820 defines fair value, establishes a framework for measuring
    fair value in accordance with generally accepted accounting
    principles and expands disclosures about fair value
    measurements. The adoption of ASC 820 did not have a material
    impact on the Company's financial condition or results of
    operations.
ASC 820 defines fair value as the price that would be received
    for an asset or paid to transfer a liability (an exit price) in
    the principal or most advantageous market for the asset or
    liability in an orderly transaction between market participants
    on the measurement date. ASC 820 also describes three levels of
    inputs that may be used to measure fair value:
•
Level 1 — quoted prices in active markets for
    identical assets and liabilities.
•
Level 2 — observable inputs other than quoted
    prices in active markets for identical assets and liabilities.
•
Level 3 — unobservable inputs in which there is
    little or no market data available, which require the reporting
    entity to develop its own assumptions.
The table below presents our assets and liabilities measured at
    fair value on a recurring basis as of December 31, 2009:
Total
Level 1
Level 2
Level 3
Common stock warrants
$
600
—
—
$
600
The following is a reconciliation of the common stock warrants,
    which are measured at fair value on a recurring basis using
    significant unobservable inputs (Level 3 inputs):
Balance as of January 1, 2008
$
—
Total (gains) losses recognized
—
Balance at December 31, 2008
—
Total (gains) losses recognized
—
Initial fair value
600
Balance at December 31, 2009
$
600
F-9
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
The carrying amounts of the Company's financial
    instruments, which include cash and cash equivalents, accounts
    receivable, accounts payable, and other accrued expenses,
    approximate their fair values due to their short maturities.
    Based on borrowing rates currently available to the Company for
    loans with similar terms, the carrying value of long-term debt,
    capital leases and notes payable approximates fair value.
Advertising
    Costs
Costs incurred for producing and distributing advertising and
    advertising materials are expensed when incurred. Advertising
    costs totaled approximately $948, $717 and $270 for 2007, 2008
    and 2009, respectively, and are included in selling, general,
    and administrative expenses.
Beneficial
    Conversion Charges
Our Series C Preferred Stock (Series C) is
    convertible into common stock and was issued with an adjustable
    conversion feature, which was based upon consolidated sales for
    the year ending December 31, 2008 with a conversion price
    ranging from $1.25 to $2.40 per common equivalent share. A
    beneficial conversion charge is measured as the difference
    between the initial price of $2.40 per share and the conversion
    price at December 31, 2008 of $1.25 per share.
At December 31, 2008 we recorded a beneficial conversion
    charge (also referred to as a deemed dividend) of approximately
    $17,500 related to the adjustment in the conversion price of the
    Series C convertible preferred stock, based upon
    consolidated sales for the year ending December 31, 2008.
    The beneficial conversion charge for equity instruments is
    recorded to additional paid in capital with no effect on total
    stockholders' equity or the consolidated statement of
    operations.
Concentrations
    of Risk
Our principal financial instruments subject to potential
    concentration of credit risk are cash and cash equivalents,
    trade receivables, accounts payable and accrued expenses. We
    invest our funds in a highly rated institution and believe the
    financial risks associated with cash and cash equivalents are
    minimal. At December 31, 2008 and 2009, approximately $250
    and $0, respectively, of our cash on deposit exceeded the
    federally insured limits.
We perform ongoing credit evaluations of our customers'
    financial condition and maintain allowances for doubtful
    accounts that we believe are sufficient to provide for losses
    that may be sustained on realization of accounts receivable. We
    had one customer that accounted for approximately 59% of sales
    in 2007 and two customers that accounted for 42% and 21% of
    sales in 2008 and three customers that accounted for
    approximately 33%, 19% and 15% of sales in 2009. We had two
    customers that accounted for approximately 32% and 11% of total
    trade receivables at December 31, 2008 and one customer
    with a balance that accounted for approximately 21% of total
    trade receivables at December 31, 2009.
Basic and
    Diluted Net loss Per Share
Net loss per share has been computed using the weighted average
    number of shares of common stock outstanding during each period.
    Diluted amounts per share include the dilutive impact, if any,
    of the Company's outstanding potential common shares, such
    as options and warrants and convertible preferred stock.
    Potential common shares that are anti-dilutive are excluded from
    the calculation of diluted net loss per common share.
F-10
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
The following outstanding options, convertible preferred stock
    and warrants were excluded from the computation of diluted net
    loss per share for the periods indicated because including them
    would have had an anti-dilutive effect:
Years Ended December 31,
2007
2008
2009
Options to purchase common stock
2,451
1,478
1,448
Convertible preferred stock
34,279
52,992
57,952
Common stock warrants
6,215
—
—
Income
    Taxes
We account for income taxes using the asset and liability
    method, which requires recognition of deferred tax assets and
    liabilities for the expected future tax consequences of events
    that have been included in the financial statements. Under this
    method, deferred tax assets and liabilities are determined based
    on the difference between the financial statement and tax bases
    of assets and liabilities, using enacted tax rates in effect for
    the year in which the differences are expected to reverse.
    Deferred tax assets are reduced by a valuation allowance to the
    extent that utilization is not presently more likely than not.
Effective January 1, 2007, we adopted the provisions of
    Accounting Standards Codification ("ASC")
740-10,
Income Taxes
. Previously, we had accounted for tax
    contingencies in accordance with ASC
450-10,
Contingencies
. As required by ASC
740-10,
we
    recognize the financial statement benefit of a tax position only
    after determining that the relevant tax authority would more
    likely than not sustain the position following an audit. For tax
    positions meeting the more-likely-than-not threshold, the amount
    recognized in the financial statements is the largest benefit
    that has a greater than 50 percent likelihood of being
    realized upon ultimate settlement with the relevant tax
    authority. At the adoption date, we applied ASC
740-10
to
    all tax positions for which the statute of limitations remained
    open. The implementation of ASC
740-10
did
    not have a material impact on our consolidated financial
    statements.
Recent
    Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
    ("FASB") issued authoritative guidance which
    established the Accounting Standards Codification
    ("ASC" or "Codification") as the source of
    authoritative GAAP recognized by the FASB to be applied to
    nongovernmental entities, and rules and interpretive releases of
    the SEC as authoritative GAAP for SEC registrants. The
    Codification supersedes all existing non-SEC accounting and
    reporting standards upon its effective date and, subsequently,
    the FASB will not issue new standards in the form of Statements,
    FASB Staff Positions or Emerging Issues Task Force Abstracts.
    The guidance is not intended to change or alter existing GAAP.
    The guidance became effective in our fourth quarter of 2009. The
    guidance did not have an impact on our consolidated financial
    position, results of operations or cash flows.
In May 2009, the FASB issued authoritative guidance on the
    accounting for and disclosure of events that occur after the
    balance sheet date. This guidance was effective for interim and
    annual financial periods ending after June 15, 2009. This
    guidance was amended in February 2010. It requires public
    reporting companies to evaluate subsequent events through the
    date that the financial statements are issued. The adoption did
    not impact our consolidated financial position, results of
    operations or cash flows.
In January 2010, the FASB issued guidance which clarifies that
    the stock portion of a distribution to stockholders that allows
    them to receive cash or stock with a potential limitation on the
    total amount of cash that all stockholders can elect to receive
    in the aggregate is considered a share issuance that is
    reflected in earnings per share
F-11
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
prospectively and is not a stock dividend. This update is
    effective for our first quarter of 2010. The adoption is not
    expected to have a material impact on our consolidated financial
    position, results of operations or cash flows.
In January 2010, the FASB issued guidance that clarifies ASC 810
    implementation issues relating to a decrease in ownership of a
    subsidiary that is a business or non-profit activity. This
    amendment affects entities that have previously adopted ASC
810-10.
This
    update is effective for our first quarter of 2010. The adoption
    is not expected to have a material impact on our consolidated
    financial position, results of operations or cash flows.
2.
Change in
    Accounting Estimate
Effective January 1, 2008, we changed our method of
    depreciation for property and equipment from accelerated methods
    to the straight-line method. Originally, we utilized accelerated
    methods due to our business model being new and the related
    uncertainty in the sustainability of the business model. Also,
    initial projections showed that upon installation of a new
    retail customer the sales would initially peak and then diminish
    over time, so using accelerated methods of depreciation was
    expected to reflect the pattern of use. However, after we
    developed some history and sustainability in our business model
    we determined that sales did not peak after installation and
    then diminish over time. Instead, sales have maintained at their
    initial level or increased steadily following the installation
    of our water bottle exchange services at a retail customer.
    Therefore, the straight-line method is more reflective of the
    pattern of use and also provides a better matching of
    depreciation expense to the related sales. We accounted for the
    change as a change in accounting estimate in the period of the
    change and did not restate prior periods. The effect on
    depreciation expense for 2008 was a decrease of approximately
    $1,100.
3.
Bottles
Bottles are summarized as follows at December 31:
2008
2009
Cost
$
2,600
$
2,637
Less accumulated depreciation
(531)
(640)
$
2,069
$
1,997
Depreciation expense for bottles was approximately $721, $853
    and $907 in 2007, 2008 and 2009, respectively, and is reflected
    in selling, general and administrative expenses in the
    consolidated statements of operations.
4.
Property
    and Equipment
Property and equipment is summarized as follows at December 31:
2008
2009
Leasehold improvements
$
72
$
72
Machinery and equipment
3,232
3,640
Racks and display panels
11,530
12,389
Office furniture and equipment
218
218
Software and computer equipment
2,521
2,770
Transportation racks
3,944
4,039
21,517
23,128
Less accumulated depreciation and amortization
(5,943)
(8,807)
$
15,574
$
14,321
F-12
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Depreciation expense for property and equipment was
    approximately $1,935, $2,223 and $2,897 in 2007, 2008 and 2009,
    respectively, and is reflected in selling, general and
    administrative expenses in the consolidated statements of
    operations.
5.
Intangible
    Assets
Intangible assets are summarized as follows at December 31:
December 31, 2008
December 31, 2009
Gross Carrying
Accumulated
Gross Carrying
Accumulated
Amount
Amortization
Net
Amount
Amortization
Net
Amortized intangible assets:
Customer lists
$
2,985
$
(1,699)
$
1,286
$
2,985
$
(2,089)
$
896
Patent costs
35
(26)
9
71
(36)
35
3,020
(1,725)
1,295
3,056
(2,125)
931
Unamortized intangible assets:
Trademarks
132
—
132
146
—
146
Total
$
3,152
$
(1,725)
$
1,427
$
3,202
$
(2,125)
$
1,077
Amortization expense for intangible assets was approximately
    $710, $542 and $401 respectively, in 2007, 2008 and 2009,
    respectively, and is reflected in selling, general and
    administrative expenses in the consolidated statements of
    operations.
Amortization expense related to intangible assets, which is an
    estimate for each future year and subject to change, is as
    follows:
2010
$
295
2011
215
2012
150
2013
106
2014
77
2015 and thereafter
88
Total
$
931
F-13
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
6.
Accrued
    Expenses and Other Current Liabilities
Accrued expenses and other current liabilities is summarized as
    follows at December 31:
2008
2009
Dividends payable
$
582
$
2,367
Accrued payroll and related items
410
184
Accrued professional and other expenses
927
580
Accrued interest
80
107
Accrued sales tax payable
518
534
Accrued advertising
87
17
Accrued receipts not invoiced
244
182
Other
77
173
$
2,925
$
4,144
7.
Long-Term
    Debt, Capital Leases and Notes Payable
Long-term debt, capital leases and notes payable are summarized
    as follows at December 31:
2008
2009
Senior loan agreement
$
7,004
$
423
Subordinated convertible notes payable, net of original issue
    discount
—
14,400
Capital leases
7
6
7,011
14,829
Less current portion
(7,006
)
(426
)
Long-term debt, capital leases and notes payable, net of current
    portion
$
5
$
14,403
We entered into a Loan and Security Agreement in June 2005 that
    was amended in April 2006, April 2007, June 2008, January 2009
    and December 2009 (the "Senior Loan Agreement")
    pursuant to which the bank originally provided a $25,000
    revolving loan commitment (the "Revolver"). In June
    2008, the Revolver commitment was reduced to $20,000 and
    subsequently reduced to $10,000 in January 2009. The Revolver is
    subject to certain borrowing base restrictions based on eligible
    accounts receivable, eligible inventory less reserves, and the
    aggregate face amount of undrawn trade letters of credit of
    which the Company is the beneficiary. The Revolver also provides
    for letters of credit issued to our vendors, which reduce the
    amount available for cash borrowings. The availability under the
    Revolver was approximately $1,500 and $5,900 at
    December 31, 2008 and 2009, respectively. All amounts
    outstanding under the Revolver are due in full on June 30,
    2010; however, at December 31, 2008 the Revolver is
    classified as current in the consolidated balance sheet due to
    the terms and conditions included in the Senior Loan Agreement.
    At December 31, 2008 and 2009, there were outstanding
    letters of credit under the Revolver totaling approximately $296
    and $371, respectively.
Interest on the outstanding borrowings under the Revolver is
    payable quarterly at the option of the Company at (i) the
    LIBOR Market Index Rate plus the applicable margin or
    (ii) the greater of (a) the federal funds rate plus
    0.50% or (b) the bank's prime rate plus in either case
    the applicable margin. At December 31, 2009 and 2008, the
    interest rate on the outstanding balance on the Revolver was
    based on the bank's prime rate plus 2.50% and 0.75%,
    respectively (5.75% at December 31, 2009 and 4.00% at
    December 31, 2008). Beginning in January
F-14
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
2010 and effective with the December 2009 amendment, the
    applicable margin for both the prime rate and the federal funds
    rate options was decreased to 1.00%.
We are required to pay a fee of 3.50% on the outstanding amount
    of letters of credit issued under the Revolver. In addition,
    there is a fee of 0.50% on the unused portion of the Revolver
    lending commitment.
On January 7, 2009, we entered into a Loan and Security
    Agreement with our primary bank that was subordinated to the
    Senior Loan Agreement (the "Prior Subordinated Loan
    Agreement"), pursuant to which a $10,000 term loan was
    provided (the "Prior Subordinated Loan"). The bank
    acted as syndication agent and provided $4,100 of the facility.
    Twelve existing investors in the Company (including our CEO and
    CFO) funded the $5,900 balance of the facility. The proceeds of
    the Prior Subordinated Loan were used to repay the then
    outstanding balance on the Revolver and for working capital
    purposes. Interest on the Prior Subordinated Loan was at the
    bank's prime rate plus 10.0%, payable monthly. The Prior
    Subordinated Loan had an original maturity of January 6,
    2010; however, the balance was paid in full in December 2009. In
    connection with the Prior Subordinated Loan the Company paid
    fees totaling approximately $575, which were deferred and
    amortized as a component of interest expense.
The Senior Loan Agreement contains and the Prior Subordinated
    Loan Agreement contained various conditions precedent to
    extensions of credit and restrictive covenants including minimum
    EBITDA and gross sales requirements. We were in violation of
    certain covenants and received a waiver from the bank at
    December 31, 2009. Substantially all of the Company's
    assets are pledged as collateral to for borrowings under the
    Senior Loan Agreement and were pledged as collateral for
    borrowings under the Prior Subordinated Loan Agreement.
On December 30, 2009, we issued Subordinated Convertible
    Promissory Notes ("Notes") to existing and new
    investors that have a total face value of $15,000 and are
    subordinated to the Senior Loan Agreement. The Notes pay
    quarterly interest at 14% and are payable in full on
    March 31, 2011 (the "Maturity Date"). We may
    prepay the Notes at any time prior to the Maturity Date with a
    prepayment premium of 2% of the principal amount being prepaid,
    except where such prepayment is made in connection with an
    initial public offering of our common stock. Upon (i) an
    initial public offering of the Company's common stock
    resulting in net proceeds to the Company of at least $30,000 (a
    "Qualified IPO"), (ii) the consummation by the
    Company of a merger or consolidation with or into another entity
    or other corporate reorganization in which the Company is not
    the surviving entity, (iii) the sale of all of the capital
    stock of the Company, or (iv) the sale of all or
    substantially all of the assets of the Company, the holders of
    the Notes may elect to sell to the Company and the Company will
    be required to purchase the Notes in full by payment of an
    amount equal to the unpaid principal balance thereof, plus, all
    unpaid interest accrued thereon through the date of redemption,
    plus in the case of clauses (ii), (iii), and (iv) above the
    principal amount of the Notes being redeemed multiplied by the
    prepayment premium of 2%.
In addition, if a Qualified IPO has not occurred by the Maturity
    Date and the Company has completed a sale of shares of its
    capital stock within 90 days of the Maturity Date or
    anytime thereafter resulting in net proceeds to the Company of
    at least $5,000 (a "Qualified Equity Financing"), all
    unpaid principal on any Notes and unpaid accrued interest is
    convertible, at the option of the Note holders, into the
    securities being issued in the Qualified Equity Financing. If
    the Notes become convertible there would be a beneficial
    conversion that would be calculated as the intrinsic value at
    the measurement or commitment date.
The Notes are accompanied by detachable warrants with a value at
    issuance equal to 4% of the face amount of the corresponding
    Notes. The exercise price per share of the warrants is equal to
    80% of the purchase price per share of common stock in a
    Qualified IPO (if a Qualified IPO has occurred by the time of
    such exercise) or ($1.25 if a Qualified IPO has not occurred by
    the time of such exercise). The total number of shares of common
F-15
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
stock issuable under the warrants is 1,111. The initial fair
    value of the warrants is $600 and resulted in an original issue
    discount on the Notes which will be amortized as interest
    expense over the term of the Notes. The fair value of the
    warrants is included in other long-term liabilities in the
    consolidated balance sheet based upon the estimated fair value
    and will be adjusted periodically until such time as the
    exercise price becomes fixed at which time the then fair value
    will be reclassified as a component of stockholders' equity
    (deficit).
Our CEO, CFO, Vice President of Products and certain members of
    our Board of Directors (either individually or through an
    affiliated entity) purchased an aggregate of $3,520 of the Notes
    with an aggregate of 261 warrants to purchase common stock.
    Substantially all of the Company's assets are pledged as
    collateral to secure the Notes, which security interest is
    junior to that securing the Senior Loan Agreement.
The aggregate future maturities of long-term debt, capital
    leases and notes payable as of December 31, 2009 are as
    follows:
2010
$
426
2011
15,003
15,429
Less: Amounts representing interest
—
Total
$
15,429
8.
Stockholders'
    Equity
Common
    Stock
In 2008, we amended and restated our Certificate of
    Incorporation to increase the number of shares authorized to be
    issued to 200,000 shares of $0.001 par value common
    stock.
Series A
    Preferred Stock
We are authorized to issue up to 100,000 shares of
    $0.001 par value preferred stock. We designated
    18,780 shares of preferred stock as Series A Preferred
    Stock ("Series A"). At December 31, 2009 and
    2008, the Company had outstanding 18,755 shares of the
    Series A that were issued at a price of $1.00 per share.
    Dividends on the Series A are neither mandatory nor
    cumulative; however, no dividends will be paid on common stock
    unless equivalent dividends are paid on the Series A on a
    pro rata basis with the common stock and Series C.
In liquidation, either voluntary or involuntary, holders of the
    Series A will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    common stock. Each share of the Series A is convertible, at
    the option of the holder, at any time into common stock. The
    initial conversion price of the shares is equal to the
    consideration paid per share and the initial conversion ratio is
    1:1. Conversion will be mandatory in the event of a public
    offering of common stock at a price per share of at least $5.00
    (as adjusted for any stock splits, reverse stock splits or other
    similar events) resulting in gross proceeds to the Company of at
    least $20,000 or upon a vote or written consent of the holders
    of more than 50% of the then-outstanding shares of the
    Series A.
F-16
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Series B
    Preferred Stock
The Company designated 30,000 shares of preferred stock as
    Series B Preferred Stock ("Series B"). At
    December 31, 2009 and 2008, the Company had outstanding
    23,280 shares of Series B that were issued at a price
    of $1.00 per share. The Series B shares are non-voting and
    non-convertible. Each share of the Series B is accompanied
    by a warrant to purchase 0.267 shares of common stock with
    an exercise price of $1.25 per share (both subject to adjustment
    in the case of stock splits, reverse stock splits or other
    similar events). Each warrant will be exercisable through the
    earliest to occur of (i) the sixteenth
    (16
th
)

    day after delivery of a notice of an exercise event (which
    includes an initial public offering of the Company's common
    stock resulting in proceeds of at least $20,000), (ii) ten
    (10) years from the date of such warrant, or
    (iii) five (5) years after the date of exercise of
    either the put or repurchase rights with respect to the
    Series B. The value of the warrants was determined to be
    approximately $3,252 and is included in common stock warrants on
    the consolidated balance sheet. No warrants had been exercised
    as of December 31, 2009.
Dividends on the Series B accrue at an annual rate of $0.10
    per share or 10%, payable when declared by the Board of
    Directors, and are cumulative. All accrued dividends on the
    Company's Series B will be paid prior to the payment
    of any dividends on the Company's Series A,
    Series C or common stock. In January 2009, the Company
    offered Series B investors the option to suspend their
    current dividend payment of 10% in exchange for a dividend
    accrual of 15% for 2009. In January 2010 the dividends began to
    accrue at 10%. Series B dividends paid during 2007, 2008
    and 2009 were $1,563, $2,327 and $1,257, respectively. At
    December 31, 2008 and 2009 the accrued and unpaid dividends
    were $582 and $2,367, respectively, which is included in accrued
    expenses and other current liabilities in the consolidated
    balance sheet.
In liquidation, either voluntary or involuntary, holders of the
    Series B will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    Company's Series A and common stock.
Series C
    Preferred Stock
In 2008, the Company amended and restated its Certificate of
    Incorporation to increase the number of shares authorized to be
    issued and designated 14,000 shares of preferred stock as
    Series C. As of December 31, 2009 and 2008, the
    Company had issued 12,520 shares of the Series C, at a
    price of $2.40 per share. The Series C is convertible into
    the Company's common stock based upon a formula taking into
    account the Company's sales for the year ending
    December 31, 2008, which resulted in a conversion ratio of
    1:1.92 as of December 31, 2008. In accordance with GAAP the
    Company determined that a beneficial conversion resulted from
    the change in the conversion ratio from 1:1 on the issuance date
    of the Series C to 1:1.92 on December 31, 2008. The
    value of the beneficial conversion feature is analogous to a
    dividend and is recognized as a return to the preferred
    stockholders over the period from the date of issuance to the
    commitment or measurement date, which was December 31,
    2008. At December 31, 2008, the Company recorded a beneficial
    conversion or deemed dividend of approximately $17,500.
Conversion of the Series C will be mandatory in the event of a
    public offering of common stock at a price per share of at least
    $5.00 (as adjusted for any stock splits, reverse stock splits or
    similar events) resulting in gross proceeds to the Company of at
    least $20,000 or upon a vote or written consent of the holders
    of more than 50% of the then-outstanding shares of Series C.
Each share of Series C is accompanied by a warrant to
    purchase 0.10 shares of common stock with an exercise price
    of $1.98 per share (subject to adjustment in the case of stock
    splits, reverse stock splits or other
F-17
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
similar events). Each warrant will be exercisable through the
    earlier to occur of (i) the sixteenth
    (16
th
)

    day after delivery of a notice of an exercise event (which
    includes an initial public offering of the Company's common
    stock resulting in gross proceeds to the Company of at least
    $20,000) or (ii) December 14, 2017. The total value of
    the warrants was determined to be approximately $501 and is
    included in common stock warrants in the Consolidated Balance
    Sheet. No warrants had been exercised as of December 31,
    2009.
Dividends on Series C are neither mandatory nor cumulative;
    however, no dividends will be paid on common stock or the
    Series A unless equivalent dividends are paid on the
    Series C.
In liquidation, either voluntary or involuntary, holders of the
    Series C will be entitled to receive an amount equal to the
    original purchase price per share together with any dividends
    declared but unpaid thereon in preference to the holders of the
    Company's Series A, Series B and common stock.
    Each share of Series C is convertible, at the option of the
    holder, at any time into common stock.
9.
Stock-Based
    Compensation
The Company has a stock-based compensation plan (the
    "Plan") for employees, including officers,
    non-employee directors and non-employee consultants. The Plan
    provides for the issuance of incentive or nonqualified stock
    options and restricted common stock. The Company has reserved
    4,500 shares of common stock for issuance under the Plan.
We account for our stock-based employee and director
    compensation plans in accordance with ASC 718,
Compensation-Stock Compensation
. ASC 718 requires
    recognition of the cost of employee services received in
    exchange for an award of equity instruments in the financial
    statements over the period the employee is required to perform
    the services in exchange for the award (presumptively the
    vesting period). In 2007, 2008 and 2009 compensation expense
    related to stock options was approximately $157, $215 and $298
    and is included in selling, general, and administrative expenses
    from continuing operations, respectively, and approximately $25,
    $61 and $80 is included in discontinued operations, respectively.
Stock options are granted with an exercise price equal to 100%
    of the fair market value per share of the common stock on the
    date of grant. The options generally vest over a period of one
    to four years, based on graded vesting, and expire ten years
    from the date of grant. The terms and conditions of the awards
    made under the Plan vary but, in general, are at the discretion
    of the board of directors or its appointed committee.
We measure the fair value of each stock option grant at the date
    of grant using a Black-Scholes option pricing model. The
    weighted-average fair value per share of the options granted
    during 2007, 2008 and 2009 was $0.67, $0.83, and $0.49
    respectively. The following assumptions were used in arriving at
    the fair value of options granted:
2007
2008
2009
Expected life of options in years
6.3
5.9
5.5
Risk-free interest rate
4.6
%
3.2
%
2.0
%
Expected volatility
45.0
%
39.0
%
39.0
%
Dividend yield
0.0
%
0.0
%
0.0
%
The risk free interest rate is based on the U.S. Treasury
    rate for the expected life of the options at the time of grant.
    As a non-public entity, historic volatility is not available for
    our shares. As a result, we estimated volatility based on a peer
    group of companies, which collectively provide a reasonable
    basis for estimating volatility. We intend to continue to
    consistently use the same group of publicly traded peer
    companies to determine volatility in the future
F-18
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
until sufficient information regarding volatility of our share
    price becomes available or the selected companies are no longer
    suitable for this purpose. The expected life is based on the
    estimated average life of the options, and forfeitures are
    estimated on the date of grant based on certain historical data
    and management estimates.
A summary of awards under the Plan at December 31, 2007,
    2008 and 2009, and changes during the years then ended is
    presented in the table below:
Weighted
Average
Weighted
Remaining
Average
Number of
Average Price
Contractual
Intrinsic
Shares
per Share
Life (Years)
Value
Outstanding at December 31, 2006
2,115
$
1.04
Granted
677
1.38
Exercised
(62
)
1.00
Forfeited
(265
)
1.05
Outstanding at December 31, 2007
2,465
1.13
8.1
$
3,123
Exercisable at December 31, 2007
1,368
$
1.03
8.1
$
3,114
Available for grant at December 31, 2007
1,913
Outstanding at December 31, 2007
2,465
$
1.13
Granted
552
1.98
Exercised
(10
)
1.25
Forfeited
(175
)
1.73
Outstanding at December 31, 2008
2,832
1.26
7.5
$
367
Exercisable at December 31, 2008
1,672
$
1.04
6.7
$
349
Available for grant at December 31, 2008
1,536
Outstanding at December 31, 2008
2,832
$
1.26
Granted
142
1.25
Exercised
(1
)
1.25
Forfeited
(50
)
1.20
Outstanding at December 31, 2009
2,923
1.26
6.6
$
331
Exercisable at December 31, 2009
2,197
$
1.21
6.2
$
329
Available for grant at December 31, 2009
1,444
The total intrinsic value of the options exercised during 2007,
    2008 and 2009 was approximately $16, $8 and $0, respectively,
    with proceeds to the Company of $62, $13 and $2, respectively.
As of December 31, 2009 there was approximately $244 of
    total unrecognized compensation cost related to non-vested
    stock-based compensation grants. This unrecognized compensation
    is expected to be recognized over a weighted-average period of
    approximately 1.0 years.
F-19
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Employee
    Stock Purchase Plan
In March 2010 our Board of Directors adopted the 2010 Employee
    Stock Purchase Plan (the "2010 ESPP"). The 2010 ESPP
    provides for the purchase of common stock and is generally
    available to all employees. The Company has reserved 250 shares
    of common stock for issuance under the 2010 ESPP.
2010
    Omnibus Long-Term Incentive Plan
In March 2010 our Board of Directors adopted the 2010 Omnibus
    Long-Term Incentive Plan (the "2010 Plan"). The 2010
    Plan is limited to employees, officers, non-employee directors,
    consultants and advisors. The 2010 Plan provides for the
    issuance of incentive or nonqualified stock options, restricted
    stock, stock appreciation rights, restricted stock units, cash-
    or stock-based performance awards and other stock-based awards.
    The Company has reserved 7,500 shares of common stock for
    issuance under the 2010 Plan.
10.
Commitments
    and Contingencies
Operating
    Leases
The Company leases office space and vehicles under various lease
    arrangements. Total rental expense from continuing operations
    for 2007, 2008 and 2009 was approximately $1,658, $1,496 and
    $1,101, respectively. The rental expense includes $693 and $325
    in 2007 and 2008, respectively, paid to PWC Leasing, LLC, which
    is an entity with common ownership. On June 30, 2008, we
    purchased the leased assets of PWC Leasing, LLC at the fair
    value of $3,500 and terminated the related lease agreement. At
    December 31, 2009, future minimum rental commitments under
    noncancelable operating leases are as follows:
2010
$
691
2011
472
2012
369
2013
266
2014
128
2015 and thereafter
82
Total
$
2,008
Sales
    Tax
We routinely purchase equipment for use in operations from
    various vendors. These purchases are subject to sales tax
    depending on the equipment type and local sales tax regulations,
    however, certain vendors have not assessed the appropriate sales
    tax. For purchases that are subject to sales tax in which the
    vendor did not assess the appropriate amount, we accrue an
    estimate of the sales tax liability we ultimately expect to pay.
Other
    Contingencies
In the normal course of business the Company may be involved in
    various claims and legal actions. Management believes that the
    outcome of such legal actions will not have a significant
    adverse effect on the Company's financial position, results
    of operations or cash flows.
F-20
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
11.
Income
    Taxes
There is no income tax provision (benefit) for federal or state
    income taxes as the Company has incurred operating losses since
    inception.
A reconciliation of the statutory U.S. federal tax rate and
    effective tax rates is as follows:
2007
2008
2009
Federal statutory taxes
34
.0
%
34
.0
%
34
.0
%
State income taxes, net of federal tax benefit
3
.5
%
3
.9
%
3
.9
%
Permanent differences
(0
.5
)
%
(0
.2
)
%
(0
.2
)
%
Change in valuation allowance
(35
.9
)
%
(37
.7
)
%
(37
.9
)
%
Other
(1
.1
)
%
0
.0
%
0
.2
%
0
.0
%
0
.0
%
0
.0
%
Deferred income taxes are recorded based upon differences
    between the financial reporting and income tax basis of assets
    and liabilities. The following deferred income taxes are
    recorded:
2008
2009
Deferred tax assets:
Federal net operating loss carryforward
$
15,131
$
18,802
State net economic loss carryforward
1,967
2,314
Intangible assets
1,240
1,325
Allowance for bad debts
538
506
Reserve for obsolescence
546
3
Stock-based compensation
254
399
Other
84
93
Total gross deferred tax assets
19,760
23,442
Deferred tax liabilities:
Fixed assets
$
(861
)
$
(67
)
Total gross deferred tax liabilities
(861
)
(67
)
Valuation allowance
(18,899
)
(23,375
)
Total net deferred tax liability
$
—
$
—
In assessing the realizability of deferred tax assets,
    management considers whether it is more likely than not that
    some portion of the deferred tax assets will be realized. The
    ultimate realization of deferred tax assets is dependent upon
    the generation of future taxable income during the periods in
    which those temporary differences become deductible. Management
    considers the scheduled reversal of deferred tax liabilities,
    available taxes in the carryback periods, projected future
    taxable income, and tax planning strategies in making this
    assessment.
Accordingly, in connection with the losses incurred in 2008 and
    2009, the Company has provided a valuation allowance of $18,899
    and $23,375 at December 31, 2008 and 2009, respectively to
    reduce the net deferred tax asset to a realizable value. The net
    increase in the valuation allowance of $4,476 primarily reflects
    the net increase in the federal and state NOL deferred tax
    assets.
F-21
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
The Company has approximately $55,000 in federal net operating
    loss carryforwards that begin to expire in 2025, and
    approximately $51,000 state net economic loss carryforwards
    that begin to expire in 2020. Utilization of net operating loss
    carryforwards and other deferred tax assets may be subject to
    certain limitations under Internal Revenue Code Section 382
    and similar state income tax provisions.
12.
Segments
We manage our business primarily through two reporting segments,
    Primo Bottled Water Exchange (Exchange) and Primo Products
    (Products). Our Exchange segment sells three- and five-gallon
    purified bottled water through retailers in each of the
    contiguous United States. We service the retail locations
    through our national network of primarily independent bottlers
    and distributors. Our Products segment sells water dispensers
    that are designed to dispense Primo and other
    dispenser-compatible bottled water through major U.S. retailers.
    We design, market and arrange for certification and inspection
    of our products.
We utilize segment net sales and segment income (loss) from
    operations before depreciation and amortization because we
    believe they provide useful information for effectively
    allocating resources among business segments, evaluating the
    health of our business segments based on metrics that management
    can actively influence, and gauging our investments and our
    ability to service, incur or pay down debt.
Operating segments that do not meet quantitative thresholds for
    segment reporting are included in Other.
Cost of sales for Exchange consists of costs for bottling,
    related packaging materials and distribution costs for our
    bottled water. Cost of sales for Products consists of contract
    manufacturing, freight, duties, and warehousing costs of our
    water dispensers.
Selling, general and administrative expenses consist primarily
    of personnel costs for sales, marketing, operations support,
    customer service, as well as other supporting cost for operating
    the segment.
Selling, general and administrative expenses not specifically
    related to operating segments are shown separately as Corporate.
    Corporate expenses are comprised mainly of the compensation and
    other related expenses for corporate support, information
    systems and human resources and administration. Corporate
    expenses also include certain professional fees and expenses and
    compensation of our Board of Directors.
The following table presents segment information for each of the
    last three years:
Year Ended December 31,
2007
2008
2009
Segment Net Sales
Exchange
$
10,875
$
19,237
$
22,638
Products
949
13,758
22,824
Other
1,818
1,874
1,611
Inter-company elimination
(189
)
(222
)
(92
)
Total net sales
$
13,453
$
34,647
$
46,981
F-22
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Year Ended December 31,
2007
2008
2009
Segment Income (Loss) From Operations
Exchange
$
(2,834
)
$
(1,267)
$
3,374
Products
(631
)
(1,447)
(272
)
Other
(175
)
(116)
(34
)
Inter-company elimination
—
(13)
9
Corporate
(5,229
)
(7,077)
(4,789
)
Depreciation and amortization
(3,366
)
(3,618)
(4,205
)
Loss from operations
$
(12,235
)
$
(13,538)
$
(5,917
)
Depreciation and Amortization Expense:
Exchange
$
2,084
$
2,592
$
3,124
Products
—
69
133
Other
774
618
491
Corporate
508
339
457
Total
$
3,366
$
3,618
$
4,205
Capital Expenditures:
Exchange
$
4,487
$
8,174
$
1,916
Products
105
336
95
Other
189
238
165
Corporate
212
672
248
Total
$
4,993
$
9,420
$
2,424
As of December 31
2008
2009
Identifiable Assets:
Exchange
$
18,939
$
16,685
Products
3,541
2,655
Other
2,000
1,601
Corporate
1,517
1,427
Total
$
25,997
$
22,368
13.
Discontinued
    Operations
In July, 2008, the Company and its Board of Directors made the
    decision to divest the operations of its subsidiary, Prima
    Bottled Water, Inc. ("Prima"). As a result, the
    related assets, liabilities and results of the operations of
    Prima are accounted for as discontinued operations. In December
    2009, the Company completed the divesture by distributing the
    stock in Prima to existing stockholders of the Company. Each
    stockholder received a number of shares in Prima based upon such
    stockholder's proportionate ownership of our Series A,
    Series C and common stock on an as converted basis as of
    the date of distribution. This transaction is reflected as a
    dividend of subsidiary stock in the statement of
    stockholders' equity (deficit) in the amount of $2,050, the
    book value of the net assets of Prima as of the distribution
    date.
F-23
Table of Contents
PRIMO
    WATER CORPORATION AND SUBSIDIARIES
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
(in
    thousands, except per share amounts)
Net sales and operating results classified as discontinued
    operations were as follows:
Year Ended December 31
2007
2008
2009
Net sales
$
239
$
1,888
$
561
Cost of sales
443
4,456
428
Gross profit
(204
)
(2,568
)
133
Selling, general and administrative expenses
1,700
2,930
1,313
Impairment of assets held for sale
—
174
2,407
Operating loss
(1,904
)
(5,672
)
(3,587
)
Interest (expense) income, net
—
(66
)
(63
)
Loss from discontinued operations, before income taxes
(1,904
)
(5,738
)
(3,650
)
Provision for income taxes
—
—
—
Loss from discontinued operations
$
(1,904
)
$
(5,738
)
$
(3,650
)
The assets and liabilities that comprise the discontinued
    operations are summarized as follows at December 31, 2008:
Discontinued Assets
Accounts receivable
$
246
Inventory
1,962
Property and equipment
2,185
Other
180
$
4,573
Discontinued Liabilities
Accounts payable
$
476
Notes payable
829
Other
17
$
1,322
14.
Employee
    Retirement Savings Plan
Effective April 1, 2005, the Company established the Primo
    Water Corporation 401(k) Plan & Trust retirement plan
    covering substantially all full-time employees who are at least
    21 years of age and who have completed at least two months
    of service. Plan participants may make before tax elective
    contributions up to the maximum percentage of compensation and
    dollar amount allowed under the Internal Revenue Code. The
    Company's matching contributions to the Plan are
    discretionary and determined with respect to each Plan year. The
    Company did not make any matching contributions during 2007,
    2008 or 2009. Plan participants are 100% vested in their
    elective contributions at all times, and are vested 25% per year
    of service for four years in the Company's discretionary
    contributions. A year of service for vesting purposes is
    1,000 hours of service in a Plan year. In 2010, our Board
    of Directors established a Company match of up to 50% of the
    employee contributions up to 6% of their salaries, with 50% of
    the matching amount being contingent upon our achievement of
    certain specified objectives to be determined by our Board of
    Directors.
F-24
Table of Contents
Shares
Common
    Stock
PROSPECTUS
,
    2010
Thomas
    Weisel Partners LLC
BB&T
    Capital Markets
Signal
    Hill
Neither we nor the
    underwriters have authorized anyone to provide information
    different from that contained in this prospectus. When you make
    a decision about whether to invest in our common stock, you
    should not rely upon any information other than the information
    in this prospectus. Neither the delivery of this prospectus nor
    the sale of our common stock means that information contained in
    this prospectus is correct after the date of this prospectus.
    This prospectus is not an offer to sell or solicitation of an
    offer to buy these shares of common stock in any circumstances
    under which the offer or solicitation is unlawful.
Until          ,
    2010 (25 days after the date of this prospectus), all
    dealers that effect transactions in these securities, whether or
    not participating in this offering, may be required to deliver a
    prospectus. This is in addition to the dealers' obligation
    to deliver a prospectus when acting as underwriters and with
    respect to their unsold allotments or subscriptions.
Table of Contents
PART II
INFORMATION
    NOT REQUIRED IN PROSPECTUS
Item 13.
Other
    Expenses Of Issuance And Distribution
The following table sets forth all costs and expenses, other
    than the underwriting discount payable by us, in connection with
    the offer and sale of the securities being registered. All
    amounts shown are estimates except the SEC registration fee, the
    Financial Industry Regulatory Authority, Inc. filing fee and the
    Nasdaq Global Market listing fee.
Item
Amount
SEC Registration Fee
$
4,278
FINRA Fee
6,500
Nasdaq Global Market Listing Fee
100,000
Printing Fees and Expenses
*
Legal Fees and Expenses
*
Accounting Fees and Expenses
*
Transfer Agent and Registrar Fees and Expenses
*
Miscellaneous
*
Total
$
*
To be filed by amendment.
Item 14.
Indemnification
    Of Directors And Officers
We are a corporation organized under the laws of the State of
    Delaware. Section 145 of the Delaware General Corporation
    Law provides that a corporation may indemnify any person who was
    or is a party or is threatened to be made a party to an action
    by reason of the fact that he or she was a director, officer,
    employee or agent of the corporation or is or was serving at the
    request of the corporation against expenses (including
    attorneys' fees), judgments, fines and amounts paid in
    settlement actually and reasonably incurred by him or her in
    connection with such action if he or she acted in good faith and
    in a manner he or she reasonably believed to be in, or not
    opposed to, the best interests of the corporation and, with
    respect to any criminal action or proceeding, had no reasonable
    cause to believe his or her conduct was unlawful, except that,
    in the case of an action by or in right of the corporation, no
    indemnification may generally be made in respect of any claim as
    to which such person is adjudged to be liable to the
    corporation. Our amended and restated bylaws, in the form that
    will become effective upon the closing of this offering, provide
    that we will indemnify and advance expenses to our directors and
    officers (and may choose to indemnify and advance expenses to
    other employees and other agents) to the fullest extent
    permitted by law; provided, however, that if we enter into an
    indemnification agreement with such directors or officers, such
    agreement controls.
Section 102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
•
breach of a director's duty of loyalty to the corporation
    or its stockholders;
•
act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
•
unlawful payment of dividends or redemption of shares; or
•
transaction from which the director derives an improper personal
    benefit.
II-1
Table of Contents
Our amended and restated certificate of incorporation, in the
    form that will become effective upon the closing of this
    offering, provides that our directors are not personally liable
    for breaches of fiduciary duties to the fullest extent permitted
    by the Delaware General Corporation Law.
These limitations of liability do not apply to liabilities
    arising under federal securities laws and do not affect the
    availability of equitable remedies such as injunctive relief or
    rescission.
Section 145(g) of the Delaware General Corporation Law
    permits a corporation to purchase and maintain insurance on
    behalf of any person who is or was a director, officer, employee
    or agent of the corporation. Our amended and restated bylaws, in
    the form that will become effective upon the closing of this
    offering, permit us to secure insurance on behalf of any
    officer, director, employee or other agent for any liability
    arising out of his or her actions in connection with their
    services to us, regardless of whether our bylaws permit
    indemnification. We have directors' and officers'
    liability insurance.
As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors
    that require us to indemnify such persons against various
    actions including, but not limited to, third-party actions where
    such director, by reason of his or her corporate status, is a
    party or is threatened to be made a party to an action, or by
    reason of anything done or not done by such director in any such
    capacity. We intend to indemnify directors against all costs,
    judgments, penalties, fines, liabilities, amounts paid in
    settlement by or on behalf such directors and for any expenses
    actually and reasonably incurred by such directors in connection
    with such action, if such directors acted in good faith and in a
    manner they reasonably believed to be in or not opposed to the
    best interests of the corporation, and with respect to any
    criminal proceeding, had no reasonable cause to believe their
    conduct was unlawful. We also intend to advance to our directors
    expenses (including attorney's fees) incurred by such
    directors in advance of the final disposition of any action
    after the receipt by the corporation of a statement or
    statements from directors requesting such payment or payments
    from time to time, provided that such statement or statements
    are accompanied by an undertaking, by or on behalf of such
    directors, to repay such amount if it shall ultimately be
    determined that they are not entitled to be indemnified against
    such expenses by the corporation.
The indemnification agreements also set forth certain procedures
    that will apply in the event of a claim for indemnification or
    advancement of expenses, including, among others, provisions
    about providing notice to the corporation of any action in
    connection with which a director seeks indemnification or
    advancement of expenses from the corporation and provisions
    concerning the determination of entitlement to indemnification
    or advancement of expenses.
Prior to the closing of this offering we plan to enter into an
    underwriting agreement, which will provide that the underwriters
    are obligated, under some circumstances, to indemnify our
    directors, officers and controlling persons against specified
    liabilities.
Item 15.
Recent
    Sales of Unregistered Securities
In the three years preceding the filing of this registration
    statement, we issued the securities indicated below that were
    not registered under the Securities Act. All share and price
    information does not reflect the conversion of all of our issued
    and outstanding shares Series A and Series C
    convertible preferred stock into common stock or the reverse
    stock split of our common stock, both of which will occur
    immediately prior to the closing of this offering.
Stock,
    Warrants and Convertible Subordinated Notes
1. On February 18, 2010, we granted to 18 employees
    and four non-employee directors 1,102,500 shares of restricted
    common stock. We received no consideration from the individuals
    in connection with the grant of the restricted stock.
II-2
Table of Contents
2. On December 30, 2009, we issued subordinated
    convertible promissory notes, bearing interest at 14% per annum,
    in an aggregate original principal amount of $15,000,000, and
    warrants to purchase an aggregate of 1,111,109 shares of
    common stock to 28 accredited investors. The aggregate
    consideration received by us was $15,000,000.
3. On June 4, 2008, we issued a warrant to purchase
    100,000 shares of common stock to two residents of Ontario,
    Canada. The consideration received by us was $10.
4. Between December 14, 2007 and June 2, 2008, we
    issued an aggregate of 12,520,001 shares of Series C
    convertible preferred stock and warrants to purchase an
    aggregate of 1,252,001 shares of common stock to 37
    accredited investors. The aggregate consideration received by us
    was $30,048,002.
5. Between November 19, 2007 and February 26,
    2009, we issued an aggregate of 73,305 shares of our common
    stock to five employees. The aggregate consideration received by
    us was $76,118.
6. Between June 1, 2007 and July 13, 2007, we
    issued an aggregate of 3,530,495 shares of Series B
    preferred stock to 26 accredited investors. The aggregate
    consideration received by us was $3,530,495.
7. On January 10, 2007, we issued 3,000 shares of
    Series B preferred stock and warrants to purchase
    801 shares of common stock to one accredited investor. The
    consideration received by us was $3000.
The grants of restricted common stock described in
    (1) above were made pursuant to our 2004 Stock Plan to our
    officers, directors and employees in reliance upon an available
    exemption from the registration requirements of the Securities
    Act, including those contained in Rule 701 promulgated
    under Section 3(b) of the Securities Act. Among other
    things, we relied on the fact that, under Rule 701,
    companies that are not subject to the reporting requirements of
    Section 13 or Section 15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    "compensatory benefit plans" as defined under that
    rule. We believe that our 2004 Stock Plan qualifies as a
    compensatory benefit plan.
We believe that the offer and sale of the securities referenced
    in (2), (4), (6) and (7) above were exempt from
    registration under the Securities Act by virtue of
    Section 4(2) of the Securities Act
and/or
Regulation D promulgated thereunder as transactions not
    involving any public offering. All of the purchasers of
    unregistered securities for which we relied on Section 4(2)
and/or
Regulation D represented that they were accredited
    investors as defined under the Securities Act. The purchasers in
    each case represented that they intended to acquire the
    securities for investment only and not with a view to the
    distribution thereof and that they either received adequate
    information about the registrant or had access, through
    employment or other relationships, to such information;
    appropriate legends were affixed to the stock certificates
    issued in such transactions; and offers and sales of these
    securities were made without general solicitation or advertising.
The sales of common stock referenced in (5) above was made
    pursuant to the exercise of stock options granted under our 2004
    Stock Plan to our officers, directors, employees and consultants
    and, we believe, were made in reliance upon an available
    exemption from the registration requirements of the Securities
    Act, including those contained in Rule 701 promulgated
    under Section 3(b) of the Securities Act. Among other
    things, we relied on the fact that, under Rule 701,
    companies that are not subject to the reporting requirements of
    Section 13 or Section 15(d) of the Exchange Act are
    exempt from registration under the Securities Act with respect
    to certain offers and sales of securities pursuant to
    "compensatory benefit plans" as defined under that
    rule. We believe that our 2004 Stock Plan qualifies as a
    compensatory benefit plan.
We believe the sales of common stock referenced in
    (3) above were exempt from registration under the
    Securities Act by virtue of Regulation S promulgated
    thereunder. All of the purchasers of unregistered securities for
    which we relied on Regulation S represented that they were
    not acquiring the securities for the account or benefit of any
    U.S. Person as defined by Regulation S.
II-3
Table of Contents
There were no underwriters engaged in connection with any of the
    transactions referenced above.
Stock
    Options
1. On February 18, 2010, we granted one of our employees an
    option to purchase 100,000 shares of our common stock at an
    exercise price of $1.23 per share. We received no consideration
    from this individual in connection with the issuance of such
    option.
2. On January 28, 2010, we granted to three of our
    employees options to purchase 225,000 shares of our common
    stock at an exercise price of $1.23 per share. We received no
    consideration from these individuals in connection with the
    issuance of such options.
3. On January 29, 2009, we granted to seven of our
    employees options to purchase an aggregate of
    142,000 shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
4. On August 1, 2008, we granted to two of our
    employees options to purchase an aggregate of 30,000 shares
    of our common stock at an exercise price of $1.98 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
5. On July 23, 2008, we granted to one employee an option
    to purchase 40,000 shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
6. On June 25, 2008, we granted to one employee an
    option to purchase 8,310 shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
7. On May 1, 2008, we granted to 18 employees
    options to purchase an aggregate of 471,807 shares of our
    common stock at an exercise price of $1.98 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
8. On January 31, 2008, we granted to one employee an
    option to purchase 1,944 shares of our common stock at an
    exercise price of $1.98 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
9. On December 31, 2007, we granted to three employees
    options to purchase an aggregate of 75,000 shares of our
    common stock at an exercise price of $2.40 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
10. On October 31, 2007, we granted to three employees
    options to purchase an aggregate of 72,038 shares of our
    common stock at an exercise price of $1.25 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
11. On August 15, 2007, we granted to one employee an
    option to purchase 10,000 shares of our common stock at an
    exercise price of $1.25 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
12. On August 10, 2007, we granted to two employees
    options to purchase and aggregate of 15,000 shares of our
    common stock at an exercise price of $1.25 per share. We
    received no consideration from these individuals in connection
    with the issuance of such options.
II-4
Table of Contents
13. On April 26, 2007, we granted to one employee an
    option to purchase 10,000 shares of our common stock at an
    exercise price of $1.25 per share. We received no consideration
    from this individual in connection with the issuance of such
    options.
14. On January 25, 2007, we granted to
    16 employees options to purchase an aggregate of
    347,295 shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
15. On January 25, 2007, we granted to four
    non-employee directors options to purchase an aggregate of
    148,000 shares of our common stock at an exercise price of
    $1.25 per share. We received no consideration from these
    individuals in connection with the issuance of such options.
All of the stock options described above were granted under our
    2004 Stock Plan to our officers, directors, employees and
    consultants in reliance upon an available exemption from the
    registration requirements of the Securities Act, including those
    contained in Rule 701 promulgated under Section 3(b)
    of the Securities Act. Among other things, we relied on the fact
    that, under Rule 701, companies that are not subject to the
    reporting requirements of Section 13 or Section 15(d)
    of the Exchange Act are exempt from registration under the
    Securities Act with respect to certain offers and sales of
    securities pursuant to "compensatory benefit plans" as
    defined under that rule. We believe that our 2004 Stock Plan
    qualifies as a compensatory benefit plan.
There were no underwriters engaged in connection with any of the
    transactions referenced above.
Item 16.
Exhibits
    and Financial Statement Schedules
See Exhibit Index following the signature page.
Item 17.
Undertakings
The undersigned registrant hereby undertakes to provide to the
    underwriters at the closing specified in the underwriting
    agreement, certificates in such denominations and registered in
    such names as required by the underwriters to permit prompt
    delivery to each purchaser.
Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to directors, officers and
    controlling persons of the registrant pursuant to the foregoing
    provisions, or otherwise, the registrant has been advised that
    in the opinion of the Securities and Exchange Commission such
    indemnification is against public policy as expressed in the
    Securities Act and is, therefore, unenforceable. In the event
    that a claim for indemnification against such liabilities (other
    than the payment by the registrant of expenses incurred or paid
    by a director, officer or controlling person of the registrant
    in the successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(2) For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
    registrant has duly caused this registration statement to be
    signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Winston-Salem, State of North
    Carolina, on March 12, 2010.
PRIMO WATER CORPORATION
By:
/s/
Billy
    D. Prim
Billy D. Prim
Chairman, Chief Executive Officer and President
POWER OF
    ATTORNEY
Each person whose signature appears below constitutes and
    appoints Billy D. Prim and Mark Castaneda and each of them, his
    true and lawful attorneys-in-fact and agents, each with full
    power of substitution and resubstitution, severally, for him and
    in his name, place and stead, in any and all capacities, to sign
    any and all amendments (including post-effective amendments) to
    this registration statement, any subsequent registration
    statements pursuant to Rule 462 of the Securities Act of
    1933, as amended, and to file the same, with all exhibits
    thereto and other documents in connection therewith, with the
    Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, and each of them, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in and about the premises, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming all that said
    attorneys-in-fact and agents, or any of them or their or his or
    her substitute or substitutes, may lawfully do or cause to be
    done by virtue hereof. This power of attorney my be executed in
    counterparts.
Pursuant to the requirements of the Securities Exchange Act of
    1934, this report has been signed below by the following persons
    on behalf of the Registrant and in the capacities indicated, in
    each case on March 12, 2010:
Signature
Title
/s/
Billy
    D. Prim
Billy
    D. Prim
Chairman, Chief Executive Officer, President and Director
    (Principal Executive Officer)
/s/
Mark
    Castaneda
Mark
    Castaneda
Chief Financial Officer (Principal Financial Officer)
/s/
David
    J. Mills
David
    J. Mills
Controller (Principal Accounting Officer)
/s/
Richard
    A. Brenner
Richard
    A. Brenner
Director
/s/
David
    W. Dupree
David
    W. Dupree
Director
/s/
Malcolm
    McQuilkin
Malcolm
    McQuilkin
Director
/s/
David
    L. Warnock
David
    L. Warnock
Director
II-6
Table of Contents
INDEX TO
    EXHIBITS
Exhibit
Number
Description
1
.1*
Underwriting Agreement
3
.1*
Amended and Restated Certificate of Incorporation of Primo Water
    Corporation
3
.2*
Amended and Restated Bylaws of Primo Water Corporation
4
.1*
Specimen Certificate representing shares of common stock of
    Primo Water Corporation
5
.1*
Opinion of K&L Gates LLP
10
.1*
Loan and Security Agreement, dated as June 23, 2005, among
    Primo Water Corporation, Primo To Go, LLC, Primo Products, LLC,
    Primo Direct, LLC, and Wachovia Bank, National Association (the
    "Credit Agreement")
10
.2*
First Amendment to Loan and Security Agreement, dated as of
    April 26, 2006, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
10
.3*
Second Amendment to Loan and Security Agreement, dated as of
    April 30, 2007, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
10
.4*
Third Amendment to Loan and Security Agreement, dated as of
    June 24, 2008, among Primo Water Corporation, Primo To Go,
    LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia Bank,
    National Association
10
.5*
Fourth Amendment to Loan and Security Agreement, dated as of
    January 7, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
10
.6*
Fifth Amendment to Loan and Security Agreement, dated as of
    December 30, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
10
.7*
Sixth Amendment to Loan and Security Agreement, dated as of
    December 30, 2009, among Primo Water Corporation, Primo To
    Go, LLC, Primo Products, LLC, Primo Direct, LLC, and Wachovia
    Bank, National Association
10
.8*
2004 Stock Option Plan**
10
.9*
2010 Omnibus Long-Term Incentive Plan ("2010 Omnibus
    Plan")**
10
.10*
Form of Option Agreement under 2010 Omnibus Plan**
10
.11*
Form of Restricted Stock Award Agreement under 2010 Omnibus
    Plan**
10
.12*
2010 Employee Stock Purchase Plan**
10
.13*
Non-Employee Director Compensation Policy**
10
.14*
Employment Agreement dated as
    of          ,
    2010 between the Company and Billy D. Prim**
10
.15*
Employment Agreement dated as
    of          ,
    2010 between the Company and Mark Casteneda**
10
.16*
Employment Agreement dated as
    of          ,
    2010 between the Company and Michael S. Gunter**
10
.17*
Employment Agreement dated as
    of          ,
    2010 between the Company and Duane G. Goodwin**
10
.18*
Form of Indemnification Agreement for Directors**
16
.1
Letter from Independent Registered Accounting Firm
21
.1*
List of subsidiaries of Primo Water Corporation
23
.1
Consent of McGladrey & Pullen LLP
23
.3*
Consent of K&L Gates LLP (contained in Exhibit 5.1)
24
.1
Powers of Attorney (Included on
Page II-6)
*
To be filed by amendment.
**
Indicates management contract or
    compensatory plan or arrangement
II-7