<table>
<tbody><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp;</font></td>
<td valign="top" width="95%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The Series D Preferred Stock is a hybrid financial instrument that, as described in the Overview above, embodies the risks and rewards typically associated with both equity and debt-type instruments. Accordingly, the Company is required to evaluate the features of this contract to determine its nature as either an equity-type contract or a debt-type contract. The Series D Preferred Stock is generally more akin to a debt-type contract, principally due to its redemption feature and the associated participation feature that behaves similarly to a coupon on indebtedness. As a result, the embedded conversion feature and those other features that have risks associated with debt require bifurcation and classification in liabilities as a compound embedded derivative financial instrument. The principal accounting concept requires bifurcation of the embedded derivatives from the host contract in these instances when the embedded feature and the host contracts have risks that are not clearly and closely related. Certain exemptions to this rule, such as the traditional conventional convertible exemption and the common-stock-indexed exemption were not available to us because the Series D Preferred Stock is not indexed, as that term is defined, to our common stock. Accordingly, the conversion feature, along with certain other features that have risks of equity, required bifurcation and classification in their compound form in liabilities as a derivative financial instrument. Derivative financial instruments are required to be measured at fair value both at inception and an ongoing basis. As more fully discussed below, the Company has used the Monte Carlo simulation technique to value the compound embedded derivative, because that model affords the flexibility to incorporate all of the assumptions that market participants would likely consider in determining the value for purposes of trading the hybrid contract. Further, due to the redemption feature, the Company is required to carry the host Series D Preferred Stock outside of stockholders’ equity and the discount resulting from the initial allocation requires accretion through charges to retained earnings, using the effective method, over the period from issuance to the redemption date.</font></font></div>
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</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp;</font></td>
<td valign="top" width="95%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp;</font></td>
</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
<td valign="top" width="95%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The Company has concluded that the Warrants require classification in stockholders’ equity. The principal concepts underlying accounting for warrants provide a series of conditions, related to the potential for net cash settlement, which must be met in order to achieve equity classification. Our conclusion is that the Warrants are indexed to our common stock and meet all of the conditions for equity classification. Notwithstanding, the Company was required to measure the fair value of the Warrants on the inception date to provide a basis for allocating the net proceeds to the various financial instruments issued in the December 2009 financing. As more fully discussed below, the Company has used the Black-Scholes-Merton valuation technique, because that method embodies, in our view, all of the assumptions that market participants would consider in determining the fair value of the Warrants for purposes of a sale or exchange. The allocated value of the Warrants was recorded to Additional Paid-in Capital.</font></div>
</td>
</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
<td valign="top" width="95%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
<td valign="top" width="95%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">Our accounting required us to allocate the proceeds to the individual financial instruments comprising the December 2009 financing. As it relates to the financial instruments sold to the Management Buyers, the Company was required to recognize as compensation expense the amount by which the fair value of the share-linked financial instruments (i.e. Series D Preferred Stock and Warrants) exceeded the proceeds that the Company received. The financial instruments subject to allocation are the Secured Notes, Series D Preferred Stock, Compound Embedded Derivatives (“CED”) and the Warrants. Other than the compensatory amounts, current accounting concepts generally provide that the allocation is, first, to those instruments that are required to be recorded at fair value; that is, the CED; and the remainder based upon relative fair values.</font></div>
</td>
</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
<td valign="top" width="95%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
</tr><tr>
<td valign="top" width="5%"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">&nbsp; </font></td>
<td valign="top" width="95%">
<div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: times new roman">The following table provides the components of the allocation and the related fair values of the subject financial instruments:</font></div>
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<tbody><tr>
<td><font> </font></td>
<td>
<div><font><font>The Series D Preferred Stock is a hybrid financial instrument that, as described in the Overview above, embodies the risks and rewards typically associated with both equity and debt-type instruments. Accordingly, the Company is required to evaluate the features of this contract to determine its nature as either an equity-type contract or a debt-type contract. The Series D Preferred Stock is generally more akin to a debt-type contract, principally due to its redemption feature and the associated participation feature that behaves similarly to a coupon on indebtedness. As a result, the embedded conversion feature and those other features that have risks associated with debt require bifurcation and classification in liabilities as a compound embedded derivative financial instrument. The principal accounting concept requires bifurcation of the embedded derivatives from the host contract in these instances when the embedded feature and the host contracts have risks that are not clearly and closely related. Certain exemptions to this rule, such as the traditional conventional convertible exemption and the common-stock-indexed exemption were not available to us because the Series D Preferred Stock is not indexed, as that term is defined, to our common stock. Accordingly, the conversion feature, along with certain other features that have risks of equity, required bifurcation and classification in their compound form in liabilities as a derivative financial instrument. Derivative financial instruments are required to be measured at fair value both at inception and an ongoing basis. As more fully discussed below, the Company has used the Monte Carlo simulation technique to value the compound embedded derivative, because that model affords the flexibility to incorporate all of the assumptions that market participants would likely consider in determining the value for purposes of trading the hybrid contract. Further, due to the redemption feature, the Company is required to carry the host Series D Preferred Stock outside of stockholders’ equity and the discount resulting from the initial allocation requires accretion through charges to retained earnings, using the effective method, over the period from issuance to the redemption date.</font></font></div>
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<td><font> </font></td>
<td><font> </font></td>
</tr><tr>
<td><font>  </font></td>
<td>
<div><font>The Company has concluded that the Warrants require classification in stockholders’ equity. The principal concepts underlying accounting for warrants provide a series of conditions, related to the potential for net cash settlement, which must be met in order to achieve equity classification. Our conclusion is that the Warrants are indexed to our common stock and meet all of the conditions for equity classification. Notwithstanding, the Company was required to measure the fair value of the Warrants on the inception date to provide a basis for allocating the net proceeds to the various financial instruments issued in the December 2009 financing. As more fully discussed below, the Company has used the Black-Scholes-Merton valuation technique, because that method embodies, in our view, all of the assumptions that market participants would consider in determining the fair value of the Warrants for purposes of a sale or exchange. The allocated value of the Warrants was recorded to Additional Paid-in Capital.</font></div>
</td>
</tr><tr>
<td><font>  </font></td>
<td><font>  </font></td>
</tr><tr>
<td><font>  </font></td>
<td>
<div><font>Our accounting required us to allocate the proceeds to the individual financial instruments comprising the December 2009 financing. As it relates to the financial instruments sold to the Management Buyers, the Company was required to recognize as compensation expense the amount by which the fair value of the share-linked financial instruments (i.e. Series D Preferred Stock and Warrants) exceeded the proceeds that the Company received. The financial instruments subject to allocation are the Secured Notes, Series D Preferred Stock, Compound Embedded Derivatives (“CED”) and the Warrants. Other than the compensatory amounts, current accounting concepts generally provide that the allocation is, first, to those instruments that are required to be recorded at fair value; that is, the CED; and the remainder based upon relative fair values.</font></div>
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</tr><tr>
<td><font>  </font></td>
<td><font>  </font></td>
</tr><tr>
<td><font>  </font></td>
<td>
<div><font>The following table provides the components of the allocation and the related fair values of the subject financial instruments:</font></div>
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