On December 15, 2006, in connection with the repayment of a subordinated loan, the Company issued 228,683 shares of its Series B-1 Preferred Stock, $10.00 par value, pursuant to the terms of the Securities Purchase Agreement dated September 8, 2006, with Avista, an affiliate of Avista and another institutional investor. Effective December 18, 2009, the holders of the Series B-1 Preferred Stock and the Company agreed to revised terms including (i) an extension of the redemption date to December 15, 2015; (ii) a reduction of the conversion rate to $17.436; (iii) an option to pay dividends in kind until December 15, 2015; and iv) an increase in the dividend rate to 9.75%. In addition, the series of preferred stock was re-designated as Series B Preferred Stock. In connection with the issuance of the 2010 Warrants on December 14, 2010, the conversion price of the Series B Preferred Stock was reset to $16.40. In connection with the issuance of the Advisory Shares on August 29, 2011, associated with the Whitebox Revolving Credit Facility, the conversion price of the Series B Preferred Stock was reset to $15.95.

On May 9, 2012, the Company entered into the Series B Exchange Agreement pursuant to which all the shares of Series B Preferred Stock were exchanged for shares of the new Series B-1 Senior Convertible Preferred Stock of the Company. The Series B Exchange Agreement was consummated to resolve certain technical legal questions relating to the prior issuance of and/or amendment to certain shares of the Series B Preferred Stock and to ensure that full legal effect is given to prior agreements between the Company and the holders of the Series B Preferred Stock. In connection with the exchange, the Company issued to the holders of the Series B Preferred Stock an equal number of shares of new Series B-1 Preferred Stock in exchange for the outstanding Series B Preferred Stock (including additional shares which were previously issued or owing as of March 31, 2012 as payments of dividends in kind).

The terms of the new Series B-1 Preferred Stock are consistent with the terms of the Series B Preferred Stock which was exchanged such that the new Series B-1 Preferred Stock is intended to have the same economic effect as the Series B Preferred Stock, except with respect to changes to modify the anti-dilution provisions in the new Series B-1 Preferred with respect to the treatment of warrants, if any, to be issued in connection with the Avista Commitment Letter (see note 3).

Each holder of Series B-1 Preferred Stock is entitled to receive cumulative dividends at the rate of 9.75% per annum on the liquidation preference of $250.00 per share, compounded quarterly. At the Company's option through December 15, 2015, dividends may be paid in additional shares of Series B-1 Preferred Stock. After such date, dividends are required to be paid in cash if declared. Dividends on the Series B-1 Preferred Stock have been accrued or paid in kind exclusively to date. At June 30, 2012 and December 31, 2011, the Series B-1 Preferred Stock is presented as mezzanine equity.

At each issuance of the Series B-1 Preferred Stock, the fair value of the Series B-1 Preferred Stock conversion feature is bifurcated and recorded as a derivative liability. The difference between the fair value of the conversion feature and the liquidation preference amount is recorded as additional discount of the Series B-1 Preferred Stock. The accretion of the additional discount to the preferred stock resulting from bifurcating the Series B-1 Preferred Stock conversion feature was $0.3 million and $0.6 million for the three and six months ended June 30, 2012, respectively. The accretion of the additional discount to the preferred stock resulting from bifurcating the Series B-1 Preferred Stock conversion feature was $0.2 million and $0.4 million for the three and six months ended June 30, 2011, respectively.

The Series B-1 Preferred Stock contains certain anti-dilution provisions. Under these provisions, if the Company issues certain equity securities at a price lower than the conversion price of the Series B-1 Preferred Stock, the conversion price is adjusted to the price per share of the newly issued equity securities except that, if prior to the issuance of new equity securities, the Company has issued certain equity securities valued at over $50.0 million, the conversion price is adjusted downward pursuant to a specific formula. Additionally, in the event of an issuance of warrants in connection with the Avista Commitment Letter (see note 3), the conversion price for the new Series B-1 Preferred Stock will not be adjusted below the closing price of the Company's common stock on the last trading day before such warrants are issued.

The following table sets forth the changes in the carrying value of the Company's Series B-1 Preferred Stock for the six months ended June, 2012:

		$ (thousands)

Balance at December 31, 2011	351,444	$	83,313
Accrued dividends	17,338		4,335
Fair value of bifurcated conversion feature	—		(27	)
Accretion of issuance costs and additional discount	—		573

Balance at June 30, 2012	368,782	$	88,194