S-1

As filed with the Securities and Exchange Commission on May 13, 2011

Registration No. 333-      

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

GLACIER WATER SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	5960	33-0493559
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

1385 Park Center Drive
Vista, California 92081
(760) 560-1111

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

Brian H. McInerney
President and Chief Executive Officer
Glacier Water Services, Inc.
1385 Park Center Drive
Vista, California 92081
(760) 560-1111

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Please send copies of all communications to:

Howard Hart
Weissmann Wolff Bergman Coleman Grodin & Evall LLP
9665 Wilshire Boulevard, Suite 900
Beverly Hills, CA 90212
(310) 858-7888 Robert Verigan
Sidley Austin LLP
One South Dearborn
Chicago, IL 60603
(312) 853-7000

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 x Smaller reporting company o

(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

	Proposed Maximum	Amount of
Title of Each Class of	Aggregate	Registration
Securities to be Registered	Offering Price(1)(2)	Fee(2)
Common Stock	$86,250,000	$10,013.63

(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.

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 these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MAY 13, 2011

Prospectus

           Shares

Glacier Water Services, Inc.

Common Stock

We are offering           shares of our common stock, and the selling stockholders identified in this prospectus are offering           shares of our common stock. We will not receive any of the proceeds from the sale of shares by the selling stockholders. The initial public offering price of our common stock is expected to be between $     and $      per share.

We have applied to list our common stock on the NASDAQ Global Market under the symbol “DRNK.”

This is the initial public offering of our common stock. Since 2006 and prior to this offering, there has been no established public trading market for our common stock and our common stock has only been quoted on the Pink Sheets.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 9 of this prospectus.

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.

	Per Share	Total
Initial public offering price	$	$
Underwriting discount and commissions	$	$
Proceeds, before expenses, to us	$	$
Proceeds, before expenses, to the selling stockholders	$	$

The underwriters may also purchase up to an additional           shares from us and certain of the selling stockholders, at the public offering price, less the underwriting discount, within 30 days of the date of this prospectus to cover over-allotments, if any.

The underwriters expect to deliver the shares of common stock to purchasers on or about          , 2011.

William Blair & Company SunTrust Robinson Humphrey

Canaccord Genuity

The date of this prospectus is          , 2011.

TABLE OF CONTENTS

	Page
Summary		1
Risk Factors		9
Special Note Regarding Forward-Looking Statements		18
Use of Proceeds		20
Dividend Policy		20
Capitalization		21
Dilution		22
Selected Financial and Operating Data		23
Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Business		39
Management		51
Executive Compensation		55
Principal and Selling Stockholders		62
Certain Relationships and Related Transactions		63
Description of Capital Stock		64
Shares Eligible for Future Sale		68
Material U.S. Federal Income and Estate Tax Considerations For Non-U.S. Holders of Our Common Stock		69
Underwriting		73
Legal Matters		76
Experts		76
Where You Can Find More Information		76
Index to Consolidated Financial Statements		F-1
CERTIFICATE OF INCORPORATION OF GLACIER WATER SERVICES, INC.
BYLAWS OF GLACIER WATER SERVICES, INC.
SPECIMEN COMMON STOCK CERTIFICATE
REVOLVING NOTE
AMENDED AND RESTATED REVOLVING NOTE
JUNIOR SUBORDINATED INDENTURE
1994 STOCK COMPENSATION PLAN AND AMENDMENTS NO. 1-9
FORM OF INDEMNIFICATION AGREEMENT
LIST OF SUBSIDIARIES OF GLACIER WATER SERVICES, INC.
CONSENT OF KPMG LLP

You should rely only on the information contained in this prospectus or to which we have referred you. We have not, and the underwriters have not, authorized anyone to provide you with information that is different. This prospectus is not an offer to sell, nor is it seeking an offer to buy, securities in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

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. 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. While we believe that each of these third-party sources is reliable, neither we nor the underwriters have independently verified such data, and neither we nor the underwriters make any representations as to the accuracy of such information. Similarly, we believe that our internal research is reliable, but it has not been verified by any independent 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.

In this prospectus, we use the term “vended water” to mean filtered water vended through machines which fill bottles provided by the consumer; it does not include water vended in pre-filled individual-use bottles. Also in this prospectus, in accordance with customary industry usage, we include “vended water” in the broader “bottled water” category.

TRADEMARKS

The Glacier Water trademark and logo appearing in this prospectus are the property of Glacier Water Services, Inc. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective owners.

SUMMARY

This summary highlights information about our Company and this offering contained elsewhere in this prospectus 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 the 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 “Glacier,” “we,” “us,” “our,” “our Company,” or “ours” refer to Glacier Water Services, Inc. and its consolidated subsidiaries.

Business Summary

We own and operate the largest network of filtered drinking water vending machines in the United States and Canada, with approximately 19,600 machines in place as of May 1, 2011 at food, drug, convenience, mass and other major retailers. Our machines apply a five-step, state-of-the-art filtration process that removes particles and impurities to produce high-quality, great-tasting drinking water that is dispensed by our machines into one-gallon or five-gallon containers provided by the consumer. This business model eliminates the bottling and distribution infrastructure required to deliver traditional bottled water, thereby significantly reducing cost and the adverse environmental impact. We believe continued growth in our market will be driven by these factors and by the perceived health benefits and growing concerns about the taste and quality of municipal tap water that we believe are driving increased demand for bottled water generally.

Our extensive network of self-service coin-operated and non-coin-operated water vending machines is supported by our in-house national field service organization, the only one in the industry, providing our retail partners with compelling commission streams and incremental customer traffic. We have a highly diversified retail partner base consisting of food retailers, as well as drug, convenience, mass and other retailers. Among our retail partners are Circle K, CVS, Family Dollar, H-E-B, Kroger, Publix, Rite Aid, Safeway, SuperValu, Wal-Mart, Walgreens and Winn-Dixie.

In fiscal 2010, our machines vended approximately 345 million gallons of filtered drinking water. As of May 1, 2011, we own and operate approximately 19,600 self-service vending machines in 42 states and Canada, which we believe represent approximately 60% of all industry units. We believe we have an unmatched in-house national service platform, with capacity to meet the growing demands of both retailers and consumers in our markets.

By filtering and dispensing water at the point of sale, we are able to avoid the costs of bottling, packaging, shipping and delivery, and the associated fuel costs. This results in substantial savings to the consumer. We charge an average of $0.28 per gallon, while the price of bottled water sold off the shelf in retail locations is often three or more times the price of our vended water. In addition, by eliminating packaging and removing the supply chain, vended water significantly reduces the adverse environmental impact associated with other forms of bottled water.

We have long-term relationships with key national and regional retail accounts as a result of our brand recognition, high-quality product, reliable service and compelling value proposition. Our solution requires no upfront investment from our retail partners and enables them to monetize typically unused retail space. Because our consumers make frequent visits to our retail partners’ locations to use our machines, the retailers benefit from incremental customer traffic and predictable commission revenue while incurring no labor, inventory or shrinkage expense.

Our machines are serviced by our in-house team of highly trained technicians, generally on a weekly or bi-weekly basis, to ensure that consistent quality standards are met; apart from this scheduled maintenance and service, our machines require little attention. Our technicians use handheld computers that provide us with real-time data from the machines to facilitate proper and timely maintenance, as well as providing us with valuable unit performance information.

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Our origins date back to the founding of our predecessor, Bottle Water Vending, Inc., in 1983. In 2001, Brian McInerney, a former executive of Honeywell International, joined us as our chief executive officer and Charles Norris, the former President of McKesson Water Products, joined us as chairman. Our management team has driven growth principally by adding self-service vending machines to existing and new geographic areas and with existing and new retail partners, as well as through the successful completion and integration of three acquisitions in the past 10 years.

We have a strong commitment to growth and over the past five years we have focused on building a national organization with a scalable platform which can support this growth. In 2004 and 2005, we invested over $30 million in machine upgrades, incorporating state-of-the-art functionality and appearance enhancements for improved ease of use and brand recognition. From January 2008 through December 2010, we installed approximately 2,800 net new machines, representing a compound annual growth rate of 5.4%. We believe that we are now poised to benefit from highly attractive industry dynamics as well as the maturation of our upgraded and newly installed machines.

We believe that our value proposition in the vended water market will also help us compete effectively in the vended ice market. We recently began testing self-service ice vending machines, and have deployed approximately 100 units as of May 1, 2011. We believe that our placement of ice vending machines will contribute to our brand awareness and future growth in both the vended water and the vended ice businesses.

Our Industry

The bottled water market, including vended water, has grown from approximately 4.4 billion gallons sold in 1999 to approximately 8.5 billion gallons sold in 2009, representing a compounded annual growth rate of 6.7%, according to the Beverage Marketing Corporation. The bottled water market in the United States, which in 2009 totaled approximately $10.6 billion at wholesale, consists of three primary segments: domestic non-sparkling, domestic sparkling and imported water. We operate in the domestic non-sparkling water segment, which represented approximately 96% of the total market in terms of gallons sold and approximately 90% of the total market in terms of wholesale dollar sales in 2009.

We believe that consumer preference toward bottled water continues to grow as bottled water has become accepted on a mainstream basis. While it is difficult to quantify bottled water consumption in all of its forms, according to an April 2010 report by independent market analyst Datamonitor, the U.S. bottled water market generated retail revenues of $17.1 billion in 2009. We believe that the following trends have contributed to the increasing demand for bottled water:

•  Emphasis on Health and Wellness. As part of a desire to live a healthier lifestyle, we believe U.S. consumers are increasingly focused on increasing their water consumption and drinking water as a substitute for high-caloric beverages, carbonated soft drinks and beverages containing artificial sweeteners.

•  Concerns Regarding Taste and Quality of Municipal Tap Water. Many consumers purchase bottled water not only due to better taste, but also because of concerns regarding municipal tap water quality.

Vended water benefits from these trends, but it is particularly poised to benefit from the following additional dynamics:

•  Growing Preference for Value. We believe that the recent growth in vended water reflects, in part, consumers’ growing preference for more affordable, high-quality bottled water alternatives. By significantly reducing the packaging and delivery costs inherent in the supply chain, our vended water typically retails for $0.20-$0.49 per gallon (averaging $0.28), compared with $1.00-$1.50 per gallon or more for pre-packaged water and multipacks.

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•  Increasing Demand for Products with Lower Environmental Impact. We believe consumers are increasingly favoring products with a lower environmental impact, with a “reduce, reuse, recycle” mindset becoming a common driver of consumer behavior.

•  Favorable Demographics. Vended water’s cost advantage is especially attractive in areas with lower-income or fixed-income (including senior) populations. Vended water has also been historically well-accepted in U.S. Hispanic and Asian-American communities. The senior, Hispanic and Asian populations are among the fastest-growing population segments in the U.S. Also, as noted above, consumers who favor products with a lower environmental impact are, we believe, a rapidly growing and important demographic.

•  Growing Interest in Self-Service Solutions. We have noted increased consumer interest in and acceptance of the consumer self-service experience, which is evidenced by the growing popularity of self-service check-outs and the use of self-service machines for purposes such as movie rentals and coin redemption.

Our Competitive Strengths

We believe our competitive strengths include the following:

Leading Market Position in Vended Water. We are the market leader in vended water with approximately 19,600 vending machines, as of May 1, 2011, which we believe represent approximately 60% of all U.S. self-service water vending machines. We have a history of over 25 years in the vended water business. With an established presence in 42 states and Canada, we are the only company in this market with a national platform supported by a national service force of our own skilled technicians and by a national operational and managerial infrastructure.

Compelling Consumer Benefits. We benefit not only from factors which lead consumers to increase the consumption of bottled water, but also from factors which lead consumers to do so at lower prices and in a more environmentally friendly manner.

Strong Strategic and Financial Value Proposition for Retailers. Our vending machines require no upfront investment from our retail partners and enable them to monetize typically unused retail space. Retailers also benefit from the recurring foot traffic and highly predictable commission revenue from our water vending machines.

Extensive Retail Relationships. Our strong brand and our reputation for quality and value with retailers nationwide form a key element of our competitive advantage in the field. We participate in multiple retail channels, with more than 4,500 retail partners as of March 31, 2011. We have long-standing relationships of 20 years or more with many of our significant retail partners.

Superior Service through Our In-House National Field Service Organization. We are committed to providing the best customer service in our industry and maintain an in-house service organization rather than outsourcing this critical component of our business. We pride ourselves on our outstanding reputation for service, which we believe to be a principal competitive factor in maintaining and building our relationships with retail partners and consumers. We believe it would be difficult to replicate a field service organization that has the breadth, experience and expertise of our in-house platform.

Modern Units and Advanced Technology. In 2004 and 2005, we made over $30 million of investments in our machines to improve functionality, appearance and ease of use while strengthening their durability and increasing their useful lives. In addition, we have expertise in money handling and counting, and we leverage our technology to insure proper chain of custody and accuracy. We have also incorporated technology to provide our technicians with real-time data from our machines through handheld computers.

Scalable National Platform. Our centralized management, in-house national field service organization and robust technology are highly scalable as our business grows. We are currently assembling machines to fill orders to place machines in new locations and we have substantial additional growth opportunities in the near-

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term. We have the capacity to satisfy these growth opportunities with limited incremental capital expenditures in infrastructure.

Broad Range of Products. We offer the widest range of vending machines in our industry, including coin-operated outdoor water machines, non-coin indoor water machines with varying footprints, coin-operated water vending kiosks and ice vending machines. We believe the flexibility provided by our product range makes us more attractive to potential retail partners than our competitors.

Highly Experienced Management Team with Proven Execution Capabilities. We are led by a proven management team with the experience and ability to execute on new opportunities, grow existing relationships and successfully integrate acquisitions. Our chairman, chief executive officer and chief operating officer have worked together as a team for more than 10 years and collectively have more than 75 years of experience in the consumer products business, including more than 50 years of collective experience in the water business. During this 10-year period, they have successfully identified, acquired and integrated three other vended water companies. In addition, our Chairman, Charles Norris, is the former President of McKesson Water Products, and other members of our board have significant experience in both the water industry and other consumer product companies.

Our Growth Strategy

We have a strong commitment to growth and over the past five years we have focused on building a national organization and infrastructure to provide a scalable platform which can support this commitment. We believe we can achieve accelerated growth by pursuing the following strategies:

Increase Penetration in Emerging Retail Channels. We believe that our product offerings will allow us to expand significantly by targeting under-served retail channels, including gas stations, convenience stores, dollar stores, drug stores, natural food markets, warehouse chains and home improvement centers. Approximately 30% of our machines are currently located in these retail channels, and we believe that our strong value proposition will allow us to successfully increase penetration, particularly among retailers that emphasize value to consumers. In fiscal year 2010, we entered into contracts that give us access to more than 10,000 new locations across several of these channels, including drug stores, dollar stores and other retailers, although we cannot at this time predict how many machines we will install at these new locations.

Increase Business with Food Retailers. We currently serve approximately 10,000 of approximately 60,000 food retailers in the United States. We intend to pursue increased business within this established channel by working to increase the business generated by our installed base as well as by adding machines at new locations.

Capture Economics from Maturing Machines. In general, we expect the volume of sales of a machine to increase as its location matures. Typically the longer a machine is operating at a particular location and consumers develop familiarity with the location and the product, the volume of sales increases. With approximately 3,300 net new machines installed from January 2008 through April 2011, nearly all of these placed at unique locations, we believe that we are well positioned to grow our same store sales as these locations continue to mature. Importantly, same store sales can be affected by both improving the average vends per machine or through increasing the pricing per vend. We believe that the combination of our recently deployed locations maturing and the opportunity to increase retail pricing while maintaining our value positioning relative to other bottled water offerings positions us for long-term same store sales growth.

Expand into New Geographic Regions. Although we have a nationwide presence, our machines are currently located in zip codes representing only 45% of the United States population. We believe our water vending machines are underrepresented at retailers in the Midwest, Southeast and Northeast regions of the United States. We believe that technological improvements in our machines and new product options offered by us will enable us to increase our penetration in these regions.

Expand into Selected International Markets. We believe that we have the ability to profitably expand into markets outside the United States, either directly or by partnering with local operators, particularly in

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countries where there is greater concern over the quality of unfiltered water. We have established a strategic relationship with a partner in Mexico, and we believe similar arrangements could be used to expand in additional international markets.

Expand Our Recently Introduced Self-Service Ice Business. We recently began testing ice vending machines, and have deployed approximately 100 of these machines as of May 1, 2011. We believe that our ice offering will be attractive to retailers who do not currently sell ice and that it has the potential to compete effectively, on both a cost and convenience basis, with ice produced by retailers in-store and delivered ice. We believe that our placement of ice vending machines will contribute to our brand awareness and future growth in both the vended water and the vended ice businesses. The addition of the ice machines also increases our geographic density and maximizes the efficient utilization of our field service personnel.

Pursue Other Marketing and Product Initiatives. We believe that we have significant opportunities to leverage our national platform and reliable workforce to offer other environmentally friendly, economical, convenient and healthy solutions to our retail partners. We intend to further develop our marketing efforts and to consider other product offerings, which could include the dispensing of flavor or other additives to our vended water or the dispensing of individual servings of ready-to-drink water-based beverages.

Pursue Strategic Investment and Acquisition Opportunities. We believe that opportunities exist to grow through selective investments and acquisitions, including acquisitions of smaller, self-service vended water companies, ice businesses and other product offerings. We intend to pursue strategic investments and acquisitions that may enhance our geographic presence or relationships with retail partners.

Summary Risk Factors

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” beginning on page 9. You should carefully consider these risks before deciding to invest in our common stock. These risks include, among others:

•  We depend on retailer and consumer acceptance of our vended water machines.

•  Our industry is highly competitive, and we might encounter significant competition from new or existing companies entering into the vended water market.

•  The loss of a major retail partner would adversely affect us.

•  If any vended water became contaminated, our business could be seriously harmed. Similarly, we could be adversely affected by a claim of contamination, even if untrue.

•  Additional government regulation of our business could adversely affect us.

•  Because the words “Glacier Water” are considered to be generic, we may be subject to competition by companies with similar names.

Corporate Information

We were incorporated as a Delaware corporation on November 19, 1991 as a successor to a corporation organized in 1983. Our headquarters are located at 1385 Park Center Drive, Vista, California 92081, and our telephone number is (760) 560-1111. Our website is www.glacierwater.com. Information on, or accessible through, our website is not a part of and is not incorporated into this prospectus.

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THE OFFERING

Common stock offered by us	shares
Common stock offered by the selling stockholders	shares
Common stock to be outstanding after this offering	shares
Use of proceeds	We estimate that the net proceeds to us from this offering will be approximately $      million (or approximately $      million if the underwriters exercise their over-allotment option in full).
	As described in “Use of Proceeds,” we intend to use the net proceeds from this offering for the following purposes:
	• $      (or $      if the underwriters exercise their over-allotment option in full) to repay our outstanding bank indebtedness;
	• $      (or $      if the underwriters exercise their over-allotment option in full) to redeem a portion of our 9.0625% Junior Subordinated Debentures due 2028; and
	• the remaining $      (or $      if the underwriters exercise their over-allotment option in full) for working capital and general corporate purposes.
	We will not receive any proceeds from the shares sold by the selling stockholders.
Risk factors	See “Risk Factors” and other information set forth in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
Proposed NASDAQ Global Market symbol	“DRNK”

The share information above is based on           shares of common stock outstanding as of                    , 2011 and excludes:

•            shares of our common stock reserved for issuance under our new Stock Incentive Plan,          of which are subject to stock option awards that we will grant to our executive officers and certain other employees at the time of the pricing of this offering with an exercise price equal to the initial public offering price;

•            shares of our common stock issuable upon the exercise of stock options issued under a prior plan, which stock options have a weighted average exercise price of $      per share.

Unless we indicate otherwise, the information in this prospectus:

•  reflects a          -for-          split of our common stock that occurred on          , 2011;

•  assumes that the underwriters do not exercise their over-allotment option to purchase up to an additional           shares from us and certain of the selling stockholders; and

•  assumes an initial public offering price of $      per share, the mid-point of the estimated price range set forth on the cover of this prospectus.

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth our summary consolidated financial and other data as of the dates and for each of the periods indicated. The summary consolidated statement of operations and other financial data for the fiscal years ended December 28, 2008, January 3, 2010 and January 2, 2011, and the summary balance sheet data as of January 2, 2011 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The historical results included here and elsewhere in this prospectus are not necessarily indicative of future performance or results of operations.

We use a fiscal year of 52 or 53 weeks ending on the Sunday closest to December 31st. The fiscal year ended January 3, 2010 consisted of 53 weeks, or 371 days, and the fiscal years ended December 28, 2008 and January 2, 2011 consisted of 52 weeks, or 364 days.

The summary historical consolidated financial data presented below represent portions of our consolidated financial statements and are not complete. You should read this information in conjunction with “Use of Proceeds,” “Capitalization,” “Selected Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes included elsewhere in this prospectus.

Summary Consolidated Statements of Operations Data:

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
	(Fiscal 2008)			(Fiscal 2009)			(Fiscal 2010)
	($ in thousands, except per share data)
Revenues	$	94,711		$	103,803		$	100,056
Cost of revenues:
Operating expenses		60,703			66,097			65,704
Depreciation and amortization		15,569			15,166			12,560
Total cost of revenues		76,272			81,263			78,264
Gross profit		18,439			22,540			21,792
Selling, general and administrative expenses		14,515			15,051			14,149
Income from operations		3,924			7,489			7,643
Other expenses (income):
Interest expense		8,583			8,406			8,578
Gain on early retirement of debt		(119	)		—			—
Total other expense		8,464			8,406			8,578
Loss before income taxes		(4,540	)		(917	)		(935	)
Income tax expense (benefit)		—			123			(35	)
Net loss	$	(4,540	)	$	(1,040	)	$	(900	)
Basic and diluted net loss per share	$	(1.68	)	$	(0.38	)	$	(0.33	)
Weighted average shares used in calculation		2,702,790			2,711,836			2,716,873
Cash dividend per common share	$	1.50		$	1.00		$	—

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Summary Consolidated Balance Sheet Data:

	As of January 2, 2011
	Actual			As Adjusted(1)
	(In thousands)
Cash and cash equivalents	$	3,692		$
Total assets(2)		73,845
Long-term debt(2)		87,629
Line of credit		31,153
Total liabilities		128,930
Total stockholders’ equity (deficit)		(55,085	)

Other Data:

	Fiscal Year
	2008		2009		2010
Machines in operation at beginning of period		16,273		17,179		18,267
Net machines added during period		906		1,088		807
Machines in operation at end of period		17,179		18,267		19,074
EBITDA (in thousands)(3)	$	19,612	$	22,655	$	20,203

(1)	The summary consolidated balance sheet data as of January 2, 2011 is presented on an actual basis and on an as adjusted basis to reflect the receipt by us of net proceeds from the sale of common stock offered by us in this offering at an assumed initial public offering price of $      per share, which is the mid-point of the estimated price range set forth on the cover of this prospectus, and the application of the net proceeds, all as described in “Use of Proceeds.”
(2)	We have a beneficial interest in $6.3 million of the Junior Subordinated Debentures included as long-term debt on our consolidated balance sheet. The beneficial interest is reflected as a long-term investment on our consolidated balance sheet and is included in total assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Indebtedness” and Notes 1(h) and 3(a) to Consolidated Financial Statements.
(3)	EBITDA is a non-GAAP measure and is defined as earnings before interest expense, taxes, depreciation and amortization. We present EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company. Management uses EBITDA to assess performance without regard to our capital structure and as a factor in setting incentive compensation. EBITDA should not be considered in isolation or as a substitute for operating income or other statement of operations items prepared in accordance with GAAP as a measure of our performance. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this prospectus, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

	Fiscal Year
	2008			2009			2010
	(In thousands)
Reconciliation of net loss to EBITDA
Net loss	$	(4,540	)	$	(1,040	)	$	(900	)
Interest expense		8,583			8,406			8,578
Income tax expense (benefit)		—			123			(35	)
Depreciation and amortization		15,569			15,166			12,560
EBITDA	$	19,612		$	22,655		$	20,203

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You should consider carefully 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. Our business, financial condition and results of operations may be 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 depend on retailer and consumer acceptance of our vended water machines.

We are a consumer products company operating in the highly-competitive bottled water market and rely on consumer demand for our vended water. Because potential customers may not be familiar with our vending machines and because we undertake limited marketing, there can be no assurance that consumer acceptance of our product will continue to grow, or that newly installed machines will attract enough customers to be profitable. In addition, if we are unable to respond effectively to the trends affecting the market for bottled water, consumer acceptance of our product may suffer. A failure to grow or maintain consumer acceptance for our vending machines could reduce the profitability of our machines, and could adversely affect our ability to install new machines with existing or potential retail partners.

In addition, if consumers have a negative experience with any brand of vended water, including the water of our competitors, vended water may lose acceptance and our business could be adversely affected.

Our industry is highly competitive, and we might encounter significant competition from new or existing companies entering into the vended water market.

The bottled water industry is highly competitive. If we are unable to respond effectively to competitive threats, our margins and results of operations could be adversely affected.

Our primary competitors in the bottled water market include Nestlé, The Coca-Cola Company, PepsiCo, Dr. Pepper Snapple Group and DS Waters of America. These leading consumer products companies have strong brand presence with consumers, established relationships with retailers and significantly greater financial and other resources than we do. We could lose market share if they, or other large companies, successfully enter the vended water market or if our consumers prefer pre-packaged water over our vended water.

We also face competition within the vended water market from Culligan (now owned by Primo Water Corporation), and from small- to medium-sized operators, although none of these companies combine a national presence and an in-house service force. If a competitor develops, or seeks to develop, a service model similar to ours, we could face increased competition to attract retail partners. In addition to competition within the bottled water industry, the industry itself faces significant competition from other non-alcoholic beverages, including soft drinks, carbonated waters, juices, sport and energy drinks, coffees, teas and spring and municipal tap water.

The loss of a major retail partner would adversely affect us.

We distribute our vended water to consumers through relationships with third-party retailers. Most of our arrangements with our retail partners are evidenced by written contracts which have terms that generally range from three to five years and contain termination clauses as well as automatic renewal clauses. During the term of these agreements, we have the exclusive right to place water vending machines at specified locations. We compete to maintain existing retail accounts and to establish new retail relationships, but we can give no assurance of renewals of any existing contracts or of our ability to enter into new contracts. For example, in fiscal 2010 we lost a retail partner account that represented approximately 550 machines. While we have been able to redeploy the machines previously located with that retail partner, there is no assurance that we would be able to do so, or as to the timing of our ability to do so, if necessary in the future.

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Continued positive relations with our retail partners depend on various factors, including commission rates, customer service, consumer demand and competition. Disruptions in relationships with retailers, including the reduction, termination or adverse modification of a retail relationship, could have a negative effect on our ability to sell our vended water and to maintain our consumer base, which would in turn adversely affect our business and results of operations.

Increased use of “point-of-use” home filtration devices could adversely affect us.

An increase in the use of in-home filtration devices, such as those that attach to faucets or are installed under the sink, could adversely affect demand for our vended water. At this time, in-home filtration devices typically employ a one-step carbon filtration process. While we believe that our vended water is decidedly superior in taste and quality to the water produced by such devices, improvement in such devices could narrow our advantage.

If we are unable to build and maintain our brand image and corporate reputation, our business may suffer.

Our future success depends on our ability to build and maintain our brand image. If we are not able to maintain and enhance our brand, particularly with new retail partners where we may have limited brand recognition, we may be unable to place additional machines at retail locations or attract sufficient numbers of consumers to our machines. Our ability to maintain our reputation is critical to our brand image. Any negative publicity, or any actual or perceived product quality issues, even if false or unfounded, could tarnish the image of our brand and may cause consumers to choose other products.

If any vended water became contaminated, our business could be seriously harmed.

We have adopted quality, environmental, health and safety standards. However, our water vending machines may not meet these standards or our products could otherwise become contaminated. A failure to meet these could result in expensive business interruptions and liability claims. Any of these failures or occurrences, or any allegation of these occurrences, even if unfounded, could negatively affect our business and financial performance. Even if our water does not ever become contaminated, a contamination of any vended water, including the water of our competitors, would be detrimental to the vended water business as a whole.

Electrical outages, localized municipal tap water system shut-downs, “boil water” directives or increases in the cost of electricity or municipal tap water could adversely affect our business.

Our machines depend on a supply of electricity and water to operate. Any electrical outages or cut-off of municipal tap water supplies to our machines or a directive to boil municipal tap water sources for our machines, whether due to national disasters or otherwise, would cause us to lose all revenue from the affected machines during that period and could, in addition, lower subsequent revenues if consumers perceive that there is a risk of contamination in our vended water. Additionally, if electricity or municipal water costs were to increase significantly, our retail partners may request that we pay them a higher commission, which, if granted, would adversely affect our results of operations.

We depend on the expertise of key personnel. If these individuals leave without replacement, our ability to implement our business strategies could be delayed or hindered.

We are dependent on the services of our senior management because of their experience, industry relationships and knowledge of the business. The loss of one or more of our key employees could seriously harm our business, and it may be difficult to find any replacement with the same or similar level of experience or expertise. Competition for these types of personnel is high, and we can give no assurance that we will be able to attract and retain qualified personnel on acceptable terms. Failure to recruit and retain such personnel could adversely affect our business, financial condition, results of operations and planned growth. We do not maintain key person insurance on any employee.

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The distribution of our vended water to consumers relies on the existence and financial health of our retail partners.

Our retail partners, such as food, drug, convenience, mass and other retailers, have faced challenging business conditions as a result of recent economic conditions, and these conditions may continue. We rely on our retail partners in order to access our consumers. If our retail partners close sites or experience disruptions such as strikes or lock-outs, we could lose access to some consumers, and our results of operations could be adversely affected.

Adverse weather conditions could negatively impact our business.

Our business is subject to seasonal fluctuations, with decreased revenues during rainy or cold weather months and increased revenues during dry or hot weather months. In addition, unseasonable or unusual weather may reduce demand and revenues for our products. Variations in demand and revenues could negatively impact the timing of our cash flows and therefore limit our ability to timely service our obligations and pay our indebtedness.

We depend on key management information systems.

We process orders, manage inventory and accounts receivable, maintain customer information and maintain cost-efficient operations through a management information systems (“MIS”) network connecting each of our water vending machines with a central computing system located at our headquarters. 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 to accommodate changes in the amount of our business 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 consumers, loss of retail partners or other business disruptions, all of which could negatively affect our business and financial performance.

Disruption in our supply chain could adversely affect us.

While we generally have multiple suppliers for the frames for our vending machines and for their component parts, including filtration parts, a disruption in our supply chain could adversely affect our ability to assemble new machines and repair, maintain and retrofit existing machines. If we cannot obtain alternative sources of supply or effectively manage a disruption if it occurs, our sales and profitability could be adversely affected, and additional resources could be necessary to restore our supply chain.

Introductions of new products may not prove successful, and future acquisitions and investments may not be successfully integrated, which could disrupt our business or adversely affect our financial condition and results of operations.

We recently began testing self-service ice vending machines, and expect that we may acquire or invest in new product lines, businesses or technologies that we believe would provide a strategic fit with our business or expand our business. Product development, acquisitions and investments are accompanied by 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. In addition, the process of negotiating acquisitions and integrating acquired products, services, technologies, personnel or businesses might result in significant transaction costs, operating difficulties or unanticipated expenditures and might require significant management attention that would otherwise be available for ongoing development of our

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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.

Increases in the price of fuel could have an adverse effect on our results of operations.

While we do not incur fuel costs to transport water, our field service personnel use substantial amounts of fuel in making service visits to our machines. As a result, a meaningful increase in fuel prices could negatively affect our margins and operating cash flows.

Limitations on our ability to utilize our net operating losses may negatively affect our financial results.

We may not be able to utilize all of our net operating losses. As of January 2, 2011, we had net operating losses of approximately $58.8 million for federal income tax purposes, $1.8 million of which will expire in 2012 and the remainder of which will expire at various dates from 2018 through 2030. To the extent available, we will use any net operating loss carryforwards to reduce the U.S. corporate income tax liability associated with our operations. However, if we do not achieve profitability prior to their expiration, we will not be able to fully utilize our net operating losses to offset income. 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 or by changes in stock ownership occurring prior to or following this offering. We have not completed an analysis of the effects of this offering or any such changes in stock ownership. 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.

We may have exposure to greater than anticipated tax liabilities.

We are subject to income tax in the numerous jurisdictions in which we have property or payroll or generate net sales. Increases in income tax rates could reduce our after-tax income from affected jurisdictions.

Adverse economic conditions in the regions in which we operate could negatively impact our financial results.

Current economic conditions, including high levels of unemployment or underemployment, or the effects of higher fuel and food prices on our customers’ shopping budgets, 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; and

•  a negative impact on the ability of our retail partners to timely pay their obligations to us, thus reducing our cash flow.

In addition, adverse economic conditions could negatively affect our vendors’ ability to timely supply materials, or increase the likelihood that our lender may be unable to honor its commitments under our senior revolving credit facility.

Other events or conditions may arise directly or indirectly from global financial events that could negatively impact our business.

We may be unable to manage our growth.

From January 2008 through December 2010, we installed approximately 2,800 net new machines, representing a compound annual growth rate of 5.4%. We anticipate that continued growth will require us to recruit, hire and retain new personnel, including for our in-house national field service organization. We

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cannot be certain that we will be successful in recruiting, hiring or retaining those personnel. Our ability to compete effectively and to manage our future growth will depend on our ability to maintain and improve our operational, financial and management information systems on a timely basis and to expand, train, motivate and manage our work force. If we continue to grow substantially, we cannot be certain that our personnel, systems, procedures and controls will be adequate to support our operations.

We have incurred net losses in the past and may incur net losses in the future.

We have incurred net losses in the past and may incur net losses in the future. We have not been profitable in recent years, and we may not become profitable in the future. Our losses may continue as we incur additional costs and expenses related to branding and marketing, expansion of operations, product development and development of relationships with retail partners. If our expenses exceed our expectations, our financial performance will be adversely affected. If we do not achieve sustained profitability, we may need to raise additional capital in order to continue operations.

Risks Relating to Regulatory and Legal Issues

Our operations are subject to regulation at both the state and federal level.

We are subject to various federal, state and local laws and regulations which require us, among other things, to obtain licenses for our business and water vending machines, to pay annual license and inspection fees, to comply with certain detailed design and quality standards regarding the vending machines and the vended water, and to continuously control the quality of the vended water. Our water vending machines are subject to routine and random regulatory quality inspections. Although we believe we are operating in substantial compliance with these laws and regulations, these laws and regulations and their interpretations and enforcement are subject to change. The enactment of additional or more stringent laws or regulations may cause a disruption in our operations in the future. Failure to comply with such current or future laws and regulations could result in fines against us, a temporary shutdown of our operations or the loss of certification to sell our product.

Licensing or inspection fees payable by us could increase.

We currently pay annual licensing fees and inspection fees to a number of states. Increases in such licensing or inspection fees payable by us could adversely affect us.

Our inability to protect our intellectual property could adversely affect our business and results of operations.

The trade name and trademarks “Glacier Water” and “Glacier Water & Penguin Design” used by us contain the word “Glacier,” which is commonly used and has been registered in connection with other marks and designs by a number of other entities for water and related services. The mark “Glacier Water,” by itself, is considered by the United States Patent and Trademark Office to be generic in relation to water and related services. We believe that no party can claim exclusive rights to “Glacier Water,” and we may claim rights only to stylized forms of the mark or the mark with design elements. We can, however, give no assurance that other entities might assert superior or exclusive rights to the marks and seek to obtain damages from the injunctive relief against us. Therefore, there can be no assurance that our use of the trade name and trademarks “Glacier Water” and “Glacier Water & Penguin Design” will not violate the claimed proprietary rights of others, which could adversely affect our business and results of operations.

Litigation or legal proceedings could expose us to significant liabilities, including product liability claims, and damage our reputation.

We are subject to a risk of legal proceedings and adverse publicity if a consumer is or claims to be harmed from using our products or water vending machines. Any such claim may result in negative publicity, loss of revenues or higher costs associated with the legal proceedings. The costs associated with defending any product liability or other claims, and the payment of damages, could be substantial.

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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 adversely affect our results of operations and financial condition.

We have Canadian operations and are exposed to fluctuations in currency exchange rates and political uncertainties.

We have Canadian operations and may in the future pursue opportunities in other countries. As a result, we are subject to risks associated with doing business internationally, including:

•  changes in foreign currency exchange rates;

•  changes in a country’s economic or political conditions;

•  difficulties enforcing intellectual property and contractual rights; and

•  unexpected changes in regulatory requirements.

To the extent the United States dollar strengthens against the Canadian dollar, or the currency of any other country in which we operate, our foreign revenues and profits will be reduced when translated into United States dollars.

Risks Relating to this Offering, Our Common Stock and Our Indebtedness

There has not been an active public market for our shares in recent years, and an active market may not develop or be sustained, which could limit the liquidity of our common stock.

Prior to this offering, there has not been an active public market for our common stock for several years. Although our stock will be listed on the NASDAQ Global Market, an active public market for our shares may not develop after this offering or, if developed, may not be sustained. The initial public offering price for our common stock was 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. 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 market price of our common stock could be volatile.

The overall market and the price of our common stock may be significantly affected by various factors, including:

•  fluctuations in our quarterly operating results;

•  changes in investors’ perception of our prospects, business risks and the conditions in our industry;

•  changes in, or failure to meet, the earnings estimates and other performance expectations of financial analysts or investors;

•  the level and quality of coverage of our stock by securities or industry analysts;

•  stock transactions by our existing and/or principal stockholders;

•  fluctuations in the stock prices of our competitors or in stock markets in general; and

•  general economic or political conditions.

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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 research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of Glacier, 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 could decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Future sales of our common stock could adversely affect our stock price.

Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock and could impair our ability to raise capital through future offerings of equity or equity-linked securities. After the closing of this offering, we will have           shares of outstanding common stock (           shares if the underwriters exercise their over-allotment option in full). 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, the sale of which will be restricted under the Securities Act.

We, our executive officers and directors and certain stockholders have agreed with the underwriters, subject to certain exceptions, 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 approximately     % of our common stock outstanding, excluding shares issued in this offering. 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. William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc. may, in their 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.

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 will be substantially higher than the net tangible book value per share of our outstanding common stock, which is negative. Purchasers of shares in this offering will experience immediate dilution in the net tangible book value of their shares. Based on the initial public offering price of $      per share, and assuming no exercise of the underwriters’ over-allotment option, dilution per share in this offering will be $      per share. Further, if we issue equity or equity-linked securities to raise additional capital in the future, your ownership interest in Glacier may be diluted and the value of your investment may be reduced. See “Dilution.”

Our principal stockholders may be able to exercise significant influence over matters requiring stockholder approval.

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. As a result, these

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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 could have the effect of delaying or preventing a change of control of Glacier or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders.

Provisions in our charter documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

Provisions in our charter documents and the Delaware General Corporation Law, the state in which we are incorporated, might discourage or delay potential acquisition proposals or make it more difficult for a third party to acquire control of our company, even if such acquisition might be beneficial to our stockholders.

Our amended and restated certificate of incorporation and bylaws provide for various procedural and other requirements that may make the acquisition of Glacier 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 in most circumstances;

•  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; and

•  provide that the board of directors is expressly authorized to make, alter or repeal our bylaws.

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 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.

The payment of dividends is at the sole discretion of the board of directors, and we do not currently intend to pay dividends on our common stock.

Since we have no current plans to pay cash dividends on our common stock, 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.

Our existing revolving credit agreement contains restrictions on our ability to pay dividends, and any deferral in interest payments on our Junior Subordinated Debentures would restrict our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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We will incur increased costs and a greater burden on our management resources as a result of being a publicly-traded company.

As a public company with listed equity securities, we will incur significant legal, accounting and other expenses not presently incurred. We are required to comply with certain laws, regulations and requirements, including provisions of the Sarbanes-Oxley Act of 2002, related Securities and Exchange Commission regulations and requirements of the NASDAQ Stock Market. Compliance with these rules, regulations and requirements may occupy a significant amount of the time of our board of directors, management and officers and may increase our legal and financial compliance costs. We estimate the annual incremental costs to operate as a public company to be between $1.0 million and $2.0 million.

If we do not 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 public company with listed equity 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 difficulty in satisfying the requirements of Section 404 in a timely manner or with adequate compliance 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.

Our indebtedness may restrict our business and operations, reduce our cash flows and restrict our access to sufficient funding to finance desired growth.

As of January 2, 2011, we had outstanding indebtedness of approximately $118.8 million. After giving effect to this offering and the intended use of proceeds, we would have had outstanding indebtedness of approximately $      million as of January 2, 2011, assuming an initial public offering price of $      per share, the mid-point of the estimated price range set forth on the cover of this prospectus. In addition, we expect to have $      million of availability under our anticipated new revolving credit facility following its completion. Having this amount of indebtedness makes us more vulnerable to adverse changes in general economic, industry and competitive conditions and places us at a disadvantage compared to our competitors that may have greater financial resources. If we do not have sufficient earnings to service our debt, we may need to refinance all or part of that debt, sell assets, borrow more money or sell securities, which we may not be able to do on favorable terms or at all.

The terms of our credit facilities include customary events of default and covenants that limit us from taking certain actions without obtaining the consent of the lenders. In addition, our anticipated revolving credit facility requires us to maintain certain financial ratios and restricts our ability to incur additional indebtedness. A breach of the provisions of our credit facilities, including any inability to comply with the required financial ratios, could result in an event of default under our credit facilities. If an event of default occurs under our credit facilities, our lenders could accelerate the repayment of amounts outstanding, plus accrued and unpaid interest, enforce their security interest in substantially all of our assets, and terminate any obligation to make further extensions of credit under our revolving credit facility.

Volatility and disruption in the global capital and credit markets could negatively affect our liquidity and increase our costs of borrowing.

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. Continued or increased volatility and disruption in the capital and credit markets may impair our liquidity or increase our costs of borrowing.

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SPECIAL 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 when or whether 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:

•  economic trends globally and in the markets in which we operate;

•  competition in the industry in which we compete;

•  growth in the market for bottled water relative to municipal tap water or other beverages;

•  consumer preference toward our vended water over alternative water;

•  consumer perception of the safety of our water;

•  consumer and retailer acceptance of our brand and our vended water machines;

•  our ability to maintain and grow existing retail relationships and develop new retail relationships;

•  our expectations regarding the placement of new water vending machines and our ability to maintain and grow our leading market position and exclusive in-house national field service organization;

•  our ability to maintain supplier relationships or identify substitute sources of supply for the components used in our water vending machines;

•  our ability to maintain customer relationships and commission rates and predict commission revenue;

•  our ability to maintain our workforce and provide superior customer service;

•  our ability to leverage our existing infrastructure to achieve growth while limiting the need for additional capital expenditures;

•  our intention to offer new products and services in the future;

•  the continuing development, innovation and placement of our vended water machines;

•  the effects of adverse weather conditions in the markets in which we operate;

•  the reliability and sufficiency of our management information systems;

•  our ability to use any net operating loss carryforwards before they expire;

•  the effects of changes in fuel prices;

•  our ability to attract and retain key personnel;

•  our projections regarding additional costs connected to the growth of our business and costs related to becoming a public company;

•  our executive compensation policies and the level of executive compensation;

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•  our belief that our capital expenditure requirements and liquidity needs will be met;

•  our intended uses of the proceeds from this offering;

•  our leverage and ability to service our debt; and

•  legislative or regulatory requirements.

The foregoing examples should not be construed as exhaustive and should be read together with the other cautionary statements included in this prospectus, including in particular the risks described in the section entitled “Risk Factors.” If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results or events could differ materially from the forward-looking statements we make. Any forward-looking statements you read in this prospectus reflect our views as of the date of this prospectus with respect to future events. 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.

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $      million (or approximately $      million if the underwriters exercise their over-allotment option in full), based on an assumed initial public offering price of $      per share, which is the mid-point of the estimated price range set forth on the cover of this prospectus. Our estimated net proceeds from the offering represent the amount we expect to receive after the underwriting discount and our payment of the other expenses of the offering. We intend to use the net proceeds we receive from this offering for the following purposes:

•  to repay $      (or $      if the underwriters exercise their over-allotment option in full) principal amount of our bank indebtedness, which currently has an interest rate of          ;

•  to redeem $      (or $      if the underwriters exercise their over-allotment option in full) principal amount of our 9.0625% Junior Subordinated Debentures due 2028; and

•  the remaining $      (or $      if the underwriters exercise their over-allotment option in full) for working capital and general corporate purposes.

A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) the net proceeds to us from the offering by approximately $      (or approximately $      if the underwriters exercise their over-allotment option in full), assuming the number of shares sold by us in the offering, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. A 1.0 million share increase (decrease) in the number of shares of common stock sold by us in this offering would increase (decrease) the net proceeds to us from this offering by approximately $     , assuming an initial offering price per share equal to the mid-point of the estimated price range set forth on the cover of this prospectus.

Pending use of the net proceeds of this offering, we intend to invest those proceeds in short-term, interest-bearing investment grade securities.

We will not receive any proceeds from the shares sold by the selling stockholders.

DIVIDEND POLICY

Although we have paid dividends on our common stock in the past, we have not paid a dividend since December 2009, and 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 on various factors, including our results of operations, financial condition, capital requirements, contractual restrictions, outstanding indebtedness, investment opportunities and other factors that our board of directors deems relevant. Our existing revolving credit agreement contains restrictions on our ability to pay dividends, and any deferral in interest payments on our Junior Subordinated Debentures would restrict our ability to pay dividends. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” As a result, you will likely need to sell your shares of common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.

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CAPITALIZATION

The following table sets forth our capitalization as of January 2, 2011:

•  on an actual basis; and

•  on an as adjusted basis, giving effect to the sale of          shares by us in this offering and the use of our net proceeds from the offering as described in “Use of Proceeds.”

You should read this table in conjunction with “Use of Proceeds,” “Selected Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Capital Stock” and the consolidated financial statements and the notes thereto included elsewhere in this prospectus.

	As of January 2, 2011
	Actual			As Adjusted
	(Unaudited; in thousands, except share and per share data)
Cash and cash equivalents(1)	$	3,692		$
Long-term debt	$	87,629		$
Line of credit		31,153
Total indebtedness		118,782
Stockholders’ equity (deficit):
Preferred Stock, $0.01 par value; liquidation preference $100 per share. Authorized, 100,000 shares; issued and outstanding, 0 shares		—
Common stock, $0.01 par value. Authorized, 10,000,000 shares; issued and outstanding, 2,720,048 shares actual, and           shares, as adjusted		44
Additional paid-in capital		13,648
Accumulated deficit		(36,645	)
Treasury stock, at cost		(32,562	)
Accumulated other comprehensive income		430
Total stockholders’ equity (deficit)		(55,085	)
Total capitalization	$	63,697		$

(1) A $1.00 increase (decrease) in the assumed initial public offering price of $      per share would increase (decrease) cash by $     , and would increase (decrease) each of total stockholders’ equity and total capitalization by $      assuming the number of shares sold by us in the offering, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. An increase (decrease) of 1.0 million shares in the number of shares offered by us would increase (decrease) additional paid-in capital by $      and would increase (decrease) each of total stockholders’ equity and total capitalization by $     , assuming an initial public offering price per share equal to the mid-point of the estimated price range set forth in the cover of this prospectus. The as adjusted information discussed above is illustrative only and will change based on the actual initial offering price and other terms of this offering.

The shares outstanding data in the preceding table as of January 2, 2011:

•  excludes an aggregate of           shares of common stock issuable upon exercise of outstanding stock options under our 1994 Stock Incentive Plan;

•  excludes an aggregate of           shares of common stock available for issuance under our 2011 Stock Incentive Plan; and

•  assumes no exercise of the underwriters’ over-allotment option.

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DILUTION

If you invest in our common stock, your ownership interest will suffer an immediate dilution in net tangible book value per share. Dilution is the amount by which the initial public offering price paid by purchasers of shares of our common stock exceeds the net tangible book value per share of our common stock after the offering. Net tangible book value per share is determined by dividing our net tangible book value, which is the amount of our total tangible assets reduced by our total liabilities, by the aggregate number of shares of common stock outstanding. As of January 2, 2011, our net tangible book value was ($66.6) million and our net tangible book value per share was $     . After giving effect to our sale of shares in this offering at an initial public offering price of $      per share, which is the mid-point of the estimated price range set forth on the cover of this prospectus, our as adjusted net tangible book value as of January 2, 2011 would have been approximately $      , 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:

Assumed initial public offering price per share		$
Net tangible book value per share as of January 2, 2011	$
Increase in net tangible book value per share attributable to new investors in this offering
As adjusted net tangible book value per share after this offering
Dilution per share to new investors		$

A $1.00 increase (decrease) in the initial public offering price per share would increase (decrease) our adjusted net tangible book value per share after this offering by approximately $      (or approximately $      if the underwriters exercise their over-allotment option in full), assuming the aggregate number of shares sold in the offering, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. A 1.0 million share increase (decrease) in the number of shares of common stock sold by us in this offering would increase (decrease) our adjusted net tangible book value per share after this offering by approximately $     , assuming an initial public offering price per share equal to the mid-point of the established price range set forth on the cover of this prospectus.

The following table summarizes, on the as adjusted basis described above as of January 2, 2011, 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 the initial public offering price of $      per share and before deducting the underwriting discount and estimated offering expenses payable by us.

	Shares Purchased				Total Consideration
	Number	Percent			Amount	Percent			Average Price Per Share
	($ in thousands, other than per share amounts)
Existing stockholders				%	$			%	$
New investors(1)				%	$			%	$
Total			100	%	$		100	%	$

(1) The number of shares disclosed for the existing stockholders includes          shares being sold by the selling stockholders in this offering. The number of shares disclosed for the new investors does not include those shares.

If the underwriters exercise their over-allotment option in full, the number of shares held by the existing stockholders would decrease 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 decrease to     % of the total number of shares of our common stock outstanding after this offering.

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SELECTED FINANCIAL AND OPERATING DATA

The following tables set forth our consolidated statements of operations, balance sheet and other financial and operating data as of the dates and for each of the periods indicated. The selected consolidated statements of operations and the other financial data for the fiscal years ended December 28, 2008, January 3, 2010 and January 2, 2011, and the selected balance sheet data as of January 3, 2010 and January 2, 2011 were derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations and other financial data for the fiscal years ended December 31, 2006 and December 30, 2007 and the selected consolidated balance sheet data as of December 31, 2006, December 30, 2007 and December 28, 2008 were derived from our audited consolidated financial statements that are not included in this prospectus. Our historical results are not necessarily indicative of future performance or results of operations.

We use a fiscal year of 52 or 53 weeks ending on the Sunday closest to December 31st. The fiscal year ended January 3, 2010 consisted of 53 weeks, or 371 days, and the fiscal years ended December 31, 2006, December 30, 2007, December 28, 2008 and January 2, 2011 consisted of 52 weeks, or 364 days.

Summary Consolidated Statements of Operations Data:

	Fiscal Year Ended
	December 31,			December 30,			December 28,			January 3,			January 2,
	2006			2007			2008			2010			2011
	(Fiscal 2006)			(Fiscal 2007)			(Fiscal 2008)			(Fiscal 2009)			(Fiscal 2010)
	($ in thousands, except per share data)
Revenues	$	87,154		$	90,376		$	94,711		$	103,803		$	100,056
Cost of revenues:
Operating expenses		53,871			56,946			60,703			66,097			65,704
Depreciation and amortization		15,829			15,835			15,569			15,166			12,560
Total cost of revenues		69,700			72,781			76,272			81,263			78,264
Gross profit		17,454			17,595			18,439			22,540			21,792
Selling, general and administrative expenses		12,877			13,728			14,515			15,051			14,149
Income from operations		4,577			3,867			3,924			7,489			7,643
Other expenses (income):
Interest expense		9,285			9,032			8,583			8,406			8,578
Gain on early retirement of debt		—			—			(119	)		—			—
Total other expense		9,285			9,032			8,464			8,406			8,578
Loss before income taxes		(4,708	)		(5,165	)		(4,540	)		(917	)		(935	)
Income tax expense (benefit)		—			—			—			123			(35	)
Net loss	$	(4,708	)	$	(5,165	)	$	(4,540	)	$	(1,040	)	$	(900	)
Basic and diluted net loss per share	$	(1.93	)	$	(1.95	)	$	(1.68	)	$	(0.38	)	$	(0.33	)
Weighted average shares used in calculation		2,434,114			2,642,784			2,702,790			2,711,836			2,716,873
Cash dividend per common share	$	0.80		$	1.80		$	1.50		$	1.00		$	—

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Summary Consolidated Balance Sheet Data:

	As of
	December 31,			December 30,			December 28,			January 3,			January 2,
	2006			2007			2008			2010			2011
	(In thousands)
Cash and cash equivalents	$	3,841		$	3,120		$	3,268		$	3,710		$	3,692
Total assets(1)		82,128			74,437			72,033			71,498			73,845
Long-term debt(1)		87,629			87,629			87,629			87,629			87,629
Line of credit		19,599			19,197			26,263			28,173			31,153
Total liabilities		117,263			117,182			122,908			125,996			128,930
Total stockholders’ deficit		(35,135	)		(42,745	)		(50,875	)		(54,498	)		(55,085	)

Other Data:

	Fiscal Year
	2006		2007		2008		2009		2010
Machines in operation at beginning of period		15,565		15,861		16,273		17,179		18,267
Net machines added during period		296		412		906		1,088		807
Machines in operation at end of period		15,861		16,273		17,179		18,267		19,074
EBITDA (in thousands)(2)	$	20,406	$	19,702	$	19,612	$	22,655	$	20,203

(1)

We have a beneficial interest in $6.3 million of the Junior Subordinated Debentures included as long-term debt on our consolidated balance sheet. The beneficial interest is reflected as a long-term investment on our consolidated balance sheet and is included in total assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Indebtedness” and Notes 1(h) and 3(a) to Consolidated Financial Statements.

(2)

EBITDA is a non-GAAP measure and is defined as earnings before interest expense, taxes, depreciation and amortization. We present EBITDA as a supplemental performance measure because we believe that it facilitates operating performance comparisons from period to period and company to company. Management uses EBITDA to assess performance without regard to our capital structure and as a factor in setting incentive compensation. EBITDA should not be considered in isolation or as a substitute for operating income or other statement of operations items prepared in accordance with GAAP as a measure of our performance. EBITDA does not take into account our debt service requirements and other commitments, including capital expenditures, and, accordingly, is not necessarily indicative of amounts that may be available for discretionary uses. In addition, EBITDA, as presented in this prospectus, may not be comparable to similarly titled measures reported by other companies due to differences in the way that these measures are calculated.

	Fiscal Year
	2006			2007			2008			2009			2010
	(In thousands)
Reconciliation of net loss to EBITDA
Net loss	$	(4,708	)	$	(5,165	)	$	(4,540	)	$	(1,040	)	$	(900	)
Interest expense		9,285			9,032			8,583			8,406			8,578
Income tax expense (benefit)		—			—			—			123			(35	)
Depreciation and amortization		15,829			15,835			15,569			15,166			12,560
EBITDA	$	20,406		$	19,702		$	19,612		$	22,655		$	20,203

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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 Financial and Operating 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 in “Risk Factors.”

Overview

We are the leading provider of high-quality, great-tasting filtered drinking water dispensed directly to consumers through state-of-the-art, self-service vending machines located at major retailers in the United States and Canada. We operate an extensive network of coin-operated and non-coin-operated water vending machines supported by the only in-house national field service organization in the industry, providing our retail partners with compelling commission streams and incremental customer traffic. We have a highly diversified retail partner base consisting of food, drug, convenience, mass and other retailers. Among our retail partners are Circle-K, CVS, Family Dollar, H-E-B, Kroger, Publix, Rite Aid, Safeway, SuperValu, Wal-Mart, Walgreens and Winn-Dixie.

As a result of our brand recognition, high-quality product, reliable service and compelling value proposition, we have long-term relationships with key national and regional retail accounts, many of which extend 20 years or more. Our solution requires no upfront investment from our retail partners and enables them to monetize typically unused retail space. Because our consumers make frequent visits to our retail partners’ locations to use our machines, the retailers benefit from incremental customer traffic and predictable commission revenue while incurring no labor, inventory or shrinkage expense. None of our retail partners accounted for more than 10% of our fiscal 2010 revenues, and our top 10 retail relationships accounted for less than 50% of our fiscal 2010 revenues.

We charge an average of $0.26 per gallon at our coin-operated water machines located outside of the retail location and $0.38 per gallon at our machines located inside, while the price of bottled water sold off the shelf in retail locations is often three or more times the price of our vended water. By filtering and dispensing water at the point of sale, we are able to avoid the costs of bottling, packaging, shipping and delivery, and the associated fuel costs. In addition, by eliminating packaging and removing the supply chain, vended water significantly reduces the environmental impact associated with other forms of bottled water.

We have focused in recent years on building a national organization and scalable platform designed to accommodate accelerated growth. In 2004 and 2005, we invested over $30 million in machine upgrades, incorporating state-of-the-art functionality and appearance enhancements for improved ease of use and brand recognition. From January 2008 through December 2010, we installed approximately 2,800 net new machines, representing a compound annual growth rate of 5.4%. Over that same time period, our same store sales growth has averaged 4.2%. In fiscal 2010, our machines vended approximately 345 million gallons of filtered drinking water. As of May 1, 2011, we owned and operated approximately 19,600 self-service vending machines installed throughout 42 states and Canada, which we believe represent approximately 60% of all industry units.

Outlook

Building on the foundation of our scalable organization and infrastructure, we believe we are poised to significantly accelerate our current growth trajectory and benefit from highly attractive industry dynamics, greater productivity from thousands of installed machines as they mature and significant capital investments over the last few years. In addition, we believe we have an unmatched national in-house platform with capacity to meet the growing demands of customers in our markets.

We plan to expand our installed base to pursue what we believe are a compelling unit economic model and significant location opportunities in new and existing channels and geographies. We have a large

25

backlog of near-term and longer-term location opportunities. We plan to take advantage of these growth opportunities by leveraging our national service infrastructure and the broadest offering of state-of-the-art equipment in the industry. We believe there will be opportunities to increase retail pricing while maintaining our value positioning relative to other bottled water offerings. We also believe there is an additional opportunity to leverage our expertise in vending solutions, our retail partnerships and our in-house service infrastructure by expanding into attractive and growing business segments, including packaged ice and ready-to-drink beverages.

How We Assess the Performance of Our Business

In assessing the performance of our business, we consider a variety of operational and financial measures. The key measures for determining how our business is performing are revenues, same store sales, new machine placements, gross profit and cost of revenues and selling, general and administrative expenses.

The following table presents our revenues, same store sales growth, machines in operation at period end and net machines added for the periods presented.

	Fiscal Year Ended
	December 28,		January 3,		January 2,
	2008		2010		2011
	($ in thousands)
Revenues	$	94,711	$	103,803	$	100,056
Same store sales growth		6.3%		6.5%		(0.3%)
Machines in operation at period end		17,179		18,267		19,074
Net machines added during period		906		1,088		807

Revenues

Our revenues consist primarily of sales of filtered drinking water to consumers through our proprietary, company owned, self-service water vending machines. Our machines are placed at retailers throughout North America and include many of the leading retailers across key segments, including food, drug, convenience and mass channels. We recognize revenue from the sale of our product at the point of purchase, when a consumer purchases our product from a vending machine. The gross retail purchase price is recognized as revenue, and the commissions paid by us to retailers are treated as operating expenses. In some retail stores, we also distribute for sale empty reusable bottles for use with our vending machines.

Same Store Sales

We calculate same store sales with reference only to sales of vended water in the United States and include a location in same store sales for two comparative periods if it has been in operation for the entirety of the two periods. Non-same store sales are all sales not included in same store sales. There may be variations in the way in which other companies calculate “same store” sales. As a result, data regarding our same store sales may not be comparable to similar data made available by other companies in our industry, particularly other companies that do not include a location in same store sales until that location has been in operation for a minimum launch period.

Measuring the change in period-over-period same store sales allows us to evaluate how our installed base is performing. We believe same store sales growth is an important indication of organic growth; over the past three years (fiscal 2008 through fiscal 2010), we have experienced average same store sales growth of 4.2%. Various factors affect same store sales, including:

•  consumer preferences, buying trends and overall economic trends;

•  the rate at which our existing and new machines mature;

•  weather, including the ambient temperature as compared to the historical averages;

•  changes in competition;

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•  changes in pricing levels and average unit price;

•  the level of service that we provide to our machines; and

•  general consumer traffic at the retail locations at which our machines are installed.

In general, we expect the volume of sales of a machine to increase as its location matures. Typically the longer a machine is installed at a particular location and consumers develop familiarity with the location and the product, the volume of sales increases. With approximately 3,300 net new machines installed from January 2008 through April 2011, nearly all of these placed at unique locations, we believe that we are well positioned to grow our same store sales as these locations continue to mature. Importantly, same store sales can be affected by both improving the average vends per machine or through increasing the pricing per vend. We believe that the combination of our recently deployed locations maturing and the opportunity to increase retail pricing while maintaining our value positioning relative to other bottled water offerings positions us for long-term same store sales growth.

New Machine Placements

Placing machines in new locations is an important part of our growth strategy. We believe we are poised to significantly accelerate our current growth trajectory in large part through increasing the placement of machines in new locations. On a net basis, from January 2008 through April 2011, we have installed approximately 3,300 incremental machines. We have a large backlog of near-term and longer-term location opportunities. In fiscal year 2010, we entered into contracts that give us access to more than 10,000 new locations across several retail channels, including drug stores, dollar stores and other retailers. We are evaluating these potential locations carefully and cannot at this time predict how many machines we will install at these new locations. We plan to take advantage of these growth opportunities by leveraging our national service infrastructure and the broadest offering of state-of-the-art equipment in the industry.

Except for the loss of a single customer in fiscal 2010, accounting for approximately 550 machines, we have not historically experienced significant discontinuation of locations. Our retail relationships are generally long-term in nature and are typically evidenced by multi-year contracts. Additionally, unlike traditional retail operations, we have the ability to redeploy our machines should we decide to discontinue a location. This enables us to leverage our capital invested in a machine by relocating it to a more desirable location.

Gross Profit and Cost of Revenues

Gross profit equals our revenues minus our cost of revenues. Cost of revenues include commissions to retailers based on our revenues, the costs associated with servicing the water vending machines (such as wages and benefits for our in-house service professionals, vehicle expenses and fuel and filters and other consumable components of our machines) and depreciation and amortization. In general, we do not pay for water or electricity for our vending locations, as the commissions we pay our retail partners are intended to compensate them for these components.

We believe that we have the capacity to meet the growing demands of customers in our markets with our existing national in-house service platform. As we expand our machine placements, we expect our operating expenses to increase in the aggregate, but on a per machine basis, we expect to gain leverage with respect to servicing costs as we better utilize our existing national in-house platform.

Depreciation and Amortization

Depreciation and amortization expense represents primarily a combination of both depreciation associated with vending machines and their installation and amortization of prepaid contract rights. Vending machines are generally depreciated over 13 years while installation costs are depreciated over five years, which is the typical contractual period with retailers. In 2004 and 2005, we invested approximately $30 million upgrading our fleet of machines. This investment was depreciated over five years; accordingly, we experienced

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a sharp decline in depreciation expense in fiscal year 2010. In periods during which we are increasing deployment of machines, depreciation expense will generally increase.

Selling, General and Administrative Expenses

Our selling, general and administrative (“SG&A”) expenses consist primarily of wages, salaries and other employee benefits for our managerial, administrative and sales personnel and other overhead items. As we expand our machine placements we expect to leverage our existing SG&A cost basis. However, we do expect an increase in our administrative expenses as a result of the additional costs related to this offering and our subsequent status as a public reporting company. We estimate the annual incremental costs to operate as a public company to be between $1.0 million and $2.0 million.

Corporate Tax

As of January 2, 2011, we had net operating losses of approximately $58.8 million for federal income tax purposes and $16.8 million for California income tax purposes. These losses expire at various dates from 2011 through 2030. To the extent available, we intend to use any net operating loss carryforwards to reduce the federal and state income tax liabilities associated with our operations. See “Critical Accounting Policies — Valuation of Deferred Income Taxes” and Note 6 to the Consolidated Financial Statements for information concerning possible limitations on the use of net operating loss carryforwards.

Other Items Related to This Offering

We had deferred financing costs, net, of $4.4 million as of January 2, 2011. In connection with the repayment of a portion of our outstanding indebtedness with the proceeds of this offering as described under “Use of Proceeds,” we expect that we will recognize a non-cash charge in the quarter in which this offering is consummated of approximately $      million to reduce our deferred financing costs, net, assuming an initial public offering price of $      per share, the mid-point of the estimated range set forth on the cover of this prospectus.

In addition, in connection with this offering we expect to grant options to purchase      shares of our common stock to our executive officers and certain other employees with an exercise price equal to the initial public offering price. We anticipate that we will recognize approximately $      to $      million of stock-based compensation expense as a result of these grants, which will be recognized over the     -year vesting period applicable to these options.

As discussed above, we also estimate that we will incur annual incremental costs to operate as a public company of $1.0 million to $2.0 million.

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Results of Operations

The following table sets forth our results of operations for the periods indicated:

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
	($ in thousands)
Revenues	$	94,711		$	103,803		$	100,056
Cost of revenues:
Operating expenses		60,703			66,097			65,704
Depreciation and amortization		15,569			15,166			12,560
Total cost of revenues		76,272			81,263			78,264
Gross profit		18,439			22,540			21,792
Selling, general and administrative expenses		14,515			15,051			14,149
Income from operations		3,924			7,489			7,643
Other expenses (income):
Interest expense		8,583			8,406			8,578
Gain on early retirement of debt		(119	)		—			—
Total other expense		8,464			8,406			8,578
Loss before income taxes		(4,540	)		(917	)		(935	)
Income tax expense (benefit)		—			123			(35	)
Net loss	$	(4,540	)	$	(1,040	)	$	(900	)

The following table sets forth our results of operations expressed as a percentage of revenues for the periods indicated:

	Fiscal Year Ended
	December 28,			January 3,			January 2
	2008			2010			2011
Revenues		100.0	%		100.0	%		100.0	%
Cost of revenues:
Operating expenses		64.1			63.7			65.7
Depreciation and amortization		16.4			14.6			12.6
Total cost of revenues		80.5			78.3			78.2
Gross profit		19.5			21.7			21.8
Selling, general and administrative expenses		15.3			14.5			14.1
Income from operations		4.1			7.2			7.6
Other expenses (income):
Interest expense		9.1			8.1			8.6
Gain on early retirement of debt		(0.1	)		—			—
Total other expense		8.9			8.1			8.6
Loss before income taxes		(4.8	)		(0.9	)		(0.9	)
Income tax expense (benefit)		—			0.1			(0.0	)
Net loss		(4.8	%)		(1.0	%)		(0.9	%)

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Comparison of Fiscal Year 2010 to Fiscal Year 2009

Revenues

Revenues decreased $3.7 million, or 3.6%, to $100.1 million in fiscal year 2010 from $103.8 million in fiscal year 2009, which included an additional 53^rd week ended on January 3, 2010. The overall decrease in revenues resulted from abnormally cold temperatures throughout much of the United States, the relocation of approximately 550 machines attributed to the loss of a single customer and the 53^rd week, which contributed $1.5 million in additional revenue in fiscal year 2009. The decrease in revenues was partially offset by 807 more machines on location in fiscal year 2010 compared to fiscal year 2009 and the maturing of newer machine placements. Same store sales decreased 0.3% in fiscal year 2010 compared to fiscal year 2009 for the reasons noted above. Same store sales were $85.1 million, or 85.1%, of $100.1 million revenues generated in fiscal year 2010.

Operating Expenses

Operating expenses decreased $0.4 million, or 0.6%, to $65.7 million in fiscal year 2010 from $66.1 million in fiscal year 2009. This decrease was the result of a 2.2% decrease in commissions as a result of a decrease in revenues offset by a 4.7% net increase in labor and benefits, replacement parts and fuel expenses to support the growth in machines. As a percentage of revenues, operating expenses increased 200 basis points to 65.7% in fiscal year 2010 from 63.7% in fiscal year 2009.

Depreciation and Amortization

Depreciation and amortization decreased $2.6 million, or 17.2%, to $12.6 million in fiscal year 2010 from $15.2 million in fiscal year 2009, as depreciation from new capital expenditures was less than the run-off of depreciation associated with significant investments in vending machines and machine upgrades during 2004 and 2005. Depreciation and amortization as a percentage of revenues decreased 200 basis points to 12.6% in fiscal year 2010 from 14.6% in fiscal year 2009.

Gross Profit

Gross profit decreased $0.7 million, or 3.3%, to $21.8 million in fiscal year 2010 from $22.5 million in fiscal year 2009. As a percentage of revenues, gross profit margin increased 10 basis points to 21.8% in fiscal year 2010 from 21.7% in fiscal year 2009, as a result of the above factors.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $0.9 million, or 6.0%, to $14.1 million in fiscal year 2010 from $15.1 million in fiscal year 2009, primarily as the result of a reduction in incentive compensation expense. As a percentage of revenues, selling, general and administrative expenses decreased 40 basis points to 14.1% in fiscal year 2010 from 14.5% in fiscal year 2009.

Interest Expense

Interest expense increased by $0.2 million, or 2.0%, to $8.6 million in fiscal year 2010 from $8.4 million in fiscal year 2009. The increase was attributable to an increase in borrowing under the revolving credit facility and an increase in the interest rate paid from 3.0% to 4.0% effective July 2010.

Net Loss

Net loss improved by $0.1 million to a net loss of $0.9 million in fiscal year 2010 from a net loss of $1.0 million in fiscal year 2009 due to the factors discussed above.

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Comparison of Fiscal Year 2009 to Fiscal Year 2008

Revenues

Revenues increased $9.1 million, or 9.6%, to $103.8 million in fiscal year 2009, which included an additional 53^rd week ended on January 3, 2010, from $94.7 million in fiscal year 2008. The overall increase in revenues resulted from a greater number of machines on location and an increase in same store sales growth across existing locations. The 53^rd week contributed $1.5 million in additional revenue in fiscal year 2009. Same store sales increased 6.5% in fiscal year 2009 compared to fiscal year 2008. Same store sales were $87.3 million, or 84.1%, of $103.8 million revenues generated in fiscal year 2009. We also installed 1,088 net new machines in fiscal year 2009.

Operating Expenses

Operating expenses increased $5.4 million, or 8.9%, to $66.1 million in fiscal year 2009 from $60.7 million in fiscal year 2008. The increase was the result of a 9.7% increase in commissions as a result of increased revenues and a 10.5% increase in labor and benefits and replacement parts to support the growth in machines. As a percentage of revenues, operating expenses decreased 40 basis points to 63.7% in fiscal year 2009 from 64.1% in fiscal year 2008.

Depreciation and Amortization

Depreciation and amortization decreased by $0.4 million, or 2.6%, to $15.2 million in fiscal year 2009 from $15.6 million in fiscal year 2008, as depreciation from new capital expenditures was less than the run-off of depreciation associated with prior investments in vending machines and machine upgrades. As a percentage of revenues, depreciation and amortization decreased 180 basis points to 14.6% for fiscal year 2009 as compared to 16.4% in fiscal year 2008.

Gross Profit

Gross profit increased $4.1 million, or 22.2%, to $22.5 million in fiscal year 2009 from $18.4 million in fiscal year 2008. As a percentage of revenues, gross profit margin increased 220 basis points to 21.7% in fiscal year 2009 from 19.5% in fiscal year 2008, as a result of the above factors.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $0.5 million, or 3.7%, to $15.1 million in fiscal year 2009 from $14.5 million in fiscal year 2008, which was primarily attributable to a 7.0% increase in labor and benefit costs. As a percentage of revenues, selling, general and administrative expenses decreased 80 basis points to 14.5% in fiscal year 2009 from 15.3% in fiscal year 2008 as a result of improved operating leverage.

Interest Expense

Interest expense decreased by $0.2 million, or 2.1%, to $8.4 million in fiscal year 2009 from $8.6 million in fiscal year 2008, which was attributable to lower average interest rates on the revolving credit facility offset by slightly higher outstanding balances.

Net Loss

Net loss improved by $3.5 million to a net loss of $1.0 million in fiscal year 2009 from a net loss of $4.5 million in fiscal year 2008 due to the factors discussed above.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base

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these estimates and assumptions, which we believe to be valid and reasonable under the circumstances, upon historical experience, projected information, and existing, known circumstances. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, allowance for doubtful accounts, repair parts, valuation of goodwill, depreciable useful lives, valuation of long-lived assets and income taxes. Actual results could differ from these estimates. Specifically, management must make estimates in the following areas:

Revenue Recognition

We recognize revenue from the sale of our product at the point of purchase, which occurs when the customer vends the water and pays for the product. As it is impractical to visit all machines at the end of each reporting period, we estimate our revenue from the last time each machine was serviced until the end of the reporting period, based on the most current daily volume of each machine. For the years ended December 28, 2008, January 3, 2010 and January 2, 2011, we recorded approximately $2.6 million, $2.8 million and $2.9 million, respectively, of such estimated revenues, which for each year represents an average of approximately 12 days per machine.

Allowance for Doubtful Accounts

We record accounts receivable for revenues generated by non-coin machines. Such revenues are collected by the retailers and remitted to us. We provide a reserve against receivables for estimated losses that may result from a retailer’s inability to pay. We determine the amount of the reserve by analyzing uncollected accounts, aged receivables, historical losses and the retailer’s creditworthiness. Amounts later determined and specifically identified to be uncollectible are charged or written off against this reserve. Accounts receivable totaled $1.7 million and the allowance for doubtful accounts was $64,000 at January 2, 2011. This allowance is consistent with our historical amounts reserved.

Repair Parts

Repair parts are stated at cost (moving weighted average) and represent machine parts used to maintain vending machines in operation. Management reviews repair parts on a regular basis for excess, obsolete and impaired items based on estimated future usage. The likelihood of any material write-down is dependent on future machine repairs or new machine developments. Historically, we have not experienced material write-offs in repair parts due to our ability to use these parts in a variety of our vending machine models. Repair parts were valued at $3.4 million at January 2, 2011.

Valuation of Goodwill

In accordance with accounting guidance on goodwill, we perform an annual impairment analysis to assess the recoverability of goodwill on the last day of each fiscal year. Goodwill is considered to be impaired if it is determined that its carrying value exceeds its fair value. In addition to the annual impairment analysis, an interim analysis is required if an event occurs or circumstances change that would more likely than not reduce the fair value below its carrying value. Assessing the impairment of goodwill requires us to make assumptions and judgments regarding the fair value of our net assets. We estimate fair value using estimates of future cash flows, discount rates, growth rates, and other assumptions. We have completed our annual evaluation for the impairment of goodwill as of January 2, 2011 and have determined that no impairment existed as of that date. The net book value of goodwill totaled $7.1 million as of January 2, 2011.

Depreciable Useful Lives

We own all of the vending machines we operate. Property and equipment is recorded at cost and is depreciated using the straight-line method over the estimated useful lives of the asset. Vending equipment is estimated to have a useful life of 5 to 13 years and is generally depreciated to a 10% salvage value. We continually assess the useful lives of our vending equipment and other property and equipment for appropriateness. The salvage value is an estimate of the replacement value of the components expected to be recovered upon disposal of the machine. Costs associated with installing vending equipment are capitalized and depreciated over five years. Other equipment, furniture and fixtures have an estimated useful life of three to

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ten years. Leasehold improvements are given an estimated useful life of the shorter of its estimated life or the term of the lease. All maintenance, repair and refurbishment costs are charged to operations as incurred. Additions and major improvements are capitalized.

Valuation of Long-Lived Assets

Included in our long-lived assets are property and equipment and definite-lived intangible assets. Long-lived assets are reviewed for impairment when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Factors that would indicate potential impairment may include, but are not limited to, significant decreases in the market value of the long-lived asset, a significant change in the long-lived assets’ physical condition, and operating or cash flow losses associated with the use of the long-lived asset. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. An impairment loss would be recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group 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 or asset group. Based on their similar characteristics and interchangeability at various locations, we evaluate our machines for impairment at the group level. In the fiscal years ended December 28, 2008, January 3, 2010, and January 2, 2011, there has been no impairment of long-lived assets recorded. At January 2, 2011, the net book value of identifiable intangible assets that are subject to amortization totaled $14,000 and the net book value of property and equipment totaled $45.3 million. Significant judgments and estimates by management are required to project cash flows and, if required, estimate the fair value of the long-lived assets. The estimated future cash flows are based upon, among other things, our strategic plans with regard to our business and operations; assumptions about expected future operating performance and the interpretation of current and future economic indicators. To the extent that the judgments used by us to calculate our future cash flows prove to be inaccurate or there are significant changes in market conditions, it is possible that our conclusions regarding long-lived asset impairment could change.

Valuation of Deferred Income Taxes

As of January 2, 2011, we had federal and California net operating loss carryforwards of $58.8 million and $16.8 million, respectively. Of the $58.8 million federal net operating loss carryforwards, $1.8 million will expire in 2012, and the remainder will expire at various dates from 2018 through 2030. The California net operating loss carryforwards will expire at various dates from 2011 through 2030. In addition, we have federal and California excess tax benefit carryovers of $9.8 million and $3.6 million, respectively, related to stock option deduction windfalls that can only be realized in additional paid-in capital to the extent they are used to reduce taxes paid. The alternative minimum tax credit does not have an expiration date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount more likely than not to be realized. The ability to utilize these assets depends on future taxable income, our ability to deduct tax loss carryforwards against future taxable income, the effectiveness of our tax planning strategies among the various tax jurisdictions in which we operate and any significant changes in the tax treatment received on our business combinations. We believe it is not more likely than not that our deferred tax assets will be realized and, therefore, we have recorded a valuation allowance on our net deferred tax assets as of January 2, 2011.

In the event that we were to determine that we are able to realize any of our deferred tax assets in the future, an adjustment to the valuation allowance would increase net income in the period such determination was made. We believe that the most significant uncertainty that will impact the determination of our valuation allowance will be our estimation of the extent and timing of future net income, if any. To the extent available, we intend to use any net operating loss carryforwards to reduce the federal and state income tax liabilities associated with our operations. However, if we do not achieve profitability prior to their expiration, we will not be able to fully utilize our net operating losses to offset income. 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 or by changes in stock ownership occurring prior to or following this offering. We have not completed an analysis of the effects of this offering or any such

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changes in stock ownership. 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.

Seasonality and Quarterly Results

Historically, we have recognized a somewhat larger share of our revenues in the second and third quarters of the year, driven by increased sales volume in the warm, dry summer months. Our revenues may be impacted by the effect of the weather. Specifically, in periods when the weather is warmer or there is less precipitation than usual, our revenues would likely increase, and in periods when the weather is colder or there is higher precipitation, our revenues would likely decline.

Our operating expenses and, therefore, our overall margins are also seasonally impacted; consequently, our overall operating income typically is higher in the second and third quarter and lower in the first and fourth quarters.

The following table sets forth our historical unaudited quarterly results of operations for our most recent four fiscal quarters. This information has been prepared on the same basis as our annual audited financial statements contained herein and includes all adjustments, consisting only of normal recurring adjustments that we considered necessary for a fair presentation of such periods.

	Fiscal Year 2010
	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
	($ in thousands, except per share data)
Revenues	$	23,035		$	25,449		$	28,265		$	23,307
Cost of revenues:
Operating expenses		15,717			16,414			17,977			15,596
Depreciation and amortization		3,347			3,157			3,004			3,052
Total cost of revenues		19,064			19,571			20,981			18,648
Gross profit		3,971			5,878			7,284			4,659
Selling, general and administrative expenses		3,681			3,770			3,577			3,121
Income from operations		290			2,108			3,707			1,538
Interest expense		2,112			2,112			2,160			2,194
Income (loss) before income taxes		(1,822	)		(4	)		1,547			(656	)
Income tax expense (benefit)		61			6			(143	)		41
Net income (loss)	$	(1,883	)	$	(10	)	$	1,690		$	(697	)
Basic and diluted net income (loss) per share:
Basic net income (loss) per share:	$	(0.69	)	$	(0.00	)	$	0.62		$	(0.26	)
Weighted average shares used in calculation		2,714,873			2,715,209			2,718,548			2,718,861
Diluted net income (loss) per share:	$	(0.69	)	$	(0.00	)	$	0.60		$	(0.26	)
Weighted average shares used in calculation		2,714,873			2,715,209			2,807,070			2,718,861

Liquidity and Capital Resources

Our cash requirements have principally been for working capital and capital expenditures. Our working capital requirements generally reflect the growth in our business and its seasonality. Historically, we have funded our working capital and our capital investments (primarily vending equipment and their installation) from cash flows provided by our operating activities, borrowings available under our revolving credit and long-term debt.

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We believe that, based on our current business plan, the proceeds of this offering, our cash and cash equivalents on hand, cash from operations and borrowings available to us under our revolving credit facility, we will be able to meet our capital expenditure requirements and liquidity needs for the foreseeable future. We may require additional capital to meet our longer term liquidity and future growth requirements. Although we believe that we have adequate sources of liquidity, future weakening of economic conditions could adversely affect our business and liquidity. In addition, continued instability in the capital markets could adversely affect our ability to obtain additional capital to grow our business and would affect the cost and terms of such capital.

Cash Flows

The following table shows the components of our cash flows used in and provided by operating, investing and financing activities for the periods presented:

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
	($ in thousands)
Net cash provided by operating activities	$	8,139		$	14,748		$	10,097
Net cash used in investing activities		(10,919	)		(11,997	)		(12,688	)
Net cash provided by (used in) financing activities		2,933			(2,314	)		2,571
Net increase (decrease) in cash and cash equivalents	$	153		$	437		$	(20	)

Cash Provided by Operating Activities

Operating activities consist primarily of net loss adjusted for certain non-cash items, primarily depreciation and amortization and stock-based compensation. In addition, operating cash flows include the effect of changes in operating assets and liabilities, principally payments for prepaid contract rights and other prepaid expenses, repair parts, account receivable and other assets, accounts payable, accrued commissions and accrued liabilities.

Cash provided by operating activities decreased by $4.7 million to $10.1 million in fiscal year 2010, as compared to 2009, primarily due to lower revenues for the year combined with added operating costs to support new machine growth.

Cash provided by operating activities increased by $6.6 million to $14.7 million in fiscal year 2009, as compared to 2008, primarily due to higher revenues for the year and increases in accounts payables, accrued liabilities and commissions.

Cash Used in Investing Activities

Cash flows used in investing activities increased by $0.7 million to $12.7 million as compared to fiscal year 2009, as a result of additional capital expenditures for vending equipment and machinery and its associated installation cost to serve our increasing placement demand.

Cash flows used in investing activities increased by $1.1 million to $12.0 million in fiscal year 2009 as compared to fiscal year 2008, as a result of additional capital expenditures for vending equipment and machinery and its associated installation cost to serve our increasing placement demand.

Cash Provided by (Used in) Financing Activities

Cash flows provided by financing activities increased by $4.9 million from a use of $2.3 million in fiscal year 2009 to cash provided of $2.6 million in fiscal year 2010 primarily as a result of increased borrowing to support capital equipment expenditures in light of lower cash provided by operating activities.

Cash flows (used in) financing activities increased by $5.2 million from cash provided of $2.9 million in fiscal year 2008 to cash used of $2.3 million in fiscal year 2009. Cash financing requirements, specifically

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borrowing from the revolving line of credit, decreased as a result of lower dividend payments of $1.3 million in fiscal year 2009 as compared to fiscal year 2008 and increased cash from operating activities due to the higher revenue levels in fiscal year 2009.

Indebtedness

Long-Term Debt. Long-term debt consists of $87.6 million of 9.0625% Junior Subordinated Debentures, which mature on January 31, 2028 but may be redeemed at our option at any time at 100% of their principal amount plus any accrued but unpaid interest. Interest on the Junior Subordinated Debentures accrues at an annual rate of 9.0625% and is payable monthly in arrears. The Junior Subordinated Debentures were issued in January 1998 to Glacier Water Trust I (the “Trust”), a newly created Delaware business trust and a wholly owned subsidiary of the Company. Concurrent with this transaction, the Trust completed a public offering of 3,400,000 of 9.0625% Cumulative Trust Preferred Securities with a liquidation amount of $25.00 per security (the “Trust Preferred Securities”). The Trust exists for the sole purpose of issuing Trust Preferred Securities and purchasing Junior Subordinated Debentures issued by the Company.

We hold 105,154 shares of the Trust’s common securities and 145,922 shares of Trust Preferred Securities as of January 2, 2011. Because of our ownership of the common securities of the Trust and of Trust Preferred Securities, if the Junior Subordinated Debentures were redeemed in full and the Trust were liquidated, we would receive $6.3 million upon liquidation of the Trust. Accordingly, the outstanding principal amount of Junior Subordinated Debentures, net of those in which we have beneficial interest, is $81.4 million as of January 2, 2011.

As indicated under “Use of Proceeds,” we intend to redeem $      principal amount of Junior Subordinated Debentures (or $           principal amount if the underwriters exercise their over-allotment option in full) with the proceeds of this offering.

Revolving Credit Facility. We have a revolving credit line agreement with City National Bank (“CNB”), which as of December 22, 2009, provided for total availability of $33.0 million through expiration in July of 2010, and interest of prime plus between (0.25%) and 0.75% depending on certain covenant ratios. Through 2009 and until July 17, 2010 the rate remained at the CNB prime rate less 0.25% (3.00% per annum).

The CNB revolving credit line agreement was modified on April 8, 2010 and again on December 10, 2010. The April modification extended the expiration date from July 17, 2010 to July 1, 2012 and changed the monthly interest calculation beginning July 18, 2010 to prime plus between 0.25% and 1.00% depending on certain covenant ratios, but with a floor of no less than 4.00%, which has been the effective rate on the line through the balance of 2010. The modification also added an annual loan fee of approximately 0.5% of the available balance of the credit facility and a principal reduction of the loan availability amount of $1.5 million per quarter beginning in January of 2011 through July of 2012. In December of 2010, the loan was modified to increase the availability on the line to $40.0 million through the end of June 2011 and to suspend the scheduled principal reductions to start instead in July of 2011. Certain other standard covenants were modified as well.

As of January 2, 2011, there was $31.2 million outstanding on this credit facility, with availability of $8.8 million.

In April 2011, the CNB revolving credit line agreement was modified to remove the principal reductions called for in the April 2010 modification, which will leave the availability on the line at $40.0 million through the end of June 2012, at which date the loan is due. In the event we are not able to obtain equity financing to pay down the balance of the revolver to the levels in the April 2010 modification by the end of August 2011, CNB retains the right to syndicate our revolving line with other banks, which would then potentially result in a re-pricing of the applicable interest rate, fees and covenants based on the syndicate partners’ requirements. As indicated under “Use of Proceeds,” we intend to repay $      (or $      if the underwriters exercise their over-allotment option in full) of our borrowings under this line with the proceeds of this offering.

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We have initiated discussions with potential lenders concerning a new revolving credit facility to replace our current revolving credit facility.

The current revolving credit facility contains various conditions for extensions of credit and certain financial and other restrictive covenants. The covenants include computations based on a rolling four quarter basis, including minimum EBITDA requirements, maximum capital expenditures and maximum dividend payments. In addition, there are covenants prohibiting us from redeeming our Junior Subordinated Debentures or incurring any additional debt other than ordinary trade debt. We are currently in compliance with all applicable covenants.

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 current revolving credit facility. Our current credit facility bears interest based on the bank 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 fiscal years 2008, 2009, and 2010 by approximately $232,000, $263,000 and $289,000, respectively. Actual changes in interest rates may differ materially from the hypothetical assumptions used in computing this exposure.

Contractual Commitments

We are obligated to make payments under specific contractual obligations and commitments. We have no minimum annual purchase requirements under any agreement with any of our vendors. A summary of these contractual obligations and commitments as of January 2, 2011 is as follows:

	Payment due by period
	Less Than						More Than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
	(in thousands)
Operating leases	$	902	$	878	$	867	$	—	$	2,647
Line of credit		—		31,153		—		—		31,153
Long-term debt(1)		—		—		—		87,629		87,629
Total	$	902	$	32,031	$	867	$	87,629	$	121,429

(1) We have a beneficial interest in $6.3 million of our long-term debt. See Notes 1(h) and 3(a) to the Consolidated Financial Statements.

We are also obligated to make commission payments to retailers based on a percentage of vending machine revenues. We are unable to determine the amount of these future payments due to the fact that they are based on future revenues.

Off-Balance Sheet Arrangements

Our only “off-balance sheet” obligations are for operating leases that are disclosed in the notes to our consolidated financial statements.

New Accounting Pronouncements

In December 2009, the FASB issued authoritative guidance for consolidations and improvements to financial reporting by enterprises involved with a VIE. The authoritative guidance revises the test for determining the primary beneficiary of a VIE from a primarily quantitative risks and rewards calculation based on the VIE’s expected losses and expected residual returns to a primarily qualitative analysis based on

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identifying the party or related-party group (if any) with (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The authoritative guidance requires kick-out rights and participating rights to be ignored in evaluating whether a variable interest holder meets the power criterion unless those rights are unilaterally exercisable by a single party or related-party group. The authoritative guidance also revises the criteria for determining whether fees paid by an entity to a decision maker or another service provider are a variable interest in the entity and revises the previous guidance scope characteristic that identifies an entity as a VIE if the equity-at-risk investors as a group do not have the right to control the entity through their equity interests to address the impact of kick-out rights and participating rights on the analysis. Finally, the authoritative guidance adds a new requirement to reconsider whether an entity is a VIE if the holders of the equity investment at risk as a group lose the power, through the rights of those interests, to direct the activities that most significantly impact the VIE’s economic performance, and requires a company to reassess on an ongoing basis whether it is deemed to be the primary beneficiary of a VIE. We adopted this authoritative guidance for the year ended January 2, 2011, which did not have a material impact on our consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. ASU 2009-13 amends FASB ASC Subtopic 605-25, Revenue Recognition — Multiple-Element Arrangements, to eliminate the requirement that all undelivered elements have vendor specific objective evidence of selling price (“VSOE”) or third-party evidence of selling price (“TPE”) before an entity can recognize the portion of the overall arrangement fee that is attributable to items that already have been delivered. In the absence of VSOE or TPE for one or more delivered or undelivered elements in a multiple-element arrangement, entities will be required to estimate the selling prices of those elements. The overall arrangement fee will be allocated to each element (both delivered and undelivered items) based on their relative selling prices, regardless of whether those selling prices are evidenced by VSOE or TPE or are based on the entity’s estimated selling price. Application of the “residual method” of allocating an overall arrangement fee between delivered and undelivered elements will no longer be permitted upon adoption of ASU 209-13. Additionally, the new guidance will require entities to disclose more information about their multiple-element revenue arrangements. ASU 2009-13 is effective prospectively for revenue arrangements entered in to or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We expect that the adoption of ASU 2009-13 in 2011 will not have a material impact on our consolidated financial statements.

In December 2010, the FASB issued ASU 2010-28, Intangibles — Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts, a consensus of the FASB Emerging Issues Task Force. ASU 2010-28 modifies step 1 of the goodwill impairment test under ASC Topic 350 for reporting units with zero or negative carrying amounts to require an entity to perform step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are adverse qualitative factors, including the examples provided in ASC paragraph 350-20-35-30, in determining whether an interim goodwill impairment test between annual test dates is necessary. The ASU allows an entity to use either the equity or enterprise valuation premise to determine the carrying amounts of a reporting unit. ASU 2010-28 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. We expect that the adoption of ASU 2010-28 in 2011 will not have a material impact on our consolidated financial statements.

Impact of Inflation

The primary inflationary factors affecting our operation include labor and other operating expenses. We do not believe that inflation has materially affected earnings during the past three years. Substantial increases in costs and expenses could have a significant impact on our operating results to the extent that such increases cannot be passed on through retail price increases for vended water sold to consumers.

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BUSINESS

Company Overview

We own and operate the largest network of filtered drinking water vending machines in the United States and Canada, with approximately 19,600 machines in place at food, drug, convenience, mass and other major retailers as of May 1, 2011. Our machines apply a five-step, state-of-the-art filtration process that removes particles and impurities to produce high-quality, great-tasting drinking water that is dispensed by our machines into one-gallon or five-gallon containers provided by the customer. This business model eliminates the bottling and distribution infrastructure required to deliver traditional bottled water, thereby significantly reducing cost and the adverse environmental impact. We believe continued growth in our market will be driven by these factors, and by the perceived health benefits and growing concerns about the taste and quality of municipal tap water that we believe are driving increased demand for bottled water generally.

Our extensive network of self-service coin-operated and non-coin-operated water vending machines is supported by our in-house national field service organization, the only one in the industry, providing our retail partners with compelling commission streams and incremental customer traffic. We have a highly diversified retail partner base consisting of food, drug, convenience, mass and other retailers. Among our retail partners are Circle K, CVS, Family Dollar, H-E-B, Kroger, Publix, Rite Aid, Safeway, SuperValu, Wal-Mart, Walgreens and Winn-Dixie.

In fiscal 2010, our machines vended approximately 345 million gallons of filtered drinking water. As of May 1, 2011, we own and operate approximately 19,600 self-service vending machines in 42 states and Canada, which we believe represent approximately 60% of all industry units. We believe we have an unmatched in-house national service platform, with capacity to meet the growing demands of both retailers and consumers in our markets.

By filtering and dispensing water at the point of sale, we are able to avoid the costs of bottling, packaging, shipping and delivery and associated fuel costs. This results in substantial savings to the consumer. We charge an average of $0.28 per gallon, while the price of bottled water sold off the shelf in retail locations is often three or more times the price of our vended water. In addition, by eliminating packaging and removing the supply chain, vended water significantly reduces the environmental impact associated with other forms of bottled water. Most consumers of our vended water use their own refillable containers, although in many cases the retail outlets where the self-service vending machines are located also sell empty reusable containers.

Inside our vending machines, impurities in the water are greatly reduced through a combination of micron filtration, reverse osmosis, carbon absorption and ultraviolet disinfection. A simple, hassle-free interface dispenses the filtered water within seconds, providing water of a quality equal to alternative bottled water without the plastic waste of individual bottles.

We have long-term relationships with key national and regional retail accounts as a result of our brand recognition, high-quality product, reliable service and compelling value proposition. Our solution requires no upfront investment from our retail partners and enables them to monetize typically unused retail space. Because our consumers make frequent visits to our retail partners’ locations to use our machines, the retailers benefit from incremental customer traffic and predictable commission revenue while incurring no labor, inventory or shrinkage expense. We have a diverse retail partner base and long-standing relationships across many major retail channels, as evidenced by our high retention rates with prominent food, drug, convenience, mass and other major retailers. Nine of our top ten retail partners in terms of revenue have placed our machines at their stores for over two decades.

Our machines are serviced by our in-house team of highly trained technicians, generally on a weekly or bi-weekly basis, to ensure that consistent quality standards are met; apart from this scheduled maintenance and service, our machines require little attention. Our technicians use handheld computers that provide us with real-time data from the machines to facilitate proper and timely maintenance, as well as providing us with valuable unit performance information.

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Our origins date back to the founding of our predecessor, Bottle Water Vending, Inc., in 1983. In 2001, Brian McInerney, a former executive of Honeywell International, joined us as our chief executive officer and Charles Norris, the former President of McKesson Water Products, which was a leading provider of bottled water sold through retail stores and home and office delivery, joined us as chairman. Our management team has driven growth principally by adding self-service vending machines to existing and new geographic areas and with new retail partners, as well as through the successful completion and integration of three acquisitions in the past 10 years.

We have a strong commitment to growth and over the past five years we have focused on building a national organization and infrastructure to provide a scalable platform which can support this growth. In 2004 and 2005, we invested over $30 million in machine upgrades, incorporating state-of-the-art functionality and appearance enhancements for improved ease of use and brand recognition. From January 2008 through December 2010, we installed approximately 2,800 net new machines, representing a compound annual growth rate of 5.4%. We believe we are now poised to benefit from highly attractive industry dynamics as well as the maturation of our upgraded and newly installed machines.

We believe that our value proposition in the vended water market will help us compete effectively in the vended ice market as well. We recently began testing self-service ice vending machines, and have deployed approximately 100 of these machines as of May 1, 2011. We believe that our placement of ice vending machines will contribute to our brand awareness and future growth in both the vended water and the vended ice businesses.

Industry Background

The bottled water market, including vended water, has grown from approximately 4.4 billion gallons sold in 1999 to approximately 8.5 billion gallons sold in 2009, representing a compounded annual growth rate of 6.7%, according to the Beverage Marketing Corporation. The bottled water market in the United States, which in 2009 totaled approximately $10.6 billion at wholesale, consists of three primary segments: domestic non-sparkling, domestic sparkling and imported water. We operate in the domestic non-sparkling water segment, which represented approximately 96% of the total market in terms of gallons sold and approximately 90% of the total market in terms of wholesale dollar sales in 2009.

Domestic non-sparkling water is distributed through three principal channels: packaged water sold off-the-shelf in retail locations, packaged water delivered to homes and offices, and water sold through vending machines. Like filtered water sold off-the-shelf or through delivery services, vended water is processed using advanced filtration methods, including reverse osmosis. Although generally equivalent in quality, vended water is sold at a substantially lower price than off-the-shelf and delivered water. This is possible, in part, because vended water eliminates the costs of bottling and packaging (since consumers provide their own, reusable, containers) and the fuel-intensive costs of shipping or delivery. Vended water dollar sales and gallonage have increased for five consecutive years, including growing from approximately 584 million gallons in 2004 to 757 million gallons in 2009, representing a compound annual growth rate of 5.3%. Vended water accounted for approximately 9.0% of total bottled water volume in 2009, and we believe it is poised for accelerated growth.

We are the leading brand sold in the domestic vended water market segment, with approximately 19,600 machines as of May 1, 2011, which we believe represent 60% of all industry units. We have accomplished this by providing a compelling value proposition to both retailer partners and consumers.

We believe that consumers’ preference toward bottled water continues to grow as bottled water has become accepted on a mainstream basis. While it is difficult to quantify bottled water consumption in all of its forms, according to an April 2010 report by independent market analyst Datamonitor, the U.S. bottled water market generated retail revenues of $17.1 billion in 2009. In addition, per capita consumption of bottled water in the U.S. has increased from 23.2 gallons in 2004 to 27.6 gallons in 2009 and is projected to reach 29.5 gallons in 2014. This per capita consumption remains significantly less than in Europe and Mexico, which we

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believe indicates there is significant room for continued growth in domestic consumption of bottled water. We believe that the following trends have contributed to the increasing demand for bottled water:

•  Emphasis on Health and Wellness. As part of a desire to live a healthier lifestyle, we believe U.S. consumers are increasingly focused on increasing their water consumption and drinking water as a substitute for high caloric beverages, carbonated soft drinks and beverages containing artificial sweeteners.

•  Concerns Regarding Taste and Quality of Municipal Tap Water. Many consumers purchase bottled water not only due to better taste, but also because of concerns regarding municipal tap water quality. Municipal tap water is typically surface water that is treated centrally and pumped to homes. In this process, contaminants may dissolve into the water through municipal or household pipes, adversely impacting taste and quality. Although our vended water is derived from municipal tap water, as is most other bottled water, it is highly filtered through our state-of-the-art five-step advanced filtration system, which consistently ensures high-quality, great-tasting water.

Vended water benefits from these trends, but it is particularly poised to benefit from the following additional dynamics:

•  Growing Preference for Value. We believe the recent growth in vended water reflects, in part, consumers’ growing preference for more affordable, high-quality bottled water alternatives. Our vended water presents an extremely strong value proposition, with the cost to the consumer a small fraction of the cost of comparable bottled water sold in other formats. We believe this to be of great and increasing advantage in the current economic climate of heightened price sensitivity and decreased emphasis on conspicuous consumption, which is evidenced by the growth in private label share of the bottled water market. By significantly reducing the packaging and delivery costs inherent in the supply chain, vended water typically retails for $0.20-$0.49 per gallon (averaging $0.28), compared with $1.00-$1.50 per gallon or more for pre-packaged water and multipacks. Vended water’s cost advantage stems principally from its “disruptive” technology, eliminating packaging costs and the costly and inefficient traditional supply chain of direct store delivery or warehouse distribution. We believe that this advantage will grow as oil prices rise, increasing both the cost of plastics and transportation.

•  Increasing Demand for Products with Lower Environmental Impact. We believe consumers are increasingly favoring products with a lower environmental impact, with a “reduce, reuse, recycle” mindset becoming a common driver of consumer behavior. Areas of concern include products’ packaging materials and carbon footprint, the crude oil used in production and distribution and the impact on landfills when packaging is disposed of. Most single-serve PET water bottles are produced using fossil fuels and contribute to landfill waste, since only 28% of PET bottles are recycled, according to a November 2009 Environmental Protection Agency report. Additionally, according to a December 2008 report 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% in 2007 to 35% 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. All of these initiatives continue to encourage consumers to migrate from disposable containers to reusable solutions. Consumers have adopted more environmentally conscious behavior in recent years, with studies by GfK Roper Consulting and the MIT Sloan Management Review indicating that a growing number of Americans are making purchase decisions based on product labeling indicating environmental benefits.

•  Favorable Demographics. Vended water’s cost advantage is especially attractive in areas with lower-income or fixed-income (including senior) populations. Vended water has also been historically well-accepted in U.S. Hispanic and Asian-American communities. The senior, Hispanic and Asian populations are among the fastest-growing population segments in the U.S. Also, as noted above,

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consumers who favor products with a lower environmental impact are, we believe, a rapidly growing and important demographic.

•  Growing Interest in Self-Service Solutions. We have noted increased consumer interest in and acceptance of the consumer self-service experience, which is evidenced by the growing popularity of self-service check-outs and the use of self-service machines for purposes such as movie rentals and coin redemption.

Our Competitive Strengths

We believe our competitive strengths include the following:

Leading Market Position in Vended Water

We are the market leader in vended water with approximately 19,600 vending machines as of May 1, 2011, which we believe represent approximately 60% of all U.S. self-service water vending machines. We vended approximately 345 million gallons of filtered drinking water in fiscal year 2010. With an established presence in 42 states and Canada, we are the only company in this market with a national platform, supported by a national service force of our own skilled technicians and a national operational and managerial infrastructure. We believe that this existing platform is readily scalable and would be able to support significantly more than our current level of business.

We have been in the vended water business for more than 25 years. Our predecessor commenced operations in 1983. In 1997, we acquired the vended water business of McKesson Water Products, which had been a pioneer of the business in the 1960s.

Compelling Consumer Benefits

We benefit not only from factors which lead consumers to increase their consumption of bottled water, but also from factors which lead consumers to do so at lower prices and in a more environmentally friendly way. These converging factors have contributed and are likely to continue to contribute to accelerated growth in the market for bottled water and, more specifically, the market for vended water. As discussed above, these factors include the following:

•  Emphasis on Health and Wellness

•  Concerns Regarding Taste and Quality of Municipal Tap Water

•  Growing Preference for Value

•  Increasing Demand for Products with Lower Environmental Impact

•  Favorable Demographics

•  Growing Interest in Self-Service Solutions

Strong Strategic and Financial Value Proposition for Retailers

Our vending machines require no upfront investment from our retail partners and enable them to monetize typically unused retail space. Retailers also benefit from the recurring foot traffic and highly predictable commission revenue from our machines. Our machines drive frequent and continuing traffic to our retail partners’ stores and, we believe, enhance customer loyalty to the stores while requiring no upfront investment by the retailer.

We enable retailers to provide value to their customers and, at the same time, to satisfy customers’ preferences for “green” solutions while leveraging the retailers’ corporate sustainability initiatives and goals. Our vended water systems permit retailers to promote the “green” aspects of our product: less use of fossil fuel and less plastic waste.

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Our machines also benefit retailers by providing to them a source of filtered water for their own purposes, such as misting produce and use in in-store bakeries.

Extensive Retail Relationships

Our strong brand and reputation for quality and value with retailers nationwide is a key element of our competitive advantage in the field and is evidenced by our strong long-standing relationships with major retailers. These relationships have been built over time by consistently delivering attractive, well-functioning machines, a responsive in-house national service force and intelligent data-gathering.

We participate in multiple retail channels, with more than 4,500 retail partners as of March 31, 2011. Although many of our retail partners are food retailers, we have recently increased our business in emerging retail channels, including drug, convenience, mass and other major retailers. Among the retailers with whom we have existing relationships are Circle K, CVS, Family Dollar, H-E-B, Kroger, Publix, Rite Aid, Safeway, SuperValu, Wal-Mart, Walgreens and Winn-Dixie. We have long-standing relationships of 20 years or more with many of our significant retail partners.

Superior Service through Our In-House National Field Service Organization

We are committed to providing the best customer service in our industry and maintain an in-house service organization rather than outsourcing this critical component of our business. We pride ourselves on our outstanding reputation for service, which we believe to be a principal competitive factor in maintaining and building our relationships with retail partners and consumers. We believe it would be difficult to replicate a field service organization that has the breadth and experience of our in-house platform.

Our service technicians are all employed and trained directly by us and are located throughout the United States and Canada, organized around multiple regional offices. This is the largest in-house national field service team in our industry. Our team is reliable and highly responsive. Their frequent visits to machines (generally on a weekly or bi-weekly basis) ensure a high level of operation and minimal downtime.

All of our technicians receive a comprehensive course of in-house and on-site training on our systems, including our management information systems. This common training experience and knowledge base enables us to effectively communicate and implement technological advances throughout our team, enhancing its ability to inspect, monitor and report most effectively.

The composition of our service team is stable, which translates into continuity of service to retailers.

Modern Units and Advanced Technology

In 2004 and 2005, we made over $30 million of investments in our machines to improve functionality, appearance and ease of use, while strengthening their durability and increasing their useful lives. In addition, we have expertise in money handling and counting, and leverage our technology to insure proper chain of custody and accuracy. Our coin-operated machines are capable of accepting many forms of payment, including bills, credit cards and prepaid cards.

All of our service technicians are furnished with handheld computers with full communications functionality, which offer us real-time data-gathering capability on a nationwide basis. This real-time data allows us to respond quickly to sales information we receive from the machines. Our advanced technology platform will enable us to support a business with significantly more volume.

Scalable National Platform

Our centralized management, in-house national field service organization and robust technology are highly scalable as our business grows. We are currently assembling machines to fill orders to place machines in new locations and we have substantial additional growth opportunities in the near-term. We have the capacity to satisfy these growth opportunities with limited incremental capital expenditures in infrastructure.

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Broad Range of Products

We offer the widest range of vending machines in our industry, including coin-operated outdoor water machines, non-coin indoor water machines with varying footprints, coin-operated water vending kiosks and ice vending machines. We believe the flexibility provided by our product range makes us more attractive to potential retail partners than our competitors.

Highly Experienced Management Team with Proven Execution Capabilities

We are led by a proven management team with the experience and ability to execute on new opportunities, grow existing relationships and successfully integrate acquisitions. Our chairman, chief executive officer and chief operating officer have worked together as a team for over 10 years and collectively have more than 75 years of experience in the consumer products business, including more than 50 years of collective experience in the water business. During this 10-year period, they have successfully identified, acquired and integrated three other vended water companies. The management team leads a group of experienced regional managers and dedicated field service personnel, and they are guided by an experienced board of directors. In addition, our Chairman, Charles Norris, is the former President of McKesson Water Products, and other members of our board have significant experience in both the water industry and other consumer product companies.

Our Growth Strategy

We have a strong commitment to growth and over the past five years we have focused on building a national organization and infrastructure to provide a scalable platform which can support this commitment. We believe we are now at an inflection point at which we can achieve this accelerated growth by pursuing the following strategies:

Increase Penetration in Emerging Retail Channels

We believe that our product offerings will allow us to expand significantly by targeting underserved retail channels, including gas stations, convenience stores, dollar stores, drug stores, natural food markets, warehouse chains and home improvement centers. Approximately 30% of our machines are currently located in these retail channels, and we believe that our strong value proposition will allow us to successfully increase penetration, particularly among retailers that emphasize value to consumers. In fiscal year 2010, we entered into contracts that give us access to more than 10,000 new locations across several of these channels, including drug stores, dollar stores and other retailers. We are evaluating these potential locations carefully and cannot at this time predict how many machines we will install at these new locations.

Increase Business with Food Retailers

We currently serve approximately 10,000 of approximately 60,000 food retailers in the United States. We intend to pursue increased business within this established channel by working to increase the business generated by our installed base as well as by adding machines at new locations.

Capture Economics from Maturing Machines

In general, we expect the volume of sales of a machine to increase as its location matures. Typically the longer a machine is installed at a particular location and consumers develop familiarity with the location and the product, the volume of sales increases. With approximately 3,300 net new machines installed from January 2008 through April 2011, nearly all of these placed at unique locations, we believe that we are well positioned to grow our same store sales as these locations continue to mature. Importantly, same store sales can be affected by both improving the average vends per machine or through increasing the pricing per vend. We believe that the combination of our recently deployed locations maturing and the opportunity to increase retail pricing while maintaining our value positioning relative to other bottled water offerings positions us for long-term same store sales growth.

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Expand into New Geographic Regions

Although we have a nationwide presence, our machines are currently located in zip codes representing only 45% of the United States population. We believe our water vending machines are underrepresented at retailers in the Midwest, Southeast and Northeast regions of the United States. We believe that technological improvements in our machines and new product options offered by us will enable us to increase our penetration in these regions.

As of January 2, 2011, our machines were distributed across the United States and Canada as follows:

Region	Number of Machines
West		10,339
South		6,023
Midwest		2,140
Northeast		123
Canada		449
Total		19,074

Expand into Selected International Markets

We believe that we have the ability to profitably expand into markets outside the United States, either directly or by partnering with local operators, particularly in countries where there is greater concern over the quality of unfiltered water. Per capita consumption is greater in many countries than in the United States, and in many of these countries the demand for the kind of value we provide is even stronger than in the United States.

We have established a strategic relationship with a partner in Mexico, and we believe similar arrangements could be used to expand in additional international markets.

Expand Our Recently Introduced Self-Service Ice Business

We recently began testing ice vending machines, and have deployed approximately 100 of these machines as of May 1, 2011. These ice vending machines, which we purchase from unrelated manufacturers, dispense 7 to 10 pound bags of ice, which is made and bagged in the machine. These machines have the ability to produce and bag upwards of 1,000 pounds of ice per day. Bags of ice are generally priced from $1.50 to $2.25.

We believe that ice represents a significant opportunity for us, as it is a large and highly fragmented industry with no leading national producers. We believe that our placement of ice vending machines will contribute to our brand awareness and future growth in both the vended water and the vended ice businesses. These machines provide consumers with high-quality ice, an easy to use consumer interface and enhanced convenience, and they present retail partners with the same strong value proposition presented to them by our water vending machines. We believe that our ice offering will be attractive to retailers who do not currently sell ice and that it has the potential to compete effectively, on both a cost and convenience basis, with ice produced by retailers in-store and with delivered ice. The addition of the ice machines also increases our geographic density and maximizes the efficient utilization of our field service personnel, who will service both water and ice machines.

Pursue Other Marketing and Product Initiatives

We believe we have significant opportunities to leverage our national platform and reliable workforce to offer other environmentally friendly, economical, convenient and healthy solutions to our retail partners. We intend to further develop our marketing efforts and to consider other product offerings, which could include the dispensing of flavor or other additives to our vended water or the dispensing of ready-to-drink water-based beverages.

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Pursue Strategic Investment and Acquisition Opportunities

We believe that opportunities exist to grow through selective investments and acquisitions, including acquisitions of smaller, self-service vended water companies, or ice businesses and other product offerings. We intend to pursue strategic investments and acquisitions that may enhance our geographic presence or relationships with retail partners.

Water Vending Machines

As of May 1, 2011, we operate approximately 19,600 water vending machines, approximately 15,300 of which are coin-operated water vending machines, designed for outdoor locations, and approximately 4,300 of which are non-coin-operated water vending machines designed for indoor locations. All of our Glacier Water machines are designed and built by us, using interchangeable filtration parts to simplify maintenance.

Coin-operated vending machines are generally placed outside retail stores, and the retail stores are paid a percentage of sales as a commission. The average price paid by the consumer for water vended from these machines is $0.26 per gallon. Our coin-operated machines are capable of accepting many forms of payment including dollar bills, credit cards and prepaid cards.

Non-coin vending machines are generally placed inside retail stores, and the consumer pays for the vended water at check-out directly to the retailer. The retailer then keeps a percentage of sales generated as a commission and remits the remainder to us. The average price paid by the consumer for water vended from these machines is $0.38 per gallon. Retailers have the option to offer empty water bottles for sale next to the machines. Indoor machines are located inside the retailer’s retail selling footprint. We offer to retailers a variety of indoor machines with different footprints in order to provide retailers flexibility in determining how many linear feet of space to devote to the machines. In many cases, these indoor machines provide filtered water for the retailer’s use for misting produce and other store purposes.

We generally place our outdoor and in-store water vending machines on the premises of food and other retailer locations. We provide the machines and typically pay for installation costs, while the retailer typically provides and pays for the required municipally supplied water and for the electricity to operate the machines. If for any reason we believe that a machine has been placed in an undesirable location, we can easily redeploy the machine to an alternative location.

In addition to our core indoor and outdoor water machines on retailers’ premises, as of May 1, 2011 we operate 50 coin-operated water vending kiosks with larger capacities than those of individual outdoor machines. These kiosks are generally located on rented space in parking lots. In those situations, we generally pay a fixed monthly rental and for the electricity and water and retain 100% of all revenues collected.

In almost all cases, we (rather than the retailer) control retail pricing, which we review on an ongoing basis. Because our vended water product has substantial cost advantages and currently a substantial retail price advantage over other forms of bottled water, we have the potential to selectively or generally increase our prices. We have tested and will continue to test price increases to determine their effect on sales in order to determine the optimal price level at various locations.

Filtration Process

Our machines are designed with a state-of-the-art filtration system which is similar to the filtration that occurs in large-scale processing plants of other bottled water companies. Our machines improve the taste and quality of local water sources through a sophisticated five-step process utilizing the following systems:

•  activated carbon filtration, which reduces chlorine, odors and tastes;

•  micron filtration, which reduces dirt, rust and other particles;

•  reverse osmosis, which reduces salts and other impurities;

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•  post-carbon filtration, which improves taste; and

•  ultraviolet disinfection, which ensures safe, high-quality drinking water.

Ice Vending Machines

We offer ice vending machines, which produce, bag and dispense 7 to 10 pound bags of ice. These machines have the ability to produce and bag upwards of 1,000 pounds of ice per day. Bags of ice are generally priced from $1.50 to $2.25. These machines are manufactured by unrelated companies. We are currently in the testing phase with these machines and have deployed approximately 100 of them as of May 1, 2011.

Retail Partners

Among the retailers with whom we have long-standing relationships are: Circle K, CVS, Family Dollar, H-E-B, Kroger, Publix, Rite Aid, Safeway, SuperValu, Wal-Mart, Walgreens and Winn-Dixie. We have long-standing relationships of 20 years or more with many of our significant retail partners. We believe that these relationships are a result of our brand recognition, product and service quality and growing same-store sales. We participate in multiple retail channels, with more than 4,500 retail partners as of March 31, 2011. None of our retail partners accounted for more than 10% of our 2010 revenues, and our top 10 retail relationships accounted for less than 50% of our 2010 revenues.

Most of our arrangements with our retail partners are evidenced by written contracts which have terms that generally range from three to five years and contain termination clauses as well as automatic renewal clauses. During the term of these agreements, we have the exclusive right to provide water vending machines at specified locations.

Site Selection

The placement of our water vending machines at retail locations is based on a thorough review of each site. Included in the site review is an analysis of the surrounding trade area in order to determine the neighborhood demographics, the level of overall retail activity, the level of direct competition and the proximity of the site to other water vending machines operated by us. We also review each site in order to ensure high visibility and easy access for the consumer, along with appropriate access to the retailer’s water supply and power source. Upon completion of this review, we make a determination as to the viability of the location and whether a single machine or multiple machines are required at the time of initial installation. With large retail chains, we generally place machines at most of the chains’ locations as part of our business agreements.

We create economies of scale in our operations by clustering machines in close proximity to one another within the geographic areas served, in order to provide cost-effective, frequent service. Using our advanced technology and real-time data gathering capability, we monitor and evaluate demand for our product at each location. This allows us to continue to evaluate demand for our product at each location, to evaluate the productivity of our machines and relocate machines as necessary to optimize their productivity on an on-going basis.

As we expand, we believe that we will be able to create greater economies of scale and efficiencies as our penetration becomes denser, which will permit an individual service technician to cover more machines with less travel time.

Sales to Retail Partners

We have both national and regional sales personnel who actively pursue relationships with new and existing retail partners. Our sales personnel work closely with retailers to arrange for prompt installation of our machines and coordination between the retailers and our service personnel.

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Consumer Marketing

Our primary marketing vehicle is our water vending machine and the billboard effect it creates. As part of our site selection process, we continually test the market, often using marketing and promotional programs to help accelerate machine sales and productivity while monitoring consumer behavior at each location. Our consumer marketing strategy highlights the core benefits to consumers, which we believe are superior value and reduced environmental impact compared to other forms of bottled water, to help build brand awareness and increase consumer sales. The modular construction of our water vending machines also facilitates the potential addition of peripherals, which could enable us to provide electronic promotions, coupons or advertising. As we expand into new geographic areas and deploy additional machines at existing locations, we expect to develop additional consumer marketing initiatives.

Our Service Force

Our service team is currently organized into 10 geographic divisions. All of our service technicians undergo a comprehensive course of in-house and on-site training. We believe that it would be difficult for a competitor to replicate our in-house service capability.

All of our machines are serviced by our own service technicians on a regularly scheduled basis, often weekly but generally no less frequently than bi-weekly. At their regularly scheduled service calls, our technicians collect cash from all coin-operated machines, perform component testing and preventative maintenance, download operating data through their hand-held computers and transmit that data to our central office. In addition, our technicians respond to unscheduled service requests, which may be generated electronically from the machines themselves through a “phone home” capability or by consumers or retail partners.

We believe that our field service team has the necessary skills to service other machines as we grow, including any expansion into ice vending and ready-to-drink beverage vending and that this will provide positive leverage and operating efficiency.

Assembly

We assemble our water vending machines at our Vista, California facility. The assembly process involves installing replaceable panels and component parts on frames built to last for many years. Individual filters and other processing components are generally sourced by us from multiple suppliers. We have long-term relationships with many of our suppliers.

Competition

We compete with bottled water, with other vended water providers and with household water filtration systems and devices. We compete on two levels — both at the retailer and consumer level.

Bottled water is generally significantly more expensive than our vended water, and it has a significantly greater impact on the environment. On average, the price to the consumer for our vended water is $0.28 per gallon, while the average price per gallon for other bottled water is typically three or more times the price.

We believe that our water is comparable in taste and quality to other bottled water and is, therefore, of a substantially better value. In addition, our water is environmentally friendlier than bottled water, with lower environmental impact in terms of fossil fuel usage (both for the manufacture of bottles and for transportation) and in terms of plastic waste. At the retailer level, we believe we offer advantages as well. We believe that retailers’ margins on our water are higher than their typical margins on bottled water, and the presence of one or more of our machines at the retailer’s premises should enable the retailer to reduce valuable shelf space devoted to bottled water in favor of stocking higher margin products.

None of our competitors in the vended water business combine our national presence and in-house national field service organization. With the exception of the Culligan vended water business (now owned by

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Primo Water Corporation), which has a nationwide presence but not an in-house service force, our competitors in the vended water market are primarily small to medium-sized operators. We compete with other vended water producers at the consumer level on the basis of our prime retail locations and on our greater consumer visibility as a result of our leading market share and nationwide presence. These factors are also a basis of competition at the retailer level. On the retailer level, we also compete on the basis of what we believe to be superior customer service on a national and regional level and, for larger retailers, the advantages of dealing with a national company and the breadth of our product offerings.

We also compete with household water filtration systems. We compete in this market on the basis of water taste and quality. Our water is more comprehensively treated than water produced by under-the-sink or faucet filters, which typically have only one level of treatment, usually simple carbon filtration.

Our ice business competes with other ice vending machines and other retail ice sales. At a consumer level, we compete in this market on the basis of cost and quality. At a retailer level, we compete on those bases, as well as on the basis that our ice provides an opportunity to retailers to earn revenues without any inventory or labor costs and in less valuable parts of the retail footprint.

We may also be deemed to compete with other beverages, including carbonated and non-carbonated soft drinks, juices, sport and energy drinks, coffee and tea.

Intellectual Property

The trade name and trademarks “Glacier Water” and “Glacier Water & Penguin Design” used by us contain the word “Glacier,” which is commonly used and has been registered in connection with other marks and designs by a number of other entities for water and related services. The mark “Glacier Water,” by itself, is considered by the United States Patent and Trademark Office to be generic in relation to water and related services. We believe that no party can claim exclusive rights to “Glacier Water,” and we may only claim rights to stylized forms of the mark or the mark with design elements. We can, however, give no assurance that other entities might now assert superior or exclusive rights to the marks and seek to obtain damages from the injunctive relief against us. Therefore, there can be no assurance that our use of the trade name and trademarks “Glacier Water” and “Glacier Water & Penguin Design” will not violate the proprietary rights of others, which could result in a material adverse effect on us.

We also use the trade names and registered trademarks “Bi-Eau Pure,” “Clear Choice” in Canada, and the trade name and registered trademark “Water Island” in select locations in the United States.

Government Regulation

The water vending industry is subject to various federal, state and local laws and regulations, which require us, among other things, to obtain licenses for our business and water vending machines, to pay annual license and inspection fees, to comply with certain detailed design and quality standards regarding the vending machines and the vended water and to continuously control the quality of the vended water. Our water vending machines are subject to routine and random regulatory quality inspections.

Our vending machines are certified by the National Automatic Merchandising Association (“NAMA”). The NAMA “Standard for the Sanitary Design and Construction of Food and Beverage Vending Machines” is a standard governing the sanitary design and construction of food and beverage vending machines and related dispensing equipment and incorporates the requirements of the Model Food Code of the Food and Drug Administration.

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Employees

As of March 31, 2011, we had 419 employees, including 36 in assembly, 64 in warehousing, administration and sales and 319 in operations. We hire temporary employees as demand requires. Our employees are not represented by a labor union, and we have not experienced any work stoppages. We believe that our employee relations are good.

Facilities

We lease approximately 46,000 square feet of executive offices and warehouse space in Vista, California (near San Diego) for our corporate offices and principal assembly operations with a lease that expires on December 31, 2015. We also lease various other facilities for area service centers. These leases range in size from approximately 1,200 square feet to 20,200 square feet and expire on various dates from September 30, 2011 through May 31, 2016. Our facilities provide adequate space for our current and future needs, and we expect no difficulty in renewing our principal leases.

Legal Proceedings

From time to time, claims are made against us in the ordinary course of business. As of the date of this prospectus, we are not a party to any legal proceeding that is likely to have a material impact on the results of our operations or financial condition.

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MANAGEMENT

The table below shows information about our executive officers and directors as of May 1, 2011.

Name	Position	Age
Brian H. McInerney	President, Chief Executive Officer and Director		43
Steven L. Murphy	Senior Vice President and Chief Operating Officer		62
Steven D. Stringer	Vice President, Chief Financial Officer and Secretary		54
Luz E. Gonzales	Vice President, Human Resources		58
Brian T. Nakagawa	Vice President, Technology and Information Systems		57
Kenneth W. Sumner, Sr.	Vice President, Sales		70
Charles A. Norris	Chairman of the Board		65
William A. Armstrong	Director		69
William G. Bell	Director		64
Richard A. Kayne	Director		66
Peter H. Neuwirth	Director		72
Heidi E. Yodowitz	Director		57

Set forth below is a brief description of the business experience of our executive officers and directors.

Executive Officers

Brian H. McInerney

Mr. McInerney joined the Company in May 2001 as the President and Chief Executive Officer. Prior to joining the Company, Mr. McInerney was the Vice President, Worldwide Autolite Products for Honeywell International (previously AlliedSignal), a manufacturing company. Mr. McInerney joined AlliedSignal in 1997 and served in various marketing management positions. Mr. McInerney began his marketing career at Nabisco, a diversified food company. Prior thereto, he served at KPMG, an accounting firm, as a financial auditor.

Steven L. Murphy

Mr. Murphy joined the Company in October 2000 as Senior Vice President and Chief Operating Officer. From 1994 to 2000 Mr. Murphy was Vice President, Operations and then Vice President, Finance and Chief Financial Officer for World Wide Parts and Accessories Company (WORLDPAC), a major importer and distributor of replacement parts for imported cars and light trucks. From 1977 to 1994, Mr. Murphy served in various roles including Vice President, General Manager for IMPAC Imported Parts and Accessories Corporation.

Steven D. Stringer

Mr. Stringer joined the Company in August 2007 as Chief Financial Officer. Prior to joining the Company, Mr. Stringer served as the Vice President, Finance and Administration of ENCAD, a subsidiary of Eastman Kodak, from 2001 to 2006. From 1994 to 2001, Mr. Stringer served in various roles for software and technology companies, including as vice president and chief financial officer.

Luz E. Gonzales

Ms. Gonzales joined the Company in February 1995 as Vice President of Human Resources. From 1981 to February 1995, Ms. Gonzales was Corporate Director of Human Resources for Southwest Water Company, a water utility and wastewater management company. Prior thereto, Ms. Gonzales served at American Isuzu Motors, an automotive manufacturer, as a Human Resources Manager.

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Brian T. Nakagawa

Mr. Nakagawa has served as Vice President, Technology and Information Systems since February 1996, after joining the Company as Director of Technology and Information Systems in June 1995. Prior to joining the Company, Mr. Nakagawa was the owner of New Frontier Technologies, an information systems consulting company.

Kenneth W. Sumner, Sr.

Mr. Sumner joined the Company in February 2002 as Vice President, Sales upon the Company’s acquisition of Pure Fill Corporation, a vended water company. Mr. Sumner was the President of Pure Fill Corporation from February 1999 through February 2002. From December 1997 to February 1999, Mr. Sumner was General Manager of National Water Services, a subsidiary of Pure Fill Corporation. From 1985 through 1996, Mr. Sumner held various positions with Coca-Cola bottling plants in Kentucky and Virginia.

Directors

Charles A. Norris

Mr. Norris has served as Chairman of the Board since June 2001. Mr. Norris is the retired President of McKesson Water Products Company, a bottled water company and wholly-owned subsidiary of McKesson Corporation, where he served as President from 1990 until he retired in October 2000. From 1981 to 1990, Mr. Norris served as President of Deer Park Spring Water Company (now a subsidiary of Nestle Waters North America) and served in various operational executive positions with Nestle in both Switzerland and the United States from 1973 to 1985. Mr. Norris is a past Chairman of the International Bottled Water Association.

William A. Armstrong

Mr. Armstrong has been a director of the Company since January 2002. Mr. Armstrong is the retired Vice President, Administration for McKesson Corporation, a health care services and technology company, where he served in various positions from 1972 to June 2002.

William G. Bell

Mr. Bell has been a director of the Company since January 2002. Mr. Bell serves on the Board of Directors of Aqua Filter Fresh, Inc., Mountain Valley Spring Water LLC, Tyler Mountain Water Company and Deep Rock Water and was past Chairman of the International Bottled Water Association. Previously, Mr. Bell held various management positions at Polar Water Company, including General Manager and Northern Region Director, before his departure in 1980 to found Aqua Filter Fresh, Inc.

Richard A. Kayne

Mr. Kayne has been a director of the Company since March 1995. Mr. Kayne served as Chairman of the Board from September 1999 to June 2001. Mr. Kayne co-founded Kayne Anderson Investment Management, Inc. in 1984. Mr. Kayne currently serves as Chairman of Kayne Anderson Capital Advisors, L.P., an investment management firm.

Peter H. Neuwirth

Mr. Neuwirth has been a director of the Company since January 2000 and has served as Vice Chairman of the Board since October 2000. Mr. Neuwirth currently serves as Chairman of the Board of Advanced Engine Management, Inc., a manufacturer of high-performance automotive systems, and has held that position since 1997. Mr. Neuwirth served as President of IMPAC Imported Parts and Accessories Company, Inc., a major importer and distributor of replacement parts for imported cars and light trucks to the specialist repair industry from 1979 to 1995. Mr. Neuwirth currently serves on the advisory board of the UCLA Neurosurgery Department.

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Heidi E. Yodowitz

Ms. Yodowitz has been a director of the Company since February 2003. Ms. Yodowitz recently retired from her role as Senior Vice President of Finance for McKesson Corporation, a health care services and technology company, where she served in various financial positions since 1990. Previously, she served at Deloitte and Touche, an accounting firm, as a senior manager in the audit group. Ms. Yodowitz is currently the CFO for Turning Point Asset Management, an investment management firm specializing in the acquisition and resolution of residential mortgages across the United States. She also provides financial consulting services on a periodic basis.

Board of Directors

Our board of directors currently consists of seven directors. Nominees for director are elected for a term of one year.

Director Independence

Upon the closing of this offering, 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 qualify as an “independent director” only 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: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries.

Our board of directors has determined that each of our directors, other than Messrs. Kayne and McInerney, is an independent director under the listing standards of the NASDAQ Stock Market.

Board Committees

The board of directors has a standing audit committee, a standing compensation committee and a standing nominating/corporate governance committee.

Audit Committee

The audit committee is responsible, among its other duties and responsibilities, for overseeing our accounting and financial reporting processes, the audits of our financial statements, the qualifications and independence of our independent registered public accounting firm and our compliance with legal and regulatory requirements. The audit committee reviews and assesses the qualitative aspects of our financial reporting, our processes to manage business and financial risk, and our compliance with significant applicable legal, ethical and regulatory requirements. The audit committee, in carrying out its oversight responsibilities and functions, oversees our independent auditors’ engagement, duties, compensation and performance; reviews with our independent auditors the scope of audits and our accounting principles, policies and practices; reviews with our independent auditors and management our audited annual financial statements; and reviews, approves and ratifies (if appropriate) related party transactions. The members of our audit committee are Ms. Yodowitz, Mr. Bell and Mr. Neuwirth.

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The board of directors has determined that Ms. Yodowitz is an “audit committee financial expert,” as that term is defined under applicable SEC rules. Our board of directors has determined that each member of our audit committee is independent under the listing standards of the NASDAQ Stock Market and each member of our audit committee is independent pursuant to Rule 10A-3 of the Securities Exchange Act of 1934. Our Board of Directors has determined that all members of the audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Stock Market.

Compensation Committee

The compensation committee is responsible, among its other duties and responsibilities, for monitoring our compensation practices and policies, establishing the compensation and benefits of our officers, monitoring compensation arrangements applicable to our officers in light of their performance, effectiveness and other relevant considerations, assisting in the Company’s compliance with the regulations of the SEC regarding executive compensation and administering our equity incentive plans. The members of our compensation committee are Mr. Armstrong, Mr. Neuwirth and Ms. Yodowitz. Our board of directors has determined that the composition of our compensation committee meets the independence requirements of the applicable listing standards of the NASDAQ Stock Market.

Nominating/Corporate Governance Committee

The nominating/corporate governance committee is responsible for recommending candidates for election to the board of directors. The committee is also responsible, among its other duties and responsibilities, for making recommendations to the board of directors or otherwise acting with respect to corporate governance policies and practices, including board size and membership qualifications; identifying individuals qualified with such criteria and selecting the director nominees; determining committee structure and membership; developing succession plans for our board of directors and officers; recommending action to our board of directors upon any vacancies on the board; facilitating the annual evaluation of the performance of our board of directors and its committees; and communicating with stockholders, including for the establishment and communication of a method for stockholders to recommend potential director nominees for the committee’s consideration and recommending to our board of directors other actions relating to our board of directors, its members and committees. The members of our nominating/corporate governance committee are Mr. Armstrong and Mr. Norris. Our board of directors has determined that the composition of our nominating/corporate governance committee meets the independence requirements of the NASDAQ Stock Market required for director nominations.

Compensation Committee Interlocks and Insider Participation

Upon the closing of this offering, our compensation committee will consist of Mr. Armstrong, Mr. Neuwirth and Ms. Yodowitz. During fiscal year 2010, Mr. Armstrong, Mr. Neuwirth and Ms. Yodowitz served on our compensation committee. None of the members of our current compensation committee or our compensation committee during fiscal year 2010 is or has at any time been an officer or employee of ours. None of our officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity other than the Company that has one or more officers who served on our board of directors or compensation committee during fiscal year 2010.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our (1) chief executive officer (Brian H. McInerney), (2) chief financial officer (Steven D. Stringer) and (3) three most highly compensated officers other than our chief executive officer and chief financial officer (collectively, our “named executive officers” or “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 describes the objectives of our compensation program and the material elements of compensation earned by our named executive officers with respect to fiscal 2010. As we gain experience as a public company, we expect that the specific direction, emphasis and elements of our executive compensation program will continue to evolve. For fiscal 2010, the material elements of compensation consisted of base salary and an annual cash incentive bonus, with the relative value of these elements determined based on job role and financial performance. While we have previously granted long-term incentive awards, we did not grant any long-term incentive awards to the NEOs during fiscal 2010.

Compensation Objectives

The objective of our compensation program is to provide competitive levels of compensation and benefits to our executive officers, including our NEOs, to 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 compensation program is designed to establish a strong, explicit link between annual and long-term incentives and the achievement of company performance goals. Our executive compensation program is intended to align the interests of our named executive officers with the creation of stockholder value through the use of incentive pay programs, which provide competitive compensation and mirror company performance.

Compensation Determination Process

Our compensation committee has the responsibility for determining the compensation of our named executive officers. In making compensation decisions, our compensation committee has relied on the assistance of our Chief Executive Officer in preparing performance evaluations of the other NEOs and of our Chief Financial Officer in evaluating the financial, accounting and tax implications of various compensation awards paid to the NEOs. However, our Chief Executive Officer and Chief Financial Officer do not recommend or determine the amounts or types of compensation paid to the NEOs. Our Chief Executive Officer and certain of our other executive officers may attend compensation committee meetings, as requested by the chairman of the compensation committee, to provide the compensation committee with information regarding the Company’s operational performance, financial performance or other topics requested by the compensation committee to assist the compensation committee in making its compensation decisions. Our executive officers do not attend any portion of the compensation committee meetings during which their compensation is determined and approved.

In setting compensation, the compensation committee considers a variety of factors, including, in addition to the objectives of the executive compensation program listed above, the competitive market for corresponding positions within comparable geographic areas and companies of similar size and stage of development. The competitive market information is based on survey data compiled by our human resources department. While the compensation committee does not undertake a formal benchmarking process, it does review the survey data to evaluate whether our compensation policies are in line with the survey data.

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The amount of past compensation, including annual bonus awards and amounts realizable from our long-term incentive programs, is generally not a significant factor in the compensation committee’s determinations, 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.

Elements of Our Executive Compensation Program

The principal elements of our executive compensation program for 2010 were base salary and an annual cash incentive bonus program. While we have previously granted long-term incentive awards, we did not grant any long-term incentive awards to our NEOs during fiscal 2010. As further discussed below, each of these compensation elements satisfies one or more of our compensation objectives.

While the compensation committee has not adopted policies with respect to the allocation between long-term and currently paid out compensation or cash versus non-cash compensation (or among different forms of non-cash compensation), the compensation committee will continue to evaluate its compensation program to ensure that it provides for a meaningful amount of equity ownership by our NEOs to help align their interests with those of our stockholders. For instance, in connection with this offering, we intend to adopt a Stock Incentive Plan which will allow for the grant of stock options, restricted shares, restricted stock units and other equity-based awards to participants in the plan, including each of the NEOs. The compensation committee believes that this new equity plan will further align the interests of our NEOs with those of our stockholders.

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 NEOs. Base salary is also designed to recognize the scope of responsibilities placed on each NEO and reward each NEO for his or her unique leadership skills, management experience and contributions. On an annual basis, our compensation committee reviews and evaluates for adjustment the base salaries of our NEOs based on the scope of an NEO’s responsibilities, individual contribution, prior experience and sustained performance. For fiscal 2010, annual base salaries for the NEOs increased, on average, by 4.3%.

Annual Cash Incentive Bonuses

Annual cash incentive bonuses provide a reward for the achievement of corporate strategic, operational and financial objectives. Our annual cash incentive bonuses are designed to motivate executives to achieve superior performance in their areas of responsibility.

The annual cash incentive bonus opportunity for executive officers is tied to the attainment of the Company’s target earnings before interest, taxes, depreciation and amortization adjusted by adding back non-cash stock compensation expenses and certain significant non-budgeted expenses (“Adjusted EBITDA”). For fiscal 2010, the target Adjusted EBITDA performance goal equaled $22.6 million.

The annual cash incentive bonus opportunity equals a percentage of the participant’s annual base salary. Meeting the target Adjusted EBITDA performance goal qualifies participants for 100% of the bonus opportunity. NEOs may also receive a threshold payout equal to 50% of their bonus target for achieving 90% of target Adjusted EBITDA and a maximum payout equal to 200% of their bonus target for achieving 130% of target Adjusted EBITDA.

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For fiscal 2010, the compensation committee determined that the Company achieved 90% of its target Adjusted EBITDA performance goal. The table below sets forth the bonus payouts to be made in 2011 to each of the named executive officers based upon fiscal 2010 performance:

Named Executive Officer	Calculated Bonus Payout
Brian H. McInerney	$	83,750
Steven L. Murphy		51,600
Steven D. Stringer		30,000
Kenneth W. Sumner, Sr.		19,000
Luz E. Gonzales		22,650

Long-Term Incentives

We adopted long-term incentive programs for executive officers of the Company in 2004 and 2007. The long-term incentive programs were three-year programs intended to compensate key executives based on obtaining certain financial performance relating to revenues and earnings before interest, taxes and depreciation by the end of each three-year term. Compensation from the long-term incentive programs rewards achievement of strategic long-term objectives and contributes toward overall stockholder value. In addition, the vesting feature of our long-term incentive programs contributes to retention by providing an incentive to our NEOs to remain with the Company during the vesting period. We did not grant any long-term incentive awards during fiscal 2010. As noted above and discussed further below, in connection with this offering, we intend to adopt a Stock Incentive Plan which will allow for the grant of stock options, restricted shares, restricted stock units and other equity-based awards to participants in the plan, including each of the NEOs.

Stock Incentive Plan

The Stock Incentive Plan, which will become effective upon the closing of this offering, provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards and other stock-based awards. Upon effectiveness of the plan, the number of shares of our common stock that will be reserved for issuance under the Stock Incentive Plan will be the sum of (i)           shares of common stock and (ii) the number of shares of our common stock subject to outstanding awards under our 1994 Stock Compensation Program, that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us. In addition, our Stock Incentive Plan contains an “evergreen” provision that allows for an annual increase in the number of shares available for issuance under our Stock Incentive Plan on the first day of fiscal 2012, 2013 and 2014. The annual increase shall be equal to the lesser of (a)           shares of common stock, (b)     % of the number of shares of our common stock outstanding on the first day of the fiscal year and (c) an amount determined by our board of directors.

Our employees, officers, directors, consultants and advisors are eligible to receive awards under the Stock Incentive Plan; however, incentive stock options may only be granted to our employees. No more than           shares of common stock may be issued pursuant to incentive stock options under the Stock Incentive Plan. The maximum number of shares of our common stock with respect to which awards may be granted to any participant under the plan is           shares per calendar year.

In accordance with the terms of the Stock Incentive Plan, our board of directors has authorized our compensation committee to administer the plan. Pursuant to the terms of the Stock Incentive Plan, our compensation committee will select the recipients of awards and determine:

•  the number of shares of our common stock covered by options and the dates upon which the options become exercisable;

•  the exercise price of options;

•  the duration of options; and

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•  the number of shares of our common stock subject to any restricted stock or other stock-based awards and the terms and conditions of such awards, including conditions for repurchase, issue price and repurchase price.

If our board of directors delegates authority to an executive officer to grant awards under the Stock Incentive Plan, the executive officer has the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards, and the maximum number of shares subject to awards that such executive officer may make.

Upon a merger or other reorganization event, our board of directors may, in its sole discretion, take any one or more of the following actions pursuant to the Stock Incentive Plan as to some or all outstanding awards other than restricted stock (except to the extent specifically provided otherwise in an applicable award agreement or another agreement between us and a plan participant):

•  provide that all outstanding awards shall be assumed or substituted by the successor corporation;

•  upon written notice to a participant, provide that all of the participant’s unexercised options or awards will terminate immediately prior to the consummation of such transaction unless exercised by the participant;

•  provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon the reorganization event;

•  in the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to the participants with respect to each award held by a participant equal to (a) the number of shares of common stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or immediately prior to such reorganization event) multiplied by (b) the excess, if any, of (i) the cash payment for each share surrendered in the reorganization event over (ii) the exercise, measurement or purchase price of such award and any applicable tax withholdings, in exchange for the termination of such awards; and

•  provide that, in connection with a liquidation or dissolution, awards convert into the right to receive liquidation proceeds.

In the case of certain restricted stock units, no assumption or substitution shall be permitted and the restricted stock units shall instead be settled in accordance with the terms of the applicable restricted stock unit agreement.

Upon the occurrence of a reorganization event other than a liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock shall continue for the benefit of the successor company and shall, unless the board of directors may otherwise determine, apply to the cash, securities or other property into which shares of our common stock are converted pursuant to the reorganization event; provided that our board of directors may provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any restricted stock or any other agreement between us and a plan participant. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all conditions on each outstanding restricted stock award will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award.

No award may be granted under the Stock Incentive Plan on or after          . Our board of directors may amend, suspend or terminate the Stock Incentive Plan at any time, except that stockholder approval may be required if necessary to comply with applicable law or stock market requirements.

Perquisites and Other Benefits

As a general matter, we do not offer perquisites or other benefits to any of our NEOs with an aggregate value in excess of $10,000 annually, because we believe we can provide better incentives for desired

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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 NEOs, with any such decision to be reviewed and approved by the compensation committee as needed.

Our NEOs are eligible to participate in standard employee benefit plans, including medical, dental, vision, life, 401(k), and any other employee benefit or insurance plans made available to employees.

Employment Agreements and Severance and Change in 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 in 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 the Company and our stockholders.

We do not currently have employment or change in control agreements with any of our NEOs but we intend to enter into employment agreements with certain of our NEOs in connection with this offering, and we expect those agreements to provide severance benefits if the employee’s employment is terminated without cause or generally in connection with a change in control.

Fiscal 2010 Executive Compensation Tables

Fiscal 2010 Summary Compensation Table

The following table sets forth the total compensation paid to our NEOs for fiscal 2010.

							Non-Equity
	Fiscal						Incentive Plan		All Other		Total
Name and Principal Position	Year		Salary		Bonus		Compensation(1)		Compensation		Compensation
Brian H. McInerney		2010	$	347,914	$	—	$	83,750	$	2,908	$	434,572
President and Chief Executive Officer
Steven L. Murphy		2010		258,472		—		51,600		—		310,072
Senior Vice President and Chief Operating Officer
Steven D. Stringer		2010		200,257		—		30,000		—		230,257
Vice President and Chief Financial Officer
Kenneth W. Sumner, Sr.		2010		152,322		9,375		19,000		8,400		189,097
Vice President, Sales
Luz E. Gonzales		2010		151,358		—		22,650		4,293		178,301
Vice President, Human Resources

(1) The amounts included in the “Non-Equity Incentive Plan Compensation” column reflect cash awards under our annual cash bonus program to be paid to the NEOs in fiscal 2011 with respect to fiscal 2010 performance. Please see the Compensation Discussion and Analysis for further information regarding the annual cash bonus program.

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Fiscal 2010 Grants of Plan-Based Awards Table

	Estimated Future Payouts Under
	Non-Equity Incentive Plan Awards(1)
Name	Threshold		Target		Maximum
Brian H. McInerney	$	83,750	$	167,500	$	335,000
Steven L. Murphy		51,600		103,200		206,400
Steven D. Stringer		30,000		60,000		120,000
Kenneth W. Sumner, Sr.		19,000		38,000		76,000
Luz E. Gonzales		22,650		45,300		90,600

(1) The amounts reported represent the threshold, target and maximum cash award levels set for fiscal 2010 under the Company’s annual cash bonus program. The amount actually earned by each NEO is included in the Non-Equity Incentive Plan Compensation column in the Fiscal 2010 Summary Compensation Table. Please see the Compensation Discussion and Analysis for further information regarding the annual cash bonus program.

Outstanding Equity Awards at Fiscal 2010 Year End

The following table sets forth information regarding outstanding stock options and unvested shares of restricted stock held as of January 2, 2011 by our named executive officers. Information set forth herein with respect to outstanding options and restricted stock awards does not reflect the stock split we intend to effect in connection with this offering.

	Option Awards					Stock Awards
	Number of					Number of
	Securities					Shares or Units		Market Value of
	Underlying					of Stock That		Shares or Units
	Unexercised		Option		Option	Have Not		of Stock That
	Options		Exercise		Expiration	Vested		Have Not Vested
Name	Exercisable (#)		Price		Date	(#)(1)		(2)
Brian H. McInerney		72,497	$	8.65	October 7, 2020		57,500	$	1,408,750
		1,500		8.00	October 7, 2020
		1,500		14.50	October 7, 2020
		5,000		15.60	October 7, 2020
Steven L. Murphy		29,208		11.50	October 7, 2020		15,000		367,500
		2,670		7.95	October 7, 2020
		1,500		8.00	October 7, 2020
		1,500		14.50	October 7, 2020
Steven D. Stringer		—		—	—		5,000		122,500
Kenneth W. Sumner, Sr.		—		—	—		5,000		122,500
Luz E. Gonzales		1,191		14.50	October 7, 2020		—		—

(1)

All restricted shares vest on the earlier to occur of January 1, 2012 and the occurrence of a change in control, subject to the continued employment of the NEO. For this purpose, a “change in control” will generally be deemed to occur if (i) a person or group (other than Messrs. Kayne and Norris and our benefit plans) acquires a greater than 40% holding of our capital stock unless such holding is less than the aggregate holdings of Messrs. Kayne and Norris, (ii) there is a change in a majority of our directors or (iii) one of certain enumerated events (e.g., certain mergers, a sale of assets or a liquidation) occurs.

(2)

The market value of the unvested shares is based on the last trading price of our common stock, as reported in the pink sheets, on December 31, 2010.

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Fiscal 2010 Option Exercises

	Option Awards
	Number of
	Shares Acquired on		Value Realized
Name	Exercise (#)		on Exercise
Brian H. McInerney		—		—
Steven L. Murphy		3,475	$	66,938
Steven D. Stringer		—		—
Kenneth W. Sumner, Sr.		—		—
Luz E. Gonzales		—		—

Fiscal 2010 Potential Payments Upon a Termination or a Change in Control

As noted in the Compensation Discussion and Analysis, we do not currently have employment or change in control agreements with any of our NEOs but we intend to enter into employment agreements in connection with this offering with certain of our NEOs, and we expect those agreements to provide severance benefits if the employee’s employment is terminated without cause or generally in connection with a change in control. If a change in control occurred as of the last day of fiscal 2010, unvested restricted shares held by our NEOs would generally accelerate and vest immediately. Assuming a change in control occurred on January 2, 2011, Messrs. McInerney, Murphy, Stringer and Sumner would have received equity values with respect to the vesting of restricted shares of approximately $1,408,750, $367,500, $122,500 and $122,500, respectively.

Risk Analysis of Compensation Program

The compensation committee has reviewed the Company’s executive and broad-based compensation programs and does not believe that such programs encourage excessive or unnecessary risk taking. Base salaries are fixed in amount and thus do not encourage risk taking. By utilizing cash bonuses that are tied to company-wide performance measures and by including long-term incentive programs as a historical element of compensation, the compensation committee believes that the executive compensation program aligns our officers’ objectives with those of our long-term stockholders.

Fiscal 2010 Compensation of Directors

The following table sets forth the compensation paid to our non-employee directors in fiscal 2010:

	Fees Earned or		All Other
Name	Paid in Cash		Compensation		Total
Charles A. Norris	$	107,000	$	—	$	107,000
William A. Armstrong		25,000		—		25,000
William G. Bell		25,000		—		25,000
Richard A. Kayne		25,000		—		25,000
Peter H. Neuwirth		25,000		—		25,000
Heidi E. Yodowitz		30,000		—		30,000

These amounts are annual fees, paid in quarterly installments for service as directors and, in the case of Mr. Norris, for serving as chairman of the board and, in the case of Ms. Yodowitz, for serving as chair of the audit committee. The directors are not entitled to any other compensation for attendance at board or committee meetings and have not received any equity or options grants during the past three fiscal years.

Directors who also are our employees do not receive any of the compensation described above.

The following non-employee directors hold options to purchase the following number of shares of our common stock: Mr. Bell, 375 shares; Mr. Kayne, 3,000 shares; and Mr. Neuwirth, 1,500 shares.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial ownership of our common stock as of          , 2011, after giving effect to a          -for-          split of our common stock that occurred on          , 2011, before and after giving effect to the offering, by:

•  the selling stockholders;

•  each of our named executive officers;

•  each of our directors; and

•  all of our directors and executive officers as a group.

Apart from the foregoing, there is no 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          , 2011 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. The address for each of the stockholders in the following table is c/o Glacier Water Services, Inc., 1385 Park Center Drive, Vista, California 92081.

			Shares of Common Stock		Shares of Common Stock
			Beneficially Owned After		Beneficially Owned After
	Shares of Common Stock		the Offering		the Offering
	Beneficially Owned Prior		(Assuming Full Exercise of		(Assuming No Exercise of
	to the Offering		Over-Allotment Option)		Over-Allotment Option)
Name of Beneficial Owner	Total	Percent	Total	Percent	Total	Percent
William A. Armstrong
William G. Bell(1)
Richard A. Kayne(1)(2)
Peter H. Neuwirth(1)
Charles A. Norris
Heidi E. Yodowitz
Luz E. Gonzales(1)
Brian H. McInerney(1)
Steven L. Murphy(1)
Brian T. Nakagawa(1)
Kenneth W. Sumner, Sr.
Steven D. Stringer
Executive officers and directors as a group(1)

*	Less than 1%.
(1)	Shares beneficially owned include shares issuable upon the exercise stock options exercisable within 60 days of          , 2011 in the amounts of           held by Mr. Bell,          held by Mr. Kayne,          held by Mr. Neuwirth,          held by Ms. Gonzales,          held by Mr. McInerney,          held by Mr. Murphy, and          held by Mr. Nakagawa.
(2)	The           shares include (i)            held directly by Mr. Kayne (including          shares which may be acquired within 60 days upon exercise of options) and (ii)            shares held by managed accounts of Kayne Anderson Capital Advisors, L.P., a registered investment adviser. Mr. Kayne disclaims beneficial ownership of such shares held in the managed accounts.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The 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 alternative transactions;

•  whether the transaction would impair the judgment of a director to act in the best interest of the Company; and

•  any other matters the audit 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 the 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.

Since December 30, 2007 and through the date of this prospectus, no transactions have occurred in which the Company or any of its subsidiaries was or is to be a participant and in which any of our directors, officers, holders of more than five percent of our voting securities or affiliates of our directors, officers and five percent stockholders had a material interest.

The following directors beneficially own the following number of shares of Glacier Water Trust I Preferred Securities: Mr. Kayne, 197,553 shares (including 193,473 shares held in managed accounts, of which Mr. Kayne disclaims beneficial ownership); Mr. McInerney, 200 shares; and Mr. Sumner, 4,000 shares. As indicated under “Use of Proceeds,” a portion of the proceeds of this offering will be used to redeem a portion of our Junior Subordinated Debentures; the redemption of the Junior Subordinated Debentures will require a corresponding pro rata redemption of the Trust Preferred Securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Long-Term Debt.”

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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 by-laws 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 by-laws filed as exhibits to the registration statement, of which this prospectus is a part.

General

Our authorized capital stock consists of: (1) 10,000,000 shares of common stock, par value $0.01 per share, 2,720,048 of which were outstanding at January 2, 2011 and (2) 100,000 shares of preferred stock, par value $0.01 per share, none of which were outstanding at January 2, 2011. The foregoing does not reflect the stock split described below. As of          , 2011, there were           holders of record of our common stock.

Upon the closing of this offering, we will amend our certificate of incorporation to provide that our authorized capital stock will consist of (1) 50,000,000 shares of common stock, par value $0.01 per share and (2) 10,000,000 shares of preferred stock, par value $0.01 per share.

On          , 2011, we effected a          -for-          stock split, which resulted in our having           shares of common stock outstanding.

After giving effect to the sale of shares of common stock in this offering, we expect to have          shares of common stock outstanding (or           shares if the underwriters exercise their over-allotment option in full) and no shares of preferred stock outstanding.

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. See “Dividend Policy.” Any future determination to pay dividends will be at the discretion of our board of directors and will depend on various factors, including our results of operations, financial condition, capital requirements, contractual restrictions, outstanding indebtedness, investment opportunities and other factors that our board of directors deems relevant.

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, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock.

Fully Paid Shares. 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 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. Our board of directors will be authorized to issue from time to time up to          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

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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.

Anti-Takeover Provisions

There are various provisions in Delaware law, our amended and restated certificate of incorporation and by-laws 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

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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.

Section 203 generally defines a business combination to include:

•  any merger or consolidation involving the corporation and the interested stockholder;

•  any sale, lease, exchange, mortgage, transfer 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;

•  any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by 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 By-laws

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 by-laws that, in most circumstances, 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 by-laws or remove directors without holding a meeting of our stockholders called in accordance with our by-laws.

In addition, our amended and restated certificate of incorporation and by-laws 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 by-laws 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 by-laws. 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

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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 by-laws 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.

Our amended and restated certificate of incorporation and by-laws do not provide for cumulative voting in the election of directors. The absence of cumulative voting may make it more difficult for stockholders who own a total of less than a majority of our voting power to elect any directors to our board of directors.

Limitations of Directors’ Liability and Indemnification

Our amended and restated certificate of incorporation limits 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 by-laws 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 by-laws 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 by-laws 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.

Listing

We have applied to list our common stock on the NASDAQ Global Market under the symbol “DRNK.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is BNY Mellon Shareholder Services.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this offering, based on our outstanding shares as of          , 2011, we will have outstanding an aggregate of           shares of our common stock (          shares if the underwriters exercise their over-allotment option in full). Of these shares, the           shares to be sold in this offering plus any shares issued upon exercise of the underwriters’ over-allotment option will be freely tradable in the public market without restriction under the Securities Act, except for shares purchased by any of our existing “affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to additional restrictions described below. A total of        shares of common stock outstanding upon the closing of this offering will be considered “restricted securities” as defined in Rule 144. A total of           of these restricted securities will be subject to transfer restrictions for 180 days from the date of this prospectus pursuant to the lock-up arrangements described below. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration, such as the exemptions afforded by Rule 144 or Rule 701 of the Securities Act, as described below. In addition, unvested shares of restricted stock and shares underlying options will become available for resale into the public markets as described below under “Options and Restricted Stock.”

Lock-up Agreements

For a description of our lockup agreements with the underwriters that restrict sales by us, our directors and executive officers and certain of our existing stockholders, see “Underwriting.”

Rule 144

In general, 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 those shares provided current public information about us is available and, after owning those shares for at least one year, would be entitled to sell an unlimited number of those shares 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, notice requirements and the availability of current public information about us.

Upon expiration of the lock-up period described in the section entitled “Underwriting,” all of the        shares of restricted common stock held by our existing stockholders will be eligible for sale under Rule 144 subject to applicable volume and other limitations for stockholders who are affiliates. 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, but without compliance with some of the restrictions, including the holding period, contained in Rule 144.

Options and Restricted Stock

Options to purchase a total of        shares of our common stock are currently outstanding with a weighted average per share exercise price of $      and expiration dates of October 2020, and a total of        shares of unvested restricted stock are currently outstanding which have vesting periods through 2011.

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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 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;

•  tax-exempt organizations;

•  persons who hold a beneficial interest through pass-through or transparent 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.

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. You may not rely upon this discussion for the purpose of avoiding federal tax penalties.

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 determined without regard to the “tie-breaker” rules of an income tax treaty;

•  a corporation or other business entity 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

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(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.

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 on dividends treated as effectively connected with a U.S. trade or business.

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, and at least once every three years.

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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 or withholding tax 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.

U.S. Federal Estate Tax

An individual non-U.S. holder who is treated as the owner, or who has made certain lifetime transfers (for example, to a trust with respect to which the individual has retained certain interests or powers), of an interest in our common stock will be, absent an applicable treaty, required to include the value of the common

71

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.

Recently-Enacted Legislation Relating to Foreign Accounts

Legislation has been recently enacted that imposes significant certification, information reporting and other requirements on “foreign financial institutions” and certain other non-U.S. entities. The legislation is generally effective for certain U.S.-source payments made after December 31, 2012. The failure to comply with the certification, information reporting and other specified requirements in the legislation would result in withholding tax being imposed on payments of dividends and sales proceeds on our common stock to foreign financial institutions and certain other non-U.S. holders. Non-U.S. holders should consult their own tax advisors regarding the application of this legislation to them.

72

UNDERWRITING

The underwriters named below have severally agreed, subject to the terms and conditions set forth in the underwriting agreement by and among the William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc., as representatives of the underwriters, the selling stockholders and us, to purchase from us and the selling stockholders the respective number of shares of common stock set forth opposite each underwriter’s name in the table below. William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc. are acting as Joint-Bookrunning Managers and Canaccord Genuity Inc. is acting as Co-Manager for this offering.

Underwriter	Number of Shares
William Blair & Company, L.L.C.
SunTrust Robinson Humphrey, Inc.
Canaccord Genuity Inc.
Total

This offering will be underwritten on a firm commitment basis. In the underwriting agreement, the underwriters have agreed, subject to the terms and conditions set forth therein, to purchase the shares of our common stock being sold pursuant to this prospectus at a price per share equal to the public offering price less the underwriting discount specified on the cover of this prospectus. According to the terms of the underwriting agreement, the underwriters either will purchase all of the shares of our common stock being sold pursuant to this prospectus or none of them. In the event of default by any underwriter, in certain circumstances, the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

The representatives of the underwriters have advised us that the underwriters propose to offer our common stock to the public initially at the public offering price set forth on the cover of this prospectus and to selected dealers at such price less a concession of not more than $      per share. The underwriters may allow, and such dealers may re-allow, a concession not in excess of $      per share to certain other dealers. The underwriters will offer the shares of our common stock subject to prior sale and subject to receipt and acceptance of the shares by the underwriters. The underwriters may reject any order to purchase shares of our common stock in whole or in part. The underwriters expect that we and the selling stockholders will deliver the shares to the underwriters through the facilities of The Depository Trust Company in New York, New York on or about          , 2011. At that time, the underwriters will pay us and the selling stockholders for the shares in immediately available funds. After commencement of the public offering, the representatives may change the public offering price and other selling terms.

We and certain of the selling stockholders have granted the underwriters an option, exercisable within 30 days after the date of this prospectus, to purchase up to an aggregate of          additional shares of common stock at the same price per share to be paid by the underwriters for the other shares offered hereby solely for the purpose of covering over-allotments, if any. If the underwriters purchase any such additional shares pursuant to this option, each of the underwriters will be committed to purchase such additional shares in approximately the same proportion as set forth in the table above. The underwriters may exercise the option only for the purpose of covering excess sales, if any, made in connection with the distribution of the shares of our common stock offered hereby. The underwriters will offer any additional shares of our common stock that they purchase on the terms described in the preceding paragraph.

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The following table summarizes the compensation to be paid by us and the selling stockholders to the underwriters. This information assumes either no exercise or full exercise by the underwriters of their over-allotment option:

		Without	With
	Per Share	Over-Allotment	Over-Allotment
Public offering price	$	$	$
Underwriting discount paid by us	$	$	$
Underwriting discount paid by selling stockholders	$	$	$
Proceeds, before expenses to us	$	$	$
Proceeds, before expenses to selling stockholders	$	$	$

We estimate that our total expenses for this offering, excluding the underwriting discount, will be approximately $      million. Atlas Strategic Advisors, LLC, a financial advisor to our company, will receive a fee equal to 1% of the gross selling price of shares of our common stock in this offering, not to exceed $     , which fee will be credited against the underwriting commission payable by us to the underwriters.

We and each of our directors, executive officers and certain of our existing stockholders holding in the aggregate approximately           shares of our common stock have agreed, subject to limited exceptions described below, for a period of 180 days after the date of this prospectus, not to, directly or indirectly, without the prior written consent of William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc.:

•  offer, sell (including “short” selling), assign, transfer, encumber, pledge, contract to sell, grant an option to purchase, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Exchange Act, or otherwise dispose of any shares of common stock or securities convertible into or exchangeable or exercisable for, common stock held of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act); or

•  enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any of our common stock.

The 180-day lock-up period will be extended if (i) we release earnings results or material news or a material event relating to us occurs during the last 17 days of the lock-up period, or (ii) prior to the expiration of the lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the lock-up period. In either case, the lock-up period will be extended for 18 days after the date of the release of the earnings results or the occurrence of the material news or material event, unless William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc. waive, in writing, such extension.

The lock-up agreements entered into by our directors, executive officers and certain of our existing stockholders do not extend to transfers or dispositions (i) by gift, (ii) by will or intestate succession to immediate family members of the transferor or (iii) to any trust for the direct or indirect exclusive benefit of the transferor or his or her immediate family, provided in each case that the recipient of those shares agrees to be bound by the foregoing restrictions for the duration of the lock-up period. In determining whether to consent to a transaction prohibited by these restrictions, William Blair & Company, L.L.C. and SunTrust Robinson Humphrey, Inc. will take into account various factors, including the number of shares requested to be sold, the anticipated manner and timing of sale, the potential impact of the sale on the market for the common stock, the restrictions on publication of research reports that would be imposed by the rules of the Financial Industry Regulatory Authority and market conditions generally. We may grant options and issue common stock under our existing stock incentive plan and issue unregistered shares in connection with any outstanding convertible securities or options during the lock-up period. For more information, see “Shares Eligible for Future Sale.”

We and the selling stockholders have agreed to indemnify the underwriters and their controlling persons against certain liabilities for misstatements in the registration statement of which this prospectus forms

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a part, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect thereof.

The representatives have informed us that the underwriters will not confirm, without client authorization, sales to their client accounts as to which they have discretionary authority. The representatives have also informed us that the underwriters intend to deliver all copies of this prospectus via electronic means, via hand delivery or through mail or courier services.

In connection with this offering, the underwriters and other persons participating in this offering may engage in transactions which affect the market price of the common stock. These may include stabilizing and over-allotment transactions and purchases to cover syndicate short positions. Stabilizing transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock. An over-allotment involves selling more shares of our common stock in this offering than are specified on the cover of this prospectus, which results in a syndicate short position. The underwriters may cover this short position by purchasing common stock in the open market or by exercising all or part of their over-allotment option. In addition, the representatives may impose a penalty bid. This allows the representatives to reclaim the selling concession allowed to an underwriter or selling group member if shares of our common stock sold by such underwriter or selling group member in this offering are repurchased by the representatives in stabilizing or syndicate short covering transactions. These transactions, which may be effected on The NASDAQ Global Market or otherwise, may stabilize, maintain or otherwise affect the market price of our common stock and could cause the price to be higher than it would be without these transactions. The underwriters and other participants in this offering are not required to engage in any of these activities and may discontinue any of these activities at any time without notice. We and the underwriters make no representation or prediction as to whether the underwriters will engage in such transactions or choose to discontinue any transactions engaged in or as to the direction or magnitude of any effect that these transactions may have on the price of our common stock.

Our common stock is currently quoted in the “pink sheets” under the symbol GWSV.PK, but is not listed on any national stock exchange. We, the selling stockholders and the representatives of the underwriters have negotiated to determine the initial public offering price. We and they have considered current market conditions, our operating results in recent periods, the market capitalization of other companies in our industry and estimates of our potential.

We have applied to list our common stock on The NASDAQ Global Market under the symbol “DRNK.”

In the ordinary course of business, some of the underwriters and their affiliates may in the future provide investment banking, commercial banking and other services to us for which they may receive customary fees or other compensation.

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LEGAL MATTERS

The validity of the shares of common stock offered hereby and certain other legal matters will be passed upon for us by Weissmann Wolff Bergman Coleman Grodin & Evall LLP, Beverly Hills, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Sidley Austin LLP, Chicago, Illinois.

EXPERTS

The consolidated financial statements of Glacier Water Services, Inc. and subsidiaries as of January 3, 2010 and January 2, 2011, and for the years ended December 28, 2008, January 3, 2010, and January 2, 2011 have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

ADDITIONAL 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. On the closing of this offering, we will be subject to the 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.glacierwater.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 (760) 560-1111 or by mail at Glacier Water Services, Inc., 1385 Park Center Drive, Vista, California 92081. You may also read and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities.

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CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Glacier Water Services, Inc.
Annual Financial Statements:
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Financial Statements:
Consolidated Balance Sheets at January 3, 2010 and January 2, 2011		F-3
Consolidated Statements of Operations for the years ended December 28, 2008, January 3, 2010 and January 2, 2011		F-4
Consolidated Statements of Stockholders’ Deficit and Comprehensive Loss for the years ended December 28, 2008, January 3, 2010 and January 2, 2011		F-5
Consolidated Statements of Cash Flows for the years ended December 28, 2008, January 3, 2010 and January 2, 2011		F-6
Notes to Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Glacier Water Services, Inc.:

We have audited the accompanying consolidated balance sheets of Glacier Water Services, Inc. and subsidiaries (the Company) as of January 3, 2010 and January 2, 2011, and the related consolidated statements of operations, stockholders’ deficit and comprehensive loss, and cash flows for the years ended December 28, 2008, January 3, 2010, and January 2, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 Glacier Water Services, Inc. and subsidiaries as of January 3, 2010 and January 2, 2011, and the results of their operations and their cash flows for the years ended December 28, 2008, January 3, 2010, and January 2, 2011, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

San Diego, California

May 5, 2011

F-2

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JANUARY 3, 2010 AND JANUARY 2, 2011

	2009			2010
	(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents	$	3,710		$	3,692
Accounts receivable, net of allowance for doubtful accounts of $63 and $64 as of January 3, 2010 and January 2, 2011, respectively		1,583			1,742
Repair parts		3,084			3,443
Prepaid expenses and other		1,381			1,133
Total current assets		9,758			10,010
Property and equipment, net		43,108			45,269
Goodwill		7,080			7,080
Intangible assets, net of accumulated amortization of $1,234 and $1,257 as of January 3, 2010 and January 2, 2011, respectively		32			14
Investment in Glacier Water Trust I Common Securities		2,629			2,629
Investment in Glacier Water Trust I Preferred Securities		3,648			3,648
Deferred financing costs, net		4,481			4,378
Other assets		762			817
Total assets	$	71,498		$	73,845
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	1,443		$	2,651
Accrued commissions		3,823			3,654
Accrued liabilities		3,580			2,900
Bank overdraft		1,331			868
Total current liabilities		10,177			10,073
Long-term debt		87,629			87,629
Line of credit		28,173			31,153
Long-term portion of deferred rent		17			75
Total liabilities		125,996			128,930
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.01 par value; liquidation preference $100 per share; 8% cumulative redeemable convertible; Authorized, 100,000 shares; issued and outstanding, 0 shares at January 3, 2010 and January 2, 2011		—			—
Common stock, $0.01 par value. Authorized, 10,000,000 shares; issued and outstanding, 2,714,873 and 2,720,048 shares at January 3, 2010 and January 2, 2011, respectively		44			44
Additional paid-in capital		13,476			13,648
Accumulated deficit		(35,745	)		(36,645	)
Treasury stock, at cost, 1,587,606 shares at January 3, 2010 and January 2, 2011		(32,562	)		(32,562	)
Accumulated other comprehensive income		289			430
Total stockholders’ deficit		(54,498	)		(55,085	)
Total liabilities and stockholders’ deficit	$	71,498		$	73,845

See accompanying notes to consolidated financial statements.

F-3

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 28, 2008, JANUARY 3, 2010 AND JANUARY 2, 2011

	2008			2009			2010
	(In thousands, except share and per share data)
Revenues	$	94,711		$	103,803		$	100,056
Cost of revenues:
Operating expenses		60,703			66,097			65,704
Depreciation and amortization		15,569			15,166			12,560
Total cost of revenues		76,272			81,263			78,264
Gross profit		18,439			22,540			21,792
Selling, general, and administrative expenses		14,515			15,051			14,149
Income from operations		3,924			7,489			7,643
Other expenses (income):
Interest expense		8,583			8,406			8,578
Gain on early retirement of debt		(119	)		—			—
Total other expense		8,464			8,406			8,578
Loss before income taxes		(4,540	)		(917	)		(935	)
Income tax expense (benefit)		—			123			(35	)
Net loss	$	(4,540	)	$	(1,040	)	$	(900	)
Basic and diluted net loss per share	$	(1.68	)	$	(0.38	)	$	(0.33	)
Weighted average shares used in calculation		2,702,790			2,711,836			2,716,873
Cash dividend per common share	$	1.50		$	1.00		$	—

See accompanying notes to consolidated financial statements.

F-4

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT AND COMPREHENSIVE LOSS

YEARS ENDED DECEMBER 28, 2008, JANUARY 3, 2010 AND JANUARY 2, 2011

																		Accumulated
									Additional									Other
	Preferred Stock				Common Stock				Paid-in			Accumulated			Treasury			Comprehensive
	Shares		Amount		Shares		Amount		Capital			Deficit			Stock			Income (Loss)			Total
	(In thousands, except share data)
Balance, December 30, 2007		—	$	—		2,690,568	$	44	$	19,532		$	(30,165	)	$	(32,562	)	$	406		$	(42,745	)
Exercise of stock options		—		—		20,905		—		325			—			—			—			325
Stock-based compensation		—		—		—		—		637			—			—			—			637
Dividends on common stock		—		—		—		—		(4,061	)		—			—			—			(4,061	)
Comprehensive income (loss):
Net loss		—		—		—		—		—			(4,540	)		—			—			(4,540	)
Foreign currency translation adjustment		—		—		—		—		—			—			—			(491	)		(491	)
Total comprehensive loss																						(5,031	)
Balance, December 28, 2008		—		—		2,711,473		44		16,433			(34,705	)		(32,562	)		(85	)		(50,875	)
Exercise of stock options		—		—		3,400		—		54			—			—			—			54
Purchase of stock options		—		—		—		—		(997	)		—			—			—			(997	)
Stock-based compensation		—		—		—		—		701			—			—			—			701
Dividends on common stock		—		—		—		—		(2,715	)		—			—			—			(2,715	)
Comprehensive income (loss):
Net loss		—		—		—		—		—			(1,040	)		—			—			(1,040	)
Foreign currency translation adjustment		—		—		—		—		—			—			—			374			374
Total comprehensive loss																						(666	)
Balance, January 3, 2010		—		—		2,714,873		44		13,476			(35,745	)		(32,562	)		289			(54,498	)
Exercise of stock options		—		—		5,175		—		54			—			—			—			54
Stock-based compensation		—		—		—		—		118			—			—			—			118
Comprehensive income (loss):
Net loss		—		—		—		—		—			(900	)		—			—			(900	)
Foreign currency translation adjustment		—		—		—		—		—			—			—			141			141
Total comprehensive loss																						(759	)
Balance, January 2, 2011		—	$	—		2,720,048	$	44	$	13,648		$	(36,645	)	$	(32,562	)	$	430		$	(55,085	)

See accompanying notes to consolidated financial statements.

F-5

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 28, 2008, JANUARY 3, 2010 AND JANUARY 2, 2011

	2008			2009			2010
	(In thousands)
Cash flows from operating activities:
Net loss	$	(4,540	)	$	(1,040	)	$	(900	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		15,569			15,166			12,560
Stock-based compensation		637			701			118
Loss on disposal of assets		19			251			6
Gain on early retirement of debt		(119	)		—			—
Changes in operating assets and liabilities:
Accounts receivable		(62	)		95			(159	)
Repair parts		(217	)		(306	)		(359	)
Prepaid expenses and other		152			(372	)		248
Other assets		(2,186	)		(1,491	)		(1,518	)
Deferred rent		(50	)		(45	)		61
Accounts payable, accrued liabilities, and accrued commissions		(1,064	)		1,789			40
Net cash provided by operating activities		8,139			14,748			10,097
Cash flows from investing activity:
Investment in property and equipment		(10,919	)		(11,997	)		(12,688	)
Net cash used in investing activity		(10,919	)		(11,997	)		(12,688	)
Cash flows from financing activities:
Dividends		(4,061	)		(2,715	)		—
Principal payments on line of credit		(21,879	)		(18,605	)		(15,280	)
Proceeds from line of credit		28,890			20,515			18,260
Purchase of stock options		—			(997	)		—
Bank overdraft		(171	)		(566	)		(463	)
Early retirement of long-term debt		(171	)		—			—
Proceeds from exercise of stock options		325			54			54
Net cash provided by (used in) financing activities		2,933			(2,314	)		2,571
Net (decrease) increase in cash and cash equivalents		153			437			(20	)
Effect of exchange rate changes on cash and cash equivalents		(5	)		5			2
Cash and cash equivalents, beginning of year		3,120			3,268			3,710
Cash and cash equivalents, end of year	$	3,268		$	3,710		$	3,692
Supplemental disclosures of cash flow information:
Cash paid for interest	$	8,623		$	8,158		$	8,437
Cash paid for income taxes		45			49			105
Acquisition of property and equipment included in accounts payable		—			—			316

See accompanying notes to consolidated financial statements.

F-6

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 28, 2008, JANUARY 3, 2010 AND JANUARY 2, 2011

(1)   Summary of Significant Accounting Policies

(a)  Description of Business

Glacier Water Services, Inc. and subsidiaries (Glacier or Company), a Delaware corporation, is primarily engaged in the operation of self-service vending machines that dispense drinking water to consumers. The machines are placed at supermarkets and other retail outlets under commission arrangements with the retailers. The Company’s revenues are subject to seasonal fluctuations, with decreased revenues during rainy or cold weather months and increased revenues during dry or hot weather months. The Company’s machines are primarily located throughout the Sunbelt and Midwest regions of the United States. The Company also has a wholly owned subsidiary that operates in Eastern Canada as Gestion Bi-Eau Pure, Inc. As of January 2, 2011, the Company operated approximately 19,100 machines in 42 states and Canada.

(b)   Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Glacier Water Services, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

(c)  Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires that management make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include, but are not limited to, assessing the following: the recoverability of accounts receivable, useful lives of property and equipment, valuation of goodwill, intangible assets, investments, deferred tax assets, fixed assets and repair parts, stock-based compensation, and the ability to estimate accrued revenues.

(d)  Fiscal Year

The Company utilizes a fiscal year of 52 or 53 weeks ending on the Sunday closest to December 31. Fiscal year 2008 ended on December 28, 2008 and fiscal year 2010 ended on January 2, 2011 and both consisted of 52 weeks. Fiscal year 2009 ended on January 3, 2010 and consisted of 53 weeks.

(e)  Other Comprehensive Loss

Components of other comprehensive loss include net loss and foreign currency translation adjustments.

(f)  Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of January 3, 2010 and January 2, 2011, cash equivalents consist primarily of cash held in money market accounts and/or certificates of deposit. The Company’s policy is to place its cash with high credit quality financial institutions in order to limit the amount of credit exposure.

(g)  Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivable are included in net cash provided by operating activities in the

F-7

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

consolidated statements of cash flows. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and customers’ financial condition, the amount of receivables in dispute, and the current receivables aging and current payment patterns. The Company reviews its allowance for doubtful accounts monthly. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

(h)  Investments

The Company holds 105,154 shares of Glacier Water Trust I Common Securities of $2.6 million at January 3, 2010 and January 2, 2011, and 145,922 shares of Glacier Water Trust I Preferred Securities of $3.6 million at January 3, 2010 and January 2, 2011, respectively, as long-term investments. The Glacier Water Trust I Preferred Securities have a liquidation amount of $25.00 per security. Glacier Water Trust I (the Trust) is considered a VIE under FASB authoritative guidance for consolidation of VIEs. The Trust exists for the sole purpose of issuing Trust Securities and purchasing Junior Subordinated Debentures issued by the Company (see note 3(a)). Because the Company is not the primary beneficiary of the Trust, the financial statements of the Trust are not consolidated with those of the Company. At January 3, 2010 and January 2, 2011, there were 3,254,078 Trust Preferred Securities outstanding (other than the 145,922 held by the Company).

Investments are accounted for in accordance with Financial Accounting Standards Board (FASB) authoritative guidance for investments, which requires that the Company determine the appropriate classification of investments at the time of purchase based on management’s intent and reevaluate such designation as of each balance sheet date. The Trust Preferred Securities are classified as held-to-maturity investments and, therefore, are stated at amortized cost as the Company has the ability and intent to hold the debt securities to the maturity date in 2028.

The Company follows the FASB authoritative guidance for investments on determining when investments in certain debt and equity securities are considered impaired, whether that impairment is other than temporary, and on measuring such impairment loss. The Company uses various indicators in determining whether a security is other-than-temporarily impaired, including for debt securities, when it is probable that the contractual interest and principal will not be collected. The debt securities are monitored for changes in credit ratings. Adverse changes in credit ratings could affect the estimated cash flows of the underlying collateral or issuer.

(i)  Fair Value of Financial Instruments

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•  Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

•  Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•  Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

F-8

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

See note 4 to the consolidated financial statements.

(j)  Repair Parts

Repair parts consist of machine parts used to maintain vending machines in operation and are stated at cost (moving weighted average). Repair parts consist of operating components that are used to replace or refurbish components installed in vending machines, thereby maintaining the overall life of the vending machine at its estimated useful life.

(k)  Long-Lived Assets

The Company evaluates and assesses its long-lived assets for impairment under the FASB authoritative guidance for property, plant, and equipment. This guidance addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically assesses triggering events for the impairment of long-lived assets. The impairment analysis requires the use of assumptions and judgments regarding the carrying value and estimated lives of these assets. For the years ended December 28, 2008, January 3, 2010, and January 2, 2011, there has been no impairment of long-lived assets recorded.

(l)  Property and Equipment and Depreciation

Property and equipment are recorded at cost and consist of the following (in thousands):

	January 3,			January 2,
	2010			2011
Vending equipment	$	160,396		$	171,412
Equipment, furniture, and fixtures		3,696			3,342
Land		77			81
Building		725			764
Leasehold improvements		79			81
		164,973			175,680
Less accumulated depreciation and amortization		(121,865	)		(130,411	)
	$	43,108		$	45,269

Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:

Vending equipment	5 to 13 years
Equipment, furniture, and fixtures	3 to 10 years
Leasehold improvements	Shorter of life of asset or remaining lease term

The Company’s vending equipment is depreciated using a 10% estimated salvage value. Costs associated with installing vending equipment are capitalized and depreciated over five years, which is the normal contractual period with the retailers. All maintenance, repair, and minor refurbishment costs are charged to operations as incurred. Additions and major improvements are capitalized. The Company currently has sufficient machines in storage available for deployment in fiscal 2011. Machines that have been previously installed and are in storage awaiting redeployment are currently being depreciated.

(m)  Other Assets

Included in other assets are prepaid contract rights, which consist of fees paid to retailers for future benefits associated with the ongoing placement of the Company’s vending equipment at those locations. These

F-9

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

fees are amortized over the life of the contract, generally ranging from a few months to five years. At January 3, 2010 and January 2, 2011, prepaid contract rights of $653,000 and $655,000, respectively, were included in other assets.

(n)  Deferred Financing Costs

Net deferred financing costs as of January 3, 2010 and January 2, 2011 consists of $4.5 million and $4.4 million respectively, which were incurred in connection with the issuance of long-term debt and are amortized using the effective-interest method over the period ending January 2028, the date of the mandatory redemption of the securities.

(o)  Revenue Recognition

The Company recognizes revenue from the sale of its product at the point of purchase, which occurs when the customer vends the water and pays for the product. It is impractical to visit all machines at the end of each reporting period. Consequently, the Company estimates the revenue from the last time each machine was serviced until the end of the reporting period, based on the most current daily volume of each machine. For the years ended December 28, 2008, January 3, 2010, and January 2, 2011, the Company recorded approximately $2.6 million, $2.8 million and $2.9 million, respectively, of such estimated revenues, which represent an average of approximately 12 days per machine during these periods.

(p)  Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

(q)  Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of the FASB authoritative guidance on stock compensation. Under the fair value recognition provisions of the guidance, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period.

The Company had an employee stock-based compensation plan (see note 8). The Company’s Stock Option Program expired in March 2004 and no options have been issued since that time. All stock options outstanding are fully vested.

The Company had previously granted performance based restricted stock to members of management, which vested subject to achieving specific earnings targets in 2011 and continued employment. During the year ended January 2, 2011, the Company modified the awards to remove the performance condition vesting requirement. As a result, the Company reversed the previously recognized compensation expense and recognized new compensation expense relating to the modified award. See note 8 for additional information.

F-10

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(r)  Net Loss Per Common Share

Basic net loss per share is computed based upon the weighted average number of common shares outstanding during the period. Diluted net loss per share is based upon the weighted average number of common shares outstanding and potentially dilutive securities during the period.

Potentially dilutive securities include shares issuable in connection with outstanding restricted shares and options granted under the Company’s stock option plans using the treasury stock method. For the years ended December 28, 2008, January 3, 2010 and January 2, 2011, a total of 229,451, 194,438 and 174,226 potentially dilutive securities, respectively, were not used to calculate diluted net loss per share because of their antidilutive effect.

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
	(In thousands, except share and per share data)
Numerator for basic earnings per share — net loss applicable to common shareholders	$	(4,540	)	$	(1,040	)	$	(900	)
Denominator — weighted average common shares:
Basic net loss per share		2,702,790			2,711,836			2,716,873
Diluted net loss per share		2,702,790			2,711,836			2,716,873
Net loss per share:
Basic and diluted net loss per share	$	(1.68	)	$	(0.38	)	$	(0.33	)

(s)   Goodwill

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is reviewed for impairment at least annually using a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the enterprise must perform step 2 of the impairment test (measurement). Under step 2, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step 2 does not need to be performed.

The Company performs its annual impairment review of goodwill on the last day of the fiscal year and when a triggering event occurs between annual impairment tests. No impairment loss was recorded for the years ended December 28, 2008, January 3, 2010 and January 2, 2011.

F-11

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(2)   Supplementary Balance Sheet Information

Accrued liabilities consist of the following (in thousands):

	January 3,		January 2,
	2010		2011
Accrued compensation, benefits, and related taxes	$	2,234	$	1,536
Accrued property, sales, income, and other taxes		436		347
Accrued interest		428		479
Other accrued liabilities		482		538
Total accrued liabilities	$	3,580	$	2,900

(3)   Long-Term Debt and Line of Credit

(a)   Company Obligated Mandatorily Redeemable Preferred Securities

Long-term debt includes an aggregate principal amount of $87.6 million of Junior Subordinated Debentures (Subordinated Debentures) issued to Glacier Water Trust I (the Trust). Interest on the Subordinated Debentures accrues at an annual rate of 9.0625% payable monthly in arrears. The Subordinated Debentures mature on January 31, 2028 but may be redeemed at the option of the Company at any time after January 31, 2003 at 100% of the principal amount plus any accrued but unpaid interest.

(b)   Line of Credit

On December 22, 2009, the City National Bank (CNB) revolving credit line agreement was modified to increase the availability on the line to $33.0 million through its expiration in July of 2010, and to change the monthly interest calculation to prime plus between (0.25%) and 0.75% depending on certain covenant ratios. Through 2009 and until July 17, 2010, the rate remained at the CNB prime rate less 0.25% (3.00% per annum).

The CNB revolving line agreement was modified again on April 8, 2010 and December 10, 2010. The April modification extended the expiration date from July 17, 2010 to July 1, 2012 and changed the monthly interest calculation beginning July 18, 2010 to prime plus between 0.25% and 1.00% depending on certain covenant ratios, but with a floor of no less than 4.00%, which has been the effective rate on the line through January 2, 2011. The modification also added an annual loan fee of approximately 0.50% of the available balance of the credit facility and a principal reduction of the loan availability amount of $1.5 million per quarter beginning in January of 2011 through July of 2012. In December of 2010, the loan was modified to increase the availability on the line to $40.0 million through the end of June 2011 and to modify the scheduled principal reductions to commence instead in July of 2011.

As of January 3, 2010 and January 2, 2011, there was $28.2 million and $31.2 million outstanding on the credit facility, respectively. Availability under the $33.0 million credit facility was $4.8 million as of January 3, 2010, and availability under the $40.0 million credit facility was $8.8 million as of January 2, 2011.

Subsequent to the Company’s fiscal year-end, on April 13, 2011 the CNB revolving line agreement was modified to remove the principal reductions called for in the April 2010 modification, which will leave the availability on the line at $40.0 million through its expiration date of June 2012. In the event the Company is not able to obtain equity financing to pay down the balance of the revolver to the levels required in the April 2010 modification by the end of August 2011, CNB retains the right to syndicate the revolving line with other banks, which would potentially result in a repricing of the applicable interest rate, fees, and covenants based on the syndicated partner’s requirements.

F-12

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4)   Fair Value Measurements

The Company is required to disclose fair-value information about all financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair-value. The Company’s disclosures of estimated fair-value of financial instruments as of January 3, 2010 and January 2, 2011 were determined using available market information. Considerable judgment is necessary to interpret market data and develop estimated fair-value. The use of different market assumptions or estimation methods may have a material effect on the estimated fair-value amounts.

The carrying amounts for cash and cash equivalents, accounts receivable, and other current liabilities approximate fair value due to the short-term nature of these instruments. The carrying amounts for the line of credit also is estimated to approximate fair value as its terms are based on the prime rate plus/minus an applicable margin that is consistent with terms available to market participants of a similar size and operations (see note 3). The Company utilizes the quoted market price of the Trust to estimate the fair-value of its long-term investments and long-term debt.

At January 3, 2010 and January 2, 2011, the aggregate fair-value and carrying value of the Company’s long-term investments and long-term debt are as follows (in thousands):

	January 3, 2010				January 2, 2011
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Assets:
Glacier Water Trust I
Common Securities	$	2,629	$	2,282	$	2,629	$	2,571
Glacier Water Trust I
Preferred Securities		3,648		3,167		3,648		3,568
Liabilities:
Long-term debt	$	87,629	$	76,062	$	87,629	$	85,701

(5)   Commitments and Contingencies

(a)   Leases

The Company leases certain vehicles, warehouse, and office facilities under noncancelable operating leases that expire on various dates through 2015. The Company leases the corporate office located in Vista, California and other facilities that have terms that include annual rate increases, and as such, the Company has recorded a deferred rent liability of $21,000 as of January 3, 2010 and $81,000 as of January 2, 2011.

Future minimum lease payments under noncancelable operating leases with initial terms of one or more years are as follows (in thousands):

Fiscal year:
2011	$	902
2012		502
2013		376
2014		429
2015		438
Total minimum lease payments	$	2,647

F-13

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Total lease expenses for the years ended December 28, 2008, January 3, 2010, and January 2, 2011 were $2.0 million, $2.1 million and $1.9 million, respectively.

(b)   Contingencies

The Company is involved in various legal proceedings and claims arising in the ordinary course of business, none of which, in the opinion of management, is expected to have a material effect on the Company’s consolidated financial position, results of operations, or liquidity.

(6)   Income Taxes

Deferred tax liabilities and assets result from the following (in thousands):

	January 3,			January 2,
	2010			2011
Deferred tax assets:
Alternative minimum tax credit	$	1,070		$	1,070
Net operating loss		15,434			20,661
Accruals and reserves		1,505			1,396
Other, net		21			870
Total gross deferred tax assets		18,030			23,997
Valuation allowance		(11,294	)		(11,224	)
Total deferred tax assets, net		6,736			12,773
Deferred tax liabilities:
Property and equipment		(6,736	)		(12,773	)
Net deferred taxes	$	—		$	—

The Company’s effective income tax rate differs from the federal statutory rate as follows:

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
Federal statutory rate		34.0	%		34.0	%		34.0	%
State and local taxes		—			(13.5	)		3.9
Other, net		3.3			(47.6	)		(9.9	)
Change in valuation allowance		(37.3	)		13.7			(24.3	)
Effective rate		—	%		(13.4	%)		3.7	%

The realization of deferred tax assets is dependent upon the Company’s ability to generate taxable income in future years. Management believes it is not more likely than not that the deferred tax asset will be realized and, therefore, has recorded a valuation allowance for the net balance as of January 3, 2010 and January 2, 2011. The impact of the Company’s wholly owned Canadian subsidiary’s deferred tax asset and offsetting valuation allowance are immaterial.

The Company has no unrecognized tax benefits at January 3, 2010 and January 2, 2011. The Company is subject to taxation in the United States and Canada. The Company is currently under examination by the Internal Revenue Service for the years 2008 and 2009.

F-14

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

At January 2, 2011, the Company had federal and California income tax net operating loss carryforwards of $58.8 million and $16.8 million, respectively. Of the $58.8 million federal net operating loss carryforwards, $1.8 million will expire in 2012, and the remainder will expire at various dates from 2018 through 2030. The California net operating loss carryforwards will expire at various dates from 2011 through 2030. Deferred tax assets corresponding to such net operating losses are offset by a full valuation allowance. In addition, the Company has federal and California excess tax benefit carryovers of $9.8 million and $3.6 million, respectively, related to stock option deduction windfalls that will be realized in additional paid-in capital when utilized to reduce taxes paid. The alternative minimum tax credit does not have an expiration date. Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of tax attribute carryforwards such as NOLs and credits could be limited in the event of cumulative changes in ownership of more than 50%. The Company has yet to complete a Sections 382/383 analysis. Therefore, utilization of the tax attribute carryforwards may be limited.

(7)   Stockholders’ Equity

The board of directors has authorized the purchase of up to 750,000 shares of the Company’s common stock in the open market. As of January 2, 2011, 603,726 shares had been repurchased under this program. No shares were acquired in 2010 or 2009. As of January 2, 2011, the Company had 1,587,606 shares of common stock held in treasury and is authorized to repurchase an additional 146,274 shares, approximately 5.4% of the Company’s total shares outstanding.

No dividends were declared during the year ended January 2, 2011. The Company declared the following cash dividends to holders of the Company’s common stock during the years ended January 3, 2010 and December 28, 2008:

			Dividend
Declared	Record	Payment	per Common
Date	Date	Date	Share		Dividend Type
3/18/2008	4/16/2008	4/30/2008	$	0.50	Reduction of additional paid-in capital
6/17/2008	7/16/2008	7/30/2008		0.50	Reduction of additional paid-in capital
9/9/2008	10/16/2008	10/30/2008		0.50	Reduction of additional paid-in capital
12/21/2009	12/22/2009	12/30/2009		1.00	Reduction of additional paid-in capital

(8)   Stock Option Plans

The Company has options outstanding under the 1994 Stock Compensation Program (the Program). The Program was terminated in 2004. The Program provided for the issuance of incentive and nonqualified stock options to key employees, including directors and consultants. Incentive stock options were granted at no less than the fair market value on the date of the grant. Nonqualified options were granted at prices determined by the board of directors, but at no less than 85% of the fair market value on the date of the grant. Options generally have a term of 10 years and become exercisable at a rate of 25% per annum. Supplemental options granted to directors for their services in lieu of cash fees have a term of five years and become exercisable one year following the date of the grant.

F-15

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the Company’s stock option plans and activity is as follows:

				Weighted
				Average
	Number			Exercise
	of Shares			Price
Balance at December, 30, 2007		200,750		$	10.82
Granted		—			—
Exercised		(20,905	)		15.55
Canceled		—			—
Expired		—			—
Balance at December, 28, 2008		179,845			10.27
Granted		—			—
Exercised		(3,400	)		15.66
Canceled		(39,179	)		10.76
Expired		—			—
Balance at January 3, 2010		137,266			9.99
Granted		—			—
Exercised		(5,175	)		10.51
Canceled		—			—
Expired		—			—
Balance at January 2, 2011		132,091		$	9.97
Exercisable at January 2, 2011		132,091		$	9.97

On May 18, 2009, the Board of Directors authorized a company program to purchase from employees holding unexercised vested common stock options a portion of those employee options for their in-the-money values for a total cash amount, not to exceed $1,000,000. Under the program, 39,179 employee options were canceled with a resulting $997,000 reduction to additional paid-in capital.

On October 7, 2010, the Board of Directors extended the exercise period of all employees unexercised vested options under the 1994 Stock Option Plan for an additional 10 years from that date. Those options may then be exercised at any time over the extended term. The Company recognized stock-based compensation associated with this modification of $232,000.

There are 132,091 options outstanding under the 1994 Stock Option Plan at January 2, 2011 with exercise prices between $7.95 and $15.60, with a weighted average exercise price of $9.97 and a weighted average remaining contractual life of approximately 10 years. At January 2, 2011, all of these options are exercisable.

F-16

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the Company’s restricted shares and activity is as follows:

			Weighted
			Average
	Number		Grant Date
	of Shares		Fair Value
Balance at December, 30, 2007		77,500	$	40.00
Granted		5,000		45.00
Forfeited		—		—
Balance at December, 28, 2008		82,500		40.30
Granted		—		—
Forfeited		—		—
Balance at January 3, 2010		82,500		40.30
Granted		—		—
Forfeited		—		—
Balance at January 2, 2011		82,500	$	40.30

The Company previously granted performance based restricted stock to members of management, which vested subject to achieving specific earnings targets in 2011 and continued employment. The fair value of the restricted stock on the date of grant was being recognized as an expense over the requisite service period of the award.

During the year ended January 2, 2011, the Company modified the awards to remove the performance condition vesting requirement. As a result, the Company reversed the previously recognized compensation expense and recognized new compensation expense relating to the fair value of the modified award, resulting in a net reversal of compensation expense of $114,000 for the year ended January 2, 2011. The total fair value of the modified award was $2.3 million, with remaining unamortized compensation expense of $482,000 at January 2, 2011, all of which is expected to be recognized during the year ended January 1, 2012.

(9)   401(k) Savings Plan

The Company has a 401(k) Savings Plan (the Plan), which allows eligible employees to contribute a percentage of their pretax compensation (subject to annual limitations of the lesser of 60% of eligible compensation or $16,500 in calendar year 2010), with the Company making discretionary matching contributions as determined each year by the plan administrator. Employees vest immediately in their contributions and vest in the Company discretionary matching contributions over a five-year period of service. The Company’s discretionary matching contributions were approximately $233,000, $260,000 and $279,000 for fiscal years 2008, 2009 and 2010, respectively.

(10)   Significant Customers

The following table sets forth the customers that represent approximately 10% or more of the Company’s total revenues in fiscal years 2008, 2009 and 2010 after the effect of any consolidations that occurred as a result of any acquisition or mergers by the retailers:

	Fiscal Year Ended
	December 28,			January 3,			January 2,
	2008			2010			2011
Company A		12.05	%		12.16	%		8.24	%
Company B		10.00			9.32			9.28

F-17

GLACIER WATER SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(11)   Business Segment and Geographic Information

The Company operates in a single business operating and reporting segment that provides drinking water to consumers through self-service vending machines. The Company has operations in the United States and Canada.

The information presented below shows geographic information relating to revenues from external customers (in thousands):

	Fiscal Year Ended
	December 28,		January 3,		January 2,
	2008		2010		2011
Revenue from external customers
Domestic	$	93,346	$	102,577	$	98,677
Foreign		1,365		1,226		1,379
Total	$	94,711	$	103,803	$	100,056

The information presented below shows geographic information relating to property and equipment, net (in thousands):

	January 3,		January 2,
	2010		2011
Property and equipment, net
Domestic	$	40,873	$	42,949
Foreign		2,235		2,320
Total	$	43,108	$	45,269

F-18

           Shares

Glacier Water Services, Inc.

Common Stock

Prospectus

          , 2011

William Blair & Company

SunTrust Robinson Humphrey

Canaccord Genuity

Until          , 2011 (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.

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	$	10,013.63
FINRA Fee		9,125.00
NASDAQ Global Market Listing Fee
Printing Fees and Expenses
Legal Fees and Expenses
Accounting Fees and Expenses
Transfer Agent and Registrar Fees and Expenses
Miscellaneous
Total	$

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.

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.

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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 in this letter does not reflect the stock split of our common stock, which will occur prior to the closing of this offering.

1. 5,000 shares of restricted stock

2. 29,480 shares issued pursuant to exercises of options

The grants of restricted common stock described in (1) above were made to an officer in reliance upon available exemptions from the registration requirements of the Securities Act, including Section 4(2) of the Securities Act and the exemption 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.

The sales of common stock referenced in (2) above were made pursuant to the exercise of stock options granted under our 1994 Stock Compensation Program to our officers, directors and employees 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

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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 1994 Stock Compensation Program 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.

The financial statement schedules are omitted because they are inapplicable or the requested information is shown in our financial statements or related notes thereto.

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.

(3) For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(4) For the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the

II-3

purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

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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 Vista, State of California, on the 12th day of May 2011.

GLACIER WATER SERVICES, INC.

By:  /s/  Brian H. McInerney

Name:     Brian H. McInerney

Title:  President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PEOPLE BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Brian H. McInerney, Steven D. Stringer and David Shladovsky, and each of them, his or her true and lawful attorneys-in-fact and agents, both with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments, including post-effective amendments, to this registration statement, and any registration statement relating to the offering covered by this registration statement and filed pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same, with 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, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 12th day of May 2011.

Signature	Title
/s/  Brian H. McInerney Brian H. McInerney	President and Chief Executive Officer (Principal Executive Officer)
/s/  Steven D. Stringer Steven D. Stringer	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/  Charles A. Norris Charles A. Norris	Chairman of the Board
/s/  William A. Armstrong William A. Armstrong	Director
/s/  William G. Bell William G. Bell	Director

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Signature	Title
/s/  Richard A. Kayne Richard A. Kayne	Director
/s/  Peter H. Neuwirth Peter H. Neuwirth	Director
/s/  Heidi E. Yodowitz Heidi E. Yodowitz	Director

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INDEX TO EXHIBITS

Exhibit
Number			Description
	1	.1	Form of Underwriting Agreement*
	3	.1	Certificate of Incorporation of Glacier Water Services, Inc.
	3	.2	Bylaws of Glacier Water Services, Inc.
	3	.3	Amended and Restated Certificate of Incorporation of Glacier Water Services, Inc.*
	3	.4	Amended and Restated Bylaws of Glacier Water Services, Inc.*
	4	.1	Specimen Certificate representing shares of common stock of Glacier Water Services, Inc.
	4	.2	Revolving Note, dated as of December 10, 2010, between GW Services, Inc. and City National Bank
	4	.3	Amended and Restated Revolving Note, dated as of April 13, 2011, between GW Services, Inc. and City National Bank
	4	.4	Junior Subordinated Indenture, dated as of January 27, 1998, between Glacier Water Services, Inc. and Wilmington Trust Company, Trustee for 9.0625% Junior Subordinated Debentures due 2028
	5	.1	Opinion of Weissmann Wolff Bergman Coleman Grodin & Evall LLP*
	10	.1	1994 Stock Compensation Plan and Amendments No. 1-9
	10	.2	Form of Indemnification Agreement between the Company and its Executive Officers and Directors
	21	.1	List of subsidiaries of Glacier Water Services, Inc.
	23	.1	Consent of KPMG LLP, Independent Registered Public Accounting Firm
	23	.2	Consent of Weissmann Wolff Bergman Coleman Grodin & Evall LLP (contained in Exhibit 5.1)*
	24	.1	Powers of Attorney (set forth on Signature Page)

 * To be filed by amendment

EX-3.1

Exhibit 3.1

CERTIFICATE OF INCORPORATION
OF
GLACIER WATER SERVICES, INC.

     1. Name: The name of the corporation is Glacier Water Services, Inc. (hereinafter, the “Corporation”).

     2. Registered office: The address of the registered office of the Corporation in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the Corporation’s registered agent at that address is The Corporation Trust Company.

     3. Purpose: The purpose of the corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware.

     4. Corporation Stock:

          (a) The total number of shares of stock which the Corporation shall have authority to issue is Ten Million One Hundred Thousand (10,100,000) shares, consisting of Ten Million (10,000,000) shares of Common Stock, having a par value of $.01 per share, and One Hundred Thousand (100,000) shares of Preferred Stock, having a par value of $.01 per share.

          (b) Holders of shares of Common stock shall be entitled to one (1) vote for each share held of record. Shares of the Common Stock shall have no preference over any other shares of capital stock of the Corporation with respect to distribution of assets on dissolution or liquidation or with respect to payment of dividends.

          (c) Shares of the preferred stock of the Corporation may be issued from time to time in one or more classes or series, each of which class or series shall have such distinctive designation or title as shall be fixed by the Board of Directors of the Corporation (the “Board of Directors”) prior to the issuance of any shares thereof. Each such class or series of Preferred Stock shall have such voting powers, full or limited or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualification, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of

any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any class or series thereof, unless a vote of any such holders is requited pursuant to the certificate or certificates establishing the class or series of Preferred Stock.

           (d) The shares of Common stock and Preferred Stock shall be issued only as fully paid and non-assessable shares.

      5. The name and mailing address of each incorporator is as follows:

NAME	MAILING ADDRESS
K. A. Widdoes	1209 Orange Street
	Wilmington, Delaware 19801
L. J. Vitalo	1209 Orange Street
	Wilmington, Delaware 19801
M. A. Brzoska	1209 Orange Street
	Wilmington, Delaware 19801

     6. The Corporation is to have perpetual existence.

     7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized:

          To make, alter or repeal the by-laws of the Corporation.

          To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.

          To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created.

2

          By a majority of the whole Board, to designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The by-laws may provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in the by-laws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the by-laws of the Corporation; and, unless the resolution or by-laws, expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock.

          When and as authorized by the stockholders in accordance with law, to sell, lease or exchanges all or substantially all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as its board of directors shall deem expedient and for the best interests of the Corporation.

     8. Elections of directors need not be by written ballot unless the by-laws of the Corporation shall so provide.

          Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation.

     9. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of

3

Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

     10. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transactions from which the director derived any improper personal benefit.

          WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purposes of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this Certificate, hereby declaring and certifying that this is our act and deed and the facts herein stated are true, and accordingly have hereunto set our hands this 19th day of November, 1991.

/s/ K. A. Widdoes  

K. A. Widdoes 

/s/ L. J. Vitalo  

L. J. Vitalo 

/s/ M. A. Brzoska  

M. A. Brzoska 

4

EX-3.2

Exhibit 3.2

GLACIER WATER SERVICES, INC.

* * * * *

BYLAWS

* * * * *

ARTICLE I

OFFICES

     Section 1. The registered office shall be in the city of Wilmington, County of New Castle, State of Delaware.

     Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

     Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Oceanside, State of California, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof.

     Section 2. Annual meetings of stockholders, commencing with the year 1993, shall be held on the first day of May if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:00 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.

     Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.

     Section 4. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the

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meeting during the whole time thereof, and may be inspected by any stockholder who is present.

     Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the chief executive officer and shall be called by the chief executive officer or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning twenty five percent (25%) of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

     Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.

     Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

     Section 8. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of

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incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question.

     Section 10. Unless otherwise provided in the certificate of incorporation, each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such

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stockholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

     Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the Corporation action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

     Section 1. The number of directors which shall constitute the whole board shall be not less than one nor more than nine. The first board shall consist of five directors. Thereafter, within the limits above specified, the number of directors shall be determined by resolution of the board of directors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this

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Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.

     Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; If there are no directors in office, then an election of directors may be held in the manner provided by statute. If at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chaneery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.

     Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the certificate

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of incorporation or by these bylaws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

     Section 4. The board of directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware.

     Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the board of directors then in office and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix, the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver by all of the directors.

     Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.

     Section 7. Special meetings of the board may called by the chief executive officer on one day’s notice to each

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director, either personally or by mail or by telegram; special meetings shall be called by the chief executive officer or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the chief executive officer or secretary in like manner and on like notice on the written request of the sole director.

     Section 8. At all meetings of the board a majority of the directors shall constitute a quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

     Section 9. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting, if all members, of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee.

     Section 10. Unless otherwise restricted by the

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certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference, telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

COMMITTEES OF DIRECTORS

     Section 11. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

     In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member.

     Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the

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the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the board of directors as provided in Section 151(a) fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the bylaws of the Corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.

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     Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.

COMPENSATION OF DIRECTORS

     Section 13. Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings.

REMOVAL OF DIRECTORS

     Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors.

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ARTICLE IV

NOTICES

     Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these bylaws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram.

     Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V

OFFICERS

     Section 1. The officers of the Corporation shall be chosen by the board of directors and shall be a chief executive officer, a president, a secretary and a treasurer. The board of directors may also designate a chief operating officer, a chief financial officer, a vice president or additional vice presidents, and one or more assistant secretaries and assistant treasurers.

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Any number of offices may be held by the same person, unless the certificate of incorporation or these bylaws otherwise provide.

     Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall designate a chief executive officer, a chief financial officer, a president, a secretary and a treasurer, and may designate a chief operating officer, one or more vice presidents and one or more assistant secretaries or assistant treasurers.

     Section 3. The board of directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

     Section 4. The salaries of all officers and agents of the Corporation shall be fixed by the board of directors.

     Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the Corporation shall be filled by the board of directors.

THE CHIEF EXECUTIVE OFFICER

     Section 6. The chief executive officer shall be the chief officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the Corporation and shall see

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that all orders and resolutions of the board of directors are carried into effect.

     Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the Corporation.

THE PRESIDENT

     Section 8. In the absence of the chief executive officer or in the event of his inability or refusal to act, the president shall perform the duties of the chief executive officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chief executive officer. The president shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE VICE PRESIDENT

     Section 9. In the absence of the chief executive officer and the president or in the event of their inability or refusal to act, the vice president shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice president shall

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perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE SECRETARY AND ASSISTANT SECRETARY

     Section 10. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or chief executive officer, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature.

     Section 11. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the

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duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

THE TREASURER AND ASSISTANT TREASURERS

     Section 12. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipt and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the board of directors.

     Section 13. He shall disburse the funds of the Corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the chief executive officer and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation.

     Section 14. If required by the board of directors, he shall give the Corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and

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other property of whatever kind in his possession or under his control belonging to the Corporation.

     Section 15. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors may from time to time prescribe.

ARTICLE VI

CERTIFICATES FOR SHARES

     Section 1. The shares of the Corporation shall be represented by a certificate or shall be uncertificated. Certificates shall be signed by, or in the name of the Corporation by, the chairman or vice chairman of the board of directors, or the chief executive officer, president or a vice president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation.

     Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that

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the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

     Section 2. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

LOST CERTIFICATES

     Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates thereto fore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same

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in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

TRANSFER OF STOCK

     Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Upon receipt of property transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be canceled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the Corporation.

FIXING RECORD DATE

     Section 5. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to Corporation action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment

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of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

REGISTERED STOCKHOLDERS

     Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

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ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

     Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation.

     Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created.

ANNUAL STATEMENT

     Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the Corporation.

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CHECKS

     Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

     Section 5. The fiscal year of the Corporation shall be fixed by resolution of the board of directors.

SEAL

     Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

INDEMNIFICATION

     Section 7. The Corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware.

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ARTICLE VIII

AMENDMENTS

     Section 1. These bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders or by the board of directors when such power is conferred upon the board of directors by the certificate of incorporation at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such special meeting. If the power to adopt, amend or repeal bylaws is conferred upon the board of directors by the certificate of incorporation, it shall not divest or limit the power of the stockholders to adopt, amend or repeal bylaws.

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EX-4.1

Exhibit 4.1

GLACIER WATER

SPECIMEN COMMON STOCK CERTIFICATE

Number GC-6326

COMMON STOCK COMMON STOCK

GLACIER WATER SERVICES, INC.

THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF LOS ANGELES OR NEW YORK

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

CUSIP 376395 109

THIS CERTIFIES THAT

SPECIMEN

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES, OF THE PAR VALUE OF $.01 PER SHARE, OF THE COMMON STOCK OF

GLACIER WATER SERVICES, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by a Transfer Agent and registered by the Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized Officers.

Dated:

Countersigned and Registered: SECURITY PACIFIC NATIONAL BANK

(Los Angeles) Transfer Agent and Register

By

AUTHORIZED SIGNATURE SECRETARY CHAIRMAN OF THE BOARD

GLACIER WATER SERVICES INC.

     The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	—	as tenants in common	UNIF GIFT MIN ACT —	Custodian ______________
				(Cust)	(Minor).
TEN ENT	—	as tenants by the entireties		under Uniform Gifts to Minors
JT TEN	—	as joint tenants with right of survivorship and not as tenants in common		Act _____________________
				(State)

Additional abbreviations may also be used though not in the above list.

     The Corporation will furnish without charge to each stockholder who so requests & statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

For Value Received, ______ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
       IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)

_____________________________________________ Shares of Common Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint

_____________________________________________ Attorney to transfer the said stock on the books of the within named Corporation with full power of substitution in the premises.

Dated __________________

NOTICE:  THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER. 

EX-4.2

Exhibit 4.2

REVOLVING NOTE

 
 
$40,000,000.00 Note No. 63123/00004
Corporate Banking #675
Los Angeles, California
December 10, 2010

          On July 1, 2012, (“Termination Date”) GW Services, Inc., a California corporation (“Borrower”), promises to pay to the order of City National Bank, a national banking association (“CNB”), at its office in this city, in United States Dollars and in immediately available funds, the principal sum of Forty Million and 00/100 Dollars ($40,000,000.00) (“Revolving Credit Commitment”), or so much thereof as may be advanced and be outstanding, with interest thereon to be computed on each advance from the date of its disbursement at a rate computed on a basis of a 360-day year, actual days elapsed, equal to the “Prime Rate” of CNB, as it exists from time to time, plus/minus the Applicable Margin per year. Provided, however, in no event shall the interest rate be less than four percent (4.00%) per annum. “Prime Rate” shall mean the rate most recently announced by CNB at its principal office in Los Angeles, California, as its “Prime Rate.” Any change in the Prime Rate shall become effective on the same business day on which the Prime Rate shall change, without prior notice to Borrower.

          As provided herein, the principal of this Note may be borrowed, repaid and reborrowed from time to time up to and including the Termination Date, provided at the time of any borrowing no Event of Default (as hereinafter defined) exists, and provided further that the total borrowings outstanding at any one time shall not exceed the lesser of (i) Forty Million and 00/100 ($40,000,000.00) until June 30, 2011 or until the company raises additional capital, whichever occurs first and Thirty Three Million and 00/100 ($33,000,000.00) less any scheduled line reductions thereafter, Each borrowing and repayment hereunder shall be noted in the books and records of CNB. The excess of borrowings over repayments shall evidence the principal balance due hereon from time to time and at any time. Borrowings hereunder shall be presumed to have been made to or for the benefit of Borrower when made as noted in such books and records.

          Following any fiscal quarter ending with Total Funded Debt in excess of two (2) times EBITDA, additional principal reductions in the amount of Excess Cash Flow shall be made and the amount available for borrowing under this Note shall be permanently reduced by the same amount until the end of any subsequent fiscal quarter ending with Total Funded Debt equal to or less than one and one-half (1 1/2) times EBITDA, measured based on the consolidated statements of Glacier Water, Inc.

     Interest accruing on this Note shall be payable on the first day of each month, commencing January 1, 2011.

     Beginning July 1, 2011 and continuing on the first day of each calendar quarter thereafter, the Revolving Credit Commitment shall reduce by One Million Five Hundred Thousand Dollars ($1,500,000.00).

     Principal shall be payable in four (4) quarterly consecutive installments of One Million Five Hundred Thousand & 00/100 Dollars ($1,500,000.00) each commencing July 1, 2011, and continuing thereafter up to and including April 1, 2012, with a final installment of Twenty Seven Million & 00/100 ($27,000,000.00) plus unpaid interest, due and payable in full on July 1, 2012,

Borrower shall pay to CNB a late charge of 5% or $10.00, whichever is greater, of any payment not received by CNB on or before the 10^th day after the payment is due.

          The occurrence of any of the following with respect to any Borrower or guarantor of this Note or any general partner of such Borrower or guarantor, shall constitute an “Event of Default” hereunder:

1. Failure to make any payment of principal or interest when due under this Note;

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2.	Filing of a petition by or against any of such parties under any provision of the Bankruptcy Code;
3.	Appointment of a receiver or an assignee for the benefit of creditors;
4.	Commencement of dissolution or liquidation proceedings or the disqualification (under any applicable law or regulation) of any of such parties which is a corporation, partnership, joint venture or any other type of entity ;
5.	Death or incapacity of any of such parties which is an individual;
6.	Revocation of any guaranty of this Note, or any guaranty of this Note becomes unenforceable as to any future advances under this Note;
7.	Any financial statement provided by any of such parties to CNB is false or materially misleading;
8.	Any material default in the payment or performance of any obligation, or any default under any provision of any contract or instrument pursuant to which any of such parties has incurred any obligation for borrowed money, any purchase obligation or any other liability of any kind to any person or entity, including CNB;
9.	Any sale or transfer of all or a substantial part of the assets of any of such parties other than in the ordinary course of business;
10.	Any violation, breach or default under this Note, any letter agreement, guaranty, security agreement, deed of trust, subordination agreement or any other contract or instrument executed in connection with this Note or securing this Note;
11.	Failure of Borrower to furnish CNB, within the times specified, the following statements:

11.1	Within one hundred twenty (120) days after the close of each fiscal year, a copy of the annual consolidated audit report for such year for Glacier Water, inc., including therein a balance sheet, income statement, reconciliation of net worth and statement of cash flows, with notes thereto, together with a compliance certificate to be audited by a certified public accountant acceptable to CNB, and prepared in accordance with generally accepted accounting principles consistently applied and accompanied by Borrower’s certification as to whether any event has occurred which constitutes an Event of Default, and if so, stating the facts with respect thereto;
11.2	Within forty-five (45) days after the end of the first three quarterly accounting periods of each fiscal year, a financial statement consisting of not less than a balance sheet, income statement, reconciliation of net worth and statement of cash flows, with notes thereto, together with a compliance certificate to be prepared in accordance with generally accepted accounting principles consistently applied, which financial statement may be internally prepared, certified by Borrower to be true and correct; and
11.3	Such additional information, reports and/or statements as CNB may, from time to time, reasonably request;

12.	Funded Debt exceeds the lesser of (i) $40,000,000.00 through June 30, 2011, $33,000,000,00 less scheduled reductions thereafter; or (ii) two and a half times EBITDA through June 30, 2011 and two times EBITDA thereafter, to be calculated on a rolling four quarter;
13.	Failure of Borrower to maintain a ratio of EBITDA to Debt Service plus interest of not less than 1.25 to 1 at all times;

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14.	Capital Expenditures during any twelve (12) month period ending with the end of a fiscal quarter in excess of $23,000,000.00 to September 30, 2011 and $18,000,000.00 thereafter, excluding capital expenditures financed by additions to capital;
15.	Payment of dividends during any fiscal year in excess of EBITDA during such fiscal year, less (i) capital expenditures for maintenance (estimated for the purposes of this section to be $5,000,000.00), (ii) scheduled principal payments on borrowed money, (iii) taxes paid, and (iv) interest expense;
16.	Borrower shall pay to CNB an annual loan fee according to the schedule below:

Amount		Due and payable
$	41,250.00	January 1, 2011
$	71,250.00	July 1, 2011
$	33,750.00	October 1, 2011
$	31,750.00	January 1, 2012

17.	Glacier Water Trust 1 (the “Trust”) makes any prepayments on the 9.0625% Cumulative Trust Preferred Securities (“Trust Securities”), without CNB’s prior written consent;
18.	Glacier Water Services Inc. (“Glacier”) makes any prepayments on the Junior Subordinated Indenture dated January 27, 1998;
19.	Glacier commits an Event of Default, including but not limited to an Event of Default relating to those provisions relating to subordination, with respect to the Junior Subordinated Indenture;
20.	Glacier commits an Event of Default, including but not limited to an Event of Default relating to those provisions relating to subordination, with respect to Glacier’s Guaranty of the Trust obligations owed to the holders of securities issued to the Trust;
21.	Borrower makes any payments or transfers any assets to Glacier or Glacier Subsidiary, except apart from transfers necessary to make payments due on the Junior Subordinate Indenture and outside the ordinary BMC course of business, provided that Borrower is not in default under the Note, without CNB’s prior written consent; or
22.	Borrower, Glacier, or any other subsidiary of Glacier creates, incurs, assumes or permits to exist any Debt except (a) Debt to CNB, and (b) trade Debt in the ordinary course of Borrower’s business.
	For purposes of this Note, the following terms have the following meanings:

          “Applicable Margin” shall be based upon the amount of Total Funded Debt divided by EBITDA, each calculated as of the last day of each fiscal quarter and applicable to the next fiscal quarter as set forth below:

Total Funded Debt	Applicable Margin
EBITDA
Less than 1.5	Plus One Quarter (+.25%)
Equal to or greater than 1.5 But less than 1.75	Plus Three-Quarters (+.75%)
Equal to or greater than 1.75	Plus One (+1.00%)

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Initial advances shall be based upon Applicable Margin of Prime plus Three Quarters (0.75%).

          “Debt Service” Shall mean (a) the aggregate amount of Current Maturity of Long Term Debt, excluding borrowings under this Note, plus (b) all interest incurred on borrowed money determined by reference to the most recently ended fiscal quarter and the immediately preceding three fiscal quarters.

          “Current Maturity of Long Term Debt” means that portion of Borrower’s consolidated long term liabilities, determined in accordance with generally accepted accounting principles, which shall, by the terms thereof, become due and payable within one (i) year following the date of the balance sheet upon which such calculations are based.

          “Funded Debt” means the total borrowings outstanding.

          “EBITDA” means earnings before interest, taxes, depreciation and amortization and will be determined on a consolidated basis for Borrower and the Subsidiaries, in accordance with generally accepted accounting principles and means the sum of (a) net income after eliminating extraordinary gains and losses, plus (b) interest expense, plus (c) provisions for income taxes, plus (d) depreciation and amortization. The calculation of EBITDA shall be determined by reference to the most recently ended fiscal quarter and the immediately preceding three fiscal quarters.

          “Subsidiary” Shall mean any corporation, the majority of whose voting shares are at any time owned, directly or indirectly by Borrower and/or by one or more Subsidiaries.

          Upon the occurrence of any Event of Default, CNB, at its option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, protest or notice of dishonor all of which are expressly waived by Borrower, and CNB shall have no obligation to make any further advances hereunder. Borrower agrees to pay all costs and expenses, including reasonable attorneys’ fees (which counsel may be CNB employees), expended or incurred by CNB (or allocable to CNB’s in-house counsel) in connection with the enforcement of this Note or the collection of any sums due hereunder and irrespective of whether suit is filed. Any principal or interest not paid when due hereunder shall thereafter bear additional interest from its due date at a rate of five percent (5.0%) per year higher than the interest rate as determined and computed above, and continuing thereafter until paid.

          In addition to pursuing all rights and remedies that would exist in an Event of Default, CNB may seek additional lenders to participate in this transaction, should Borrower fail to cause the commitment to be reduced to $33,000,000.00 as of June 30, 2011.

          Should more than one person or entity execute this Note as Borrower, the liability and obligations of each Borrower shall be joint and several.

          This Note and all matters relating thereto, shall be governed by the laws of the State of California.

4

Borrower represents and warrants to CNB that (a) Borrower’s most recent financial statements that have been delivered to CNB are true, complete and correct and fairly present the financial condition of Borrower as of the accounting period referenced on the statements, and there has been no material adverse change in the financial condition of Borrower since the date of such financial statements, and (b) Borrower’s most recent federal income tax return and all schedules attached to such return (“Federal Tax Return”) that have been delivered to CNB are a true and correct copy of such Federal Tax Return filed with the internal Revenue Service for the tax period ending on the date indicated in such Federal Tax Return.

“Borrower”	GW Services, Inc., a California corporation
	By:	/s/ Brian H. McInerney
		Brian H. McInerney, President/CEO

5

DISBURSEMENT INSTRUCTIONS

Branch: Corporate Banking #675
Date: December 10, 2010

     City National Bank is authorized to disburse the proceeds of that certain original note dated December 10, 2010, in the amount of $40,000,000.00, executed by the undersigned Borrower as follows:

Restructure/Renewal	In the Name of
63123/00004	GW Services, Inc.	$	33,000,000.00
Undisbursed:		$	7,000,000.00
TOTAL:		$	40,000,000.00

LOAN PROCEEDS, All proceeds are to be credited to Account Number 101-895637 at City National Bank.

Disburse as Requested by: (identify persons authorized to make requests)

Brian H. McInerney or Steve Stringer upon written or verbal request.

GW Services, Inc., a California corporation
By:	/s/ Brian H. McInerney
	Brian H. McInerney, President/CEO

LOAN FEES AND CHARGES

Borrower: GW Services, Inc.	Date: 12/10/10
Branch Name and No.: Corporate Banking #675
Customer No.: 63123	Note No.: 00004

In connection with the above referenced loan, fees and charges, as estimated, are as follows:

Loan Fee	$17,500.00
Total Estimated Fees	$17,500.00

Actual fees may be higher or lower than estimated fees. Any excess funds will be deposited to Borrower’s Checking Account or reimbursed by Cashier’s Check. If fees collected are insufficient to cover out of pocket costs, the Borrower will be billed directly for the balance unless authorization to debit the account is received.

þ By checking this box, Borrower hereby authorizes City National Bank to charge the aforementioned fees and charges to depository account number 101895637.

GW Services, Inc., a California corporation
By:	/s/ Brian H. McInerney
	Brian H. McInerney, President/CEO

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL

Principal	Loan Date	Maturity	Loan No	Call / Coll	Account	Officer	Initials
$40,000,000,00	12-10-2010	07-01-2012	00004		63123	GP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing “***” has been omitted due to text length limitations.

		Lender:	City National Bank, a national banking association
Corporation:	GW SERVICES, INC., A CALIFORNIA		Entertainment — New York Office
	CORPORATION		400 Park Avenue, Suite 2010
	1385 PARK CENTER DRIVE		New York, NY 10022
	VISTA, CA 92081-8338

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is GW SERVICES, INC., A CALIFORNIA CORPORATION (“Corporation”). The Corporation is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of California. The Corporation is duly authorized to transact business in the State of New York and all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 1385 PARK CENTER DRIVE, VISTA, CA 92081-8338. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly, called and held on December 10, 2010, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.

OFFICER. The following named person is an officer of GW SERVICES, INC., A CALIFORNIA CORPORATION:

NAMES	TITLES	AUTHORIZED	ACTUAL SIGNATURES
BRIAN H. McINERNEY	President/CEO	Y	X	/s/ Brian H. McInerney

ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation:

Borrow Money. To borrow, as a cosigner or otherwise, from time to time from Lender, on such terms as may be agreed upon between the Corporation and Lender, such sum or sums of money as in his or her judgment should be borrowed, without limitation.

Execute Notes. To execute and deliver to Lender the promissory note or notes, or other evidence of the Corporation’s credit accommodations, on Lender’s forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any of the Corporation’s indebtedness to Lender, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, any portion of the notes, or any other evidence of credit accommodations.

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the payment of any loans or credit accommodations so obtained, any promissory notes so executed (including any amendments to or modifications, renewals, and extensions of such promissory notes), or any other or further indebtedness of the Corporation to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered.

Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances.

Negotiate Items. To draw, endorse, and discount with Lender all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the Corporation’s account with Lender, or to cause such other disposition of the proceeds derived therefrom as he or she may deem advisable.

Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances under such lines, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution. The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from the Corporation, at Lender’s address shown above, written notice of revocation of such authority: BRIAN H. McINERNEY and STEVE STRINGER.

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation’s

CORPORATE RESOLUTION TO BORROW / GRANT COLLATERAL
(Continued)

Loan No: 00004 Page 2

principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender. No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified and approved. This Resolution shall be continuing, shall remain in full force and effect and Lender may rely on it until written notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signature set opposite the name listed above is his or her genuine signature.

I have read all the provisions of this Resolution, and I personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Borrow / Grant Collateral is dated December 10, 2010.

CERTIFIED TO AND ATTESTED BY:
X	/s/ Steve Stringer
	STEVE STRINGER, SECRETARY

NOTE: If the officer signing this Resolution is designated by the foregoing document at one of the officers authorized to act on the Corporation’s behalf, it is advisable to have this Resolution signed by at least one non-authorized officer of the Corporation.

[Illegible]

CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE

Principal	Loan Date	Maturity	Loan No	Call/Coll	Account	Officer	Initials
$40,000,000,00	12-10-2010	07-01-2012	00004		63123	GP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing “***” has been omitted due to text length limitations.

Borrower:	GW SERVICES, INC., A CALIFORNIA CORPORATION 1385 PARK CENTER DRIVE VISTA, CA 92081-8338	Lender:	City National Bank, a national banking association Entertainment — New York Office 400 Park Avenue, Suite 2010 New York, NY 10022
Corporation:	GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION 1385 PARK CENTER DRIVE VISTA, CA 92081-8338

I, THE UNDERSIGNED, DO HEREBY CERTIFY THAT:

THE CORPORATION’S EXISTENCE. The complete and correct name of the Corporation is GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION (“Corporation”). The Corporation is a corporation for profit which is and at all times shall be, duly organized, validly existing, and in good standing under and by virtue of the laws of the State of Delaware. The Corporation is duly authorized to transact business in the State of New York and all other states in which the Corporation is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in which the Corporation is doing business. Specifically, the Corporation is, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition. The Corporation has the full power and authority to own its properties and to transact the business in which it is presently engaged or presently proposes to engage. The Corporation maintains an office at 1385 PARK CENTER DRIVE, VISTA, CA 92081-8338. Unless the Corporation has designated otherwise in writing, the principal office is the office at which the Corporation keeps its books and records. The Corporation will notify Lender prior to any change in the location of the Corporation’s state of organization or any change in the Corporation’s name. The Corporation shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to the Corporation and the Corporation’s business activities.

RESOLUTIONS ADOPTED. At a meeting of the Directors of the Corporation, or if the Corporation is a close corporation having no Board of Directors then at a meeting of the Corporation’s shareholders, duly called and held on December 10, 2010, at which a quorum was present and voting, or by other duly authorized action in lieu of a meeting, the resolutions set forth in this Resolution were adopted.

OFFICER. The following named person is an officer of GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION:

NAMES	TITLES	AUTHORIZED		ACTUAL SIGNATURES
BRIAN H. MCINERNEY	CEO	Y	X	/s/ Brian H. McInerney	(Seal)

ACTIONS AUTHORIZED. The authorized person listed above may enter into any agreements of any nature with Lender, and those agreements will bind the Corporation. Specifically, but without limitation, the authorized person is authorized, empowered, and directed to do the following for and on behalf of the Corporation.

Guaranty. To guarantee or act as surety for loans or other financial accommodations to Borrower from Lender on such guarantee or surety terms as may be agreed upon between the officer of the Corporation and Lender and in such sum or sums of money as in his or her judgment should be guaranteed or assured, (the “Guaranty”).

Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or otherwise encumber and deliver to Lender any property now or hereafter belonging to the Corporation or in which the Corporation now or hereafter may have an interest, including without limitation all of the Corporation’s real property and all of the Corporation’s personal property (tangible or intangible), as security for the Guaranty, and as a security for the payment of any loans, any promissory notes, or any other or further indebtedness of GW SERVICES, INC., A CALIFORNIA CORPORATION to Lender at any time owing, however the same may be evidenced. Such property may be mortgaged, pledged, transferred, endorsed, hypothecated or encumbered at the time such loans are obtained or such indebtedness is incurred, or at any other time or times, and may be either in addition to or in lieu of any property theretofore mortgaged, pledged, transferred, endorsed, hypothecated or encumbered. The provisions of this Resolution authorizing or relating to the pledge, mortgage, transfer, endorsement, hypothecation, granting of a security interest in, or in any way encumbering, the assets of the Corporation shall include, without limitation, doing so in order to lend collateral security for the indebtedness, now or hereafter existing, and of any nature whatsoever, of GW SERVICES, INC., A CALIFORNIA CORPORATION to Lender. The Corporation has considered the value to itself of lending collateral in support of such indebtedness, and the Corporation represents to Lender that the Corporation is benefited by doing so.

Execute Security Documents. To execute and deliver to Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation agreement, and other security agreements and financing statements which Lender may require and which shall evidence the terms and conditions under and pursuant to which such liens and encumbrances, or any of them, are given; and also to execute and deliver to Lender any other written instruments, any chattel paper, or any other collateral, of any kind or nature, which Lender may deem necessary or proper in connection with or pertaining to the giving of the liens and encumbrances.

Further Acts. To do and perform such other acts and things and to execute and deliver such other documents and agreements as the officer may in his or her discretion deem reasonably necessary or proper in order to carry into effect the provisions of this Resolution.

ASSUMED BUSINESS NAMES. The Corporation has filed or recorded all documents or filings required by law relating to all assumed business names used by the Corporation. Excluding the name of the Corporation, the following is a complete list of all assumed business names under which the Corporation does business: None.

NOTICES TO LENDER. The Corporation will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to time) prior to any (A) change in the Corporation’s name; (B) change in the Corporation’s assumed business name(s); (C) change in the management of the Corporation; (D) change in the authorized signer(s); (E) change in the Corporation’s ‘ principal office address; (F) change in the Corporation’s state of organization; (G) conversion of the Corporation to a new or different type of business entity; or (H) change in any other aspect of the Corporation that directly or indirectly relates to any agreements between the Corporation and Lender, No change in the Corporation’s name or state of organization will take effect until after Lender has received notice.

CERTIFICATION CONCERNING OFFICERS AND RESOLUTIONS. The officer named above is duly elected, appointed, or employed by or for the

CORPORATE RESOLUTION TO GRANT COLLATERAL / GUARANTEE
(Continued)

Loan No: 00004 Page 2

Corporation, as the case may be, and occupies the position set opposite his or her respective name. This Resolution now stands of record on the books of the Corporation, is in full force and effect, and has not been modified or revoked in any manner whatsoever.

NO CORPORATE SEAL. The Corporation has no corporate seal, and therefore, no seal is affixed to this Resolution.

CONTINUING VALIDITY. Any and all acts authorized pursuant to this Resolution and performed prior to the passage of this Resolution are hereby ratified, and approved. This Resolution shall be continuing, shall remain in full force and affect and Lender may rely on it until written . notice of its revocation shall have been delivered to and received by Lender at Lender’s address shown above (or such addresses as Lender may designate from time to time). Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given,

IN TESTIMONY WHEREOF, I have hereunto set my hand and attest that the signature set opposite the name listed above is his or her genuine signature.

I have read all the provisions of this Resolution, and I personally and on behalf of the Corporation certify that all statements and representations made in this Resolution are true and correct. This Corporate Resolution to Grant Collateral / Guarantee is dated December 10, 2010.

THIS RESOLUTION IS DELIVERED UNDER SEAL AND IT IS INTENDED THAT THIS RESOLUTION IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

CERTIFIED TO AND ATTESTED BY:
X	/s/ Steve Stringer	(Seal)
	STEVE STRINGER, SECRETARY

NOTE: If the officer signing this Resolution is designated by the foregoing document as one of the officers authorized to net on the Corporation’s behalf, it is advisable so have this Resolution signed by at least one non-authorized officer of five Corporation.

[Illegible]

COMMERCIAL GUARANTY

Principal	Loan Date	Maturity	Loan No	Call/Coll	Account	Officer	Initials
						GP

References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing “***” has been omitted due to text length limitations.

Borrower:	GW SERVICES, INC., A CALIFORNIA CORPORATION 1385 PARK CENTER DRIVE VISTA, CA 92081-8338	Lender:	City National Bank, a national banking association Entertainment — New York Office 400 Park Avenue, Suite 2010 New York, NY 10022
Guarantor:	GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION 1385 PARK CENTER DRIVE VISTA, CA 92081-8338

CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s obligations are continuing.

INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, reasonable attorneys’ fees, arising from any and all debts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively or interchangeably with others, owes or will owe Lender, “indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit card indebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodity price protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans or transactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether; voluntarily or involuntarily incurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct or indirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by a negotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reason whatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced or extinguished and then afterwards increased or reinstated.

If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties.

GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in this Guaranty mean an amount not to exceed Forty Million & 00/100 Dollars ($40,000,000.00) of the principal amount, plus interest thereon to the extent not prohibited by law, and all collection costs, expenses and reasonable attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit, any fees and costs for trial and appeals.

Guarantor’s Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced by sums from any other source including, but not limited to, sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone other than Guarantor, or reductions by operation of law, judicial order or equitable principles. Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness.

The above limitation on liability is not a restriction on the amount of the Note of Borrower to Lender either in the aggregate or at any one time.

CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULL AND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE GUARANTOR’S SHARE OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOW EXISTING OR HEREAFTER ARISING OR ACQUIRED, ON A CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ON THE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTY FOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAY BE A ZERO BALANCE FROM TIME TO TIME.

DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. If Guarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to new Indebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness” does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is: incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, and modifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death or incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legal representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this

COMMERCIAL GUARANTY
(Continued)

Loan No: 00004 Page 2

Guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness covered by this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars ($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the Guarantor’s Share of the Indebtedness remains unpaid and even though the Guarantor’s Share of the Indebtedness may from time to time be zero dollars ($0.00).

GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice or demand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make one or more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations in all or any part of the indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all future financial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship with Borrower.

GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to resort for payment or to proceed directly or at once against any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to pursue any other remedy within Lender’s power; or (F) to commit any act or omission of any kind, or at any time, with respect to any matter whatsoever.

Guarantor also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness. If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this Guaranty.

Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or similar right whether such claim, demand or right may be asserted by the Borrower, the Guarantor, or both.

GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy.

SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor from time to time to file financing statements and continuation statements

COMMERCIAL GUARANTY
(Continued)

Loan No. 00004 Page 3

and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty.

Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Attorneys’ Fees: Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by the court.

Caption Headings Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions of this Guaranty.

Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of New York without regard to its conflicts of law provisions.

Choice of Venue. If there is a lawsuit. Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts of LOS ANGELES County, State of California.

Integration. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of Borrower’ or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

Notices. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the section of this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors.

No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the parties, their successors and assigns.

FEDERAL TAX RETURN. Guarantor represents and warrants to Lender that Guarantor’s most recent federal income tax return and all schedules attached to such return (“Federal Tax Return”) that have been delivered to Lender are a true and correct copy of such Federal Tax Return filed with the Internal Revenue Service for the tax period ending on the date indicated in such Federal Tax Return.

DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed to such terms in the Uniform Commercial Code:

Borrower. The word “Borrower” means GW SERVICES, INC., A CALIFORNIA CORPORATION and includes all co-signers and co-makers signing the Note and all their successors and assigns.

Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without limitation GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION, and in each case, any signer’s successors and assigns.

Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of the Indebtedness” mean Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.

Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.

Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.

COMMERCIAL GUARANTY
(Continued)

Loan No: 00004 Page 4

Lender. The word “Lender” means City National Bank, a national banking association, its successors and assigns.

Note. The word “Note” means the promissory note dated December 10, 2010, in the original principal amount of $40,000,000,00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissory note or agreement.

Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the indebtedness.

EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED DECEMBER 10, 2010.

GUARANTOR: GLACIER WATER SERVICES, INC., A DELAWARE CORPORATION
By:	/s/ Brian H. McInerney
	BRIAN H. MCINERNEY, CEO of GLACIER WATER
	SERVICES, INC., A DELAWARE CORPORATION

[Illegible]

August 29, 2007

To whom it may concern:

This letter is to confirm that effective August 29, 2007, Mr. W. David Walters has resigned as Sr. Vice President and Corporate Secretary for Glacier Water Services, Inc., and is replaced by Steven D. Stringer, Chief Financial Officer and Corporate Secretary.

I, Steven D. Stringer, certify that I am the Corporate Secretary of the above named corporation organized under the laws of California, Federal Employer I.D. Number 95-3829620, engaged in business under the trade name of Glacier Water Services, Inc.

Corporate Secretary, and Chief Financial Officer
 

/s/ Steven D. Stringer  

Steven D. Stringer 

President and Chief Executive Officer

/s/ Brian H. McInerney  

Brian H. McInerney 

Glacier Water Services, Inc. • 1385 Park Center Drive, Vista, CA 92081-8338
800-GLACIER • 760-560-1111 • FAX 760-560-3333
www.glacierwater.com

EX-4.3

Exhibit 4.3

AMENDED AND RESTATED REVOLVING NOTE

	Note No. 63123/00004
	Corporate Banking #675
$40,000,000.00	Los Angeles, California
	April 13, 2011

     This Amended and Restated Revolving Note shall amend and restate in its entirety that certain Revolving Note dated as of December 10, 2010, made by GW Services, Inc., a California corporation (“Borrower”), in favor of City National Bank, a national banking association (“CNB”).

     On July 1, 2012 (“Termination Date”), Borrower promises to pay to the order of CNB, at its office in this city, in United States Dollars and in immediately available funds, the principal sum of Forty Million and 00/100 Dollars ($40,000,000.00) (“Revolving Credit Commitment”), or so much thereof as may be advanced and be outstanding, with interest thereon to be computed on each advance from the date of its disbursement at a rate computed on a basis of a 360-day year, actual days elapsed, equal to the “Prime Rate” of CNB, as it exists from time to time, plus the Applicable Margin per year. Provided, however, in no event shall the interest rate be less than four percent (4.00%) per annum. “Prime Rate” shall mean the rate most recently announced by CNB at its principal office in Los Angeles, California, as its “Prime Rate.” Any change in the Prime Rate shall become effective on the same business day on which the Prime Rate shall change, without prior notice to Borrower.

     As provided herein, the principal of this Note may be borrowed, repaid and reborrowed from time to time up to and including the Termination Date, provided at the time of any borrowing no Event of Default (as hereinafter defined) exists, and provided further that immediately after the occurrence of an Equity Event the total borrowings outstanding at any one time shall not exceed Thirty Three Million and 00/100 Dollars ($33,000,000.00) (the “Post Equity Event Availability”). If after the Equity Event, Funded Debt exceeds the Post Equity Event Availability, Borrower shall immediately repay the amount of principal outstanding hereunder equal to such excess. Borrower agrees that after August 31, 2011, CNB may elect, in its sole discretion, to commence and continue the Syndication Process. Each borrowing and repayment hereunder shall be noted in the books and records of CNB. The excess of borrowings over repayments shall evidence the principal balance due hereon from time to time and at any time. Borrowings hereunder shall be presumed to have been made to or for the benefit of Borrower when made as noted in such books and records.

     Following any fiscal quarter ending with total Funded Debt in excess of two (2) times EBITDA, additional principal reductions in the amount of Excess Cash Flow shall be made and the amount available for borrowing under this Note shall be permanently reduced by the same amount until the end of any subsequent fiscal quarter ending with total Funded Debt equal to or less than one and one-half (1 1/2) times EBITDA.

     Interest accruing on this Note shall be payable on the first day of each month, commencing January 1, 2011.

     Borrower shall pay to CNB a late charge of 5% or $10.00, whichever is greater, of any payment not received by CNB on or before the 10^th day after the payment is due.

     The occurrence of any of the following with respect to any Borrower or guarantor of this Note or any general partner of such Borrower or guarantor, shall constitute an “Event of Default” hereunder:

1.	Failure to make any payment of principal or interest when due under this Note;
2.	Filing of a petition by or against any of such parties under any provision of the Bankruptcy Code;
3.	Appointment of a receiver or an assignee for the benefit of creditors;

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4.	Commencement of dissolution or liquidation proceedings or the disqualification (under any applicable law or regulation) of any of such parties which is a corporation, partnership, joint venture or any other type of entity;
5.	Death or incapacity of any of such parties which is an individual;
6.	Revocation of any guaranty of this Note, or any guaranty of this Note becomes unenforceable as to any future advances under this Note;
7.	Any financial statement provided by any of such parties to CNB is false or materially misleading;
8.	Any material default in the payment or performance of any obligation, or any default under any provision of any contract or instrument pursuant to which any of such parties has incurred any obligation for borrowed money, any purchase obligation or any other liability of any kind to any person or entity, including CNB;
9.	Any sale or transfer of all or a substantial part of the assets of any of such parties other than in the ordinary course of business;
10.	Any violation, breach or default under this Note, any letter agreement, guaranty, security agreement, deed of trust, subordination agreement or any other contract or instrument executed in connection with this Note or securing this Note;
11.	Failure of Borrower to furnish CNB, within the times specified, the following statements:

11.1	Within one hundred twenty (120) days after the close of each fiscal year, a copy of the annual consolidated audit report for such year for Glacier Water, Inc., including therein a balance sheet, income statement, reconciliation of net worth and statement of cash flows, with notes thereto, together with a compliance certificate to be audited by a certified public accountant acceptable to CNB, and prepared, in accordance with generally accepted accounting principles consistently applied and accompanied by Borrower’s certification as to whether any event has occurred which constitutes an Event of Default, and if so, stating the facts with respect thereto;
11.2	Within forty-five (45) days after the end of the first three quarterly accounting periods of each fiscal year, a financial statement consisting of not less than a balance sheet, income statement, reconciliation of net worth and statement of cash flows, with notes thereto, together with a compliance certificate to be prepared in accordance with generally accepted accounting principles consistently applied, which financial statement may be internally prepared, certified by Borrower to be true and correct; and
11.3	Such additional information, reports and/or statements as CNB may, from time to time, reasonably request;

12.	Funded Debt exceeds two and a half times EBITDA, to be calculated on a rolling four quarter basis;
13.	Failure of Borrower to maintain a ratio of EBITDA to Debt Service plus interest of not less than 1.25 to 1.00 at all times;
14.	Capital expenditures during any twelve (12) month period measured as of the end of each fiscal quarter are in excess of: (i) from the date hereof through and including the quarter ending September 30, 2011, $23,000,000.00, and (ii) for each fiscal quarter ending after September 30, 2011, $18,000,000.00, in each case excluding capital expenditures financed by additions to capital;

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15.	Prior to an initial public offering of Borrower’s or Glacier’s common stock, payment of dividends during any fiscal year in excess of EBITDA during such fiscal year, less (i) capital expenditures for maintenance (estimated for the purposes of this section to be $5,000,000.00), (ii) scheduled principal payments on borrowed money, (iii) taxes paid, and (iv) interest expense;
16.	After an initial public offering of Borrower’s or Glacier’s common stock, payment of dividends during any fiscal year in excess of EBITDA during such fiscal year, less (i) all capital expenditures, (ii) scheduled principal payments on borrowed money, (iii) taxes paid, and (iv) interest expense
17.	Borrower shall pay to CNB an annual loan fee according to the schedule below; provided that upon an Event of Default or a syndication of the obligations under this Note by CNB, all of the loan fee installments set forth below shall be immediately due and payable and fully earned:

Amount		Due and payable
$	41,250.00	January 1, 2011
$	71,250.00	July 1,2011
$	33,750.00	October 1,2011
$	31,750.00	January 1, 2012

18.	Glacier Water Trust I (the “Trust”) makes any prepayments on the 9.0625% Cumulative Trust Preferred Securities (“Trust Securities”), without CNB’s prior written consent;
19.	Glacier Water Services Inc. (“Glacier”) makes any prepayments on the Junior Subordinated Indenture dated January 27, 1998;
20.	Glacier commits an Event of Default, including but not limited to an Event of Default relating to those provisions relating to subordination, with respect to the Junior Subordinated Indenture;
21.	Glacier commits an Event of Default, including but not limited to an Event of Default relating to those provisions relating to subordination, with respect to Glacier’s Guaranty of the Trust obligations owed to the holders of securities issued to the Trust;
22.	Borrower makes any payments or transfers any assets to Glacier or Glacier Subsidiary, except apart from transfers necessary to make payments due on the Junior Subordinate Indenture or in the ordinary course of business, provided that Borrower is not in default under the Note, without CNB’s prior written consent; or
23.	Borrower, Glacier, or any other subsidiary of Glacier creates, incurs, assumes or permits to exist any Debt except (a) Debt to CNB, and (b) trade Debt in the ordinary course of Borrower’s business.
	For purposes of this Note, the following terms have the following meanings:

     “Applicable Margin” shall be based upon the amount of total Funded Debt divided by EBITDA, each calculated as of the last day of each fiscal quarter and applicable to the next fiscal quarter as set forth below:

Total Funded Debt EBITDA	Applicable Margin
Less than 1.5	Plus One Quarter (+.25%)
Equal to or greater than 1.5 But less than 1.75	Plus Three-Quarters (+.75%)
Equal to or greater than 1.75	Plus One (+1.00%)

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Initial advances shall be based upon Applicable Margin of Prime plus Three Quarters (0.75%).

     “Current Maturity of Long Term Debt” means that portion of Borrower’s consolidated long term liabilities, determined in accordance with generally accepted accounting principles, which shall, by the terms thereof, become due and payable within one (1) year following the date of the balance sheet upon which such calculations are based.

     “Debt” means, at any date, the aggregate amount of, without duplication, (a) all obligations of Borrower or any Subsidiary for borrowed money; (b) all obligations of Borrower or any Subsidiary evidenced by bonds, debentures, notes or other similar instruments; (c) all obligations of Borrower or any Subsidiary to pay the deferred purchase price of property or services; (d) all capitalized lease obligations of Borrower or any Subsidiary; (e) all obligations or liabilities of others secured by a lien on any asset of Borrower or any Subsidiary, whether or not such obligation or liability is assumed; (f) all obligations guaranteed by Borrower or any Subsidiary; (g) all obligations of Borrower or any Subsidiary, direct or indirect, for letters of credit; and (h) any other obligations or liabilities which are required by generally accepted accounting principles to be shown as debt on the balance sheet of Borrower or any Subsidiary.

     “Debt Service” Shall mean (a) the aggregate amount of Current Maturity of Long Term Debt, excluding borrowings under this Note, plus (b) all interest incurred on borrowed money determined by reference to the most recently ended fiscal quarter and the immediately preceding three fiscal quarters.

     “EBITDA” means earnings before interest, taxes, depreciation and amortization and will be determined on a consolidated basis for Borrower and the Subsidiaries, in accordance with generally accepted accounting principles and means the sum of (a) net income after eliminating extraordinary gains and losses, plus (b) interest expense, plus (c) provisions for income taxes, plus (d) depreciation and amortization. The calculation of EBITDA shall be determined by reference to the most recently ended fiscal quarter and the immediately preceding three fiscal quarters.

     “Equity Event” shall mean the occurrence of either of the following: (a) an initial public offering of the Borrower’s or Glacier’s common stock, or (ii) any issuance of capital stock by the Borrower or Glacier or any other capital contribution made to the Borrower or Glacier by an existing or new shareholder.

      “Excess Cash Flow” shall be computed for Borrower and its Subsidiaries as of each fiscal quarter (based on such fiscal quarter and the immediately preceding three fiscal quarters) and shall be the EBITDA for such period less (i) federal and state income taxes payable for such period, (ii) capital expenditures during such period to the such capital expenditures are permitted under this Note, (iii) principal and interest paid to CNB under this Note during such period, and (iv) any previous Excess Cash Flow payments made pursuant to this Note during such period.

     “Funded Debt” means the total borrowings outstanding hereunder.

     “Subsidiary” shall mean any corporation, the majority of whose voting shares are at any time owned, directly or indirectly by Borrower and/or by one or more Subsidiaries.

     “Syndication Process” shall mean, to the extent CNB elects and for as long as CNB elects, in its sole discretion, a process by which CNB shall, with the cooperation of the Borrower as set forth below, attempt to syndicate the obligations under this Note to additional lenders.

     Upon the occurrence of any Event of Default, CNB, at its option, may declare all sums of principal and interest outstanding hereunder, together with any loan fee installments yet to be paid, to be immediately due and payable without presentment, demand, protest or notice of dishonor all of which are expressly waived by Borrower, and CNB shall have no obligation to make any further advances hereunder. Borrower agrees to pay all

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costs and expenses, including reasonable attorneys’ fees (which counsel may be CNB employees), expended or incurred by CNB (or allocable to CNB’s in-house counsel) in connection with the enforcement of this Note or the collection of any sums due hereunder and irrespective of whether suit is filed. Any principal or interest not paid when due hereunder shall thereafter bear additional interest from its due date at a rate of five percent (5.0%) per year higher than the interest rate as determined and computed above, and continuing thereafter until paid.

     Borrower hereby agrees that it will cooperate with CNB if CNB elects to initiate the Syndication Process. Borrower hereby acknowledges that a successful conclusion to the Syndication Process may require, without limitation, the following: (i) the re-documentation of the obligations hereunder with a form of credit agreement that will include customary syndication provisions and such other provisions which are necessary to allow CNB to syndicate the obligations hereunder, (ii) the re-documentation of any security agreement, guaranty or other documentation related to this Note, (iii) the modification of the terms of the obligations hereunder, including, without limitation, changes to the applicable interest rate, the amount of fees payable, financial covenants, the schedule for principal repayments and the scope of the collateral securing this Note, and (iii) the sharing of information related to the Borrower, including Borrower’s financial information, with prospective participants in the syndication. Notwithstanding anything in this paragraph, CNB shall be under no obligation to initiate or continue the Syndication Process.

     Should more than one person or entity execute this Note as Borrower, the liability and obligations of each Borrower shall be joint and several.

     This Note and all matters relating thereto, shall be governed by the laws of the State of California.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     Borrower represents and warrants to CNB that (a) Borrower’s most recent financial statements that have been delivered to CNB are true, complete and correct and fairly present the financial condition of Borrower as of the accounting period referenced on the statements, and there has been no material adverse change in the financial condition of Borrower since the date of such financial statements, and (b) Borrower’s most recent federal income tax return and all schedules attached to such return (“Federal Tax Return”) that have been delivered to CNB are a true and correct copy of such Federal Tax Return filed with the Internal Revenue Service for the tax period ending on the date indicated in such Federal Tax Return.

“Borrower”	GW Services, Inc., a California corporation
	By:	/s/ Brian H. McInerney
		Brian H. McInerney, President/CEO

CONSENT OF GUARANTOR:

     The undersigned has previously guaranteed the indebtedness of GW Services, Inc. owed to CNB. The undersigned confirms that its guaranty shall continue in full force and effect and that such guaranty shall be a separate and distinct obligation and apply to the indebtedness arising from the foregoing Amended and Restated Revolving Note.

Glacier Water Services, Inc., a Delaware corporation
By:	/s/ Brian H. McInerney
	Name:	Brian H. McInerney
	Title:	CEO

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DISBURSEMENT INSTRUCTIONS

Branch: Corporate Banking #675
Date: April 12, 2011

     City National Bank is authorized to disburse the proceeds of that certain Amended and Restated Revolving Note dated April 12, 2011, in the amount of $40,000,000.00, executed by the undersigned Borrower as follows:

Restructure		In the name of
	63123/00004	GW Services, Inc.	$	40,000,000.00
		TOTAL:	$	40,000,000.00

LOAN PROCEEDS. All proceeds are to be credited to Account Number 101-895637 at City National Bank.

These Disbursement Instructions supersede and replace those certain Disbursement Instructions dated December 10, 2010.

Disburse as Requested by: (identify persons authorized to make requests)

Brian H. Mclnerney or Steve Stringer upon written or verbal request.

GW Services, Inc., a California corporation
By:	/s/ Brian H. Mclnerney
	Brian H. Mclnerney, President/CEO

LOAN FEES AND CHARGES

Borrower: GW Services, Inc.	Date: April 12, 2011
Branch Name and No.: Corporate Banking #675
Customer No.: 63123	Note No.: 00004

In connection with the above referenced loan, fees and charges, as estimated, are as follows:

Loan Fee	$	10,000.00
Interest Due on Loan #63123/00004 to 04/12/11	$	43,512.84
Total Estimated Fees	$	53,512.84

Actual fees may be higher or lower than estimated fees. Any excess funds will be deposited to Borrower’s Checking Account or reimbursed by Cashier’s Check. If fees collected are insufficient to cover out of pocket costs, the Borrower will be billed directly for the balance unless authorization to debit the account is received.

þ By checking this box, Borrower hereby authorizes City National Bank to charge the aforementioned fees and charges to depository account number 101895637.

GW Services, Inc., a California corporation
By:	/s/ Brian H. McInerney
	Brian H. McInerney, President/CEO

EX-4.4

Exhibit 4.4

GLACIER WATER SERVICES, INC.

to

WILMINGTON TRUST COMPANY

Trustee

JUNIOR SUBORDINATED INDENTURE

Dated as of January 27, 1998

TABLE OF CONTENTS

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION		1
Section 1.1	Definitions	1
Section 1.2	Compliance Certificate and Opinions	10
Section 1.3	Forms of Documents Delivered to Trustee	10
Section 1 4	Acts of Holders	11
Section 1.5	Notices, Etc. to Trustee and Company	13
Section 1.6	Notice to Holders; Waiver	13
Section 1.7	Conflict with Trust Indenture Act	14
Section 1.8	Effect of Headings and Table of Contents	14
Section 1.9	Successors and Assigns	14
Section 1.10	Separability Clause	14
Section 1.11	Benefits of Indenture	14
Section 1.12	Governing Law	14
Section 1.13	Non-Business Days	15
ARTICLE II
SECURITY FORMS		15
Section 2.1	Forms Generally	15
Section 2.2	Form of Face of Security	15
Section 2.3	Form of Reverse of Security	20
Section 2.4	Additional Provisions Required in Global Security	22
Section 2.5	Form of Trustee’s Certificate of Authentication	23
ARTICLE III
THE SECURITIES		24
Section 3.1	Title and Terms	24
Section 3.2	Denominations	26
Section 3.3	Execution, Authentication, Delivery and Dating	27
Section 3.4	Temporary Securities	28
Section 3.5	Registration, Transfer and Exchange	29
Section 3.6	Mutilated, Destroyed, Lost and Stolen Securities	30
Section 3.7	Payment of Interest; Interest Rights Preserved	31
Section 3.8	Persons Deemed Owners	33
Section 3.9	Cancellation	33

Section 3.10	Computation of Interest	33
Section 3.11	Deferrals of Interest Payment Dates	33
Section 3.12	Right of Set-Off	35
Section 3.13	Agreed Tax Treatment	35
Section 3.14	Shortening of Stated Maturity	35
Section 3.15	CUSIP Numbers	35
ARTICLE IV
SATISFACTION AND DISCHARGE		36
Section 4.1	Satisfaction and Discharge of Indenture	36
Section 4.2	Application of Trust Money	37
ARTICLE V
REMEDIES		37
Section 5.1	Events of Default	37
Section 5.2	Acceleration of Maturity; Rescission and Annulment	38
Section 5.3	Collection of Indebtedness and Suits for Enforcement by Trustee	40
Section 5.4	Trustee May File Proofs of Claim	40
Section 5.5	Trustee May Enforce Claim Without Possession of Securities	41
Section 5.6	Application of Money Collected	41
Section 5.7	Limitation on Suits	42
Section 5.8	Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Preferred Securities	43
Section 5.9	Restoration of Rights and Remedies	43
Section 5.10	Rights and Remedies Cumulative	43
Section 5.11	Delay or Omission Not Waiver	44
Section 5.12	Control by Holders	44
Section 5.13	Waiver of Past Defaults	44
Section 5.14	Undertaking for Costs	45
Section 5.15	Waiver of Usury, Stay or Extension Laws	45
ARTICLE VI
THE TRUSTEE		46
Section 6.1	Certain Duties and Responsibilities	46
Section 6.2	Notice of Defaults	47
Section 6.3	Certain Rights of Trustee	47
Section 6.4	Not Responsible for Recitals or Issuance of Securities	48
Section 6.5	May Hold Securities	48

Section 6.6	Money Held in Trust	49
Section 6.7	Compensation and Reimbursement	49
Section 6.8	Disqualification; Conflicting Interests	50
Section 6.9	Corporate Trustee Required; Eligibility	50
Section 6.10	Resignation and Removal; Appointment of Successor	50
Section 6.11	Acceptance of Appointment by Successor	52
Section 6.12	Merger, Conversion, Consolidation or Succession to Business	53
Section 6.13	Preferential Collection of Claims Against Company	53
Section 6.14	Appointment of Authenticating Agent	53
ARTICLE VII
HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY		56
Section 7.1	Company to Furnish Trustee Names and Addresses of Holders	56
Section 7.2	Preservation of Information, Communications to Holders	56
Section 7.3	Reports by Trustee	56
Section 7.4	Reports by Company	57
ARTICLE VIII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE		57
Section 8.1	Company May Consolidate, Etc., Only on Certain Terms	57
Section 8.2	Successor Corporation Substituted	58
ARTICLE IX
SUPPLEMENTAL INDENTURES		59
Section 9.1	Supplemental Indentures without Consent of Holders	59
Section 9.2	Supplemental Indentures with Consent: of Holders	60
Section 9.3	Execution of Supplemental Indentures	61
Section 9.4	Effect of Supplemental Indentures	62
Section 9.5	Conformity with Trust Indenture Act	62
Section 9.6	Reference in Securities to Supplemental Indentures	62
ARTICLE X
COVENANTS		62
Section 10.1	Payment of Principal, Premium and Interest	62
Section 10.2	Maintenance of Office or Agency	63

Section 10.3	Money for Security Payments to be Held in Trust	63
Section 10.4	Statement as to Compliance	64
Section 10.5	Waiver of Certain Covenants	65
Section 10.6	Additional Sums	65
Section 10.7	Additional Covenants	66
ARTICLE XI
REDEMPTION OF SECURITIES		67
Section 11.1	Applicability of This Article	67
Section 11.2	Election to Redeem; Notice to Trustee	67
Section 11.3	Selection of Securities to be Redeemed	67
Section 11.4	Notice of Redemption	68
Section 11.5	Deposit of Redemption Price	69
Section 11.6	Payment of Securities Called for Redemption	69
Section 11.7	Right of Redemption of Securities Initially Issued to a Glacier Trust	69
ARTICLE XII
SINKING FUNDS		70
Section 12.1	Applicability of Article	70
Section 12.2	Satisfaction of Sinking Fund Payments with Securities	70
Section 12.3	Redemption of Securities for Sinking Fund	71
ARTICLE XIII
SUBORDINATION OF SECURITIES		72
Section 13.1	Securities Subordinate to Senior Debt and Subordinated Debt	72
Section 13.2	Payment Over of Proceeds Upon Dissolution, Etc.	72
Section 13.3	Prior Payment to Senior Debt and Subordinated Debt Upon Acceleration of Securities	74
Section 13.4	No Payment When Senior Debt and Subordinated Debt in Default	74
Section 13.5	Payment Permitted If No Default	75
Section 13.6	Subrogation to Rights of Holders of Senior Debt and Subordinated Debt	75
Section 13.7	Provisions Solely to Define Relative Rights	76
Section 13.8	Trustee to Effectuate Subordination	76

Section 13.9	No Waiver of Subordination Provisions	76
Section 13.10	Notice to Trustee	77
Section 13.11	Reliance on Judicial Order or Certificate of Liquidating Agent	78
Section 13.12	Trustee Not Fiduciary for Holders of Senior Debt and Subordinated Debt	78
Section 13.13	Rights of Trustee as Holder of Senior Debt and Subordinated Debt; Preservation of Trustee’s Rights	78
Section 13.14	Article Applicable to Paying Agents	78
Section 13.15	Certain Conversions or Exchanges Deemed Payment	79

GLACIER WATER SERVICES, INC.

     Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture whether or not physically contained therein) and the Junior Subordinated Indenture, dated as of January 27, 1998.

Trust Indenture		Indenture
Act Section		Section
§ 310(a)	(1), (2) and (5)	Not Applicable
(a)	(3)	Not Applicable
(a)	(4)	Not Applicable
(b)		6.8
		6.10
(c)		Not Applicable
§ 311(a)		6.13(a)
(b)		6.13(bb)(2) 7.3(a)(2)
		7.3(a)(2)
§ 312(a)		7.1
		7.2(a)
(b)		7.2(b)
(c)		7.2(c)
§ 313(a)		7.3(a)
(b)		7.3(b)
(c)		7.3(a), 7.3(b)
(d)		7.3(c)
§ 314(a)	(1), (2) and (3)	7.4
(a)	(4)	10.5
(b)		Not Applicable
(c)	(1)	1.2
(c)	(2)	1.2
(c)	(3)	Not Applicable
(d)		Not Applicable
(e)		1.2
(f)		Not Applicable
§ 315(a)		6.1(a)
(b)		6.2

Trust Indenture		Indenture
Act Section		Section
		7.3(a)(6)
(c)		6.1(b)
(d)		6.1(c)
(d)	(1)	6.1(a)(1)
(d)	(2)	6.1(c)(2)
(d)	(3)	6.1(c)(3)
(e)		5.14
§ 316(a)		1.1
(a)	(1) (A)	5.12
(a)	(1) (B)	5.13
(a)	(2)	Not Applicable
(b)		5.8
(c)		1.4(f)
§ 317(a)	(1)	5.3
(a)	(2)	5.4
(b)		10.3
§ 318(a)		1.7

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Junior Subordinated Indenture.

     JUNIOR SUBORDINATED INDENTURE, dated as of January 27, 1998, between GLACIER WATER SERVICES, INC., a Delaware corporation (hereinafter called the “Company”) having its principal office at 2261 Cosmos Court, Carlsbad, California 92009, and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Trustee (hereinafter called the ‘Trustee”).

RECITALS OF THE COMPANY

     The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured junior subordinated debt securities in series (hereinafter called the “Securities”) of substantially the tenor hereinafter provided, including, without limitation, Securities issued to evidence loans made to the Company of the proceeds from the issuance from time to time by one or more business trusts (each a “Glacier Trust,” and, collectively, the “Glacier Trusts”) of preferred trust interests in such Trusts (the “Preferred Securities”) and common interests in such Trusts (the “Common Securities” and, collectively with the Preferred Securities, the Trust Securities), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered.

     All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done.

     NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of any series thereof, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1 Definitions.

     For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

     (a) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular;

     (b) All other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;

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     (c) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; provided, that when two or more principles are so generally accepted, it shall mean that set of principles consistent with those in use by the Company; and

     (d) The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

     “1940 Act” means the Investment Company Act of 1940, as amended.

     “Act” when used with respect to any Holder has the meaning specified in Section 1.4.

     “Additional Interest” means the interest, if any, that shall accrue on any interest on the Securities of any series the payment of which has not been made on the applicable Interest Payment Date and which shall accrue at the rate per annum specified or determined as specified in such Security.

     “Additional Sums” has the meaning specified in Section 10.6.

     “Additional Taxes” means the sum of any additional taxes, duties and other governmental charges to which a Glacier Trust has become subject from time to time as a result of a Tax Event.

     “Administrative Trustee” means, in respect of any Glacier Trust, each Person identified as an “Administrative Trustee” or an “Administrative Agent” in the related Amended and Restated Trust Agreement, solely in such Person’s capacity as Administrative Trustee or an Administrative Agent, as the case may be, of such Glacier Trust under such Amended and Restated Trust Agreement and not in such Person’s individual capacity, or any successor administrative trustee or successor administrative agent, as the case may be, appointed as therein provided.

     “Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; provided, however, no Glacier Trust to which Securities have been issued shall be deemed to be an Affiliate of the Company. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

     “Allocable Amounts,” when used with respect to any Senior Debt and Subordinated Debt, means all amounts due or to become due on such Senior Debt and Subordinated Debt less, if applicable, any amount which would have been paid to, and retained by, the holders of such

2

Senior Debt and Subordinated Debt (whether as a result of the receipt of payments by the holders of such Senior Debt and Subordinated Debt from the Company or any other obligor thereon or from any holders of, or trustee in respect of, other indebtedness that is subordinate and junior in right of payment to such Senior Debt and Subordinated Debt pursuant to any provision of such indebtedness for the payment over of amounts received on account of such indebtedness to the holders of such Senior Debt and Subordinated Debt or otherwise) but for the fact that such Senior Debt and Subordinated Debt is subordinate or junior in right of payment to (or subject to a requirement that amounts received on such Senior Debt and Subordinated Debt be paid over to obligees on) trade accounts payable or accrued liabilities arising in the ordinary course of business.

     “Authenticating Agent” means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities of one or more series.

     “Board of Directors” means either the board of directors of the Company or any committee of that board duly authorized to act hereunder.

     “Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Company to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee.

     “Business Day” means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in the State of California are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee, or, with respect to the Securities of a series initially issued to a Glacier Trust, the principal office of the Property Trustee under the related Trust Agreement, is closed for business.

     “Commission” means the Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date.

     “Common Securities” has the meaning specified in the first recital of this indenture.

     “Common Stock” means the common stock, $.01 par value per share, of the Company.

     “Company” means the Person named as the “Company” in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Company” shall mean such successor corporation.

     “Company Request” and “Company Order” mean, respectively, the written request or order signed in the name of the Company by the Chief Executive Officer, President or a Vice President,

3

and by its Vice President, Controller, its Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.

     “Corporate Trust Office” means the principal office of the Trustee at which at any particular time its corporate trust business shall be administered.

     “Corporation” includes a corporation, association, company, joint-stock company or business trust.

     “Debt” means, with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed; (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including obligations incurred in connection with the acquisition of property, assets or businesses; (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person; (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business); (v) every capital lease obligation of such Person; (vi) all indebtedness of such Person whether incurred on or prior to the date of this Indenture or thereafter incurred, for claims in respect of derivative products, including interest rate, foreign exchange rate and commodity forward contracts, options and swaps and similar arrangements; and (vii) every obligation of the type referred to in clauses (i) through (vi) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable for, directly or indirectly, as obligor or otherwise.

     “Defaulted Interest” has the meaning specified in Section 3.7.

     “Depositary” means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 3.1 with respect to such series (or any successor thereto).

     “Discount Security” means any security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2.

     “Distributions,” with respect to the Trust Securities issued by a Glacier Trust, means amounts payable in respect of such Trust Securities as provided in the related Trust Agreement and referred to therein as “Distributions.”

     “Dollar” or “U.S. $” means the currency of the United States of America that, as at the time of payment, is legal tender for the payment of public and private debts.

4

     “Event of Default” has the meaning specified in Article V unless otherwise specified in the supplemental indenture or the Officers’ Certificate delivered pursuant to Section 3.1 hereof creating a series of Securities.

     “Exchange Act” means the Securities Exchange Act of 1934 and any statute successor thereto, in each case as amended from time to time.

     “Extension Period” has the meaning specified in Section 3.11.

     “Global Security” means a Security in the form prescribed in Section 2.4 evidencing all or part of a series of Securities, issued to the Depositary or its nominee for such series, and registered in the name of such Depositary or its nominee.

     “Glacier Guarantee” means the guarantee by the Company of distributions on the Preferred Securities of a Glacier Trust to the extent provided in the related Guarantee Agreement.

     “Glacier Trust” has the meaning specified in the first recital of this Indenture.

     “Guarantee Agreement” means the Guarantee Agreement substantially in the form attached hereto as Annex C, or substantially in such form as may be specified as contemplated by Section 3.1 with respect to the Securities of any series, in each case as amended from time to time.

     “Holder” means a Person in whose name a Security is registered in the Securities Register.

     “Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof or one or more Officers’ Certificates delivered pursuant to Section 3.1 and shall include the terms of each particular series of Securities established as contemplated by Section 3.1.

     “Interest Payment Date” means as to each series of Securities, the Stated Maturity of an installment of interest on such Securities.

     “Investment Company Event” means, in respect of a Glacier Trust, the receipt by the Company and a Glacier Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, such Glacier Trust is or will be considered an “investment company” that is required to be registered under the 1940 Act, which change becomes effective on or after the date of original issuance of the Preferred Securities of such Glacier Trust.

     “Junior Subordinated Payment” has the meaning specified in Section 13.2.

5

     “Maturity” when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

     “Notice of Default” means a written notice of the kind specified in Section 5.1(3).

     “Officers’ Certificate” means a certificate signed by the Chief Executive Officer, the President or a Vice President, and by the Vice President, Controller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee.

     “Opinion of Counsel” means a written opinion of counsel, who may be counsel for the Company, and who shall be acceptable to the Trustee.

     “Original Issue Date” means the date of issuance specified as such in each Security.

     “Outstanding” means, when used in reference to any Securities’ as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except:

     (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation;

     (ii) Securities for whose payment money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities; and

     (iii) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or, unless all the Securities of a series shall then be held by an Affiliate of the Company, any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or such other obligor. Upon the written request of the Trustee, the Company shall furnish to the Trustee promptly an Officers’ Certificate listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of the Company, or any other obligor on the Securities or any Affiliate of the Company or such obligor, and, subject to the provisions of

6

Section 6.1. the Trustee shall be entitled to accept such Officers’ Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination.

     “Paying Agent” means the Trustee or any Person authorized by the Company to pay the principal of or interest on any Securities on behalf of the Company.

     “Person” means any individual, corporation, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

     “Place of Payment” means, with respect to the Securities of any series, the place or places where the principal of (and premium, if any) and interest on the Securities of such series are payable pursuant to Sections 3.1 and 3.11.

     “Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security.

     “Preferred Securities” has the meaning specified in the first recital of this Indenture.

     “Proceeding” has the meaning specified in Section 13.2.

     “Property Trustee” means, in respect of any Glacier Trust, the commercial bank or trust company identified as the “Property Trustee” in the related Trust Agreement, solely in its capacity as Property Trustee of such Glacier Trust under such Trust Agreement and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as therein provided.

     “Redemption Date” when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture.

     “Redemption Price” when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture.

     “Regular Record Date” for the interest payable on any Interest Payment Date with respect to the Securities of a series means, unless otherwise provided pursuant to Section 3.1 with respect to Securities of a series, (i) in the case of Securities of a series represented by one or more Global Securities, the Business Day next preceding such Interest Payment Date and (ii) in the case of Securities of a series not represented by one or more Global Securities, the date which is fifteen days next preceding such Interest Payment Date (whether or not a Business Day).

     “Responsible Officer” when used with respect to the Trustee means any officer of the Trustee assigned by the Trustee from time to time to administer its corporate trust matters.

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     “Securities” or “Security” means any debt securities or debt security, as the case may be, authenticated and delivered under this Indenture.

     “Securities Register” and “Securities Registrar” have the respective meanings specified in Section 3.5.

     “Senior Debt and Subordinated Debt” means the principal of (and premium, if any) and interest, if any (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not such claim for post-petition interest is allowed in such proceeding), on Debt of the Company, whether incurred on or prior to the date of this Indenture or thereafter incurred, unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior in right of payment to the Securities or to other Debt which is pari passu with, or subordinated to the Securities, provided, however, that Senior Debt and Subordinated Debt shall not be deemed to include (a) any Debt of the Company which, when incurred and without respect to any election under Section 1111(b) of the Bankruptcy Reform Act of 1978, as amended, was without recourse to the Company, (b) any Debt of the Company to any of its Subsidiaries, (c) Debt to any employee of the Company, and (d) any Securities.

     “Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7.

     “Stated Maturity” when used with respect to any Security or any installment of principal thereof or interest thereon means the date specified pursuant to the terms of such Security as the date on which the principal of such Security or such installment of interest is due and payable, in the case of such principal, as such date may be shortened or extended as provided pursuant to the terms of such Security and this Indenture.

     “Subsidiary” means a corporation more than 50% of the outstanding voting stock of which is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For purposes of this definition, voting stock means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

     “Tax Event” means the receipt by the Company and the Glacier Trust of an Opinion of Counsel (as defined in the relevant Glacier Trust Agreement) experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or such prospective change, pronouncement or decision is announced on or after the date of issuance of the Preferred Securities of such Glacier Trust, there is more than an insubstantial risk that (i) such Glacier Trust is, or will be within 90 days of the date of such Opinion of Counsel, subject to United States Federal income tax with respect to

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income received or accrued on the corresponding series of Securities, (ii) interest payable by the Company on such corresponding series of Securities is not, or within 90 days of the date of such Opinion of Counsel, will not be, deductible by the Company, in whole or in part, for United States Federal income tax purposes or (iii) such Glacier Trust is, or will be within 90 days of the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties or other governmental charges.

     “Trust” has the meaning specified in the first recital of this Indenture.

     “Trust Agreement” means the Trust Agreement substantially in the form attached hereto as Annex A, as amended by the form of Amended and Restated Trust Agreement substantially in the form attached hereto as Annex B, or substantially in such form as may be specified as contemplated by Section 3.1 with respect to the Securities of any series, in each case as amended from time to time.

     “Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean or include each Person who is then a Trustee hereunder and, if at any time there is more than one such Person, “Trustee” as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series.

     “Trust indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbb), as amended and as in effect on the date as of this Indenture, except as provided in Section 9.5.

     “Trust Securities” has the meaning specified in the first recital of this Indenture.

     “Vice President” when used with respect to the Company, means any duly appointed vice president, whether or not designated by a word or words added before or after the title “vice president,” of the Company.

Section 1.2 Compliance Certificate and Opinions.

     Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers’ Certificate stating that all conditions precedent (including covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (including covenants compliance with which constitute a condition precedent), if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

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     Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.5) shall include:

     (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

     (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

     (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

     (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

Section 1.3 Forms of Documents Delivered to Trustee.

     In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

     Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

     Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions, or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Section 1.4 Acts of Holders.

     (i) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in

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person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

     (ii) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.

     (iii) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine.

     (iv) The ownership of Securities shall be proved by the Securities Register.

     (v) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

     (vi) The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities of such series, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of the relevant series on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph

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shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 1.6.

     The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities of any series entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 5.2, (iii) any request to institute proceedings referred to in Section 5.7(2) or (iv) any direction referred to in Section 5.12, in each case with respect to Securities of such series. If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities of such series on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date, provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date. Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be canceled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities of the relevant series on the date such action is taken. Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company’s expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities of the relevant series in the manner set forth in Section 1.6.

     With respect to any record date set pursuant to this Section, the party hereto which sets such record dates may designate any day as the “Expiration Date” and from time to time may change the Expiration Date to any earlier or later day, provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities of the relevant series in the manner set forth in Section 10.6, on or prior to the existing Expiration Date. If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

     (vii) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principle amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

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Section 1.5 Notices, Etc. to Trustee and Company.

     Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

     (a) the Trustee by any Holder, any holder of Preferred Securities or the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust office, or

     (b) the Company by the Trustee, any Holder or any holder of Preferred Securities shall be sufficient for every purpose (except as otherwise provided in Section 5.1) hereunder if in writing and mailed, first class, postage prepaid, to the Company, addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company.

Section 1.6 Notice to Holders; Waiver.

     Where this indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

Section 1.7 Conflict with Trust Indenture Act.

     If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by any of Sections 310 to 317, inclusive, of the Trust Indenture Act through operation of Section 318(c) thereof, such imposed duties shall control.

Section 1.8 Effect of Headings and Table of Contents.

     The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 1.9 Successors and Assigns.

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     All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

Section 1.10 Separability Clause.

     In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 1.11 Benefits of Indenture.

     Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns, the Holders of Senior Debt and Subordinated Debt, the Holders of the Securities and, to the extent expressly provided in Sections 5.2, 5.8, 5.9, 5.11, 5.13, 9.1 and 9.2, the holders of Preferred Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 1.12 Governing Law.

     This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of California without regard to conflicts of laws principles thereof, except that the immunities and standard of care of the Trustee shall be governed by Delaware law.

Section 1.13 Non-Business Days.

     In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day (and no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, until such next succeeding Business Day, with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity).

ARTICLE II

SECURITY FORMS

Section 2.1 Forms Generally.

     The Securities of each series shall be in substantially the forms set forth in this Article, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements

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placed thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Vice President, Controller, the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities.

     The Trustee’s certificates of authentication shall be substantially in the form set forth in this Article.

     The definitive Securities shall be printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such securities.

Section 2.2 Form of Face of Security.

GLACIER WATER SERVICES, INC.

____% Junior Subordinated Debenture due ___________

Registered	Principal Amount:
No.:	CUSIP No.:

     Glacier Water Services, Inc., a corporation organized and existing under the laws of Delaware (hereinafter called the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________________, or registered assigns, the principal sum of _____________ Dollars on _________; provided that the Company may shorten the Stated Maturity of the principal of this Security to a date not earlier than __________. The Company further promises to pay interest on said principal sum from ____________________, or from the most recent interest payment date (each such date, an “Interest Payment Date”) on which interest has been paid or duly provided for, monthly (subject to deferral as set forth herein) in arrears on the 15th day of each calendar month of each year commencing _____________ at the rate of _______% per annum, until the principal hereof shall have become due and payable, plus Additional Interest, if any, until the principal hereof is paid or duly provided for or made available for payment and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at the rate of ______%

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per annum. The amount of interest payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of any such delay), with the same force and effect as if made on the date the payment was originally payable. A “Business Day” shall mean any day other than a Saturday or Sunday a day on which banking institutions in the State of California are authorized or required by law or executive order to remain closed or on a day on which the Corporate Trust Office of the Trustee, or the principal office of the Property Trustee under the Amended and Restated Trust Agreement (hereinafter referred to) for [Name of Trust] is closed for business. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest installment, which shall be [insert Record Date] next preceding such Interest Payment Date. Any such interest installment not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than _____ days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.

     [If applicable insert — So long as no Event of Default has occurred and is continuing, the Company shall have the right at any time during the term of this Security to defer payment of interest on this Security, at any time or from time to time, for up to 60 consecutive monthly interest payment periods with respect to each deferral period (each an “Extension Period”), (during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date, and at the end of which the Company shall pay all interest then accrued and unpaid (together with Additional Interest thereon to the extent permitted by applicable law)); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of this Security; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary of the Company to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company’s capital stock (which includes common and preferred stock), or (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt security of the Company (including Securities issued by the Company pursuant to the Indenture other than the Securities represented by this certificate) that ranks pari passu with or junior in interest to this Security, (iii) make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiaries of the Company (if such guarantee ranks pari passu in all respects with or junior in interest to this

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Security (other than (a) dividends or distributions in capital stock (which includes common and preferred stock), (b) any declaration of a dividend in connection with the implementation of a stockholders’ rights plan, or the issuance of stock under any such plan in the future or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Glacier Guarantee related to the Preferred Securities issued by [name of trust], and (d) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company’s benefit plans for its directors, officers or employees or (iv) redeem, purchase or acquire less than all of the Securities of this series or any of the Preferred Securities. Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such extension does not cause such Extension Period to exceed _____ consecutive interest payment periods or to extend beyond the Stated Maturity. Upon the termination of any such Extension Period and upon the payment of all amounts then due on any Interest Payment Date, and subject to the foregoing limitation, the Company may elect to begin a new Extension Period. No interest shall be due and payable during an Extension Period except at the end thereof. The Company shall give the Trustee, the Property Trustee and the Administrative Trustees of [name of trust] notice of its election to begin any Extension Period at least ______ Business Days prior to the earlier of (i) the date on which Distributions on the Preferred Securities would be payable except for the election to begin such Extension Period, or (ii) the date the Administrative Trustees are required to give notice to the American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock Market or other applicable stock exchange or automated quotation system on which the Preferred Securities are then listed or quoted or to holders of such Preferred Securities of the record date or (iii) the date such Distributions are payable, but in any event not less than ______ Business Days prior to such record date. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the holders of the Preferred Securities. There is no limitation on the number of times that the Company may elect to begin an Extension Period.

     Payment of the principal of (and premium, if any) and interest on this Security will be made at the office or agency of the Trustee or at the office of such paying agent or paying agents as the Company may designate from time to time, maintained for that purpose in the United States, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Securities Register or (ii) by transfer to an account maintained by the person entitled thereto, in immediately available funds, at such place and to such account as may be designated by the Person entitled thereto as specified in the Securities Register.

     The indebtedness evidenced by this Security is, to the extent provided in the Indenture, unsecured and will rank junior and subordinate and subject in right of payments to the prior payment in full of all Senior Debt and Subordinated Debt, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such

17

purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Debt and Subordinated Debt, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.

     Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

     Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

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     IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

Glacier Water Services, Inc.
By:
	[Chief Executive Officer,
	President or Vice President]

Attest:
 

[Secretary or Assistant Secretary] 

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Section 2.3 Form of Reserve of Security.

     This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under a Junior Subordinated Indenture, dated as of January 27, 1998 (herein called the “Indenture”), between the Company and Wilmington Trust Company as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof, limited in aggregate principal amount to $__________________.

     All terms used in this Security that are defined in the Indenture and in the Amended and Restated Trust Agreement, dated as of ______________________, as amended (the “Amended and Restated Trust Agreement”), for [insert name of trust] among Glacier Water Services, Inc., as Depositor, and the Trustees named therein, shall have the meanings assigned to them in the Indenture or the Amended and Restated Trust Agreement, as the case may be.

     [If applicable, insert — The Company may at any time, at its option, on or after _________________ and subject to the terms and conditions of Article XI of the Indenture, redeem this Security [in whole at any time] [or in part from time to time], without premium or penalty, at a redemption price equal to [insert redemption price] to the Redemption Date.]

     [If applicable insert — Upon the occurrence and during the continuation of a Tax Event or Investment Company Event in respect of a Glacier Trust, the Company may, at its option, at any time within 90 days of the occurrence of such Tax Event or Investment Company Event redeem this Security, [if applicable, insert — in whole but not in part, subject to the provisions of Section 11.7 and the other provisions of Article XI of the Indenture, at a redemption price equal to [insert redemption price] to the Redemption Date.

     [If applicable, insert — In the event of redemption of this Security in part only, a new Security or Securities of this series for the portion hereof not redeemed will be issued in the name of the Holder hereof upon the cancellation hereof.]

     The Indenture contains provisions for satisfaction and discharge of the entire indebtedness of this Security upon compliance by the Company with certain conditions set forth in the Indenture.

     The Indenture permits, with certain exceptions as therein provided, the Company and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Company and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series to be affected by such supplemental indenture. The

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Indenture also contains provisions permitting Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

     [If the Security is not a Discount Security, — As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series may declare the principal amount of all the Securities of this series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, in the case of the Securities of this series issued to a Glacier Trust, if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series fails to declare the principal of all the Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration the principal amount of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture.]

     [If the Security is a Discount Security, — As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities of this series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than such portion of the principal amount as may be specified in the terms of this series may declare an amount of principal of the Securities of this series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, in the case of the Securities of this series issued to a Glacier Trust, if upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of this series fails to declare the principal of all the Securities of this series to be immediately due and payable, the holders of at least 25% in aggregate Liquidation Amount of the Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee. Such amount shall be equal to [insert formula for determining the amount]. Upon any such declaration, such amount of the principal of and the accrued interest (including any Additional Interest) on all the Securities of this series shall become immediately due and payable, provided that the payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII of the Indenture. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the

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payment of such interest shall be legally enforceable), all of the Company’s obligations in respect of the payment of the principal of and interest, in any, on the Security shall terminate.]

     No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

     The Securities of this series are issuable only in registered form without coupons in denominations of minimum denominations of $25 and any integral multiples of $25 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of such series of a different authorized denomination, as requested by the Holder surrendering the same.

     The Company and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for United States Federal, state and local tax purposes it is intended that this Security constitute indebtedness.

     THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

Section 2.4 Additional Provisions Required in Global Security.

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     Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form:

     “THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY.”

Section 2.5 Form of Trustee’s Certificate of Authentication.

     This is one of the Securities referred to in the within mentioned Indenture.

Dated:

[INSERT NAME OF TRUSTEE] as Trustee
By:
	Authorized Officer

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ARTICLE III

THE SECURITIES

Section 3.1 Title and Terms.

     The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited.

     The Securities may be issued in one or more series. There shall be established in or pursuant to a Board Resolution, and set forth in an Officers’ Certificate (such Officers’ Certificate shall have the effect of a supplemental indenture for all purposes hereunder), or established in one or more indentures supplemental hereto, prior to the issuance of Securities of a series:

     (i) the title of the securities of such series, which shall distinguish the Securities of the series from all other Securities;

     (ii) the limit, if any, upon the aggregate principal amount of the Securities of such series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6 and except for any Securities which, pursuant to Section 3.3, are deemed never to have been authenticated and delivered hereunder); provided, however, that the authorized aggregate principal amount of such series may be increased above such amount by a Board Resolution to such effect;

     (iii) the Stated Maturity or Maturities on which the principal of the Securities of such series is payable or the method of determination thereof;

     (iv) the rate or rates, if any, at which the Securities of such series shall bear interest, if any, the rate or rates and extent to which Additional Interest, if any, shall be payable in respect of any Securities of such series, the Interest Payment Dates on which such interest shall be payable, the right, pursuant to Section 3.11 or as otherwise set forth therein, of the Company to defer or extend an interest Payment Date, and the Regular Record Date for the interest payable on any Interest Payment Date or the method by which any of the foregoing shall be determined;

     (v) the place or places where the principal of (and premium, if any) and interest on the Securities of such series shall be payable, the place or places where the Securities of such series may be presented for registration of transfer or exchange, and the place or places where notices and demands to or upon the Company in respect of the Securities of such series may be made;

     (vi) the period or periods within or the date or dates on which, if any, the price or prices at which and the terms and conditions upon which the Securities of such series may be redeemed, in whole or in part, at the option of the Company;

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     (vii) the obligation or the right, if any, of the Company to prepay, repay or purchase the Securities of such series pursuant to any sinking fund, amortization or analogous provisions, or at the option of a Holder thereof, and the period or periods within which, the price or prices at which, the currency or currencies (including currency unit or units) in which and the other terms and conditions upon which Securities of the series shall be redeemed, repaid or purchased, in whole or in part, pursuant to such obligation;

     (viii) the denominations in which any Securities of such series shall be issuable, if other than denominations of $25 and any integral multiples of $25 in excess thereof;

     (ix) if other than Dollars, the currency or currencies (including currency unit or units) in which the principal of (and premium, if any) and interest, if any, on the Securities of the series shall be payable, or in which the Securities of the series shall be denominated;

     (x) the additions, modifications or deletions, if any, in the Events of Default or covenants of the Company set forth herein with respect to the Securities of such series;

     (xi) if other than the principal amount thereof, the portion of the principal amount of Securities of such series that shall be payable upon declaration of acceleration of the Maturity thereof;

     (xii) the additions or changes, if any, to this Indenture with respect to the Securities of such series as shall be necessary to permit or facilitate the issuance of the Securities of such series in bearer form, registrable or not registrable as to principal, and with or without interest coupons;

     (xiii) any index or indices used to determine the amount of payments of principal of and premium, if any, on the Securities of such series or the manner in which such amounts will be determined;

     (xiv) whether the Securities of the series, or any portion thereof, shall initially be issuable in the form of a temporary Global Security representing all or such portion of the Securities of such series and provisions for the exchange of such temporary Global Security for definitive Securities of such series;

     (xv) if applicable, that any Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective Depositaries for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Section 2.4 and any circumstances in addition toor in lieu of those set forth in Section 3.5 in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the Depositary for such Global Security or a nominee thereof;

     (xvi) the appointment of any Paying Agent or Agents for the Securities of such series;

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     (xvii) the terms of any right to convert or exchange Securities of such series into any other securities or property of the Company, and the additions or changes, if any, to this Indenture with respect to the Securities of such series to permit or facilitate such conversion or exchange;

     (xviii) the form or forms of the Trust Agreement, Amended and Restated Trust Agreement and Guarantee Agreement, if different from the forms attached hereto as Annexes A, B and C, respectively;

     (xix) the relative degree, if any, to which the Securities of the series shall be senior to or be subordinated to other series of Securities in right of payment, whether such other series of Securities are issued or not; and

     (xx) any other terms of the Securities of such series (which terms shall not be inconsistent with the provisions of this Indenture).

     All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided herein or in or pursuant to such Board Resolution and set forth in such Officers’ Certificate or in any such indenture supplemental hereto.

     If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate setting forth the terms of the series.

     The Securities shall be subordinated in right of payment to Senior Debt and Subordinated Debt as provided in Article XIII.

Section 3.2 Denominations.

     The Securities of each series shall be in registered form without coupons and shall be issuable in minimum denominations of $25 and integral multiples of $25 in excess thereof, unless otherwise specified as contemplated by Section 3.1.

Section 3.3 Execution, Authentication, Delivery and Dating.

     The Securities shall be executed on behalf of the Company by its President or one of its Vice Presidents under its corporate seal reproduced or impressed thereon and attested by its Vice President, Controller, Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile.

     Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time

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to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 2.1 and 3.1, in authenticating such Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel stating,

     (a) if the form of such Securities has been established by or pursuant to Board Resolution as permitted by Section 2.1, that such form has been established in conformity with the provisions of this Indenture;

     (b) if the terms of such Securities have been established by or pursuant to Board Resolution as permitted by Section 3.1, that such terms have been established in conformity with the provisions of this Indenture; and

     (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.

     If such form or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee’s own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee.

     Notwithstanding the provisions of Section 3.1 and of the preceding paragraph, if all Securities of a series are not to be originally issued at one time, it shall not be necessary to deliver the Officers’ Certificate otherwise required pursuant to Section 3.1 or the Company Order and Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued.

     Each Security shall be dated the date of its authentication.

     No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder.

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Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 3.9, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture.

Section 3.4 Temporary Securities.

     Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any denomination, substantially of the tenor of the definitive Securities of such series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities.

     If temporary Securities of any series are issued, the Company will cause definitive Securities of such series to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Company designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series of authorized denominations having the same Original Issue Date and Stated Maturity and having the same terms as such temporary Securities. Until so exchanged, the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series.

Section 3.5 Registration, Transfer and Exchange.

     The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the “Securities Register.” The Trustee is hereby appointed “Securities Registrar” for the purpose of registering Securities and transfers of Securities as herein provided.

     Upon surrender for registration of transfer of any Security at the office or agency of the Company designated for that purpose the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series of any authorized denominations, of a like aggregate principal amount, of the same Original Issue Date and Stated Maturity and having the same terms.

     At the option of the Holder, Securities may be exchanged for other Securities of the same series of any authorized denominations, of a like aggregate principal amount, of the same Original

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Issue Date and Stated Maturity and having the same terms, upon surrender of the Securities to be exchanged at such office or agency. Whenever any securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.

     All Securities issued upon any transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such transfer or exchange.

     Every Security presented or surrendered for transfer or exchange shall (if so required by the Company or the Securities Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

     No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities.

     No service charge shall be made to a Holder for any transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Securities.

     The provisions of Clauses (a), (b), (c) and (d) below shall apply only to Global Securities:

     (a) Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary designated for such Global Security or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Security shall constitute a single Security for all purposes of this Indenture.

     (b) Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Security or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency registered under the Exchange Act at a time when the Depositary is required to be so registered to act as depositary, in each case unless the Company has approved a successor Depositary within 90 days, (B) there shall have occurred and be continuing an Event of Default with respect to such Global Security, (C) the Company in its sole discretion determines that such Global Security will be so exchangeable or transferable or (D) there shall exist such circumstances, if any, in addition to or in lieu of the foregoing as have been specified for this purpose as contemplated by Section 3.1.

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     (c) Subject to Clause (2) above, any exchange of a Global Security for other Securities may be made in whole or in part, and all Securities issued in exchange for a Global Security or any portion thereof shall be registered in such names as the Depositary for such Global Security shall direct.

     (d) Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Section, Section 3.4, 3.6, 9.6 or 11.6 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary for such Global Security or a nominee thereof.

     Neither the Company nor the Trustee shall be required, pursuant to the provisions of this Section, (a) to issue, transfer or exchange any Security of any series during a period beginning at the opening of business 15 days before the day of selection for redemption of Securities pursuant to Article XI and ending at the close of business on the day of mailing of notice of redemption or (b) to transfer or exchange any Security so selected for redemption in whole or in part, except, in the case of any Security to be redeemed in part, any portion thereof not to be redeemed.

Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.

     If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Company or the Trustee to save each of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same issue and series of like tenor and principal amount, having the same Original Issue Date and Stated Maturity, and bearing a number not contemporaneously outstanding.

     If there shall be delivered to the Company and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same issue and series of like tenor and principal amount, having the same Original Issue Date and Stated Maturity as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding.

     In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security.

     Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed

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in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith.

     Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder.

     The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

Section 3.7 Payment of Interest; Interest Rights Preserved.

     Interest on any Security of any series which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest in respect of Securities of such series, except that, unless otherwise provided in the Securities of such series, interest payable on the Stated Maturity of the principal of a Security shall be paid to the Person to whom principal is paid. The initial payment of interest on any Security of any series which is issued between a Regular Record Date and the related Interest Payment Date shall be payable as provided in such Security or in the Board Resolution pursuant to Section 3.1 with respect to the related series of Securities.

     Any interest on any Security which is payable, but is not timely paid or duly provided for, on any Interest Payment Date for Securities of such series (herein called “Defaulted Interest”), shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (a) or (b) below:

     (a) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series in respect of which interest is in default (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon, the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the

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notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first class, postage prepaid, to each Holder of a Security of such series at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Company, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the state of California, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).

     (b) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of the series in respect of which interest is in default may be listed and, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section 3.7, each Security delivered under this Indenture upon transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

Section 3.8 Persons Deemed Owners.

     The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name any Security is registered as the owner of such Security for the purpose of receiving payment of principal of and (subject to Section 3.7) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

Section 3.9 Cancellation.

     All Securities surrendered for payment, redemption, transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities and Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All

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canceled Securities shall be destroyed by the Trustee and the Trustee shall deliver to the Company a certificate of such destruction.

Section 3.10 Computation of Interest.

     Except as otherwise specified as contemplated by Section 3.1 for Securities of any series, interest on the Securities of each series for any period shall be computed on the basis of a 360-day year of twelve 30-day months and interest on the Securities of each series for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months.

Section 3.11 Deferrals of Interest Payment Dates.

     If specified as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a particular series, so long as no Event of Default has occurred and is continuing, the Company shall have the right, at any time during the term of such series, from time to time to defer the payment of interest on such Securities for such period or periods as may be specified as contemplated by Section 3.1 (each, an “Extension Period”) during which Extension Periods the Company shall have the right to make partial payments of interest on any Interest Payment Date. No Extension Period shall end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all interest then accrued and unpaid on the Securities (together with Additional Interest thereon, if any, at the rate specified for the Securities of such series to the extent permitted by applicable law); provided, however, that no Extension Period shall extend beyond the Stated Maturity of the principal of the Securities of such series; provided, further, that during any such Extension Period, the Company shall not, and shall not permit any Subsidiary to, (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of the Company’s capital stock (which includes common and preferred stock), (ii) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company (including Securities other than the Securities of such series) that ranks pari passu in all respects with or junior in interest to the Securities of such series or make any guarantee payments with respect to any guarantee by the Company of the debt securities of any Subsidiary of the Company if such guarantee rank pari passu in all respects with or junior in interest to the securities of such series (other than (a) dividends or distributions in capital stock (which includes common and preferred stock), (b) any declaration of a dividend in connection with the implementation of a stockholders’ rights plan, or the redemption or repurchase of any such rights pursuant thereto, (c) payments under the Glacier Guarantee related to the Preferred Securities issued by the Glacier Trust holding Securities of such series, and (d) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company’s benefit plans for its directors, officers or employees) or (iii) redeem, purchase or acquire less than all of the Securities of such series or any of the Preferred Securities. Prior to the termination of any such Extension Period, the Company may further extend such Extension Period, provided that such extension does not cause such Extension Period to extend beyond the Stated Maturity of the principal of such Securities. Upon termination of any Extension Period and upon the payment of

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all accrued and unpaid interest and any Additional Interest then due on any Interest Payment Date, the Company may elect to begin a new Extension Period, subject to the above requirements. No interest shall be due and payable during an Extension Period, except at the end thereof. The Company shall give the Trustee, the Property Trustee and the Administrative Trustees of the Glacier Trust holding Securities of such series notice of its election of any Extension Period (or an extension thereof) at least one Business Day prior to the earlier of (i) the next succeeding date on which Distributions on the Preferred Securities of such Glacier Trust would be payable except for the election to begin or extend such Extension Period or (ii) the date the Administrative Trustees are required to give notice to the American Stock Exchange, the New York Stock Exchange, the Nasdaq Stock Market or other applicable stock exchange or automated quotation system on which the Preferred Securities are then listed or quoted or to holders of such Preferred Securities of the record date or (iii) the date such Distributions are payable, but in any event not less than one Business Day prior to such record date. The Trustee shall give notice of the Company’s election to begin a new Extension Period to the holders of the Securities, here is no limitation on the number of times that the Company may elect to begin an Extension Period.

     The Trustee shall promptly give notice of the Company’s election to begin any such Extension Period to the Holders of the Outstanding Securities of such series.

Section 3.12 Right of Set-Off.

     With respect to the Securities of a series issued to a Glacier Trust, notwithstanding anything to the contrary in this Indenture, the Company shall have the right to set-off any payment it is otherwise required to make thereunder in respect of any such Security to the extent the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Guarantee Agreement relating to such Security or under Section 5.8 of the Indenture.

Section 3.13 Agreed Tax Treatment.

     Each Security issued hereunder shall provide that the Company and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for United States Federal, state and local tax purposes it is intended that such Security constitute indebtedness.

Section 3.14 Shortening of Stated Maturity.

     If specified as contemplated by Section 2.1 or Section 3.1 with respect to the Securities of a particular series, the Company shall have the right to shorten the Stated Maturity of the principal of the Securities of such series at any time to any date not earlier than the first date on which the Company has the right to redeem the Securities of such series. In the event that the Company elects to shorten the stated maturity of the Junior Subordinated Debentures it shall give notice to the Indenture Trustee, and the Indenture Trustee shall give notice of such shortening to

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the holders of the Junior Subordinated Debentures no less than 60 days prior to the effectiveness thereof.

Section 3.15 CUSIP Numbers.

     The Company in issuing the Securities may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

ARTICLE IV

SATISFACTION AND DISCHARGE

Section 4.1 Satisfaction and Discharge of Indenture.

     This Indenture shall, upon Company Request, cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for and as otherwise provided in this Section 4.1) and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

     (i) either

     (a) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3 have been delivered to the Trustee for cancellation; or

     (b) all such Securities not theretofore delivered to the Trustee for cancellation

     1) have become due and payable, or

     2) will become due and payable at their Stated Maturity within one year of the date of deposit, or

     3) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company,

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and the Company, in the case of Clause (b) (1), (2) or (3) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Securities of such series are payable sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest (including any Additional Interest) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;

     (c) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

     (d) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, the obligations of the Trustee to any Authenticating Agent under Section 6.14 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 shall survive.

Section 4.2 Application of Trust Money.

     Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for the payment of which such money or obligations have been deposited with or received by the Trustee.

ARTICLE V

REMEDIES

Section 5.1 Events of Default.

     “Event of Default,” wherever used herein with respect to the Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

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     (a) default in the payment of any interest upon any Security of that series, including any Additional Interest in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days (subject to the deferral of any due date in the case of an Extension Period); or

     (b) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Stated Maturity, upon redemption by declaration or otherwise; or

     (c) default in the performance, or breach, in any material respect, of any covenant of the Company in this Indenture (other than a covenant, a default in the performance of which is elsewhere in this Section 5.1 specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied; or

     (d) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or

     (e) the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit for creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company in furtherance of any such action; or

     (f) any other Event of Default provided with respect to Securities of that series.

Section 5.2 Acceleration of Maturity; Rescission and Annulment.

     If an Event of Default (other than an Event of Default specified in Section 5.1(4) or 5.1(5)) with respect to Securities of any series at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Securities

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of that series are Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), provided that, in the case of the Securities of a series issued to a Glacier Trust, if, upon an Event of Default, the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Securities of that series fail to declare the principal of all the Securities of that series to be immediately due and payable, the holders of at least 25% in aggregate liquidation amount of the corresponding series of Preferred Securities then outstanding shall have such right by a notice in writing to the Company and the Trustee; and upon any such declaration such principal amount (or specified portion thereof) of and the accrued interest (including any Additional Interest) on all the Securities of such series shall become immediately due and payable. Payment of principal and interest (including any Additional Interest) on such Securities shall remain subordinated to the extent provided in Article XIII notwithstanding that such amount shall become immediately due and payable as herein provided. If an Event of Default specified in Section 5.1(4) or 5.1(5) with respect to Securities of any series at the time Outstanding occurs, the principal amount of all the Securities of that series (or, if the Securities of that series are Discount Securities, such portion of the principal amount of such Securities as may be specified by the terms of that series) shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable.

     At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if:

     (a) the Company has paid or deposited with the Trustee a sum sufficient to pay:

     (i) all overdue installments of interest (including any Additional Interest) on all Securities of that series,

     (ii) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and

     (iii) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and

     (b) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which has become due solely by such acceleration, have been cured or waived as provided in Section 5.13.

     In the case of Securities of a series issued to a Glacier Trust, the holders of a majority in aggregate Liquidation Amount (as defined in the Trust Agreement under which such Glacier Trust

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is formed) of the related series of Preferred Securities issued by such Glacier Trust shall also have the right to rescind and annul such declaration and its consequences by written notice to the Company and the Trustee subject to the satisfaction of the conditions set forth in Clauses (1) and (2) above of this Section 5.2.

     No such rescission shall affect any subsequent default or impair any right consequent thereon.

Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.

     The Company covenants that if:

     (a) default is made in the payment of any installment of interest (including any Additional Interest) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or

     (b) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof,

the Company will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal, including any sinking fund payment or analogous obligations (and premium, if any) and interest (including any Additional Interest); and, in addition thereto, all amounts owing the Trustee under Section 6.7.

     If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated.

     If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

Section 5.4 Trustee May File Proofs of Claim.

     In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the

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Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors,

     (A) the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal (and premium, if any) or interest (including any Additional Interest)) shall be entitled and empowered, by intervention in such proceeding or otherwise,

          1) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including any Additional interest) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 allowed in any such judicial proceedings; and

          2) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and

     (B) any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7.

     Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors’ or other similar committee.

Section 5.5 Trustee May Enforce Claim Without Possession of Securities.

     All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.

Section 5.6 Application of Money Collected.

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     Any money or property collected or to be applied by the Trustee with respect to a series of Securities pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal (or premium, if any) or interest (including any Additional Interest), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

     FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7;

     SECOND: Subject to Article XIII, to the payment of the amounts then due and unpaid upon such series of Securities for principal (and premium, if any) and interest (including any Additional Interest), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such series of Securities for principal (and premium, if any) and interest (including any Additional interest), respectively; and

     THIRD: The balance, if any, to the Person or Persons entitled thereto.

Section 5.7 Limitation on Suits.

     No Holder of any Securities of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless:

     (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series;

     (b) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

     (c) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

     (d) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and

     (e) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series;

it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing itself of, any provision of this Indenture to affect,

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disturb or prejudice the rights of any other Holders of Securities, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest; Direct Action by Holders of Preferred Securities.

     Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on such Security on the respective Stated Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. In the case of Securities of a series issued to a Glacier Trust, any holder of the corresponding series of Preferred Securities issued by such Glacier Trust shall have the right, upon the occurrence of an Event of Default described in Section 5.1(1) or 5.1(2), to institute a suit directly against the Company for enforcement of payment to such holder of principal of (premium, if any) and (subject to Section 3.7) interest (including any Additional Interest) on the Securities having a principal amount equal to the aggregate Liquidation Amount (as defined in the Trust Agreement under which such Glacier Trust is formed) of such Preferred Securities of the corresponding series held by such holder.

Section 5.9 Restoration of Rights and Remedies.

     If the Trustee, any Holder or any holder of Preferred Securities has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee, such Holder or such holder of Preferred Securities, then and in every such case the Company, the Trustee, the Holders and such holder of Preferred Securities shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee, the Holders and the holders of Preferred Securities shall continue as though no such proceeding had been instituted.

Section 5.10 Rights and Remedies Cumulative.

     Except as otherwise provided in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

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Section 5.11 Delay or Omission Not Waiver.

     No delay or omission of the Trustee, any Holder of any Security or any holder of any Preferred Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.

     Every right and remedy given by this Article or by law to the Trustee or to the Holders and the right and remedy given to the holders of Preferred Securities by Section 5.8 may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Holders or the holders of Preferred Securities, as the case may be.

Section 5.12 Control by Holders.

     The Holders of a majority in principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that:

     (a) such direction shall not be in conflict with any rule of law or with this Indenture,

     (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

     (c) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if a Responsible Officer or Officers of the Trustee shall, in good faith, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability.

Section 5.13 Waiver of Past Defaults.

     The Holders of not less than a majority in principal amount of the Outstanding Securities of any series and, in the case of any Securities of a series issued to a Glacier Trust, the holders of Preferred Securities issued by such Glacier Trust may waive any past default hereunder and its consequences with respect to such series except a default:

     (a) in the payment of the principal of (or premium, if any) or interest (including any Additional latest) on any Security of such series, or

     (b) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected.

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     Any such waiver shall be deemed to be on behalf of the Holders of all the Securities of such series or, in the case of a waiver by holders of Preferred Securities issued by such Glacier Trust, by all holders of Preferred Securities issued by such Glacier Trust.

     Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

Section 5.14 Undertaking for Costs.

     All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security on or after the respective Stated Maturities expressed in such Security.

Section 5.15 Waiver of Usury, Stay or Extension Laws.

     The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VI

THE TRUSTEE

Section 6.1 Certain Duties and Responsibilities.

     (A) Except during the continuance of an Event of Default;

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          a) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

          b) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.

     (B) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs.

     (C) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that

          a) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;

          b) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and

          c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series.

     (D) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there shall be reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

     (E) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 6.1.

Section 6.2 Notice of Defaults.

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     Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Securities Register, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including any Additional Interest) on any Security of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders of Securities of such series; and provided, further, that, in the case of any default of the character specified in Section 5.1(3), no such notice to Holders of Securities of such series shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series.

Section 6.3 Certain Rights of Trustee.

     Subject to the provisions of Section 6.1:

     (A) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, Security or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;

     (B) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution;

     (C) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers’ Certificate;

     (D) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

     (E) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

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     (F) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, indenture, Security or other paper or document, but the Trustee in its discretion may make such inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; and

     (G) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

Section 6.4 Not Responsible for Recitals or Issuance of Securities.

     The recitals contained herein and in the Securities, except the Trustee’s certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof.

Section 6.5 May Hold Securities.

     The Trustee, any Authenticating Agent, any Paying Agent, any Securities Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6,13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Securities Registrar or such other agent.

Section 6.6 Money Held in Trust.

     Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company.

Section 6.7 Compensation and Reimbursement.

The Company agrees

     (a) to pay to the Trustee from time to time compensation for all services rendered by it hereunder in such amounts as the Company and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

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     (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and

     (c) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the expenses and disbursements of its agents and counsel) incurred without negligence or bad faith, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Agreement.

     To secure the Company’s payment obligations in this Section 6.7, the Company and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction and discharge of this Indenture.

     When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(4) or (5) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Reform Act of 1978 or any successor statute.

Section 6.8 Disqualification; Conflicting Interests.

     The Trustee for the Securities of any series issued hereunder shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of said Section 301(b).

Section 6.9 Corporate Trustee Required; Eligibility.

There shall at all times be a Trustee hereunder which shall be

     (A) a corporation organized and doing business under the laws of the United States of America or of any State or Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority, or

     (B) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision

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thereof substantially equivalent to supervision or examination applicable to United States institutional trustees,

in either case having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section 6.9, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.9, it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. Neither the Company nor any Person directly or indirectly controlling, controlled by or under common control with the Company shall serve as Trustee for the Securities of any series issued hereunder.

Section 6.10 Resignation and Removal; Appointment of Successor.

     (A) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11.

     (B) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

     (C) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company.

     (D) If at any time:

     a) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or

     b) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Company or by any such Holder, or

     c) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

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then, in any such case, (i) the Company, acting pursuant to the authority of a Board Resolution, may remove the Trustee with respect to all Securities, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees.

     (E) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee with respect to the Securities of that or those series. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee with respect to the Securities of such series and supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series.

     (F) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities of such series as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office.

Section 6.11 Acceptance of Appointment by Successor.

     (A) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder.

     (B) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each

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successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates.

     (C) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) or (b) of this Section 6.11, as the case may be.

     (D) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VI.

Section 6.12 Merger, Conversion, Consolidation or Succession to Business.

     Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article VI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either

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in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have.

Section 6.13 Preferential Collection of Claims Against Company.

     If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).

Section 6.14 Appointment of Authenticating Agent.

     The Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, or of any State or Territory or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section 6.14 the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.14.

     Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

     An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the

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Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.14, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities of the series with respect to which such Authenticating Agent will serve. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section 6.14.

     The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.14, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7.

     If an appointment with respect to one or more series is made pursuant to this Section 6.14, the Securities of such series may have endorsed thereon, in addition to the Trustee’s certificate of authentication, an alternative certificate of authentication in the following form:

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     This is one of the Securities referred to in the within mentioned Indenture.

Dated:

[INSERT NAME OF TRUSTEE] As Trustee
By:
	As Authenticating Agent
By:
	Authorized Officer

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ARTICLE VII

HOLDERS’ LISTS AND REPORTS BY TRUSTEE AND COMPANY

Section 7.1 Company to Furnish Trustee Names and Addresses of Holders.

     The Company will furnish or cause to be furnished to the Trustee:

     (A) semi-annually, not more than 15 days after January 15 and July 15 in each year, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of January 1 and July 1 of such year, and

     (B) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished, excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar.

Section 7.2 Preservation of Information, Communications to Holders.

     (A) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished.

     (B) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided in the Trust Indenture Act.

     (C) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act.

Section 7.3 Reports by Trustee.

     (A) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto.

     (B) Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than July 15 in each calendar year, commencing with the first July 15 after the first issuance of Securities under this Indenture.

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     (C) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed and also with the Commission. The Company will notify the Trustee when any Securities are listed on any stock exchange.

Section 7.4 Reports by Company.

     The Company shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act shall be filed with the Trustee within 15 days after the same is required to be filed with the Commission. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall continue to file with the Commission and provide the Trustee with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act. The Company also shall comply with the other provisions of Trust Indenture Act Section 314(a).

ARTICLE VIII

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

Section 8.1 Company May Consolidate, Etc., Only on Certain Terms.

     The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, and no Person shall consolidate with or merge into the Company or convey, transfer or lease its properties and assets substantially as an entirety to the Company, unless:

     (a) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a corporation, partnership or trust organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Interest) on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed;

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     (b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time, or both, would become an Event of Default, shall have happened and be continuing;

     (c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and any such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with; and the Trustee, subject to Section 6.1, may rely upon such Officers’ Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1.

Section 8.2 Successor Corporation Substituted.

     Upon any consolidation or merger by the Company with or into any other Person, or any conveyance, transfer or lease by the Company of its properties and assets substantially as an entirety to any Person in accordance with Section 8.1, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; and in the event of any such conveyance, transfer or lease the Company shall be discharged from all obligations and covenants under the Indenture and the Securities and may be dissolved and liquidated.

     Such successor Person may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor Person instead of the Company and subject to all the terms, conditions and limitations in this indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication pursuant to such provisions and any Securities which such successor Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof.

     In case of any such consolidation, merger, sale, conveyance or lease, such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate.

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ARTICLE IX

SUPPLEMENTAL INDENTURES

Section 9.1 Supplemental Indentures without Consent of Holders.

     Without the consent of any Holders, the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, provided, however, that the form and terms of Securities of any series may be established by a Board Resolution, as set forth in the Officers’ Certificate delivered to the Trustee pursuant to Section 3.1, without entering into a supplemental indenture for all purposes hereunder, for any of the following purposes:

     (a) to evidence the succession of another Person to the Company, and the assumption by any such successor of the covenants of the Company herein and in the Securities contained; or

     (b) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Company; or

     (c) to establish the form or terms of Securities of any series as permitted by Sections 2.1 or 3.1; or

     (d) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or

     (e) to add any additional Events of Default for the benefit of the Holders of all or any series of Securities (and if such additional Events of Default are to be for the benefit of less than all series of Securities, stating that such additional Events of Default are expressly being included solely for the benefit of such series); or

     (f) to change or eliminate any of the provisions of this Indenture, provided that any such change or elimination shall become effective only when there is no Security Outstanding of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or

     (g) to cure my ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (g) shall not adversely affect the interest of the Holders of Securities of any series in any material respect or, in the case of the Securities of a series issued to a Glacier Trust and

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for so long as any of the corresponding series of Preferred Securities issued by such Glacier Trust shall remain outstanding, the holders of such Preferred Securities; or

     (h) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11 (b); or

     (i) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act.

Section 9.2 Supplemental Indentures with Consent of Holders.

     With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby,

     (a) except to the extent permitted by Sections 3.11 or 3.14 or as otherwise specified as contemplated by Section 2.1 or Section 3.1 with respect to the deferral of the payment of interest on the Securities of any series or the shortening of the Stated Maturity of the Securities of any series, change the Stated Maturity of the principal of, or any installment of interest (including any Additional Interest) on, any Security, or reduce the principal amount thereof or the rate of interest thereon or reduce any premium payable upon the redemption thereof, or reduce the amount of principal of a Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 5.2, or change the place of payment where, or the coin or currency in which, any Security or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date), or

     (b) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or

     (c) modify any of the provisions of this Section, Section 5.13 or Section 10.5, except to increase any such percentage or to provide that certain other provisions of this Indenture

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cannot be modified or waived without the consent of the Holder of each Security affected thereby; or

     (d) modify the provisions in Article XIII of this indenture with respect to the subordination of Outstanding Securities of any series in a manner adverse to the Holders thereof; provided, further, that, in the case of the Securities of a series issued to a Glacier Trust, so long as any of the corresponding series of Preferred Securities issued by such Glacier Trust remains outstanding, (i) no such amendment shall be made that adversely affects the holders of such Preferred Securities in any material respect, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of the Securities of such series and all accrued and, subject to Section 3.7, unpaid interest (including any Additional Interest) thereon have been paid in full and (ii) no amendment shall be made to Section 5.8 of this Indenture that would impair the rights of the holders of Preferred Securities provided therein without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal (and premium, if any) of the Securities of such series and all accrued and (subject to Section 3.7) unpaid interest (including any Additional interest) thereon have been paid in full.

     A supplemental indenture that changes or eliminates any covenant or other provision of this Indenture that has expressly been included solely for the benefit of one or more particular series of Securities or Preferred Securities, or which modifies the rights of the Holders of Securities or holders of Preferred Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities or holders of Preferred Securities of any other series.

     It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Section 9.3 Execution of Supplemental Indentures.

     In executing or accepting the additional series of Securities created by any supplemental indenture permitted by this Article or the modifications thereby of any series of Securities previously created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent have been complied with. The Trustee may but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Section 9.4 Effect of Supplemental Indentures.

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     Upon the execution of any supplemental indenture under this Article IX or delivery to the Trustee of the Officers’ Certificate pursuant to Section 3.1 hereof (which Officers’ Certificate shall have the effect of a supplemental indenture for all purposes hereunder), this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 9.5 Conformity with Trust Indenture Act.

     Every supplemental indenture executed pursuant to this Article IX and every Officers’ Certificate delivered to the trustee pursuant to Section 3.1 hereof shall conform to the requirements of the Trust Indenture Act as then in effect.

Section 9.6 Reference in Securities to Supplemental Indentures.

     Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX or delivery to the Trustee of the Officers’ Certificate pursuant to Section 3.1 hereof (which Officers’ Certificate shall have the effect of a supplemental indenture for all purposes hereunder) may, and shall if required by the Company, bear a notation in form approved by the Company as to any matter provided for in such supplemental indenture or such Officers’ Certificate. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Company, to any such supplemental indenture or such Officers’s Certificate may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series.

ARTICLE X

COVENANTS

Section 10.1 Payment of Principal, Premium and Interest.

     The Company covenants and agrees for the benefit of each series of securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of such Securities and this Indenture.

Section 10.2 Maintenance of Office or Agency.

     The Company will maintain in each Place of Payment for any series of Securities, an office or agency where Securities of that series may be presented or surrendered for payment and an office or agency where Securities of that series may be surrendered for transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company initially appoints the Trustee, acting through its Corporate Trust Office, as its agent for said purposes. The Company will give prompt written

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notice to the Trustee of any change in the location of any such office or agency. If at any time the Company shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands.

     The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation and any change in the location of any such office or agency.

Section 10.3 Money for Security Payments to be Held in Trust.

     If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of such series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its failure so to act.

     Whenever the Company shall have one or more Paying Agents, it will, prior to 10:00 a.m. California time on each due date of the principal of or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal and premium (if any) or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act.

     The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section 10.3, that such Paying Agent will:

     (a) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

     (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest;

     (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and

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     (d) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent.

     The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

     Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Company Request to the Company, or (if then held by the Company) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the state of California, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

Section 10.4 Statement as to Compliance.

     The Company shall deliver to the Trustee, within 120 days after the end of each calendar year of the Company ending after the date hereof, an Officers’ Certificate covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture, and if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For the purpose of this Section 10.4, compliance shall be determined without regard to any grace period or requirement of notice provided pursuant to the terms of this Indenture.

Section 10.5 Waiver of Certain Covenants.

     The Company may omit in any particular instance to comply with any covenant or condition provided pursuant to Sections 3.1, 9.1(3), or 9.1(4) with respect to the Securities of any series, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either

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waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company in respect of any such covenant or condition shall remain in full force and effect.

Section 10.6 Additional Sums.

     In the case of the Securities of a series issued to a Glacier Trust, so long as no Event of Default has occurred and is continuing and except as otherwise specified as contemplated by Section 2.1 or Section 3.1, in the event that (i) such Glacier Trust is the Holder of all of the Outstanding Securities of such series, (ii) a Tax Event in respect of such Glacier Trust shall have occurred and be continuing and (iii) the Company shall not have (A) redeemed the Securities of such series pursuant to Section 11.7 or (B) terminated such Glacier Trust pursuant to Section 9.2(b) of the related Trust Agreement, the Company shall pay to such Glacier Trust (and its permitted successors or assigns under the related Trust Agreement) for so long as such Glacier Trust (or its permitted successor or assignee) is the registered holder of any Securities of such series, such additional amounts as may be necessary in order that the amount of Distributions (including any Additional Amounts (as defined in such Trust Agreement)) then due and payable by such Glacier Trust on the related Preferred Securities and Common Securities that at any time remain outstanding in accordance with the terms thereof shall not be reduced as a result of any Additional Taxes (the “Additional Sums”). Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Sums provided for in this paragraph to the extent that, in such context, Additional Sums are, were or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Sums (if applicable) in any provisions hereof shall not be construed as excluding Additional Sums in those provisions hereof where such express mention is not made; provided however, that the deferral of the payment of interest pursuant to Section 3.11 or the Securities shall not defer the payment of any Additional Sums that may be due and payable.

Section 10.7 Additional Covenants.

     If at any time (i) there shall have occurred an Event of Default, (ii) the Company shall have given notice of its election of an Extension Period as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing, or (iii) white Securities are held by a Glacier Trust, the Company shall be in default with respect to its payment of any obligation under the Guarantee, then the Company covenants and agrees with each Holder of Securities of any series that it shall not, and it shall not permit any Subsidiary of the Company to, (a) declare or pay any dividends or distributions on, or redeem purchase, acquire or make a liquidation payment with respect to, any shares of the Company’s capital stock (which includes common and preferred stock), (b) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company (including Securities other than the Securities of such series) that rank pari passu in all respects with or junior in interest to the Securities of such series or make any guarantee

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payments with respect to any guarantee by the Company of debt securities of any subsidiary of the Company if such guarantee ranks pari passu in all respects with or junior in interest to the Securities (other than (i) dividends or distributions in capital stock (which includes common and preferred stock), (ii) any declaration of a dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan or the redemption or repurchase of any such rights pursuant thereto, (iii) payments under the Glacier Guarantee related to the Preferred Securities issued by the Glacier Trust holding Securities of such series, and (iv) purchases of Common Stock related to the issuance of Common Stock or rights under any of the Company’s benefit plans for its directors, officers, consultants or employees or (c) redeem, purchase or acquire less than all of the Securities of such series or any of the Preferred Securities if at such time (i) there shall have occurred an Event of Default with respect to the Securities of such series, (ii) if the Securities of such series are held by a Glacier Trust, the Company shall be in default with respect to its payment of any obligations under the Glacier Guarantee relating to the Preferred Securities issued by such Glacier Trust or, (iii) the Company shall have given notice of its election to begin an Extension Period with respect to the Securities of such series as provided herein and shall not have rescinded such notice, or such Extension Period, or any extension thereof, shall be continuing.

     The Company also covenants with each Holder of Securities of a series issued to a Glacier Trust (i) to maintain directly or indirectly 100% ownership of the Common Securities of such Glacier Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company’s ownership of such Common Securities, (ii) not to voluntarily terminate, wind-up or liquidate such Glacier Trust, except (a) in connection with a distribution of the Securities of such series to the holders of Trust Securities in liquidation of such Glacier Trust or (b) in connection with certain mergers, consolidations or amalgamations permitted by the related Trust Agreement and (iii) to use its reasonable efforts, consistent with the terms and provisions of such Trust Agreement, to cause such Glacier Trust to remain classified as a grantor trust and not an association taxable as a corporation for United States federal income tax purposes,

ARTICLE XI

REDEMPTION OF SECURITIES

Section 11.1 Applicability of This Article.

     Redemption of Securities of any series (whether by operation of a sinking fund or otherwise) as permitted or required by any form of Security issued pursuant to this Indenture shall be made in accordance with such form of Security and this Article; provided, however, that if any provision of any such form of Security shall conflict with any provision of this Article, the provision of such form of Security shall govern. Except as otherwise set forth in the form of Security for such series, each Security of such series shall be subject to partial redemption only in the amount of $25 or, in the case of the Securities of a series issued to a Glacier Trust, $25, or integral multiples of $25 in excess thereof.

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Section 11.2 Election to Redeem; Notice to Trustee.

     The election of the Company to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In case of any redemption at the election of the Company of less than all of the Securities of any particular series and having the same terms, the Company shall, not less than 30 nor more than 60 days prior to the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such date and of the principal amount of Securities of that series to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Company shall furnish the Trustee with an Officers’ Certificate and an Opinion of Counsel evidencing compliance with such restriction.

Section 11.3 Selection of Securities to be Redeemed.

     If less than all the Securities of any series are to be redeemed (unless all the Securities of such series and of a specified tenor are to be redeemed or unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of a portion of the principal amount of any Security of such series, provided that the portion of the principal amount of any Security not redeemed shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security. If less than all the Securities of such series and of a specified tenor are to be redeemed (unless such redemption affects only a single Security), the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series and specified tenor not previously called for redemption in accordance with the preceding sentence.

     The Trustee shall promptly notify the Company in writing of the Securities selected for partial redemption and the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Security redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. If the Company shall so direct, Securities registered in the name of the Company, any Affiliate or any Subsidiary thereof shall not be included in the Securities selected for redemption.

Section 11.4 Notice of Redemption.

     Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the Redemption Date, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register.

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     With respect to Securities of each series to be redeemed, each notice of redemption shall state:

     (A) the Redemption Date;

     (B) the Redemption Price;

     (C) if less than all Outstanding Securities of such particular series and having the same terms are to be redeemed, the identification (and, in the case of partial redemption, the respective principal amounts) of the particular Securities to be redeemed;

     (D) that on the Redemption Date, the Redemption Price will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date;

     (E) the place or places where such Securities are to be surrendered for payment of the Redemption Price; and

     (F) that the redemption is for a sinking fund, if such is the case.

     Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company’s request, by the Trustee in the name and at the expense of the Company and shall not be irrevocable. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security.

Section 11.5 Deposit of Redemption Price.

     Prior to 12:00 noon, Eastern time on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Company will deposit with the Trustee or with one or more Paying Agents (or if the Company is acting as its own Paying Agent, the Company will segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the Redemption Price of, and any accrued interest (including Additional Interest) on, all the Securities which are to be redeemed on that date.

Section 11.6 Payment of Securities Called for Redemption.

     If any notice of redemption has been given as provided in Section 11.4, the Securities or portion of Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price. On presentation and surrender of such Securities at a Place of Payment in said notice specified, the said securities or the specified portions thereof shall be paid and redeemed by the

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Company at the applicable Redemption Price, together with accrued interest (including any Additional Interest) to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 3.1, installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7.

     Upon presentation of any Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of the same series, of authorized denominations, in aggregate principal amount equal to the portion of the Security not redeemed so presented and having the same Original Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security will also be a new Global Security.

     If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security.

Section 11.7 Right of Redemption of Securities Initially Issued to a Glacier Trust.

     In the case of the Securities of a series initially issued to a Glacier Trust, except as otherwise specified as contemplated by Section 3.1, the Company, at its option, may redeem such Securities (i) on or after the date five years after the Original Issue Date of such Securities, in whole at any time or in part from time to time, or (ii) upon the occurrence and during the continuation of a Tax Event or Investment Company Event, at any time within 90 days following the occurrence of such Tax Event or Investment Company Event in respect of such Glacier Trust, in whole (but not in part), in each case at a Redemption Price equal to 100% of the principal amount thereof.

ARTICLE XII

SINKING FUNDS

Section 12.1 Applicability of Article.

     The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of any series except as otherwise specified as contemplated by Section 3.1 for such Securities.

     The minimum amount of any sinking fund payment provided for by the terms of any Securities of any series is herein referred to as a “mandatory sinking fund payment”, and any sinking fund payment in excess of such minimum amount which is permitted to be made by the terms of such Securities of any series is herein referred to as an “optional sinking fund payment”. If provided for by the terms of any Securities of any series, the cash amount of any sinking fund

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payment may be subject to reduction as provided in Section 12.2. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of such Securities.

Section 12.2 Satisfaction of Sinking Fund Payments with Securities.

     In lieu of making all or any part of a mandatory sinking fund payment with respect to any Securities of a series in cash, the Company may at its option, at any time no more than 16 months and no less than 30 days prior to the date on which such sinking fund payment is due, deliver to the Trustee Securities of such series (together with the unmatured coupons, if any, appertaining thereto) theretofore purchased or otherwise acquired by the Company, except Securities of such series that have been redeemed through the application of mandatory or optional sinking fund payments pursuant to the terms of the Securities of such series, accompanied by a Company Order instructing the Trustee to credit such obligations and stating that the Securities of such series were originally issued by the Company by way of bona fide sale or other negotiation for value; provided that the Securities to be so credited have not been previously so credited. The Securities to be so credited shall be received and credited for such purpose by the Trustee at the redemption price for such Securities, as specified in the Securities so to be redeemed, for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly.

Section 12.3 Redemption of Securities for Sinking Fund.

     Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officers’ Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash in the currency in which the Securities of such series are payable (except as provided pursuant to Section 3.1) and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities pursuant to Section 12.2 and will also deliver to the Trustee any Securities to be so delivered. Such Officers’ Certificate shall be irrevocable and upon its delivery the Company shall be obligated to make the cash payment or payments therein referred to, if any, on or before the succeeding sinking fund payment date. In the case of the failure of the Company to deliver such Officers’ Certificate (or, as required by this Indenture, the Securities and coupons, if any, specified in such Officers’ Certificate), the sinking fund payment due on the succeeding sinking fund payment date for such series shall be paid entirely in cash and shall be sufficient to redeem the principal amount of the Securities of such series subject to a mandatory sinking fund payment without the right to deliver or credit securities as provided in Section 12.2 and without the right to make the optional sinking fund payment with respect to such series at such time.

     Any sinking fund payment or payments (mandatory or optional) made in cash plus any unused balance of any preceding sinking fund payments made with respect to the Securities of any particular series shall be applied by the Trustee (or by the Company if the Company is acting as its own Paying Agent) on the sinking fund payment date on which such payment is made (or,

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if such payment is made before a sinking fund payment date, on the sinking fund payment date immediately following the date of such payment) to the redemption of Securities of such series at the Redemption Price specified in such Securities with respect to the sinking fund. Any sinking fund moneys not so applied or allocated by the Trustee (or, if the Company is acting as its own Paying Agent, segregated and held in trust by the Company as provided in Section 10.3) for such series and together with such payment (or such amount so segregated) shall be applied in accordance with the provisions of this Section 12.3. Any and all sinking fund moneys with respect to the Securities of any particular series held by the Trustee (or if the Company is acting as its own Paying Agent, segregated and held in trust as provided in Section 10.3) on the last sinking fund payment date with respect to Securities of such series and not held for the payment or redemption of particular Securities of such series shall be applied by the Trustee (or by the Company if the Company is acting as its own Paying Agent), together with other moneys, if necessary, to be deposited (or segregated) sufficient for the purpose, to the payment of the principal of the Securities of such series at Maturity. The Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 11.3 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 11.4. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Section 11.6. On or before each sinking fund payment date, the Company shall pay to the Trustee (or, if the Company is acting as its own Paying Agent, the Company shall segregate and hold in trust as provided in Section 10.3) in cash a sum in the currency in which Securities of such series are payable (except as provided pursuant to Section 3.1) equal to the principal and any interest accrued to the Redemption Date for Securities or portions thereof to be redeemed on such sinking fund payment date pursuant to this Section 12.3.

     Neither the Trustee nor the Company shall redeem any Securities of a series with sinking fund moneys or mail any notice of redemption of Securities of such series by operation of the sinking fund for such series during the continuance of a default in payment of interest, if any, on any Securities of such series or of any Event of Default (other than an Event of Default occurring as a consequence of this paragraph) with respect to the Securities of such series, except that if the notice of redemption shall have been provided in accordance with the provisions hereof, the Trustee (or the Company, if the Company is then acting as its own Paying Agent) shall redeem such Securities if cash sufficient for that purpose shall be deposited with the Trustee (or segregated by the Company) for that purpose in accordance with the terms of this Article XII. Except as aforesaid, any moneys in the sinking fund for such series at the time when any such default or Event of Default shall occur and any moneys thereafter paid into such sinking fund shall, during the continuance of such default or Event of Default, be held as security for the payment of the Securities and coupons, if any, of such series; provided, however, that in case such default or Event of Default shall have been cured or waived herein, such moneys shall thereafter be applied on the next sinking fund payment date for the Securities of such series on which such moneys may be applied pursuant to the provisions of this Section 12.3.

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ARTICLE XIII

SUBORDINATION OF SECURITIES

Section 13.1 Securities Subordinate to Senior Debt and Subordinated Debt.

     The Company covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article XIII, the payment of the principal of (and premium, if any) and interest (including any Additional Interest) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Debt and Subordinated Debt.

Section 13.2 Payment Over of Proceeds Upon Dissolution, Etc.

     In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company (each such event, if any, herein sometimes referred to as a “Proceeding”), then the holders of Senior Debt and Subordinated Debt shall be entitled to receive payment in full of Allocable Amounts of such Senior Debt and Subordinated Debt, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt and Subordinated Debt, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Debt of the Company subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a “Junior Subordinated Payment”), on account of principal of (or premium, if any) or interest (including any Additional Interest) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary and to that end the holders of Senior Debt and Subordinated Debt shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Proceeding.

     In the event that, notwithstanding the foregoing provisions of this Section 13.2, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any Junior Subordinated Payment, before all Allocable Amounts of all Senior Debt and Subordinated Debt are paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt and Subordinated Debt, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Allocable Amounts of all Senior Debt and

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Subordinated Debt remaining unpaid, to the extent necessary to pay all Allocable Amounts of all Senior Debt and Subordinated Debt in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt and Subordinated Debt.

     For purposes of this Article XIII only, the words “any payment or distribution of any kind or character, whether in cash, property or securities” shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Debt and Subordinated Debt to substantially the same extent as the Securities are so subordinated as provided in this Article XIII. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Proceeding for the purposes of this Section 13.2 if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article VIII.

Section 13.3 Prior Payment to Senior Debt and Subordinated Debt Upon Acceleration of Securities.

     In the event that any Securities are declared due and payable before their Stated Maturity, then and in such event the holders of the Senior Debt and Subordinated Debt outstanding at the time such Securities so become due and payable shall be entitled to receive payment in full of all Allocable Amounts due on or in respect of such Senior Debt and Subordinated Debt (including any amounts due upon acceleration), or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt and Subordinated Debt, before the Holders of the Securities are entitled to receive any payment or distribution of any kind or character, whether in cash, properties or securities (including any Junior Subordinated Payment) by the Company on account of the principal of (or premium, if any) or interest (including any Additional interest) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary; provided, however, that nothing in this Section 13.3 shall prevent the satisfaction of any sinking fund payment in accordance with this Indenture or as otherwise specified as contemplated by Section 3.1 for the Securities of any series by delivering and crediting pursuant to Section 12.2 or as otherwise specified as contemplated by Section 3.1 for the Securities of any series Securities which have been acquired (upon redemption or otherwise) prior to such declaration of acceleration.

     In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section 13.3, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company.

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     The provisions of this Section 13.3 shall not apply to any payment with respect to which Section 13.2 would be applicable.

Section 13.4 No Payment When Senior Debt and Subordinated Debt in Default.

     (a) In the event and during the continuation of any default in the payment of principal of (or premium, if any) or interest on any Senior Debt and Subordinated Debt, or in the event that any event of default with respect to any Senior Debt and Subordinated Debt shall have occurred and be continuing and shall have resulted in such Senior Debt and Subordinated Debt becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable, unless and until such event of default shall have been cured or waived or shall have ceased to exist and such acceleration shall have been rescinded or annulled, or (b) in the event any judicial proceeding shall be pending with respect to any such default in payment or such event or default, then no payment or distribution of any kind or character, whether in cash, properties or securities (including any Junior Subordinated Payment) shall be made by the Company on account of principal of (or premium, if any) or interest (including any Additional Interest), if any, on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary, in each case unless and until all Allocable Amounts of such Senior Debt and Subordinated Debt are paid in full; provided, however, that nothing in this Section 13.4 shall prevent the satisfaction of any sinking fund payment in accordance with this Indenture or as otherwise specified as contemplated by Section 3.1 for the Securities of any series by delivering and crediting pursuant to Section 12.2 or as otherwise specified as contemplated by Section 3.1 for the Securities of any series Securities which have been acquired (upon redemption or otherwise) prior to such default in payment or event of default.

     In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section 13.4, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company.

     The provisions of this Section 13.4 shall not apply to any payment with respect to which Section 13.2 would be applicable.

Section 13.5 Payment Permitted If No Default.

     Nothing contained in this Article XIII or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any Proceeding referred to in Section 13.2 or under the conditions described in Sections 13.3 and 13.4, from making payments at any time of principal of (and premium, if any) or interest (including Additional Interest) on the Securities, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest (including any Additional Interest) on the Securities or the retention

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of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article XIII.

Section 13.6 Subrogation to Rights of Holders of Senior Debt and Subordinated Debt.

     Subject to the payment in full of all amounts due or to become due on all Senior Debt and Subordinated Debt, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Debt and Subordinated Debt, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Debt and Subordinated Debt pursuant to the provisions of this Article XIII (equally and ratably with the holders of all indebtedness of the Company which by its express terms is subordinated to Senior Debt and Subordinated Debt of the Company to substantially the same extent as the Securities are subordinated to the Senior Debt and Subordinated Debt and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Debt and Subordinated Debt) to the rights of the holders of such Senior Debt and Subordinated Debt to receive payments and distributions of cash, property and securities applicable to the Senior Debt and Subordinated Debt until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Debt and Subordinated Debt of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article XIII to the holders of Senior Debt and Subordinated Debt by Holders of the Securities or the Trustee, shall, as among the Company, its creditors other than holders of Senior Debt and Subordinated Debt, and the Holders of the Securities, be deemed to be a payment or distribution by the Company to or on account of the Senior Debt and Subordinated Debt.

Section 13.7 Provisions Solely to Define Relative Rights.

     The provisions of this Article XIII are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Debt and Subordinated Debt on the other hand. Nothing contained in this Article XIII or elsewhere in this Indenture or in ‘the Securities is intended to or shall (a) impair, as between the Company and the Holders of the Securities, the obligations of the Company, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including any Additional Interest) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Company of the Holders of the Securities and creditors of the Company other than their rights in relation to the holders of Senior Debt and Subordinated Debt; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, If any, under this Article XIII of the holders of Senior Debt and Subordinated Debt to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

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Section 13.8 Trustee to Effectuate Subordination,

     Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article XIII and appoints the Trustee his or her attorney-in-fact for any and all such purposes.

Section 13.9 No Waiver of Subordination Provisions.

     No right of any present or future holder of any Senior Debt and Subordinated Debt to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with.

     Without in any way limiting the generality of the immediately preceding paragraph, the holders of Senior Debt and Subordinated Debt may, at any time and from to time, without the consent of or notice to the Trustee or the Holders of the Securities, without incurring responsibility to the Holders of the Securities and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Securities to the holders of Senior Debt and Subordinated Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt and Subordinated Debt, or otherwise amend or supplement in any manner Senior Debt and Subordinated Debt or any instrument evidencing the same or any agreement under which Senior Debt and Subordinated Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt and Subordinated Debt; (iii) release any Person liable in any manner for the collection of Senior Debt and Subordinated Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.

Section 13.10 Notice to Trustee.

     The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article XIII or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from the Company or a holder of Senior Debt and Subordinated Debt or from any trustee, agent or representative therefor; provided, however, that if the Trustee shall not have received the notice provided for in this Section 13.10 at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including any Additional Interest) on any Security),

75

then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date.

     Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a holder of Senior Debt and Subordinated Debt (or a trustee therefor) to establish that such notice has been given by a holder of Senior Debt and Subordinated Debt (or a trustee therefor). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Debt and Subordinated Debt to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Debt and Subordinated Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

Section 13.11 Reliance on Judicial Order or Certificate of Liquidating Agent.

     Upon any payment or distribution of assets of the Company referred to in this Article XIII, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and Subordinated Debt and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XIII.

Section 13.12 Trustee Not Fiduciary for Holders of Senior Debt and Subordinated. Debt.

     The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and Subordinated Debt and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other Person cash, property or securities to which any holders of Senior Debt and Subordinated Debt shall be entitled by virtue of this Article or otherwise.

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Section 13.13 Rights of Trustee as Holder of Senior Debt and Subordinated Debt; Preservation of Trustee’s Rights.

     The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XIII with respect to any Senior Debt and Subordinated Debt which may at any time be held by it, to the same extent as any other holder of Senior Debt and Subordinated Debt, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

Section 13.14 Article Applicable to Paying Agents.

     In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article XIII shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article XIII in addition to or in place of the Trustee.

Section 13.15 Certain Conversions or Exchanges Deemed Payment.

     For the purposes of this Article XIII only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including any Additional Interest) on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section 13.15, the term “junior securities” means (i) shares of any stock of any class of the Company and (ii) securities of the Company which are subordinated in right of payment to all Senior Debt and Subordinated Debt which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article XIII.

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     This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

GLACIER WATER SERVICES, INC.
By:	/s/ Jerry A. Gordon
	Name:	Jerry A. Gordon
	Title:	President and Chief Operating Officer

Attest:
By:	/s/ Brenda K. Foster
	Name:	Brenda K. Foster
	Title:	Vice President, Controller and Secretary

WILMINGTON TRUST COMPANY, as Trustee
By:
	Its:

Attest:
By:
	Its:

STATE OF CALIFORNIA   )

                                                       ) SS.

COUNTY OF SAN DIEGO  )

     On the 23rd day of January, 1998 before me personally came Jerry A. Gordon and Brenda K. Foster, each to me known. who, being by me duly sworn, did depose and say that they are the President and Chief Operating Officer and the Vice President, Controller and Secretary, respectively, of GLACIER WATER SERVICES, INC., one of the corporations described in and which executed the foregoing instrument; that each knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; and that each signed such person’s name thereto by authority of the Board of Directors of said corporation.

[SEAL]	/s/ [Illegible]
		Notary Public

STATE OF DELAWARE     )

                                               ) SS.

COUNTY OF                         )

     On the ____ day of____________, 1998 before me personally came ______________ and ______________ to me known, who, being by me duly sworn, did depose and say that they are the ______________ and ____________ respectively, of WILMINGTON TRUST COMPANY, one of the corporations described in and which executed the foregoing instrument; that they know the seal of said corporation; that the seal affixed to said instrument is such corporate seal; and that they signed their respective names thereto by authority of the Board of Directors of said corporation.

[SEAL]
	Notary Public

     This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

GLACIER WATER SERVICES, INC.
By:
	Name:	Jerry A. Gordon
	Title:	President and Chief Operating Officer

Attest:

By:
	Name:	Brenda K. Foster
	Title:	Vice President, Controller and Secretary

WILMINGTON TRUST COMPANY, as Trustee
By:	/s/ Donald G. Mackelcan
	Its:	DONALD G. MACKELCAN
		ASSISTANT VICE PRESIDENT

Attest:

By:	/s/ [Illegible]
	Its: Vice President

STATE OF CALIFORNIA  )

                                                        ) SS.

COUNTY OF SAN DIEGO )

     On the _______ day of January, 1998 before me personally came Jerry A. Gordon and Brenda K. Foster, each to me known, who, being by me duly sworn, did depose and say that they are the President and Chief Operating Officer, and the Vice President, Controller and Secretary, respectively, of GLACIER WATER SERVICES, INC., one of the corporations described in and which executed the foregoing instrument; that each knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; and that each signed such person’s name thereto by authority of the Board of Directors of said corporation.

[SEAL]
	Notary Public

STATE OF DELAWARE  )

                                            ) SS.

COUNTY OF New Castle  )

     On the 26^th day of January, 1998 before me personally came Donald G. MacKelcan and Enmett R. Harmon to me know, Who, being by me duly sworn, did depose and say that they are the Assistant Vice President and Vice President respectively, of WILMINGTON TRUST COMPANY, one of the corporations described in and which executed the foregoing instrument; that they know the seal of said corporation; that the seal affixed to said instrument is such corporate seal; and that they signed their respective names thereto by authority of the Board of Directors of said corporation.

[SEAL]	/s/ Kathleen A. Pedelini
	Notary Public
	Kathleen A. Pedelini Notary Public My Commission expires October 31, 1998

EX-10.1

Exhibit 10.1

Glacier Water Services, Inc.

Stock Compensation Program

Including

Amendments 1-9

GLACIER WATER SERVICES, INC.
STOCK COMPENSATION PROGRAM

     1. Purpose. This Glacier Water Services, Inc. Stock Compensation Program (the “Program”) is intended to secure for Glacier Water Services, Inc. (the “Company”) and its Subsidiaries and its stockholders the benefits arising from ownership of the Company’s common stock (the “Common Stock”) by those selected key individuals of the Company and its Subsidiaries who will be responsible for the future growth of such corporations. The Program is designed to help attract and retain superior personnel for positions of substantial responsibility with the Company and its Subsidiaries, and to provide key individuals with an additional incentive to contribute to the success of the corporations.

     2. Elements of the Program. In order to maintain flexibility in the award of stock benefits, the Program is composed of two parts. Part I is the 1994 Employee Stock Option Plan (the “Plan”) under which are granted incentive and non-qualified stock options. Part II is the 1994 Non-Employee Directors Stock Option Plan (the “Non-Employee Plan”) under which Non-Employee Directors are granted non-qualified stock options. The Plan and the Non-Employee Plan are collectively referred to herein as the “Plans.”

     3. Applicability of General Provisions. Unless any Plan specifically indicates to the contrary, both Plans shall be subject to the General Provisions of the Program set forth below.

     4. Administration of the Plans. The Plans shall be administered, construed, governed, and amended in accordance with their respective terms, provided, however, in no case shall any action be taken by any member of the Committee if such action would result in the loss of “disinterested administrator” status, within the meaning of Rule 16b-3, as promulgated by the SEC (as defined below) under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), or any successor rule or regulation thereto, as such Rule is amended or applied from time to time (the “SEC Rule l6b-3”), of any director who is a member of the Committee (as defined below).

     5. Definitions. For purposes of the Program, the following terms shall have the meanings set forth below:

     (a) “Agreement” or “Option Agreement” means a written agreement between the Company and a Participant or an Eligible Director setting forth the terms and conditions of an Option grant.

     (b) “Annual Meeting” means the annual meeting of the Company’s stockholders for any fiscal year as determined by the Company’s By-Laws.

     (c) “Board” means the Board of Directors of the Company as constituted from time to time.

     (d) “Cause” means (i) the willful and continued failure of a Participant to perform his or her duties other than such failure resulting from the Participant’s incapacity due to physical or mental illness or injury, (ii) the conviction of the Participant of a felony, (iii) the willful engaging by the Participant in misconduct which is materially injurious to the Company or (iv) the willful commission by the Participant of any fraud on the Company.

     (e) “Change of Control” shall mean:

          (i) The acquisition by an individual, entity or group (within the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act), other than the Company, Kayne, Anderson Investment Management, Inc., any group (as heretofore defined) of which any of them is a member, any affiliate of any of the foregoing or any person who on the effective date of this Plan is an officer or director of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (A) the shares of the Common Stock, or (B) the combined voting power of the voting securities of the Company entitled to vote generally in the election of directors (the “Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change of Control: (x) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (y) any acquisition by any corporation if, immediately following such acquisition, more than 50% of the outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation (entitled to vote generally in the election of directors), is beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who, immediately prior to such acquisition, were the beneficial owners of the Common Stock and the Voting Securities in substantially the same proportions, respectively, as their ownership, immediately prior to such acquisition, of the Common Stock and Voting Securities; or

          (ii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, other than a reorganization, merger or consolidation with respect to which all or substantially all of the individuals and entities who were the

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beneficial owners, immediately prior to such reorganization, merger or consolidation, of the Common Stock and Voting Securities beneficially own, directly or indirectly, immediately after such reorganization, merger or consolidation more than 50% of the then outstanding common stock and voting securities (entitled to vote generally in the election of directors) of the corporation resulting from such reorganization, merger or consolidation in substantially the same proportions as their respective ownership, immediately prior to such reorganization, merger or consolidation, of the Common Stock and the Voting Securities; or

          (iii) Approval by the shareholders of the Company of (A) a complete liquidation or substantial dissolution of the Company, or (B) the sale or other disposition of all or substantially all of the assets of the Company, other than to a Subsidiary, wholly-owned, directly or indirectly, by the Company.

     (f) “Closing Price” means on, or with respect to, any given date, the closing per share market trading prices for the Common Stock as reported on the consolidated transaction reporting system for the American Stock Exchange (the “AMEX”) or, if the Cosmos Stock is not then listed on the AMEX, on any other domestic exchange on which the stock is listed or, if the Common Stock is not so listed, the average of the closing bid and asked prices quoted in the NASDAQ system or, if the Common Stock shall not be quoted on the NASDAQ system, the average of the closing bid and asked prices in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization for such date(s), or, if the Common Stock was not traded on such date, on the next preceding day on which the Common Stock traded.

     (g) “Code” means the Internal Revenue Code of 1986, as in effect and as amended from time to time, or any successor statute thereto, together with any rules, regulations and interpretations promulgated thereunder or with respect thereto.

     (h) “Committee” mean’s the committee of the Board established to administer the Plan, as described in Article 1 of the General Provisions of the Program.

     (i) “Common Stock” means the common stock, par value $.01 per share, of the Company or any security of the Company issued in substitution or exchange therefor.

     (j) “Company” means Glacier Water Services, Inc., a Delaware corporation, or any successor corporation to Glacier Water Services, Inc.

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     (k) “Disability” means with respect to a Participant disability as defined in the Participant’s then effective employment agreement, or if the Participant is not then a party to an effective employment agreement with the Company which defines disability, “Disability” means disability as determined by the Committee in accordance with standards and procedures similar to those under the Company’s long-term disability plan, if any. If disability is not defined in either an employment agreement or a long-term disability program, or in any case with respect to an Eligible Director, “Disability” means any physical or mental disability which is determined to be total and permanent by a physician selected in good faith by the Company.

     (l) “Eligible Director” means any Non-Employee Director of the Company who becomes a member of the Board.

     (m) “Exchange Act” means the Securities Exchange Act of 1934, as in effect and as amended from time to time, or any successor statute thereto, together with any rules, regulations and interpretations promulgated thereunder.

     (n) “Fair Market Value” means on, or with respect to, any given date(s), the average of the highest and lowest per share market trading prices for the Common Stock, as reported on the consolidated transaction reporting system for the American Stock Exchange (the “AMEX”) or, if the Common Stock is not then listed on the AMEX, on any other domestic exchange on which the stock is listed or, if the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ system or, if the Common Stock shall not be quoted on the NASDAQ system, the average of the high and low bid and asked prices in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization for such date(s), or, if the Common Stock was not traded on such date, on the next preceding day on which the Common Stock is traded.

     (o) “Grant Date” means the date of any Annual Meeting in respect of which an Annual Grant is made to an Eligible Director.

     (p) “Incentive Stock Option” means an option granted pursuant to Section 3 of Part I which is intended to be, and meets the requirements of, an “incentive stock option” under Section 422 of the Code.

     (q) “Non-Employee Director” means any director of the Company who is not, and who has not been for at least one year preceding the commencement of his or her membership on the Board,

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an employee of the Company, or any parent or subsidiary companies of the Company.

     (r) “Non-Employee Plan” or “Part II” means the Glacier Water Services, Inc. 1994 Non-Employee Directors Stock Option Plan, as set forth herein and as in effect and as amended from time to time (together with any rules, regulations and guidelines promulgated thereunder).

     (s) “Non-Qualified Stock Option” means any option granted pursuant to the provisions of the Program which is not, and is designated as not being, an Incentive Stock Option.

     (t) “Participant” means any individual selected to receive an award under Part I.

     (u) “Plan” or “Part I” means the Glacier Water Services, Inc. 1994 Employee Stock Option Plan, as set forth herein and as in effect and as amended from time to time (together with any rules, regulations and guidelines promulgated thereunder).

     (v) “Program Guidelines” means the guidelines for granting and administering Options established pursuant to Article 1(c) of the General Provisions of the Program.

     (w) “SEC” means the Securities and Exchange Commission, or any successor governmental agency.

     (x) “Stock Options” or “Options” means Incentive Stock Options and Non-Qualified Stock Options (whether granted under Part I or Part II) , collectively, provided, however, that the Provisions of Part I and Part II apply only to Options granted under Part I and Part II, respectively.

     (y) “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations, including and beginning with the Company, if each of such corporations, other than the last corporation in the unbroken chain, owns, directly or indirectly, more than fifty percent of the voting stock of one of the other corporations in such chain.

GENERAL PROVISIONS OF THE PROGRAM

     Article 1. Administration. The Program shall be administered by a Committee appointed by the Board to administer the Program.

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     (a) Committee Membership. The Committee shall consist of not less than two “disinterested” directors within the meaning of SEC Rule 16b-3. The Board may from time to time remove members from the Committee, fill vacancies on the Committee and may select one of the members of the Committee as the Committee’s chairman.

     (b) Plan Administration. Except with respect to Option grants under the Non-Employee Plan, the Committee shall have full and final authority in its discretion to interpret the provisions of the Program and to decide all questions of fact arising in its application; to determine the individuals to whom Options shall be granted under the Program; to determine the type of Option to be granted and the amount, size, timing, and terms of each such Option; and to make all other determinations necessary or advisable for the effective administration of the Program. The Committee may designate persons other than members of the Committee to carry out the day-to-day ministerial administration of the Program and may seek independent advice and counsel from such professional advisors as it deems necessary; provided that the Committee may not delegate its authority regarding the selection of Participants and granting of Options under Part I. The Committee shall report all actions taken by it to the Board.

     (c) Program Guidelines. Without limiting the foregoing, Option grants shall be determined and administered pursuant to Program Guidelines, not inconsistent with the provisions of the Program, established from time to time by the Committee. Program Guidelines shall be designed to further the purpose of the Program and to ensure the administration of an effective and competitive incentive program based on the Company’s needs and requirements from time to time.

     (d) Limitation of Liability. Neither the Board nor the Committee, nor any member of either or other employees designated to help administer the Program, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Program and the members of the Board and the committee and such other employees shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including without limitation attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or any directors and officers liability insurance coverage which may be in effect from time to time.

     Article 2. Common Shares Subject to Options. The maximum aggregate number of shares of Common Stock with respect to which Options may be granted from time to time under the Plan

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is 8,00,000 shares, subject to adjustment as provided in Article 5 of the General Provisions of the Program. The maximum aggregate number of shares of Common Stock with respect to which Options may be, granted from time to time under the Non-Employee Plan is 5,00,000 shares, subject to adjustment as provided in Article 5 of the General Provisions of the Program. The Common Stock issued under the Program may be either previously authorized but unissued shares or treasury shares acquired by the Company. In the event that any Option expires, lapses, is forfeited, is settled in cash in lieu of Common Stock or otherwise terminates, any shares of Common Stock allocable to the terminated portion of such Option may again be made subject to an Option under the Program; provided, however, if an individual hag received the benefits of ownership with respect to the securities underlying any option granted under the Plan or the Non-employee Plan, including without limitation, the right to receive dividends, such shares may not again be made subject to an Option under the Program.

     Article 3. Eligibility and Participation. Officers, employees, advisors or consultants of the Company or its Subsidiaries shall be eligible for selection by the Committee to participate in Part I. However, Incentive Stock Options may be granted under the Plan only to a person who is an employee of the Company or its Subsidiaries. An employee may be granted Nonqualified Stock Options under the Program; provided, however, that the grant of Nonqualified Stock Options and Incentive Stock Options to an employee shall be the grant of separate options and each Nonqualified Stock Option and each Incentive Stock Option shall be specifically designated as such in accordance with applicable provisions of the Code. Only Non-Employee Directors are eligible to receive grants under Part II and such directors may only receive grants under Part II.

     Article 4. Effective Date and Term of the Program. The Program shall be effective upon its adoption by the Board, subject to the approval of the Program by the Company’s shareholders in accordance with SEC Rule 16b-3 and Sections 162(m) and 422 of the Code. The Program shall remain in effect until all Options granted thereunder have been satisfied by the issuance of Common Stock or the payment of cash (unless sooner terminated under Article 6 of these General Provisions).

     Article 5. Adjustments. If the outstanding shares of Common Stock are increased, decreased, changed into, or exchanged for a different number or kind of shares or securities through merger, consolidation, combination, exchange of shares, other reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, an appropriate and proportionate adjustment shall be made in the maximum number and

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kind of shares as to which Options may be granted under this Program. A corresponding adjustment changing the number and kind of shares allocated to unexercised Options or portions thereof, which shall have been granted prior to any such change, shall likewise be made. Any such adjustment in outstanding Options shall be made without change in the aggregate purchase price applicable to the unexercised portion of the Option, but with a corresponding adjustment in the price for each share or other unit of any security covered by the Option.

     Article 6. Termination and Amendment of the Program. In general, the Program shall terminate 10 years from the date such program is adopted by the Board of Directors, or the date such program is approved by the stockholders, whichever is earlier, or shall terminate at such earlier time as the Board of Directors may so determine. No options shall be granted under the Program after that date. Subject to the limitation contained in Article 7 of these General Provisions, the Committee may at any time amend or revise the terms of the Program, including the form and substance of the Option Agreements to be used hereunder; provided, however, that the terms and provisions of the Program which determine the eligibility of Non-Employee Directors to receive grants under Part II and the amount, price and timing of the formula grants under such Part II shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended (the “Code”) , the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder; provided, further, however, that without approval by the stockholders of the Company representing a majority of the shares entitled to vote thereon (as described in Article 4 of these General Provisions) no amendment or revision shall (a) except as provided in Article 5 of these General Provisions, materially increase the maximum number of shares that may he issued under this Program; (b) change the minimum purchase price for shares under Section 3 of Part I and/or Section 2 of Part II; (c) increase the maximum term established under, the Plans for any Option; (d) materially modify the requirements as to eligibility for participation in the Program; (e) change the term of the Program described in Article 4 of these General Provisions; or (f) materially increase the benefits accruing to participants under the Program. In addition, no such amendment or revision shall be effective if it would disqualify the Program from the exemptions provided by SEC Rule 16b-3.

     Article 7. Prior Rights and Obligations. No amendment, suspension, or termination of the Program shall, without the consent of the individual who has received an Option, alter or impair any of that person’s rights or obligations under any Option granted under the Program prior to that amendment, suspension, or, termination.

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     Article 8. Privileges of Stock Ownership. Notwithstanding the exercise of any Option granted pursuant to the terms of this Program, no individual shall have any of the rights or privileges of a stockholder of the Company in respect of any shares of stock issuable upon the exercise of his or her Option until certificates representing the shares have been issued and delivered. No shares shall be required to be issued and delivered upon exercise of any Option unless and until all of the requirements of law and of all regulatory agencies having jurisdiction over the issuance and delivery of the securities have been fully complied with.

     Article 9. Reservation of Shares of Common Stock. The Company, during the term of this Program, will at all times reserve and keep available such number of shares of Common stock as shall be sufficient to satisfy the requirements of the Program. In addition, the Company will from time to time, as is necessary to accomplish the purposes of this Program, seek or obtain from any regulatory agency having jurisdiction any requisite authority in order to issue and sell shares of Common Stock hereunder. The inability of the Company to obtain from any regulatory agency having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares of its stock hereunder shall relieve the Company of any liability in respect of the nonissuance or sale of the stock as to which the requisite authority shall not have been obtained.

     Article 10. Tax Withholding. The Company shall have the right to deduct from any payment or settlement under the . Program, including, without limitation, the exercise of any Option, or the delivery, transfer or vesting of any Common Stock, any federal, state, local or other taxes of any kind which the Committee, in its sole discretion, deems necessary to be withheld to comply with the and/or any other applicable law, rule or regulation. If the Committee in its sole discretion, permits shares of Common Stock to be used to satisfy any such tax withholding, such Common Stock shall be valued based on the Fair Market Value of such stock as of the date the tax withholding is required to be made, such date to be determined by the Committee. The Committee may establish rules limiting the use of Common Stock to meet withholding requirements by Participants and Eligible Directors who are subject to Section 16 of the Exchange Act.

     Article 11. SEC Compliance. With respect to persons subject to Section 16 of the Exchange Act, transactions under the Program are intended to comply with all applicable conditions of SEC Rule 16b-3. To the extent any provision of the Program or any action of the Committee fails to comply with such rule, it shall be deemed null and void, to the extent permitted by law and

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deemed advisable by the Committee. If a person subject to Section 16 of the Exchange Act exercises his or her rights under an Option grant under the Program before six months have passed from the date of the grant, the Company shall hold in its custody any resulting stock certificate until six months has passed from the date of the grant provided, however, that upon the occurrence of any Change of Control all such stock certificates which have been withheld shall immediately be delivered to such person.

     Article 12. Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware (without reference to the principles of conflict of laws thereof), except to the extent preempted by federal law which shall govern to that extent. Any titles and headings herein are for reference purposes only, and in no way shall limit, define or otherwise affect the meaning, construction or interpretation of any provisions of the Program.

     Article 13. Listing, Registration and Other Legal Compliance. No Options or shares of Coupon Stock shall be required to be granted or issued under the Program unless legal counsel for the Company shall be satisfied that such issuance or grant will be in compliance with all applicable federal and state securities laws and regulations and any other applicable laws or regulations. The Committee may require, as a condition of any payment or share issuance, that such agreements, undertakings, representations, certificates, and/or information as the Committee may deem necessary or advisable, be executed or provided to the Company to assure compliance with all such applicable laws or regulations. Certificates for shares of Common Stock delivered under the Program may be subject to such stock transfer orders and such other restrictions as the Committee may deem advisable under the rules, regulations, or other requirements of the SEC, or any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. In addition, if, at any time specified herein (or in any Option Agreement or otherwise) for, (i) the granting of any Option or the making of any determination, (ii) the issuance or other distribution of Common Stock, or (iii) the payment of amounts to or through any Participant or Eligible Director with respect to any Option, any law, rule, regulation or other requirement of any governmental authority or agency shall require either the Company, any Subsidiary or any Participant or Eligible Director (or any estate, designated beneficiary or other legal representative thereof) to take any action in connection therewith, the granting of such Option, the making of such determination, the issuance or distribution of Common Stock or such payment, as the case may be, shall be deferred until such required action is taken.

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     Article 14. Transfer of Options. Options granted under the Program and any Option Agreement, and any rights or interests herein or therein, shall not be assigned, transferred, sold, exchanged, or otherwise disposed of in any way at any time by any Participant or Eligible Director (or any beneficiary (ies) of any Participant or Eligible Director), other than by testamentary disposition by the Participant or Eligible Director or intestate succession. Any such Option, Option Agreement, rights or interests shall not be pledged, encumbered or otherwise hypothecated in any way at any time by any Participant or Eligible Director (or any beneficiary (ies) of any Participant or Eligible Director). Any such Option, Option Agreement, rights or interests shall not be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber, or otherwise dispose of or hypothecate in any way any such Options, rights or interests, or the levy of any execution, attachment or similar legal process thereon, contrary to the terms of this Program shall be null and void and without legal force or effect.

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PART I

GLACIER WATER SERVICES, INC.
1994 EMPLOYEE STOCK OPTION PLAN

     1. Purpose. The purpose of the Glacier Water Services, Inc. 1994 Employee Stock Option Plan (the “Plan”) is to further the interests of the Company, its subsidiaries and its shareholders by enabling the Company’s Board of Directors to award stock options to officers, employees, advisors and consultants of the Company or its Subsidiaries. It is intended that the Plan will help secure, retain, and motivate employees of the highest calibre and potential.

     2. Form of Options. Options may be granted from time to time under the Plan and pursuant to established Program Guidelines in the form of Incentive Stock Options or Non-Qualified Stock Options. Option grants shall be evidenced by written Option Agreements.

     3. Stock Options. Options for the purchase of Common Stock of the Company shall be evidenced by Agreements in such form and not inconsistent with the Plan as the Committee shall approve from time to time, which Agreements shall contain in substance the following terms and conditions:

     (a) Type of Option. Options granted under the Plan may be in the form of Incentive Stock Options or Non-Qualified Stock Options, and each Option Agreement shall identify the type of Option represented thereby.

     (b) Option Price. The exercise price per share of the Common Stock subject to an Option shall be determined by the Committee, including without limitation, a determination based on a formula determined by the Committee; provided, however, that the exercise price of an Incentive Stock Option shall be determined in accordance with Subsection (h), of this Section 3 and, provided, further that no exercise price shall be less than the par value of the Common Stock.

     (c) Exercise Term. Each Option Agreement shall state the period or periods of time within which the Option may be exercised, in whole or in part, which shall be such period or periods of time as may be determined by the Committee, provided that no Option shall be exercisable prior to six months. or after ten years from the date of grant thereof. The Committee may, in its discretion , provide in the Agreement circumstances under which the Option shall become immediately exercisable, and may,

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notwithstanding the foregoing, accelerate the exercise of any outstanding Option at any time.

     (d) Notice. Upon becoming exercisable, the exercisable portion of an Option may be exercised in whole or in part at any time and from time to time before termination of such Option, by giving written notice, signed by the person exercising the Option, to the Secretary of the Company stating the number of shares of Common Stock in respect of which the Option is being exercised, accompanied by payment in full of the aggregate option exercise price for the shares of Common Stock to be acquired. The date both such notice and payment are received by the office of the Secretary of the Company shall be the date of exercise of the Option as to such number of shares of Common Stock. No Option may be exercised at any time in respect of a fractional share.

     (e) Payment for Shares. The purchase price of the shares with respect to which an Option is exercised shall be payable in full at the time of exercise in cash, by certified check, bank draft or money order payable to the order of the Company or, if permitted by the Committee and applicable law, by delivery of, alone or in conjunction with a partial cash or instrument payment (i) shares of Common Stock already owned by the Participant for at least six (6) months, or, (ii) some other form of payment acceptable to the Committee The Committee may also permit Participants to simultaneously exercise Options and sell the shares of Common Stock thereby acquired, pursuant to a “cashless exercise” arrangement or program, selected by and approved in all respects in advance by the Committee. Payment instruments shall be received by the Company subject to collection.

     (f) Rights Upon Termination of Employment. In the event that a Participant ceases to be an employee of the Company or its Subsidiaries upon retirement or for any reason other than death, Disability or termination by the Company for Cause, the Participant shall have the right to exercise an Option during its term within a period of ninety days after such termination to the extent that the Option was exercisable at the time employment was terminated, or within such other period, and subject to such terms and conditions, as may be prescribed by the Committee. In the event that a Participant ceases to be an employee of the Company or its Subsidiaries due to death or Disability, such Participant’s Options shall immediately and fully vest and the Participant or his or her successor shall have the right to exercise any such Option during its term within a period of one year after such termination, or within such other period, and subject to such terms and conditions, as may be prescribed by the Committee. In the event of a Participant’s termination by the

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Company for Cause, all unexercised Options shall be forfeited and canceled.

     (g) Non-transferability. Each Option is not transferable other than by testamentary disposition or the laws of intestate succession, and during the lifetime of the Participant is exercisable only by him or her.

     (h) incentive Stock Options. In the case of an Incentive Stock Option, each Option Agreement shall contain such other terms, conditions and provisions as the Committee determines necessary or desirable in order to qualify such Option as a tax-favored Option (within the meaning of Section 422 of the Code, or any amendment thereof, substitute therefore, or regulation thereunder, including without limitation, the following: (i) the aggregate Fair Market Value (determined as of the time the Option is granted) of the Common Stock with respect to which the Incentive Stock Options are exercisable by any individual for the first time in any calendar year (under all plans of the Company and its Subsidiaries) shall not exceed $100,000; (ii) the exercise price of an incentive Stock Option shall not be less than one hundred percent, of the Fair Market Value of the Common Stock on the date of grant of the Option; and, (iii) no incentive Stock Options shall be granted to any individual if at the time such Option is granted the individual owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its Subsidiaries unless at the time such Option is granted the exercise price is at least 110 percent of the Fair Market Value of the Common Stock subject to such Option and such Incentive Stock Option by its terms is not exercisable after five years from the date of grant.

     4. Designation of Beneficiary. Each Participant to whom an Option has been granted under the Plan may designate a beneficiary or beneficiaries to exercise any option or to receive any payment which under the terms of the Plan and the relevant Option Agreement may become exercisable or payable on or after the Participant’s death. At any time, and from time to time, any such designation may be changed or canceled by the Participant without the consent of any such beneficiary. Any such designation, change or cancellation must be on a form provided for that purpose by the Committee and shall not be effective until received by the Company. If no beneficiary has been designated, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s estate. If the Participant designates more than one beneficiary, any payments under the Plan to such beneficiaries shall be made in equal shares unless the Participant has expressly designated otherwise.

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     5. Recapitalization Adjustments. All Options granted pursuant to the terms of the Plan shall be adjusted in the manner prescribed by Article 5 of the General Provisions of the Program.

     6. Certain Mergers.

     (a) The Company as Surviving Corporation. If the Company enters into or is involved in any merger, reorganization or other business combination with any person or entity (such merger, reorganization or other business combination to be referred to herein as a “Merger Event”) and as a result of any such Merger Event, the Company will be or is the surviving corporation, a Participant shall be entitled, as of the date of the execution of the agreement evidencing the Merger Event (the “Execution Date”) and with respect to both exercisable and non-exercisable Options (but only to the extent not previously exercised), to receive substitute stock options in respect of the shares of the surviving corporation on such terms and conditions, as to the number of shares, pricing and otherwise, which shall substantially preserve the value, rights and benefits of any affected Option granted hereunder as of the date of the consummation of the Merger Event. Notwithstanding anything to the contrary in this Section, if any Merger Event occurs, the Company shall have the right, but not the obligation, to pay to each affected Participant an amount in cash or certified check equal to the excess of the Fair Market Value of the Common Stock underlying any affected unexercised Options as of the Execution Date (whether then exercisable or not) over the aggregate exercise price of such unexercised Options.

     (b) The Company Not the Surviving Corporation. In the case of a Merger Event in which the Company will not be, or is not, the surviving corporation, and the Company determines not to make the cash or certified check payment described in Section 6(a) of the Plan, the Company shall compel and obligate, as a condition of the consummation of the Merger Event, the surviving or resulting corporation and/or the other party to the Merger Event, as necessary, or any parent, Subsidiary or acquiring corporation thereof, to grant, with respect to both exercisable and non-exercisable Options (but only to the extent not previously exercised), substitute options in respect of the shares of common or other capital stock of such surviving or resulting corporation on such terms and conditions, as to the number of shares, pricing and otherwise, as shall substantially preserve the value, rights and benefits of any affected Options previously granted hereunder as of the date of this consummation of the Merger Event.

     (c) Cancellation of Pervious Awards. upon receipt by an affected Participant of any such cash, certified check, or

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substitute options as a result of any such Merger Event, such Participant’s affected Options for which such cash, certified check or substitute options was received shall be thereupon canceled without the need for obtaining the consent of any such affected Participant.

     (d) Administration. The foregoing adjustments and the manner of application of the foregoing provisions, including, without limitation, the issuance of any substitute stock options, shall be determined in good faith by the Committee in its sole discretion. Any such adjustment may provide for the elimination of fractional shares.

     7. Change of Control.

     (a) Acceleration of Awards. Anything in the Program to the contrary notwithstanding, if a Change of Control of the Company occurs, all Options then unexercised and outstanding shall become fully vested and exercisable as of the date of the Change of Control. The immediately preceding sentence shall apply to only those Participants (A) who are employed by the Company and/or one of its subsidiaries as of the date of the Change of Control, or (B) to whom Section 7(c) below is applicable.

     (b) Payment After Change of Control. Notwithstanding anything to the contrary in the Plan, within thirty (30) days after a Change of Control under subsection (i) of the definition of Change of Control, the holders of any Options shall have the right, but not the obligation, to elect, within ten (10) business days after the Participant has actual or constructive knowledge of the occurrence of such Change of Control, to require the Company to purchase such Options from the Participant for an aggregate amount equal to the then aggregate Fair Market Value of the Common Stock underlying such Options tendered, less the aggregate exercise price of such tendered Options.

     (c) Termination as a Result of a Change of Control. Anything in the Plan to the contrary notwithstanding, if a Change of Control occurs and if the Participant’s employment is terminated before such Change of Control and it is reasonably demonstrated by the Participant that such employment termination (i) was at the request, directly or indirectly, of a third party who has taken steps reasonably calculated to effect the Change of Control, or (ii) otherwise arose in connection with or in anticipation of the Change of Control, then for purposes of this Section 7, the Change of Control shall be deemed to have occurred immediately prior to such Participant’s employment termination (for all purposes other than those set forth in Section 7(b) of the Plan).

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     8. Right to Terminate Employment. Neither the adoption of the Plan, the granting of any Option, nor the execution of any Option Agreement, shall confer upon any employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, as the case may be, nor shall it interfere in any way with the right, if any, of the Company or any Subsidiary to terminate the employment of any employee at any time for any reason.

     9. Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets in connection with any Options granted under the Plan. Any liability of the Company to any person with respect to any Option granted under the Plan or any Option Agreement shall be based solely upon the contractual obligations that may fee created as a result of the Plan or any such Option grant or Option Agreement. No such obligation of the Company shall be deemed to secured by any pledge of, encumbrance on, or other interest in, any property or asset of the Company or any Subsidiary. Nothing contained in the Plan or any Option Agreement shall be construed as creating in respect of any Participant (or beneficiary thereof or any other person) any equity or other interest of any kind in any assets of the Company or any Subsidiary or creating a trust or a fiduciary relationship of any kind between the Company, any Subsidiary and/or any such Participant, any beneficiary thereof or any other person.

     10. Other Plans. Participation in this Plan shall not affect a Participant’s eligibility to participate in any other compensation or benefit plan of the Company or its Subsidiaries and any Options granted pursuant to this Plan shall not be used in determining any benefits or payments provided under any other plan unless specifically provided to the contrary.

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PART II

GLACIER WATER SERVICES, INC.
1994 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

     1. Purpose. The purpose of the Glacier Water Services, Inc. 1994 Non-Employee Directors Stock Option Plan (the “Non- Employee Plan”) is to promote the interests of the Company and its stockholders by strengthening the Company’s ability to attract and retain the services of experienced and knowledgeable Non-Employee Directors through formula grants and Deferred Elections of non-qualified stock options to acquire the Company’s Common Stock, par value of $.01 per share. In addition, such grants will encourage the closer alignment of the interests of such directors with those of the Company’s stockholders.

     2. Non-Qualified Stock Option Grants.

     (a) Nature of Options. All Options granted under the Non-Employee Plan shall be nonstatutory options and are not intended to qualify under Section 422 of the Code as “incentive stock options.”

     (b) Annual Grant. An annual Option to acquire 1,500 shares of Common Stock (as adjusted pursuant to Article 5 of the General Provisions of the Program) shall be granted (an “Annual Grant”) automatically each year, the first such grant to be made, subject to shareholder approval, on April 12, 1994 and subsequent grants to be made on the first business day of January of each year, to each Eligible Director.

     (c) Exercise Price. The option exercise price per Option Share for an Annual Grant shall be the Closing Price of the Common Stock on the first trading day (that is, a day on which the American Stock Exchange or any other exchange or association on or through which the stock is traded is open for trading and during which at least one share of Common Stock is traded) preceding the Grant Date.

     (d) Notice. Upon becoming exercisable in accordance with Section 3 of the Non-Employee Plan, the exercisable portion of an Option may be exercised in whole or in part at any time and from time to time during the Option Period (as defined in Section 2 (f) of the Non-Employee Plan) by giving written notice, signed by the person exercising the Option, to the Secretary of the Company stating the number of shares of Common Stock in respect of which the Option is being exercised, accompanied by payment in full of the aggregate option exercise price for the shares of Common Stock to be acquired. The date both such notice

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and payment are received by the office of the Secretary of the Company shall be the date of exercise of the Option as to such number of shares of Common Stock. No Option may be exercised at any time in respect of a fractional share.

     (e) Payment. Payment of the aggregate option exercise price may be made in cash or by certified or cashier’s check, bank draft or money order payable to the order of the Company or, if permitted by the Committee and applicable law, by delivery of, alone or in conjunction with a partial cash or instrument payment (i) shares of Common Stock already owned by the Eligible Director for at least six (6) months and having a fair market value equal to all or a portion of the option exercise price at the time of such exercise, or (ii) some other form of payment acceptable to the Committee. The Committee may also permit Eligible Directors to simultaneously exercise Options and sell the shares of Common Stock thereby acquired, pursuant to a “cashless exercise” arrangement or program, selected by and approved in all respects in advance by the Committee.

     (f) Option Period. Each Option shall expire ten years after its Grant Date (the “Option Period”) unless terminated earlier in accordance with Section 2 (g) of this Part II.

     (g) Rights Upon Termination of Board Membership. In the event that an Eligible Director ceases to be a Director of the Company or its Subsidiaries upon retirement or for any reason other than death, Disability or removal from the Board for Cause, the Eligible Director shall have the right to exercise an Option during its term within a period of ninety days after such termination to the extent that the Option was exercisable at the time such Eligible Director ceased to be a member of the Board. In the event that an Eligible Director ceases to be a Director of the Company or its Subsidiaries due to death or Disability, such Eligible Director’s Options shall immediately and fully vest and the Eligible Director or his or her successor shall have the right to exercise any such Option during its term within a period of one year after such Eligible Director ceased to be a member of the Board. In the event of an Eligible Director’s removal from the Board for Cause, all unexercised Options shall be forfeited and cancelled.

     (h) Assignment. The right of any Eligible Director to exercise an Option granted under the Non-Employee Plan shall, during the lifetime of such Eligible Director, be exercisable only by such Eligible Director and shall not be assignable or transferable by such Eligible Director other than by testamentary disposition or intestate succession.

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          (i) Shareholder Rights. Neither the Eligible Director, nor an Eligible Director’s successor or successors in interest, shall have any rights as a stockholder of the Company with respect to any shares of Common Stock subject to an Option granted to any such Eligible Director until the date of issuance of a stock certificate in respect of such shares. Neither the Non-Employee Plan, nor the granting of an Option, nor any other action taken pursuant to the Non-Employee Plan shall constitute or be evidence of any agreement or understanding, express or implied, that an Eligible Director has a right to continue as a director of the Company for any period of time or at any particular rate of remuneration.

          3. Vesting. Subject to Section 2 (f) of the Non-Employee Plan, an Option shall become exercisable in respect of the aggregate number of underlying shares of Common Stock, determined as of the Grant Date, according to the following schedule:

(a)	one-fourth on the first anniversary of the Grant Date;
(b)	an additional one-fourth on the second anniversary of the Grant Date;
(c)	an additional one-fourth on the third anniversary of the Grant Date; and
(d)	the remaining one-fourth on the fourth anniversary of the Grant Date.

          4. Board Authority. The existence of the Non-Employee Plan, any Option Agreement and/or the formula grants made hereunder shall not limit, affect or restrict in any way the right or power of the Board or the shareholders of the Company to make or authorize (a) any adjustment, recapitalization, reorganization or other change in the Company’s or any Subsidiary’s capital structure or its business, (b) any merger, consolidation or change in the ownership of the Company or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stocks ahead of or affecting the Company’s or any Subsidiary’s capital stock or the rights thereof, (d) any dissolution or liquidation of the Company or any Subsidiary, (e) any sale or transfer of all or any part of the Company’s or any Subsidiary’s assets or business, or (f) any other corporate act or proceeding by the Company or any Subsidiary. An Eligible Director, any beneficiary(ies) of any such Eligible Director and/or any other person shall not have any claim against any member of the Board or any committee thereof, the Company or any Subsidiary, or any employees, officers or

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agents of the Company or any Subsidiary, as a result of any such action.

          5. Recapitalization Adjustments. All Options granted pursuant to the terms of the Non-Employee Plan shall be adjusted in the manner described in Article 5 of the General Provisions of the Program.

          6. Certain Mergers.

          (a) The Company as Surviving Corporation. If the Company enters into or is involved in any merger, reorganization or other business combination with any person or entity (such merger, reorganization or other business combination to be referred to herein as a “Merger Event”) and as a result of any such Merger Event, the Company will be or is the surviving corporation, an Eligible Director shall be entitled, as of the date of the execution of the agreement evidencing the Merger Event (the “Execution Date”) and with respect to both exercisable and non-exercisable Options (but only to the extent not previously exercised), to receive substitute stock options in respect of the shares of the surviving corporation on such terms and conditions, as to the number of shares, pricing and otherwise, which shall substantially preserve the value, rights and benefits of any affected Option granted hereunder as of the date of the consummation of the Merger Event. Notwithstanding anything to the contrary in this Section, if any Merger Event occurs, the Company shall have the right, but not the obligation, to pay to each affected Eligible Director an amount in cash or certified cheek equal to the excess of the Fair Market Value of the Common Stock underlying any affected unexercised Options as of the Execution Date (whether then exercisable or not) over the aggregate exercise price of such unexercised Options; provided, however, that if the Company chooses to make such a payment to any Eligible Director, it must make such a payment to all Eligible Directors.

          (b) The Company Not the Surviving Corporation. In the case of a Merger Event in which the Company will not be, or is not, the surviving corporation, and the Company determines not to make the cash or certified cheek payment described in Section 6 (a) of the Non-Employee Plan, the Company shall compel and obligate, as a condition of the consummation of the Merger Event, the surviving or resulting corporation and/or the other party to the Merger Event, as necessary, or any parent, Subsidiary or acquiring corporation thereof, to grant, with respect to both exercisable and non-exercisable Options (but only to the extent not previously exercised), substitute options in respect of the shares of common or other capital stock of such surviving or resulting corporation on such terms and conditions,

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as to the number of shares, pricing and otherwise, as shall substantially preserve the value, rights and benefits of any affected Options previously granted hereunder as of the date of the consummation of the Merger Event.

          (c) Cancellation of Previous Awards. Upon receipt by an affected Eligible Director of any such cash, certified check, or substitute options as a result of any such Merger Event, such Eligible Directors’ affected Options for which such cash, certified check or substitute options was received shall be thereupon canceled without the need for obtaining the consent of any such affected Eligible Director.

          7. Change of Control.

          (a) Acceleration of Awards. Anything in the Program to the contrary notwithstanding, if a Change of Control of the Company occurs, all Options then unexercised and outstanding shall become fully vested and exercisable as of the date of the Change of Control. The immediately preceding sentence shall apply to only those Eligible Directors (A) who are directory of the Company and/or one of its Subsidiaries as of the date of the Change of Control, or (B) to whom Section 7(c) below is applicable.

          (b) Payment After Change of Control. Notwithstanding anything to the contrary in the Plan, within thirty (30) days after a Change of Control under subjection (i) of the definition of Change of Control any Eligible Director who holds Options shall have the rights, but not the obligation, to elect, within ten (10) business days after the Eligible Director has actual or constructive knowledge of the occurrence of such Change of Control, to require the Company to purchase such Options from the Eligible Director for an aggregate amount equal to the then aggregate Fair Market Value of the Common Stock underlying such Options tendered, less the aggregate exercise price of such tendered Options.

          (c) Termination as a Result of a Change of Control. Anything in the Plan to the contrary notwithstanding, if a Change of Control occurs and if the Eligible Director’s membership on the Board is terminated before such Change of Control and it is reasonably demonstrated by the Eligible Director that such termination (i) was at the request, directly or indirectly, of a third party who has taken steps reasonably calculated to effect the Change of Control, or (ii) otherwise arose in connection with or in anticipation of the Change of Control, then for purposes of this Section 7, the Change of Control shall be deemed to have occurred immediately prior to such Eligible Director’s removal

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from the Board (for all purposes other than those set forth in Section 7(b) of the Non-Employee Plan).

          8. Miscellaneous.

          (a) Option Agreements. Each Eligible Director shall enter into an Option Agreement with the Company in a form specified by the Company, Each such Eligible Director shall agree therein to the restrictions, terms and conditions set forth in such Option Agreement and/or the Non-Employee Plan.

          (b) Beneficiaries. Each Eligible Director may designate a beneficiary or beneficiaries to receive any payment which under the terms of the Non-Employee Plan and the relevant Option Agreement may become payable on or after the Eligible Director’s death. At any time, and from time to time, any such designation may be changed or canceled by the Eligible Director without the consent of any such beneficiary. Any such designation, change or cancellation must be on a form provided for that purpose by the Company and shall not be effective until received by the Company. If no beneficiary has been designated by a deceased Eligible Director, or if the, designated beneficiaries have predeceased the Eligible Director, the beneficiary shall be the Eligible Director’s estate. If the Eligible Director designates more than one beneficiary, any payments under the Non-Employee Plan to such beneficiaries shall be made in equal shares unless the Eligible Director has expressly designated otherwise, in which case the payments shall be made in the shares designated by the Eligible Director.

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IN WITNESS WHEREOF, this Program is adopted by Glacier Water services, Inc. on this ____ day of ____________, 1994,

GLACIER WATER SERVICES, INC.
By:
	Title:

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FIRST AMENDMENT TO GLACIER WATER SERVICES. INC.
1994 STOCK COMPENSATION PROGRAM

l. Purpose

     The purpose of this First Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Amendment”) is to include provisions pursuant to which non-employee members of the Board of Directors of Glacier Water Services, Inc. may elect to receive stock options in lieu of cash director fees and to increase the maximum number of shares issuable under the Program.

2. Definitions

     (a) Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

     (b) Paragraph 5 of the Program is amended by adding the following as a now Paragraph 5(b):

“Amendment No. 1” means amendment No. 1 to the Program as adopted by the stockholders of the Company on June 6, 1995.

     (c) Former Paragraphs 5(b) through (j) of the Program are renumbered Paragraphs 5(c) through (k).

     (d) Paragraph 5 of the Program is further amended by addling the following as a Paragraph 5(1):

“Deferral Election” means the election to receive Deferral Election Stock Options (i) under Part I, by a director of the Company who does not constitute an Eligible Director under the non-Employee Plan or (ii) under Part II, by an Eligible Director.

     (e) Paragraph 5 of the Program is further amended by adding the following as a new Paragraph 5(m):

“Deferral Election Stock Option” shall means and refer to any Option granted to a director of the Company pursuant to a Deferral Election.

     (f) Former Paragraphs 5(k) through (n) of the Program are renumbered Paragraphs 5(n) through (q).

     (g) Former Paragraph 5(o) of the Program is renumbered paragraph 5(r); such Paragraph 5(r) is amended by deleting the words “of any Annual Meeting” and adding the words “or a Deferral Election Stock Option” after the words “in respect of which an Annual Grant.”

     (h) Former Paragraph 5(p) of the Program is renumbered Paragraph 5(s).

     (i) Paragraph 5 of the Program is further amended by adding the following as a new Paragraph 5(t):

          “Initial Election Date” means, for each member of the Board of Directors, the later too occur of (i) the date Amendment No. 1 is adopted by the Board of Directors, or (ii) date of such member’s initial election or appointment to the Board of Directors.

     (j) Former Paragraphs 5(q) through (s) of the Program are renumbered paragraphs 5(u) through (w).

     (k) Former Paragraph 5(f) of the Program is renumbered Paragraph 5(x); such Paragraph 5(x) is amended by adding the words “or entitled to elect” after the words “Participate means any individual selected.”

     (l) Former Paragraphs 5(u) through (w) are renumbered 5(y) through (aa).

     (m) Former Paragraph 5(x) is renumbered Paragraph 5(ab); such Paragraph 5(ab) is amended by adding the words “including without limitation Deferral Election Stock Options” after the words “whether granted under Part I or Part II.”

     (n) Former Paragraph 5(y) is renumbered Paragraph 5(ac).

3. Administration

     Article 1(b) of the Program is amended by adding the words “and Deferral Election Stock Options” after the words “Except with respect to Option grants under the Non-Employee Plan” in the first sentence thereof.

4. Common Shares Subject to Options

     Article 2 of the Program is amended by deleting the number “117,250” and replacing it with the number “175,000” in the first sentence thereof; and by deleting the number “25,000” and replacing it with the number “100,000” in the second sentence thereof.

5. Eligibility and Participation

     Article 3 of the Program is amended by adding the words “and directors who do not constitute Eligible Directors shall be eligible to receive Deferral Election Stock Options under Part I” at the end of the first sentence thereof.

6. Termination and Amendment of the Program

     Article 6 of the Program is amended by adding the words “and Deferral Elections” after the words to receive grants under Part II and the amount, price and timing of the formula grants” in the third sentence thereof.

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PART I: GLACIER WATER SERVICES, INC. 1994 EMPLOYEE STOCK OPTION PLAN (THE “PLAN”)

7. Purpose

     Paragraph 1 of the Plan is amended by adding the words “and enabling directors of the Company who do not constitute Eligible Directors to elect to receive Deferral Election Stock Options” at the end of the first sentence thereof.

8. Form of Options

     Paragraph 2 of the Plan is amended by adding the following sentence after the first sentence thereof: “Deferral Election Stock Options shall be granted hereunder in the same manner set forth in Section 2(b) of the Non-Employee Plan as if the Participant Director were an Eligible Director.”

9. Stock Option

     (a) Paragraph 3(b) of the Plan is amended by adding the following sentence at the end thereof: “Notwithstanding the forgoing, the exercise price of Deferral Election Stock Options granted hereunder shall be determined in the same manner set forth in Section 2(c) of the Non-Employee Plan.”

     (b) Paragraph 3(c) of the Plan is amended by adding the following sentence at the end thereof: “Notwithstanding the foregoing, the periods of time within which Deferral Election Stock Options granted hereunder shall become exercisable shall be determined in the same manner set forth in Section 3 of the Non-Employee Plan.”

     (c) Paragraph 3(f) of the Plan is amended by adding the following sentence at the end thereof: “This Section 3(f) shall not apply to Deferral Election Stock Options, which will be subject instead to the last paragraph of Section 3 of the Non-Employee Plan.”

10. Change of Control

     Paragraph 7(c) of the Plan is amended by adding the words “or directorship” after the words “if a Change of Control occurs and if the Participant’s employment” in the first sentence thereof: by adding the words “or directorship” after the words “reasonably demonstrated by the Participant that such employment” in the first sentence thereof; and by adding the words “or directorship” after the words “deeded to have occurred immediately prior to such Participant’s employment” in the last sentence thereof.

PART II: GLACIER WATER SERVICES, INC. 1994 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN (THE “NON-EMPLOYEE PLAN”)

11. Purpose

     Paragraph 1 of the Non-Employee Plan is amended by adding the words “and Deferral Elections” after the words “retain the services of experienced and knowledgeable Non-Employee Director through formula grants” in the first sentence thereof.

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12. Non-Qualified Stock Option Grants

     (a) Paragraph 2(b) of the Non-Employee Plan is amended by adding the words “and Deferral Election Stock Options” after the words “Annual Grant” in the heading to Paragraph 2(b); and by inserting the following at the end thereof:

          “Each Eligible Director may make an irrevocable election (a “Deferral Election”) each year, at least six months prior to the Company’s next scheduled annual meeting of stockholders (or for directors whose Initial Election Date shall fall within the period of six months prior to the next scheduled annual meeting, on such Initial Election Date), to receive, in lieu of all or any portion of the compensation to which such Eligible Director would otherwise be entitled to receive as a member of the Board of Directors (other than reimbursement for expenses) for the period from the next scheduled annual meeting to the day prior to the following annual meeting, Deferral Election Stock Options in accordance with the formula set forth below; provided, however, that a director may make his first Deferral Election on, or at any time prior to, such director’s Initial Election Date. The Deferral Election Stock Options shall be granted on the day of the annual meeting in each year for which a Deferral Election has been made. The number of Deferral Election Stock Options granted to an Eligible Director shall be an amount whose value, as determined by an independent valuation expert, retained by the Committee, is equivalent on the Grant Date to the cash compensation which the Eligible Director would otherwise have been entitled to receive for such year. No Eligible Director shall be entitled to receive Deferral Election Stock Options having a value greater than the amount of the annual cash compensation that such director would have been entitled to receive for such year as of the date of the adoption of Amendment No. 1, unless, in the event that such cash compensation is increased subsequent to the date of the adoption of Amendment No. 1, such increase has been approved by a majority of stockholders of the Company. Each Deferral Election shall be set forth in a written notice delivered to the Secretary of the Company. A Deferral Election may be terminated or modified by written notice to the Secretary of the Company, in which case such termination or modification shall become effective six months after the receipt of such notice by the Company.

          (b) Paragraph 2(c) of the Non-Employee Plan is amended by adding the words “or a Deferral Election Stock Option” after the words “Option exercise price per Option Share for an Annual Grant.

          (c) Paragraph 2(g) of the Non-Employee Plan is amended by adding the following sentence at the end thereof: “This Section 2(g) shall not apply to Deferral Election Stock Options which shall be subject instead to the last paragraph of Section 3 of this Part II.”

13. Vesting

     Paragraph 3 of the Non-Employee Plan is amended by adding the words “(other than Deferral Election Stock Options)” after the words “Subject to Section 2(f) of the Non-Employee Plan, an Option” in the first sentence thereof; and by inserting the following at the end thereof:

          “Deferral Election Stock Options shall become exercisable in respect of the aggregate number of underlying shares of Common Stock, determined as of the Grant Date, on the first anniversary of the Grant Date (or such longer period as the Committee may set); provided that Deferral Election Stock Options shall become immediately exercisable upon a director’s death, Disability or upon a Change of Control. If a director’s membership on the Board ends for any reason other than death. Disability, or a Change of Control, then the number of Deferral Election Stock Options granted for the year in which the membership ends shall be reduced to reflect the amount of compensation actually earned by the Director in that year and the remaining Deferral Election Stock Options granted in that year shall become immediately exercisable. Once any Deferral Election Stock Options become exercisable, they shall remain exercisable for the lesser of (i) 10 years after the Grant Date or (ii) one year after the director’s membership on the Board ends for any reason.”

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14. Board Authority

     Paragraph 4 of the Non-Employee Plan is amended by adding the words “and Deferral Elections” after the words “The existence of the Non-Employee Plan, any Option Agreement and/or the formula grants” in the first sentence thereof.

15. Date of the Amendment and Approval of Shareholders

     This First Amendment is dated April 27, 1995, which is the date upon which the Board of Directors adopted this Amendment. This Amendment is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at, a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, no Deferral Election Stock Options may be granted to directors until such shareholder approval is obtained and all elections previously made by any directors shall be automatically canceled.

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SECOND AMENDMENT TO THE GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

     1. Purpose. The purpose of this Second Amendment to the Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Amendment”) is to modify certain provisions pursuant to which members of the Board of Directors of Glacier Water Services, Inc. may elect to receive Deferral Election Stock Options in lieu of cash director fees.

     2. Definition. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program.

     3. Vesting. The last sentence of Paragraph 3 of the 1994 Non-Employee Directors Stock Option Plan is amended by deleting the text “10 years” and replacing it with the text “five (5) years.”

     4. Date of the Amendment. This Second Amendment is dated 9/17,1996 and shall be effective for all Deferral Election Stock Options granted prior to the date hereof or granted hereafter.

In WITNESS WHEREOF, the Company has caused this Amendment to be executed this 17^th day of September, 1996.

GLACIER WATER SERVICES, INC.
By:	/s/ Brenda K. Foster
	Name:	Brenda K. Foster
	Title:	Corporate Secretary

SECOND AMENDMENT TO THE GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

     1. Purpose. The purpose of this Second Amendment to the Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Amendment”) is to modify certain provisions pursuant to which members of the Board of Directors of Glacier Water Services, Inc. may elect to receive Deferral Election Stock Options in lieu of cash director fees.

     2. Definitions. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program.

     3. Vesting. The last sentence of Paragraph 3 of the 1994 Non-Employee Directors Stock Option Plan is amended by deleting the text “10 years” and replacing it with the text “five (5) years.”

     4. Date of the Amendment. This Second Amendment is dated _______,1996 and shall be effective for all Deferral Election Stock Options granted prior to the date hereof or granted hereafter.

     In WITNESS WHEREOF, the Company has caused this Amendment to be executed this 19^th day of September, 1996.

GLACIER WATER SERVICES, INC.
By:
	Name:
	Title:

Exhibit 1

THIRD AMENDMENT TO GLACIER WATER SERVICES, INC
1994 STOCK COMPENSATION PROGRAM

     1. Purpose. The purpose of this Third Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Third Amendment”) is to increase the maximum number of shares of common stock issuable under the Program.

     2. Definitions. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

     3. Common Shares Subject to Options. Article 2 of the Program is amended by deleting the number “175,000” and replacing it with the number “275,000” in the first sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under the 1994 Employee Stock Option Plan (Part I of the Program).

     4. Date of the Amendment and Approval of Shareholders. This Third Amendment is dated February        , 1997, which is the date upon which the Board of Directors adopted this Amendment. This Amendment is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, this Third Amendment shall have no further effect and any options granted in reliance of shareholder approval hereof shall be automatically cancelled.

Exhibit 1

FIVE AMENDMENT TO GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

     1. Purpose. The purpose of this Fourth Amendment (this “Fourth Amendment”) to Glacier Water Services, Inc. (the “Company”) 1994 Stock Compensation Program (the “Program”) is to (i) amend the Program to remove the requirement that the shareholders of the Company approve certain amendments delineated in Article 6 of the Program, in accordance with the modifications made to Rule 16b-3, effective as of August 15, 1996, promulgated under the Securities Exchange Act of 1934, as amended, and (ii) to amend Part II of the Program, the 1994 Non-Employee Directors Plan (the “Plan”), to allow the Compensation Committee of the Board of Directors of the Company to set the vesting and exercise schedule for Non-Employee Directors upon termination of Board of Directors membership for any reason other than for Cause.

     2. Definitions. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Program.

     3. Amendment of the Program. Article 6 of the Program is hereby deleted in its entirety and replaced by the following:

“Article 6. Termination and Amendment of the Program. In general, the Program shall terminate 10 years from the date such program is adopted by the Board of Directors, or the date such program is approved by the stockholders, whichever is earlier, or shall terminate at such earlier time as the Board of Directors may so determine. No options shall be granted under the Program after that date. Subject to the limitation contained in Article 7 of these General Previsions, the Committee may at any time amend or revise the terms of the Program, including the form and substance of the Option Agreements to be used hereunder; provided, however, that the terms and provisions of the Program which determine the eligibility of Non-Employee Directors to receive grants under Part II and the amount, price end timing of the formula grants under such Part II shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended (the “Code”), the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder; provided, further, however, that without approval by the stockholders of the Company representing a majority of the shares entitled to vote thereon (as described in Article 4 of these General Provisions) no amendment or revision shall, except as provided in Article 5 of these General Provisions, materially increase the maximum number of shares that may be issued under this Program. In addition, no such amendment or revision shall be effective it would disqualify the Program from the exemptions provided by SEC Rule l6b-3.”

     4. Amendment of the Plan. Section 2(g) of the Plan is hereby replaced in its entirety and replaced with the following:

     “(g) Rights Upon Termination of Board Membership. In the event that an Eligible Director ceases to be a Director of the Company or its Subsidiaries upon retirement or for any reason other than death, Disability or removal from the Board for Cause, the Eligible Director shall have the right to exercise an Option during its term within a period of ninety days after such termination to the extent that the Option was exercisable at the time such Eligible Director ceased to be a member of the Board. In the event that an Eligible Director ceases to be a Director of the Company or its Subsidiaries due to death or Disability, such Eligible Director’s Options shall immediately and fully vest and the Eligible Director or his or her successor shall have the right to exercise any such Option during its term within a period of one year after such Eligible Director ceased to be a member of the Board. Notwithstanding the foregoing, however, the Committee may, as its discretion based on the specific facts surrounding the departure of an Eligible Director

from the Board, set an alternative vesting and exercise schedule for Options issued to such Eligible Director so long as such Eligible Director’s departure from the Board was for any reason other than for Cause. In the event of an Eligible Director’s removal from the Board for Cause, all unexercised Options shall be forfeited and cancelled.”

     5. Date of the Amendment. This Fourth Amendment is effective as of March 31,1997, which is the date upon which the Board of Directors adopted this Amendment.

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Exhibit A

FOURTH AMENDMENT TO GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

     1. Purpose. The purpose of this fourth Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Fourth Amendment”) is to increase the maximum number of shares of common stock issuable under the Program.

     2. Definitions. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

     3. Common Shares Subject to Options. Article 2 of the Program is amended by deleting the number “275,000” and replacing it with the number “525,000” in the first sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part I of the 1994 Stock Compensation Program. Article of the Program is amended by deleting the number “150,000” and replacing it with the number “180,000” in the second sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part II of the 1994 Stock Compensation Program.

     4. Date of the Amendment and Approval of Shareholders. This Fourth Amendment is effective as of April 14, 1998, and is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, this Fourth Amendment shall have no further effect and any options granted in reliance of shareholder approval hereof shall be automatically cancelled.

Exhibit 1
SIXTH AMENDMENT TO GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

1. Purpose.

     The purpose of this Sixth Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Sixth Amendment”) is to increase the maximum number of shares of common stock under the Program.

2. Definitions.

     Terms used in this Amendment and not defined herein shall have the meaning ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

3. Common Shares Subject to Options.

     Article 2 of the Program is amended by deleting the number “525,000” and replacing it with the number “650,000” in the first sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part I of the 1994 Stock Compensation Program.

     Article 2 of the Program is amended by deleting the number “180,000” and replacing it with the number “300,000” in the second sentence thereof, such number pertains to the maximum number of options for common stock to be granted under Part II of the 1994 Stock Compensation Program.

4. Date of the Amendment and Approval of Shareholders.

     This Sixth Amendment is effective as of March 21, 2000, and is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, this Sixth Amendment shall have no further effect and any options granted in reliance of shareholder approval hereof shall be automatically canceled.

16

Exhibit II

SEVENTH AMENDMENT TO GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

1. Purpose.

     The purpose of this Seventh Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Seventh Amendment”) is to increase the maximum number of shares of common stock under the Program.

2. Definitions.

     Terms used in this Amendment and not defined herein shall have the meaning ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

3. Common Shares Subject to Options.

     Article 2 of the Program is amended by deleting the number “650,000” and replacing it with the number “800,000” in the first sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part I of the 1994 Stock Compensation Program.

     Article 2 of the Program is amended by deleting the number “300,000” and replacing it with the number “500,000” in the second sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part II of the 1994 Stock Compensation Program.

4. Date of the Amendment and Approval of Shareholders.

     This Seventh Amendment is effective as of March 15, 2001, and is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, this Seventh Amendment shall have no further effect and any options granted in reliance of shareholder approval hereof shall be automatically canceled.

22

Eighth Amendment to the Glacier Water Services, Inc.

1994 Stock Compensation Program

     1. Purpose. The purpose of this Eighth Amendment to the Glacier Water Services, Inc. 1994 Stock Compensation Program (this “Amendment”) is to modify certain provisions pursuant to which members of the Board of Directors of Glacier Water Services, Inc. may be granted options in accordance with the 1994 Non-Employee Directors Stock Option Plan (the “Plan”).

     2. Definitions. Terms used in this Amendment and not defined herein shall have the meanings ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program.

     3. Grants.

     (a) The Plan is hereby amended by deleting each reference to the term “Deferral Elections”, including, without limitation, in the first sentence of Paragraph 1 of Part II of the Plan, and inserting, in its place, the term “Supplemental Grants”.

     (b) Section 2(b) of Part II of the Plan is hereby amended and restated in its entirety to read as follows: “An annual Option to acquire 1,500 shares of Common Stock (as adjusted pursuant to Article 5 of the General Provisions of the Program) shall be granted (an “Annual Grant”) automatically each year, the first such grant to be made, subject to shareholder approval, on April 12, 1994 and subsequent grants to be made on the first business day of January of each year, to each Eligible Director. A supplemental Option to acquire the number of shares of Common Stock determined as set forth below (as adjusted pursuant to Article 5 of the General Provisions of the Program) shall be granted (a “Supplemental Grant”) automatically each year, the first such grant to be made on the day of the next annual meeting and subsequent grants to be made on each succeeding annual meeting, to each Eligible Director. The number of Options granted to an Eligible Director under a Supplemental Grant shall be the lesser of (i) a number whose value, as determined by an independent valuation expert, retained by the Committee, is equivalent on the Grant Date to Twenty Five Thousand Dollars ($25,000.00) in the case of Directors and One Hundred Seven Thousand Dollars ($107,000.00) in the case of the Chairman of the Board of Directors, and (ii) a number determined by the Committee on an annual basis.”

     (c) The Plan is hereby amended by deleting each reference to the term “Deferral Election Stock Option”, including, without limitation, in the first sentence of Paragraph 2(c) of Part II of the Plan, the last sentence of Paragraph 2(g) of Part II of the Plan and the first, second, third and fourth sentences of Paragraph 3 of Part II of the Plan, and inserting, in its place, the term “supplemental Option”.

     4. Date of the Amendment. This Eighth Amendment is dated the 1^st day of May 2002 and shall be effective for all supplemental Options granted prior to the date hereof or granted hereafter.

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed this 1^st day of May 2002.

Glacier Water Services, Inc.
By:
	Name:	W.D. Walters
	Title:	Secretary

Exhibit I

NINTH AMENDMENT TO GLACIER WATER SERVICES, INC.
1994 STOCK COMPENSATION PROGRAM

1. Purpose.

     The purpose of this Ninth Amendment to Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Ninth Amendment”) is to increase the maximum number of shares of common stock under the Program

2. Definitions.

     Terms used in this Amendment and not defined herein shall have the meaning ascribed to them in the Glacier Water Services, Inc. 1994 Stock Compensation Program (the “Program”).

3. Common Shares Subject to Options.

     Article 2 of the Program is amended by deleting the number “500,000” and replacing it with the number “600,000” in the second sentence thereof. Such number pertains to the maximum number of options for common stock to be granted under Part II of the 1994 Stock Compensation Program

4. Date of the Amendment and Approval of Shareholders.

     This Ninth Amendment is effective as of July 11, 2002, and is subject to the approval by affirmative vote of the holders of a majority of the shares present, either in person or by proxy, and entitled to vote at a duly held meeting of the shareholders at which a quorum is present representing a majority of all outstanding shareholders either in person or by proxy. If such shareholder approval is not obtained, this Ninth Amendment shall have no further effect and any options granted in reliance of shareholder approval hereof shall be automatically canceled.

     If a stockholder wants to nominate a person for election to the Board other than a director nominated by the Nominating Committee, notice of the proposed nomination must be provided to the Secretary of the Company in the time period set forth in the previous paragraph in the case of the 2003 annual meeting and, in the case of a special meeting called for the purpose of electing directors, by the close of business on the tenth day following the day on which public disclosure of the date of the special meeting is made.

FORWARD LOOKING STATEMENTS

     This Proxy Statement contains “forward-looking” information, as that term is defined by the federal securities laws, about our financial condition, results of operations and business. You can find many of these statements by looking for words such as “may”, “will”, “expect”, “anticipate”, “believe”, “estimate”, and similar words used in this Proxy Statement. The forward-looking statements in this Proxy Statement are intended to be subject to the safe harbor protection provided by the federal securities laws.

     These forward-looking statements are subject to numerous assumptions, risks and uncertainties (including trade relations and competition that may cause our actual results to be materially different from any future results expressed or implied in those statements).

     Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. We caution readers not to place undue reliance on these statements, which speak only as of the date of this Proxy Statement.

     The cautionary statements set forth above should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We do not undertake any obligation to review or confirm analysts’ expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

By Order of the Board of Directors
 

/s/ W. David Walters  

W. David Walters 

Senior Vice President,
Chief Financial Officer and Secretary 

Dated: June 11, 2002

EX-10.2

Exhibit 10.2

INDEMNIFICATION AGREEMENT

     THIS AGREEMENT (the “Agreement”) is made and entered into as of ____________, 20___ between Glacier Water Services, Inc. a Delaware corporation (“the Company”), and _________________ (“Indemnitee”).

     WITNESSETH THAT:

     WHEREAS, Indemnitee performs a valuable service for the Company; and

     WHEREAS, the Amended and Restated Certificate of Incorporation of the Company (the “Charter”) providing for the indemnification of the officers and directors of the Company to the maximum extent authorized by Section 145 of the Delaware General Corporation Law, as amended (“Law”); and

     WHEREAS, the Charter and the Law, by their nonexclusive nature, permit contracts between the Company and the officers or directors of the Company with respect to indemnification of such officers or directors; and

     WHEREAS, in accordance with the authorization as provided by the Law, the Company may purchase and maintain a policy or policies of directors’ and officers’ liability insurance (“D & O Insurance”), covering certain liabilities which may be incurred by its officers or directors in the performance of their obligations to the Company; and

     WHEREAS, in order to induce Indemnitee to continue to serve as an officer or director of the Company, the Company has determined and agreed to enter into this contract with Indemnitee;

     NOW, THEREFORE, in consideration of Indemnitee’s service as an officer or director after the date hereof, the parties hereto agree as follows:

     1. Indemnity of Indemnitee. The Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of the Law, as such may be amended from time to time, and of the Charter, as such may be amended. In furtherance of the foregoing indemnification, and without limiting the generality thereof:

          (a) Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(a) if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.

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          (b) Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him, or on his behalf, in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made.

          (c) Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

     2. Additional Indemnity. In addition to, and without regard to any limitations on, the indemnification provided for in Section 1 of this Agreement, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company’s obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under Delaware law.

     3. Contribution in the Event of Joint Liability.

          (a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and the Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. The Company shall not enter into any settlement of any action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such

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action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.

          (b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which the Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), the Company shall contribute to the amount of expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and ail officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the Law may require to be considered. The relative fault of the Company and all officers, directors or employees of the Company, other than Indemnitee, who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary and the degree to which their conduct is active or passive.

          (c) The Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company, other than Indemnitee, who may be jointly liable with Indemnitee.

     4. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

     5. Advancement of Expenses. Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee’s Corporate Status within thirty (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free.

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     Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (and as to which all rights of appeal therefrom have been exhausted or lapsed).

     6. Procedures and Presumptions for Determination of Entitlement to Indemnification. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the Law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

          (a) To obtain indemnification (including, but not limited to, the advancement of Expenses and contribution by the Company) under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

          (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of the Board of Directors: (1) by a majority vote of the disinterested directors, even though less than a quorum, (2) by independent legal counsel in a written opinion or (3) by the stockholders.

          (c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by the Board of Directors. Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that

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such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.

          (d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

          (e) Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise (as hereinafter defined) in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

          (f) If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making such determination with respect to entitlement to indemnification in good faith requires such additional time to obtain or evaluate documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(f) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders

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pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination, the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy-five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.

          (g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors or stockholder of the Company shall act reasonably and in good faith in making a determination regarding the Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

          (h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion by clear and convincing evidence.

     7. Remedies of Indemnitee.

          (a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification is made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such

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proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee’s right to seek any such adjudication.

          (b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of the adverse determination under Section 6(b).

          (c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent a prohibition of such indemnification under applicable law.

          (d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors’ and officers’ liability insurance policies maintained by the Company, the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.

          (e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.

     8. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

          (a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter, the bylaws of the Company, any agreement, a vote of stockholders, a resolution of directors or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Charter and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

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          (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any director, officer, employee, agent or fiduciary under such policy or policies.

          (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

          (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. In the event the Company makes any indemnification payments to the Indemnitee and the Indemnitee is subsequently reimbursed from the proceeds of insurance, the Indemnitee shall promptly refund such indemnification payments to the Company to the extent of such insurance reimbursement.

          (e) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise.

     9. Exception to Right of Indemnification. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the Company or (b) such Proceeding is being brought by Indemnitee to assert, interpret or enforce his rights under this Agreement. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of state statutory law or common law.

     10. Duration of Agreement. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other Enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is

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acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement.

     11. Security. To the extent requested by Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide security to Indemnitee for the Company’s obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.

     12. Enforcement.

          (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumes the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.

          (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.

     13. Definitions. For purposes of this Agreement:

          (a) “Corporate Status” describes the status of a person who is or was a director, officer, employee, agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise that such person is or was serving at the express written request of the Company.

          (b) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

          (c) “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other Enterprise that Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary.

          (d) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding.

          (e) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material either such party (other than with respect to matters concerning Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the

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Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

          (f) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was an officer or director of the Company, by reason of any action taken by him or of any inaction on his part while acting as an officer or director of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement, but excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.

     14. Severability. If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, illegal or otherwise unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Without limiting the generality of the foregoing, this Agreement is intended to confer upon Indemnitee indemnification rights to the fullest extent permitted by applicable laws. In the event any provision hereof conflicts with any applicable law, such provision shall be deemed modified, consistent with the aforementioned intent, to the extent necessary to resolve such conflict.

     15. Modification and Waiver. No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

     16. Notice By Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with or otherwise receiving any summons, citation, subpoena,

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complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.

     17. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and received by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

          (a) If to Indemnitee, to the address set forth below Indemnitee signature hereto.

If to the Company, to:

Glacier Water Services, Inc.
1385 Park Center Drive
Vista, CA 92081-8338

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

     18. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

     19. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

     20. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without application of the conflict of laws principles thereof.

     21. Gender. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

[Remainder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

COMPANY

GLACIER WATER SERVICES, INC.

By:

INDEMNITEE

Name:

Address:

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EX-21.1

Exhibit 21.1

Subsidiaries of the Registrant

Name	Jurisdiction of Organization
GW Services, Inc.	California
Glacier Water Trust I	Delaware
Glacier Water Services, Inc.	Delaware
GW Services International, Inc.	Delaware
GW Mexico, Inc.	Delaware
4318102 Canada Inc.	Canada
Bi-Eau Pure Management, Inc.	Quebec

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Glacier Water Services, Inc.:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

San Diego, California

May 12, 2011