UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 001-07680
 Voyager Learning Company
  Delaware
36-3580106
 1800 Valley View Lane, Suite 400, Dallas, Texas
75234-8923
 (214) 932-9500
  Securities registered pursuant to Section 12(g) of the Act:
  common stock, $.001 par value per share
 Indicate by check mark if the Company is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
 Indicate by check mark if the Company is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act. Yes o No þ
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K . þ
 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 definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
 Large accelerated filero
    
    Accelerated filerþ
    
    Non-accelerated filero
    
    Smaller reporting companyo
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
 The aggregate market value of the registrants voting stock held by non-affiliates (based upon the
per share closing price of $5.45 on June 30, 2008) was approximately $142 million.
 The number of shares of the registrants common stock, $.001 par value, outstanding as of January
31, 2009 was 29,874,145.
 Documents Incorporated By Reference: None




---



##### 



Part I  Voyager Learning Company
 Safe Harbor for Forward-looking Statements.
  Item 1. Business.
 Unless otherwise expressly indicated in this Item 1, the discussions set forth herein are as
of December 31, 2008.
 Voyager Learning Company Business Overview
   2




---



##### 



® ®
 ®
 ®
   3




---



##### 



Product Review
 Reading Programs
     4




---



##### 



Reading Next
    5




---



##### 



www.readinga-z.com
 www.raz-kids.com
 www.reading-tutors.com
  6




---



##### 



www.vocabularya-z.com
 www.writinga-z.com
 Math and Science Programs
     7




---



##### 



www.sciencea-z.com
 Professional Development Programs
  Business Development .
 Curriculum Development.
  8




---



##### 



Sales
and Marketing.
 Proprietary Rights
    ® ® ® ® ® ® ® ® ® ® ® ® ®
  9




---



##### 



Seasonality
  Competition
  Government Regulations
  Concentration Risk
  Employees
    10




---



##### 



Website Access to Company Reports
 www.voyagercompany.com
  Code of Ethics
 www.voyagercompany.com.
   11




---



##### 



Item 1A.Risk Factors.
  The following risk factors are as of the date of this report and are not necessarily risk
factors as of the December 31, 2008 financial statements.
  Our sales and profitability depend on our ability to continue to develop new products that
appeal to customers and end users.
  Changes in funding for public schools could cause the demand for our products to decrease.
    12




---



##### 



We face intense competition and may not be able to successfully attract and retain customers.
  Recent developments in the commercial credit markets and education funding environment may
adversely affect the Companys ability to pursue strategic alternatives, including the possible
sale of the Company.
  Our intellectual property protection may be inadequate, allowing others to use our
technologies and thereby reduce our ability to compete.
  We license from third parties certain technology content and that content may not continue to
be available to us.
   13




---



##### 



Our products could infringe on the intellectual property of
others, which may cause us to engage in costly litigation and could cause us to pay
substantial damages and prohibit us from selling our products.
  Our success depends on our ability to attract and retain key personnel.
  We use the Internet extensively, and federal or state governments may adopt laws or
regulations that could expose us to substantial liability.
   14




---



##### 



We could experience system failures, software errors or capacity constraints, any of which
would cause interruptions in our delivery of electronic content to customers and ultimately may
cause us to lose customers.
  Our systems face security risks and our customers have concerns about their privacy.
   15




---



##### 



We have a single distribution center and could experience significant disruption of business
and ultimately lose customers in the event it was damaged or destroyed.
  Our operating results continue to fluctuate, and a revenue or earnings shortfall in a
particular quarter could have a negative impact on the price of our common stock.
   16




---



##### 



Our stock price may be volatile, and your investment in our stock could decline in value.
   We are a party to a number of matters of civil litigation that could have a material adverse
effect on our financial results.
  The impact of ongoing securities class action, derivative and insurance-related litigation may
be material. We are also subject to the risk of additional litigation and regulatory action in
connection with the restatement of our Consolidated Financial Statements.
   17




---



##### 



18




---



##### 



Our insurance coverage could be insufficient to cover losses we may incur as a result of
litigation.
   Item 1B. Unresolved Staff Comments.
  Item 2. Properties.
    19




---



##### 



Total(sq ft)Owned
    
    
    Leased
    
    
    164,131Total
    
    
    164,131
  Item 3. Legal Proceedings.
 Putative Securities Class Actions
 In re ProQuest Company Securities Litigation,
    20




---



##### 



Shareholder Derivative Lawsuits
    21




---



##### 



Securities and Exchange Commission Investigation
  Item 4. Submission of Matters to a Vote of Security Holders.
  Part II
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities.
    2008
    
    
    2007Fiscal Quarter
    
    High
    
    
    Low
    
    
    High
    
    
    LowFirst
    
    $
    7.15
    
    
    $
    5.95
    
    
    $
    12.14
    
    
    $
    8.23Second
    
    
    6.55
    
    
    
    4.95
    
    
    
    10.36
    
    
    
    8.32Third
    
    
    5.20
    
    
    
    3.93
    
    
    
    9.85
    
    
    
    6.94Fourth
    
    
    3.90
    
    
    
    1.05
    
    
    
    8.20
    
    
    
    4.75
  22




---



##### 



Item 6. Selected Financial Data.
  Fiscal(Dollars in thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006
    
    

2005
    
    

2004Continuing Operations Data:(1) (2)Net sales
    
    $
    98,531
    
    
    $
    109,612
    
    
    $
    115,051
    
    
    $
    90,967
    
    
    $
    1,837Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    (35,939
    )
    
    
    (36,192
    )
    
    
    (37,417
    )
    
    
    (30,874
    )
    
    
    (60
    )Gross profit
    
    
    62,592
    
    
    
    73,420
    
    
    
    77,634
    
    
    
    60,093
    
    
    
    1,777Research and development expense
    
    
    (5,302
    )
    
    
    (4,532
    )
    
    
    (5,198
    )
    
    
    (4,127
    )
    
    
    Selling and administrative expense(3)
    
    
    (64,394
    )
    
    
    (82,867
    )
    
    
    (92,695
    )
    
    
    (48,585
    )
    
    
    (17,744
    )Depreciation and amortization expense
    
    
    (21,358
    )
    
    
    (23,190
    )
    
    
    (23,865
    )
    
    
    (20,513
    )
    
    
    (663
    )Goodwill impairment(4)
    
    
    (43,141
    )
    
    
    (67,232
    )
    
    
    (42,496
    )
    
    
    
    
    
    
    Lease termination costs(5)
    
    
    (11,673
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from continuing operations before
interest, other income (expense), and income taxes
    
    
    (83,276
    )
    
    
    (104,401
    )
    
    
    (86,620
    )
    
    
    (13,132
    )
    
    
    (16,630
    )Net interest income (expense)
    
    
    975
    
    
    
    335
    
    
    
    (27,464
    )
    
    
    (18,915
    )
    
    
    (378
    )Other income (expense)
    
    
    (363
    )
    
    
    4,408
    
    
    
    
    
    
    
    
    
    
    
    Income tax benefit (expense) (6)
    
    
    1,160
    
    
    
    12,396
    
    
    
    64,063
    
    
    
    1,778
    
    
    
    (25,097
    )Loss from continuing operations
    
    $
    (81,504
    )
    
    $
    (87,262
    )
    
    $
    (50,021
    )
    
    $
    (30,269
    )
    
    $
    (42,105
    )Basic and diluted loss from continuing
operations per common share
    
    $
    (2.73
    )
    
    $
    (2.92
    )
    
    $
    (1.68
    )
    
    $
    (1.03
    )
    
    $
    (1.47
    )
  23




---



##### 



At the End of Fiscal(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance Sheet Data:Cash and cash equivalents
    
    $
    67,302
    
    
    $
    53,868
    
    
    $
    39,902
    
    
    $
    30,957
    
    
    $
    4,313Total assets
    
    
    304,097
    
    
    
    402,727
    
    
    
    833,531
    
    
    
    917,114
    
    
    
    535,968Long-term debt and capital leases, less current maturities(7)
    
    
    96
    
    
    
    810
    
    
    
    1,592
    
    
    
    860
    
    
    
    150,000Total debt and capital leases(7)
    
    
    245
    
    
    
    1,599
    
    
    
    60,664
    
    
    
    516,149
    
    
    
    154,185Total shareholders equity (deficit)(8)
    
    
    212,759
    
    
    
    290,330
    
    
    
    306,994
    
    
    
    (48,447
    )
    
    
    (51,073
    )
 Footnotes to the Selected Financial Data:
 (1)
    
    On January 31, 2005, we acquired all the outstanding ownership interest in VEL. The results of VELs
operations subsequent to the acquisition on January 31, 2005 are combined with the results of two
minor acquisitions (ExploreLearning and Learning A-Z), one made in 2004 and one made in 2005 to form the Voyager
Education VED segment reported as continuing operations in our Consolidated Financial Statements.(2)
    
    The Company implemented a plan to sell its PQBS and PQIL operations during the second quarter of 2006.
The sale of PQBS was completed in November 2006 and the sale of PQIL was completed in February 2007.
Results of operations for PQBS and PQIL are reported as results from discontinued operations for all
periods presented.(3)
    
    In 2008, 2007, and 2006, respectively, selling and administrative expenses include corporate costs of $14.9 million,
$34.1 million, and $46.2 million, the majority of which are associated with the closing of the Ann Arbor offices, financial
restatements, and completion of the sale of PQBS and PQIL. The transition of corporate offices from Ann Arbor, MI to Dallas, TX
was completed by year-end 2008.(4)
    
    The required annual testing for impairment of goodwill resulted in goodwill impairment
for the VED business unit in 2008, 2007, and 2006. See Note 5 to our Consolidated Financial Statements included herein for
further details.(5)
    
    In 2008 the Company entered into a series of agreements with its landlord regarding the termination of certain obligations
in relation to the long term leases for the facilities in Ann Arbor,
Michigan. The Company terminated and was released from all
obligations relating to these certain leases on March 7, 2008, resulting in a total charge to expense in the first quarter of
2008 for all lease termination costs.(6)
    
    Tax expense in 2004 reflects an increase in deferred tax expense of $25.1 million to reflect the impact
of establishing a valuation allowance against deferred tax assets as a result of restatement adjustments.(7)
    
    Upon closing on the sale of PQBS on November 28, 2006, we made a pro-rata payment of 89% of the
principal then outstanding under our 2002 Notes, our 2005 Notes and our Credit Agreement. Upon closing on
the sale of PQIL on February 9, 2007, we paid our remaining balances owed to our bank lenders and
Noteholders and were released from all obligations under the 2002 Note Purchase Agreement, the 2005 Note
Purchase Agreement, and the Credit Agreement.(8)
    
    Shareholders equity for 2006 reflects the $347.7 million gain from the sale of PQBS.
Shareholders equity for 2007 reflects the $46.6 million gain from the sale of PQIL. Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
  Organization of Information
  
    
    Overview
 
    
    Critical Accounting Policies and Estimates
 
    
    Results of Continuing Operations
 
    
    Fiscal Year 2008 Compared to Fiscal Year 2007
 
    
    Fiscal Year 2007 Compared to Fiscal Year 2006
 
    
    Liquidity and Capital Resources
 
    
    Capital Expenditures and Outlook
 
    
    Commitments and Contractual Obligations
 
    
    Recently Issued Financial Accounting Standards
  24




---



##### 



Overview
    2007 as
    
    
    
    
    
    
    2007 in
    
    
    2006 as
    
    
    
    
    
    
    2006 inOriginally
    
    
    
    
    
    
    Current Year
    
    
    Originally
    
    
    
    
    
    
    Current YearFiled
    
    
    Reclassifications
    
    
    Presentation
    
    
    Filed
    
    
    Reclassifications
    
    
    PresentationCost of sales
    
    $
    (55,720
    )
    
    $
    19,528
    
    
    $
    (36,192
    )
    
    $
    (57,279
    )
    
    $
    19,862
    
    
    $
    (37,417
    )Gross profit
    
    
    53,892
    
    
    
    19,528
    
    
    
    73,420
    
    
    
    57,772
    
    
    
    19,862
    
    
    
    77,634Selling and administrative expense
    
    
    (86,529
    )
    
    
    86,529
    
    
    
    
    
    
    
    (96,698
    )
    
    
    96,698
    
    
    
    Sales and marketing expense
    
    
    
    
    
    
    (29,587
    )
    
    
    (29,587
    )
    
    
    
    
    
    
    (27,614
    )
    
    
    (27,614
    )General and administrative expense
    
    
    
    
    
    
    (53,280
    )
    
    
    (53,280
    )
    
    
    
    
    
    
    (65,081
    )
    
    
    (65,081
    )Depreciation and amortization expense
    
    
    
    
    
    
    (23,190
    )
    
    
    (23,190
    )
    
    
    
    
    
    
    (23,865
    )
    
    
    (23,865
    )
 Critical Accounting Policies and Estimates
    25




---



##### 



Revenue Recognition. " 
  Discontinued Operations.
  26




---



##### 



Impairment of Long Lived Assets. 
 Impairment of Goodwill. "  .
 Developed Curriculum.
 Accounts Receivable.
  27




---



##### 



Reserve for Obsolete Inventory.
 Income Taxes.
 Other Contingencies.
  28




---



##### 



Results of Continuing Operations
   Fiscal2008
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of(Dollars in thousands)
    
    Amount
    
    
    sales
    
    
    Amount
    
    
    sales
    
    
    Amount
    
    
    salesNet sales
    
    $
    98,531
    
    
    
    100.0
    
    
    $
    109,612
    
    
    
    100.0
    
    
    $
    115,051
    
    
    
    100.0Cost of sales (exclusive of depreciation and
amortization shown separately below)
    
    
    (35,939
    )
    
    
    (36.5
    )
    
    
    (36,192
    )
    
    
    (33.0
    )
    
    
    (37,417
    )
    
    
    (32.5
    )Gross profit
    
    
    62,592
    
    
    
    63.5
    
    
    
    73,420
    
    
    
    67.0
    
    
    
    77,634
    
    
    
    67.5Research and development expense
    
    
    (5,302
    )
    
    
    (5.4
    )
    
    
    (4,532
    )
    
    
    (4.1
    )
    
    
    (5,198
    )
    
    
    (4.5
    )Sales and marketing expense
    
    
    (33,734
    )
    
    
    (34.2
    )
    
    
    (29,587
    )
    
    
    (27.0
    )
    
    
    (27,614
    )
    
    
    (24.0
    )General and administrative expense
    
    
    (30,660
    )
    
    
    (31.1
    )
    
    
    (53,280
    )
    
    
    (48.6
    )
    
    
    (65,081
    )
    
    
    (56.6
    )Depreciation and amortization expense
    
    
    (21,358
    )
    
    
    (21.7
    )
    
    
    (23,190
    )
    
    
    (21.2
    )
    
    
    (23,865
    )
    
    
    (20.8
    )Goodwill impairment
    
    
    (43,141
    )
    
    
    (43.8
    )
    
    
    (67,232
    )
    
    
    (61.3
    )
    
    
    (42,496
    )
    
    
    (36.9
    )Lease termination costs
    
    
    (11,673
    )
    
    
    (11.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss from continuing operations
before interest, other income (expense)
and income taxes
    
    
    (83,276
    )
    
    
    (84.5
    )
    
    
    (104,401
    )
    
    
    (95.2
    )
    
    
    (86,620
    )
    
    
    (75.3
    )Net interest income (expense)
    
    
    975
    
    
    
    1.0
    
    
    
    335
    
    
    
    0.3
    
    
    
    (27,464
    )
    
    
    (23.9
    )Other income (expense), net
    
    
    (363
    )
    
    
    (0.4
    )
    
    
    4,408
    
    
    
    4.0
    
    
    
    
    
    
    
    Income tax benefit
    
    
    1,160
    
    
    
    1.2
    
    
    
    12,396
    
    
    
    11.3
    
    
    
    64,063
    
    
    
    55.7Loss from continuing operations
    
    $
    (81,504
    )
    
    
    (82.7
    )
    
    $
    (87,262
    )
    
    
    (79.6
    )
    
    $
    (50,021
    )
    
    
    (43.5
    )
 Fiscal Year 2008 Compared to Fiscal Year 2007
 Overview
   29




---



##### 




    
    The increasing usage of web-based capabilities within our curriculum, including
Ticket to Read and VmathLive, has had a positive impact on student achievement and
stand-alone sales of these products has increased. We believe such capabilities are an
emerging trend within education and that we are well positioned to capture market share
in this space.
 
    
    Our web-based products have seen a significant increase in usage outside of normal
school hours, including weekends, which increases the advocacy of our products among
influential groups, such as students, teachers and parents.
 
    
    Participation in the 2008 Florida adoption has proved successful
in generating sales, customer acceptance, and student achievement.
 
    
    We filed all of our fiscal quarterly reports for 2008 in January 2009. Upon filing
these reports, the Company became current with its filings with the SEC after three
years of delinquent reporting following the discovery of material irregularities in our
accounting in January 2006.
  30




---



##### 



Operating Trends
  
    
    Sales of our online subscription based products grew significantly in 2008 and we
expect growth to continue in the coming years.
 
    
    We believe our product diversification, such as growth in the online offerings and
new intervention products for higher grades, will allow us to strengthen our ability to
sustain share in a troubled market and capture share when the market recovers.
 
    
    We believe our focus on usage and partnership with the customer to implement our
solutions with fidelity will result in higher success rates and such success, if
achieved, will lead to customer retention and growth through reference sales.
 
    
    Efforts taken in 2008 to reduce our cost structure, including the reduction in
force, better aligns our cost structure to current market conditions.
  
    
    Adverse developments in the education funding environment, including the reductions
in Reading First funding that occurred in 2008 and reductions in available state and
local funds as property taxes decline, have impacted our operations during the current
year and may continue to have and potentially increase the impact on our future sales,
profits, cash flows and carrying value of assets.
 
    
    School districts may find it difficult to secure alternative funding sources in the
midst of the current market conditions.
 Recently Passed Federal Legislation
   31




---



##### 



Net Sales
 (Dollars in millions)
    
    2008
    
    
    2007Reading programs
    
    $
    75.6
    
    
    $
    87.1Math and science programs
    
    
    12.6
    
    
    
    11.0Professional development
    
    
    5.6
    
    
    
    7.4Other (primarily freight)
    
    
    4.7
    
    
    
    4.1Total
    
    $
    98.5
    
    
    $
    109.6
  Gross Profit
   32




---



##### 



Research and Development
  Sales and Marketing
  General and Administrative
 (Dollars in millions)
    
    2008
    
    
    2007VED
    
    $
    15.8
    
    
    $
    19.2Corporate
    
    
    14.9
    
    
    
    34.1Total
    
    $
    30.7
    
    
    $
    53.3
    33




---



##### 



Goodwill Impairment
   Lease Termination Costs
   34




---



##### 



Net Interest Income
 (Dollars in millions)
    
    2008
    
    
    2007Interest income
    
    $
    1.5
    
    
    $
    3.7Interest expense
    
    
    (0.5
    )
    
    
    (3.4
    )Net interest income
    
    $
    1.0
    
    
    $
    0.3
   35




---



##### 



Other Income (Expense)
   Income Tax Benefit
    36




---



##### 



(Dollars in millions)
    
    2008
    
    
    2007Taxes at statutory federal income tax rate
    
    $
    (28.9
    )
    
    $
    (34.9
    )Non-deductible goodwill impairment
    
    
    15.1
    
    
    
    23.5Changes in valuation allowance
    
    
    13.5
    
    
    
    Other
    
    
    (0.9
    )
    
    
    (1.0
    )Total tax benefit from continuing operations
    
    $
    (1.2
    )
    
    $
    (12.4
    )
 Fiscal Year 2007 Compared to Fiscal Year 2006
 Net Sales
 (Dollars in millions)
    
    2007
    
    
    2006Reading programs
    
    $
    87.1
    
    
    $
    91.6Math and science programs
    
    
    11.0
    
    
    
    8.1Professional development
    
    
    7.4
    
    
    
    9.0Other (primarily freight)
    
    
    4.1
    
    
    
    6.4Total
    
    $
    109.6
    
    
    $
    115.1
  Gross Profit
   37




---



##### 



Research and Development
  Sales and Marketing
  General and Administrative
 (Dollars in millions)
    
    2007
    
    
    2006VED
    
    $
    19.2
    
    
    $
    18.9Corporate
    
    
    34.1
    
    
    
    46.2Total
    
    $
    53.3
    
    
    $
    65.1
  Net Interest Income (Expense)
 (Dollars in millions)
    
    2007
    
    
    2006Interest income
    
    $
    3.7
    
    
    $
    1.1Debt
    
    
    (3.4
    )
    
    
    (28.1
    )Other
    
    
    
    
    
    
    (0.5
    )Net interest income (expense)
    
    $
    0.3
    
    
    $
    (27.5
    )
  38




---



##### 



Income Tax Benefit
  Discontinued Operations
    39




---



##### 



Goodwill Impairment
  Liquidity and Capital Resources
     40




---



##### 




    
    $9.6 million of net purchases of marketable securities
 
    
    $7.9 million of expenditures related to property, plant, equipment, curriculum
development costs, and software; and
 
    
    $0.3 million for principal payments on capital leases.
 Capital Expenditures and Outlook
 (Dollars in millions)
    
    2008
    
    
    2007
    
    
    2006Curriculum development costs
    
    $
    3.7
    
    
    $
    5.4
    
    
    $
    3.6Fixed capital
    
    
    0.7
    
    
    
    0.6
    
    
    
    9.2Software
    
    
    3.5
    
    
    
    2.8
    
    
    
    1.6Total expenditures for property,
equipment, curriculum
development costs, and software
    
    $
    7.9
    
    
    $
    8.8
    
    
    $
    14.4
     41




---



##### 



Commitments and Contractual Obligations
   (Dollars in millions)
    
    Total
    
    
    2009
    
    
    2010 & 2011
    
    
    2012 & 2013
    
    
    After 2013Capital lease obligation as of December 31, 2008
    
    $
    0.3
    
    
    $
    0.2
    
    
    $
    0.1
    
    
    $
    
    
    
    $
    Operating lease obligation as of December 31, 2008
    
    $
    3.3
    
    
    $
    1.3
    
    
    $
    1.4
    
    
    $
    0.6
    
    
    $
    
    Off-Balance
Sheet Arrangements
  Recently Issued Financial Accounting Standards
   42




---



##### 



Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
 Interest Rate Risk
  Foreign Currency Risk
  Item 8. Financial Statements and Supplementary Data.
 Report of Independent Registered Public Accounting Firm
 
 Internal
ControlIntegrated Framework Managements Report on Internal Control Over Financial
Reporting
   43




---



##### 



Internal
ControlIntegrated Framework
   
  44




---



##### 



Report of Independent Registered Public Accounting Firm
 
    Accounting for Uncertainty in Income Taxes 
an Interpretation of FASB No. 109,
 Internal ControlIntegrated Framework
  
  45




---



##### 



Report of Independent Registered Public Accounting Firm
       
  46




---



##### 



Voyager Learning Company and Subsidiaries
Consolidated Statements of Operations
For the fiscal years ended December 31, 2008, December 29, 2007 and December 30, 2006
 (In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006Net sales
    
    $
    98,531
    
    
    $
    109,612
    
    
    $
    115,051Cost of sales (exclusive of depreciation and amortization shown
separately below)
    
    
    (35,939
    )
    
    
    (36,192
    )
    
    
    (37,417
    )Gross profit
    
    
    62,592
    
    
    
    73,420
    
    
    
    77,634Research and development expense
    
    
    (5,302
    )
    
    
    (4,532
    )
    
    
    (5,198
    )Sales and marketing expense
    
    
    (33,734
    )
    
    
    (29,587
    )
    
    
    (27,614
    )General and administrative expense
    
    
    (30,660
    )
    
    
    (53,280
    )
    
    
    (65,081
    )Depreciation and amortization expense
    
    
    (21,358
    )
    
    
    (23,190
    )
    
    
    (23,865
    )Goodwill impairment
    
    
    (43,141
    )
    
    
    (67,232
    )
    
    
    (42,496
    )Lease termination costs
    
    
    (11,673
    )
    
    
    
    
    
    
    Loss from continuing operations before interest, other income (expense)
and income taxes
    
    
    (83,276
    )
    
    
    (104,401
    )
    
    
    (86,620
    )Net interest income (expense):Interest income
    
    
    1,485
    
    
    
    3,682
    
    
    
    1,080Interest expense
    
    
    (510
    )
    
    
    (3,347
    )
    
    
    (28,544
    )Net interest income (expense)
    
    
    975
    
    
    
    335
    
    
    
    (27,464
    )Other income (expense), net
    
    
    (363
    )
    
    
    4,408
    
    
    
    Loss from continuing operations before
income taxes
    
    
    (82,664
    )
    
    
    (99,658
    )
    
    
    (114,084
    )Income tax benefit
    
    
    1,160
    
    
    
    12,396
    
    
    
    64,063Loss from continuing operations
    
    
    (81,504
    )
    
    
    (87,262
    )
    
    
    (50,021
    )Earnings from discontinued operations (less applicable
income tax expense of $0, $1,491, and $23,776, respectively)
    
    
    
    
    
    
    5,460
    
    
    
    44,926Gain on sale of discontinued operations (less applicable
income tax expense of $0, $11,160, and $66,321, respectively)
    
    
    
    
    
    
    46,572
    
    
    
    347,708Net earnings (loss)
    
    $
    (81,504
    )
    
    $
    (35,230
    )
    
    $
    342,613Net earnings (loss) per common share:Basic:Loss from continuing operations
    
    $
    (2.73
    )
    
    $
    (2.92
    )
    
    $
    (1.68
    )Earnings from discontinued operations
    
    
    
    
    
    
    0.18
    
    
    
    1.51Gain on sale of discontinued operations
    
    
    
    
    
    
    1.56
    
    
    
    11.66Basic net earnings (loss) per common share
    
    $
    (2.73
    )
    
    $
    (1.18
    )
    
    $
    11.49Diluted:Loss from continuing operations
    
    $
    (2.73
    )
    
    $
    (2.92
    )
    
    $
    (1.68
    )Earnings from discontinued operations
    
    
    
    
    
    
    0.18
    
    
    
    1.51Gain on sale of discontinued operations
    
    
    
    
    
    
    1.56
    
    
    
    11.66Diluted net earnings (loss) per common share
    
    $
    (2.73
    )
    
    $
    (1.18
    )
    
    $
    11.49Average number of common shares and equivalents outstanding:Basic
    
    
    29,871
    
    
    
    29,858
    
    
    
    29,816Diluted
    
    
    29,871
    
    
    
    29,858
    
    
    
    29,816
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these
statements.
  47




---



##### 



Voyager Learning Company and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2008 and December 29, 2007
 (In thousands, except per share  data)
    
    2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    67,302
    
    
    $
    53,868Accounts receivable, net
    
    
    7,371
    
    
    
    9,266Income tax receivable
    
    
    19,782
    
    
    
    65,600Inventory
    
    
    15,196
    
    
    
    16,005Other current assets
    
    
    33,826
    
    
    
    16,489Total current assets
    
    
    143,477
    
    
    
    161,228Property, equipment, and software at cost:Buildings and improvements
    
    
    1,220
    
    
    
    10,666Machinery and equipment
    
    
    4,707
    
    
    
    5,975Software
    
    
    10,616
    
    
    
    7,284Total property, equipment, and software at cost
    
    
    16,543
    
    
    
    23,925Accumulated depreciation and amortization
    
    
    (9,718
    )
    
    
    (8,584
    )Net property, equipment, and software
    
    
    6,825
    
    
    
    15,341Goodwill
    
    
    99,717
    
    
    
    142,858Acquired curriculum intangibles, net
    
    
    38,594
    
    
    
    51,206Other intangible assets, net
    
    
    5,218
    
    
    
    6,411Developed curriculum, net
    
    
    8,903
    
    
    
    9,333Other assets
    
    
    1,363
    
    
    
    16,350Total assets
    
    $
    304,097
    
    
    $
    402,727
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these
statements.
  48




---



##### 



Voyager Learning Company and Subsidiaries
Consolidated Balance Sheets
As of December 31, 2008 and December 29, 2007
 (In thousands, except per share data)
    
    2008
    
    
    2007LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Current maturities of capital lease obligations
    
    $
    149
    
    
    $
    789Accounts payable
    
    
    1,962
    
    
    
    4,403Accrued expenses
    
    
    40,866
    
    
    
    25,315Deferred revenue
    
    
    27,917
    
    
    
    19,822Total current liabilities
    
    
    70,894
    
    
    
    50,329Long-term liabilities:Capital lease obligations, less current maturities
    
    
    96
    
    
    
    810Other liabilities
    
    
    20,348
    
    
    
    61,258Total long-term liabilities
    
    
    20,444
    
    
    
    62,068Commitments and contingencies (See Note 18)Shareholders equity:Common stock ($.001 par value, 50,000 shares authorized,
30,550 shares issued and 29,874 shares outstanding at
the end of fiscal 2008, and 30,552 shares issued and
29,883 shares outstanding at the end of fiscal 2007)
    
    
    30
    
    
    
    30Capital surplus
    
    
    357,741
    
    
    
    356,683Accumulated earnings (deficit)
    
    
    (129,227
    )
    
    
    (47,723
    )Treasury stock, at cost (676 shares at the end of fiscal 2008
and 669 shares at the end of fiscal 2007)
    
    
    (16,836
    )
    
    
    (16,742
    )Other comprehensive income (loss):Pension and postretirement plans, net of tax benefit of $713 in each year
    
    
    1,093
    
    
    
    (2,088
    )Net unrealized gain (loss) on securities, net of tax expense of $39 in each year
    
    
    (42
    )
    
    
    170Accumulated other comprehensive income (loss)
    
    
    1,051
    
    
    
    (1,918
    )Total shareholders equity
    
    
    212,759
    
    
    
    290,330Total liabilities and shareholders equity
    
    $
    304,097
    
    
    $
    402,727
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these
statements.
  49




---



##### 



Voyager Learning Company and Subsidiaries
Consolidated Statements of Cash Flows
For the fiscal years ended December 31, 2008, December 29, 2007 and December 30, 2006
 (Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Operating activities:Net earnings (loss)
    
    $
    (81,504
    )
    
    $
    (35,230
    )
    
    $
    342,613Adjustments to reconcile net earnings (loss)
to net cash provided by (used in) operating activities:Goodwill and long-lived asset impairment
    
    
    43,141
    
    
    
    67,232
    
    
    
    42,496Gain on sale of discontinued operations, net of tax
    
    
    
    
    
    
    (46,572
    )
    
    
    (347,708
    )Earnings from discontinued operations, net of tax
    
    
    
    
    
    
    (5,460
    )
    
    
    (44,926
    )Depreciation and amortization
    
    
    21,358
    
    
    
    23,190
    
    
    
    23,865Amortization and write-off of deferred financing costs
    
    
    
    
    
    
    2,286
    
    
    
    9,003Stock-based compensation
    
    
    878
    
    
    
    137
    
    
    
    4,309Excess tax benefit realized related to stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (92
    )Gain on sale of available for sale securities
    
    
    (106
    )
    
    
    (508
    )
    
    
    (405
    )Deferred income taxes
    
    
    (1,176
    )
    
    
    (12,671
    )
    
    
    (64,105
    )Non-cash lease termination costs
    
    
    673
    
    
    
    
    
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    1,895
    
    
    
    6,067
    
    
    
    (3,286
    )Tax receivable
    
    
    45,818
    
    
    
    (55,742
    )
    
    
    9,009Inventory
    
    
    809
    
    
    
    (3,404
    )
    
    
    371Other current assets
    
    
    6,866
    
    
    
    52,009
    
    
    
    2,890Other assets
    
    
    (13
    )
    
    
    (1,205
    )
    
    
    (14,970
    )Accounts payable
    
    
    (2,441
    )
    
    
    661
    
    
    
    (2,295
    )Accrued expenses
    
    
    (9,038
    )
    
    
    (61,113
    )
    
    
    (3,623
    )Deferred revenue
    
    
    8,367
    
    
    
    3,385
    
    
    
    3,685Other long-term liabilities
    
    
    (4,353
    )
    
    
    (15,217
    )
    
    
    32,455Other, net
    
    
    50
    
    
    
    (4
    )
    
    
    (133
    )Net cash provided by (used in) operating activities of continuing
operations
    
    
    31,224
    
    
    
    (82,159
    )
    
    
    (10,847
    )Investing activities:Expenditures for property, equipment,
curriculum development costs, and software
    
    
    (7,912
    )
    
    
    (8,755
    )
    
    
    (14,408
    )Purchases of equity investments available for sale
    
    
    (11,786
    )
    
    
    (7,777
    )
    
    
    (6,664
    )Proceeds from sales of equity investments available for sale
    
    
    2,172
    
    
    
    8,843
    
    
    
    11,521Proceeds from (expenditures associated with) sale of
discontinued operations, net
    
    
    
    
    
    
    186,342
    
    
    
    501,231Net cash provided by (used in) investing activities of continuing
operations
    
    
    (17,526
    )
    
    
    178,653
    
    
    
    491,680Financing activities:Proceeds from debt
    
    
    
    
    
    
    
    
    
    
    561,059Repayment of debt
    
    
    
    
    
    
    (58,225
    )
    
    
    (1,015,798
    )Principal payments under capital lease obligations
    
    
    (264
    )
    
    
    (840
    )
    
    
    (746
    )Debt issuance costs
    
    
    
    
    
    
    (302
    )
    
    
    (8,379
    )Proceeds from exercise of stock options, net
    
    
    
    
    
    
    
    
    
    
    589Excess tax benefit realized related to stock-based compensation
    
    
    
    
    
    
    
    
    
    
    92Net cash used in financing activities of continuing operations
    
    
    (264
    )
    
    
    (59,367
    )
    
    
    (463,183
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    
    
    
    
    (7,148
    )Increase in cash and cash equivalents of continuing operations
    
    
    13,434
    
    
    
    37,127
    
    
    
    10,502Net cash used in discontinued operations:Net cash provided by (used in) operating activities
    
    
    
    
    
    
    (19,891
    )
    
    
    66,716Net cash used in investing activities
    
    
    
    
    
    
    (2,540
    )
    
    
    (47,510
    )Net cash used in financing activities
    
    
    
    
    
    
    (730
    )
    
    
    (20,763
    )Net cash used in discontinued operations
    
    
    
    
    
    
    (23,161
    )
    
    
    (1,557
    )Increase in cash and cash equivalents
    
    
    13,434
    
    
    
    13,966
    
    
    
    8,945Cash and cash equivalents, beginning of year
    
    
    53,868
    
    
    
    39,902
    
    
    
    30,957Cash and cash equivalents, end of year
    
    $
    67,302
    
    
    $
    53,868
    
    
    $
    39,902Non-cash financing and investing activities:Acquisition of equipment through capital leases
    
    $
    
    
    
    $
    
    
    
    $
    1,937
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these
statements.
  50




---



##### 



Voyager Learning Company and Subsidiaries
Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss)
For the fiscal years ended December 31, 2008, December 29, 2007 and December 30, 2006
 Unearned
    
    
    
    
    
    
    AccumulatedCompensation
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Capital
    
    
    on Restricted
    
    
    Accumulated
    
    
    Comprehensive(Dollars and shares in thousands)
    
    Issued
    
    
    Treasury
    
    
    Surplus
    
    
    stock
    
    
    Deficit
    
    
    Income(Loss)
    
    
    TotalBalance, at the end of fiscal 2005
(Common stock, 30,563 shares issued;
treasury stock, 653 shares)
    
    $
    30
    
    
    $
    (16,550
    )
    
    $
    354,879
    
    
    $
    (3,122
    )
    
    $
    (375,986
    )
    
    $
    (7,698
    )
    
    $
    (48,447
    )Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342,613
    
    
    
    
    
    
    
    342,613Foreign currency translation adjustments (net
of tax expense of $2,739)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,292
    
    
    
    14,292Pension and postretirement plans (net of tax
expense
of $7,059)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,163
    )
    
    
    (6,163
    )Unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    350,763Adoption of SFAS 158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (193
    )
    
    
    (193
    )Restricted stock grant, 2 shares
    
    
    
    
    
    
    
    
    
    
    (60
    )
    
    
    60
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock amortization, net of cancellations, 29 shares
    
    
    
    
    
    
    
    
    
    
    1,259
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,259Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,050Stock options exercised, net 29 shares
    
    
    
    
    
    
    
    
    
    
    589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    589Reclassification of unearned compensation on restricted stock
    
    
    
    
    
    
    
    
    
    
    (3,062
    )
    
    
    3,062
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock utilized to pay taxes
    
    
    
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27
    )Balance, at the end of fiscal 2006
(Common stock, 30,565 shares issued;
treasury stock, 655 shares)
    
    $
    30
    
    
    $
    (16,577
    )
    
    $
    356,655
    
    
    $
    
    
    
    $
    (33,373
    )
    
    $
    259
    
    
    $
    306,994Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (35,230
    )
    
    
    
    
    
    
    (35,230
    )Foreign currency translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,313
    )
    
    
    (1,313
    )Pension and postretirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,029
    
    
    
    1,029Unrealized loss on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (501
    )
    
    
    (501
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,015
    )Adoption of FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,880
    
    
    
    
    
    
    
    20,880Write off foreign currency translation adjustments upon sale of PQIL
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,676
    )
    
    
    (24,676
    )Write off accumulated other comprehensive income (loss) related to PQIL pension plan
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,284
    
    
    
    23,284Restricted stock amortization, net of cancellations, 13 shares
    
    
    
    
    
    
    
    
    
    
    369
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    369Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    (506
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (506
    )Restricted stock utilized to pay taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, at the end of fiscal 2007
(Common stock, 30,552 shares issued;
treasury stock, 669 shares)
    
    $
    30
    
    
    $
    (16,742
    )
    
    $
    356,683
    
    
    $
    
    
    
    $
    (47,723
    )
    
    $
    (1,918
    )
    
    $
    290,330Comprehensive income (loss):Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (81,504
    )
    
    
    
    
    
    
    (81,504
    )Pension and postretirement plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,181
    
    
    
    3,181Unrealized loss on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (212
    )
    
    
    (212
    )Total comprehensive income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78,535
    )Restricted stock amortization
    
    
    
    
    
    
    
    
    
    
    110
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    110Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    854
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    854Restricted stock utilized to pay taxes
    
    
    
    
    
    
    (94
    )
    
    
    94
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance, at the end of fiscal 2008
(Common stock, 30,550 shares issued;
treasury stock, 676 shares)
    
    $
    30
    
    
    $
    (16,836
    )
    
    $
    357,741
    
    
    $
    
    
    
    $
    (129,227
    )
    
    $
    1,051
    
    
    $
    212,759
 The accompanying Notes to the Consolidated Financial Statements are an integral part of these
statements.
  51




---



##### 



Voyager Learning Company and Subsidiaries
Notes to the Consolidated Financial Statements
 Note 1  Significant Accounting Policies
 Nature of Operations.
 ® ®
 ®
 ®
    52




---



##### 



Reclassifications.
  2007 as
    
    
    
    
    
    
    2007 in
    
    
    2006 as
    
    
    
    
    
    
    2006 inOriginally
    
    
    
    
    
    
    Current Year
    
    
    Originally
    
    
    
    
    
    
    Current YearFiled
    
    
    Reclassifications
    
    
    Presentation
    
    
    Filed
    
    
    Reclassifications
    
    
    PresentationCost of sales
    
    $
    (55,720
    )
    
    $
    19,528
    
    
    $
    (36,192
    )
    
    $
    (57,279
    )
    
    $
    19,862
    
    
    $
    (37,417
    )Gross profit
    
    
    53,892
    
    
    
    19,528
    
    
    
    73,420
    
    
    
    57,772
    
    
    
    19,862
    
    
    
    77,634Selling and administrative expense
    
    
    (86,529
    )
    
    
    86,529
    
    
    
    
    
    
    
    (96,698
    )
    
    
    96,698
    
    
    
    Sales and marketing expense
    
    
    
    
    
    
    (29,587
    )
    
    
    (29,587
    )
    
    
    
    
    
    
    (27,614
    )
    
    
    (27,614
    )General and administrative expense
    
    
    
    
    
    
    (53,280
    )
    
    
    (53,280
    )
    
    
    
    
    
    
    (65,081
    )
    
    
    (65,081
    )Depreciation and amortization expense
    
    
    
    
    
    
    (23,190
    )
    
    
    (23,190
    )
    
    
    
    
    
    
    (23,865
    )
    
    
    (23,865
    )
 Use of Estimates.
 Principles of Consolidation.
 Discontinued Operations.
   53




---



##### 



Fiscal Year.
  Revenue Recognition.  
   54




---



##### 



Accounts Receivable.
 Foreign Currency Translation.
  55




---



##### 



Net Earnings (Loss) per Common Share.
 (Shares in thousands)
    
    2008
    
    
    2007
    
    
    2006Basic
    
    
    29,871
    
    
    
    29,858
    
    
    
    29,816Dilutive effect of awards
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    
    29,871
    
    
    
    29,858
    
    
    
    29,816
  Cash and Cash Equivalents.
 Inventory.
 Property and Equipment.
  56




---



##### 



Purchased and Developed Software.
 Acquired Curriculum
 Developed Curriculum.
  57




---



##### 



Goodwill and Other Intangible Assets.
  Impairment of Long Lived Assets. , 
 Deferred Costs.
 Shipping and Handling Costs.
  58




---



##### 



Advertising Costs.
 Income Taxes.
 Sales Taxes.
 Stock-Based Compensation.
  59




---



##### 



Foreign Exchange Risks.
 Recently Issued Financial Accounting Standards.
  60




---



##### 



 
  61




---



##### 



  (
   62




---



##### 



Note 2  Business Segments
   2008VED
    
    
    Corporate
    
    
    TotalNet sales
    
    $
    98,531
    
    
    $
    
    
    
    $
    98,531Loss from continuing operations
before interest, other income (expense)
and income taxes
    
    $
    (56,569
    )
    
    $
    (26,707
    )
    
    $
    (83,276
    )Capital expenditures
    
    $
    7,912
    
    
    $
    
    
    
    $
    7,912Depreciation and amortization
    
    $
    21,248
    
    
    $
    110
    
    
    $
    21,358Total assets
    
    $
    304,097
    
    
    $
    
    
    
    $
    304,097
 2007VED
    
    
    Corporate
    
    
    TotalNet sales
    
    $
    109,612
    
    
    $
    
    
    
    $
    109,612Earnings (loss) from continuing operations
before interest and income taxes
    
    $
    (69,192
    )
    
    $
    (35,209
    )
    
    $
    (104,401
    )Capital expenditures
    
    $
    8,670
    
    
    $
    85
    
    
    $
    8,755Depreciation and amortization
    
    $
    22,110
    
    
    $
    1,080
    
    
    $
    23,190Total assets
    
    $
    283,091
    
    
    $
    119,636
    
    
    $
    402,727
 2006VED
    
    
    Corporate
    
    
    TotalNet sales
    
    $
    115,051
    
    
    $
    
    
    
    $
    115,051Earnings (loss) from continuing operations
before interest and income taxes
    
    $
    (39,315
    )
    
    $
    (47,305
    )
    
    $
    (86,620
    )Capital expenditures
    
    $
    5,860
    
    
    $
    8,548
    
    
    $
    14,408Depreciation and amortization
    
    $
    22,777
    
    
    $
    1,088
    
    
    $
    23,865Total assets(1)
    
    $
    322,131
    
    
    $
    150,085
    
    
    $
    472,216
 (1)
    
    Total assets includes assets from continuing operations only.  63




---



##### 



Note 3  Income Taxes
   (Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Income from continuing operations
    
    $
    (1,160
    )
    
    $
    (12,396
    )
    
    $
    (64,063
    )Income from discontinued operations
    
    
    
    
    
    
    1,491
    
    
    
    23,776Gain on sale of discontinued operations
    
    
    
    
    
    
    11,160
    
    
    
    66,321Shareholders equity, for minimum pension liability
    
    
    
    
    
    
    
    
    
    
    7,059Shareholders equity, for currency translation
adjustment on unremitted foreign earnings
    
    
    
    
    
    
    
    
    
    
    2,739Goodwill
    
    
    
    
    
    
    
    
    
    
    (54
    )Long-lived intangibles
    
    
    
    
    
    
    
    
    
    
    (413
    )$
    (1,160
    )
    
    $
    255
    
    
    $
    35,365
  (Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Current income tax expense (benefit):United States federal
    
    $
    (222
    )
    
    $
    
    
    
    $
    State and local
    
    
    238
    
    
    
    275
    
    
    
    42Current income tax expense
    
    
    16
    
    
    
    275
    
    
    
    42Deferred income tax benefitUnited States federal
    
    
    (832
    )
    
    
    (12,183
    )
    
    
    (62,268
    )State and local
    
    
    (344
    )
    
    
    (488
    )
    
    
    (1,837
    )Deferred income tax benefit
    
    
    (1,176
    )
    
    
    (12,671
    )
    
    
    (64,105
    )Income tax benefit
    
    $
    (1,160
    )
    
    $
    (12,396
    )
    
    $
    (64,063
    )
  (Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Deferred income tax benefit, exclusive of
item listed below:
    
    $
    (1,176
    )
    
    $
    (3,692
    )
    
    $
    (45,829
    )Benefits of gain from sale and discontinued
operations allocated to continuing operations
    
    
    
    
    
    
    (8,979
    )
    
    
    (18,276
    )Deferred income tax benefit
    
    $
    (1,176
    )
    
    $
    (12,671
    )
    
    $
    (64,105
    )
  64




---



##### 



(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006Statutory federal income tax rate
    
    $
    (28,932
    )
    
    $
    (34,880
    )
    
    $
    (39,930
    )Increase (reduction) in taxes resulting from:State income taxes, net of federal benefit
    
    
    (56
    )
    
    
    (214
    )
    
    
    (1,795
    )Change of intent for investment basis
difference
    
    
    
    
    
    
    
    
    
    
    (37,525
    )Non-deductible goodwill
    
    
    15,099
    
    
    
    23,531
    
    
    
    14,874Changes in valuation allowance
    
    
    13,486
    
    
    
    
    
    
    
    Other
    
    
    (757
    )
    
    
    (833
    )
    
    
    313Income tax benefit
    
    $
    (1,160
    )
    
    $
    (12,396
    )
    
    $
    (64,063
    )
  (Dollars in thousands)
    
    2008
    
    
    2007Deferred tax assets are attributable to:Net operating loss carryforwards
    
    $
    13,191
    
    
    $
    822Tax credit carryforwards
    
    
    8,675
    
    
    
    10,176Deferred compensation & pension benefits
    
    
    8,300
    
    
    
    10,154Legal contingency accrual, less insurance receivable
    
    
    1,750
    
    
    
    1,750Property and equipment
    
    
    197
    
    
    
    202Other
    
    
    3,258
    
    
    
    5,661Total gross deferred tax assets
    
    
    35,371
    
    
    
    28,765Valuation allowance
    
    
    (20,513
    )
    
    
    (11,154
    )Net deferred tax assets
    
    
    14,858
    
    
    
    17,611Deferred tax liabilities are attributable to:Curriculum costs
    
    
    (13,057
    )
    
    
    (17,320
    )Intangibles
    
    
    (2,075
    )
    
    
    (2,247
    )Other liabilities
    
    
    (370
    )
    
    
    68Total gross deferred tax liabilities
    
    
    (15,502
    )
    
    
    (19,499
    )Net deferred tax asset (liability)
    
    $
    (644
    )
    
    $
    (1,888
    )
  65




---



##### 



(Dollars in thousands)
    
    2008
    
    
    2007Short-term deferred tax asset
    
    $
    1,994
    
    
    $
    2,566Long-term deferred tax liability
    
    
    (2,638
    )
    
    
    (4,454
    )Net deferred tax asset (liability)
    
    $
    (644
    )
    
    $
    (1,888
    )
    66




---



##### 



Amount as of year
    
    
    Expire or start expiring at(Dollars in thousands)
    
    ended 2008
    
    
    the end of:U.S. net operating loss(1)
    
    $
    37,337
    
    
    
    2028State net operating loss carryforward (net):State tax net operating losses
    
    
    349
    
    
    
    2012-2028Tax credits:Foreign tax credit
    
    
    1,378
    
    
    
    2011-2015Minimum tax credit
    
    
    6,549
    
    
    Carry forward indefinitelyResearch and development tax credit
    
    
    748
    
    
    
    2014-2021Total tax credits
    
    
    8,675
 (1)
    
    Not subject to any annual limitation.     67




---



##### 



Uncertain Tax Positions
   Balance,
December 31, 2006
    
    $
    18,940Increases for tax positions taken during the current period
    
    
    1,381Decreases relating to settlements
    
    
    (623
    )Decreases
relating to dispositions
    
    
    (4,909
    )Balance, December 29, 2007
    
    $
    14,789Increases for tax positions taken during the current period
    
    
    Decreases relating to settlements
    
    
    (173
    )Balance, December 31, 2008
    
    $
    14,616
    68




---



##### 



Note 4  Discontinued Operations
    69




---



##### 



Fiscal Years EndedDecember 29,
    
    
    December 30,(Dollars in thousands)
    
    2007
    
    
    2006Net sales by business segment:ProQuest Information and Learning
    
    $
    26,062
    
    
    $
    259,103ProQuest Business Solutions
    
    
    
    
    
    
    172,813Net sales from discontinued operations
    
    
    26,062
    
    
    
    431,916Earnings (loss) before interest and income taxes:ProQuest Information and Learning
    
    
    7,798
    
    
    
    37,591ProQuest Business Solutions
    
    
    
    
    
    
    51,533Earnings from discontinued operations
before interest and income taxes
    
    
    7,798
    
    
    
    89,124Interest expense, net
    
    
    (847
    )
    
    
    (20,422
    )Income tax expense
    
    
    (1,491
    )
    
    
    (23,776
    )Earnings from discontinued
operations, net of taxes
    
    $
    5,460
    
    
    $
    44,926
  (Dollars in thousands)
    
    2007
    
    
    2006Sale price
    
    $
    195,249
    
    
    $
    513,986Net assets, related liabilities, and selling costs(1)
    
    
    (137,517
    )
    
    
    (99,957
    )Gain on sale
    
    
    57,732
    
    
    
    414,029Income tax expense
    
    
    (11,160
    )
    
    
    (66,321
    )Gain on sale of discontinued operations, net of tax
    
    $
    46,572
    
    
    $
    347,708
 (1)
    
    Net assets sold in fiscal 2007 and 2006 include goodwill of $68.0 million and $52.2
million, respectively.   70




---



##### 



Note 5  Goodwill and Other Intangible Assets
  (Dollars in thousands)Balance as of December 30, 2006
    
    $
    210,090Goodwill impairment
    
    
    (67,232
    )Balance as of December 29, 2007
    
    $
    142,858Goodwill impairment
    
    
    (43,141
    )Balance as of December 31, 2008
    
    $
    99,717
 Goodwill and Other Intangible
Assets,
  71




---



##### 



72




---



##### 



Balance as of December 31, 2008Accumulated(Dollars in thousands)
    
    Gross
    
    
    Amortization
    
    
    NetAcquired curriculum
    
    $
    98,410
    
    
    $
    (59,816
    )
    
    $
    38,594Developed curriculum
    
    
    14,243
    
    
    
    (5,340
    )
    
    
    8,903Customer relationships
    
    
    5,130
    
    
    
    (2,160
    )
    
    
    2,970Trademark
    
    
    3,860
    
    
    
    (1,636
    )
    
    
    2,224Non-compete agreements
    
    
    381
    
    
    
    (357
    )
    
    
    24Total intangibles, net
    
    $
    122,024
    
    
    $
    (69,309
    )
    
    $
    52,715
 Balance as of December 29, 2007AccumulatedGross
    
    
    Amortization
    
    
    NetAcquired curriculum
    
    $
    98,410
    
    
    $
    (47,204
    )
    
    $
    51,206Developed curriculum
    
    
    15,288
    
    
    
    (5,955
    )
    
    
    9,333Customer relationships
    
    
    5,130
    
    
    
    (1,614
    )
    
    
    3,516Trademark
    
    
    3,860
    
    
    
    (1,224
    )
    
    
    2,636Non-compete agreements
    
    
    3,517
    
    
    
    (3,258
    )
    
    
    259Total intangibles, net
    
    $
    126,205
    
    
    $
    (59,255
    )
    
    $
    66,950
   Note 6  Other Current Assets
  (Dollars in thousands)
    
    2008
    
    
    2007Short-term deferred tax asset
    
    $
    1,994
    
    
    $
    2,566Deferred costs
    
    
    1,907
    
    
    
    1,434Available for sale securities
    
    
    13,137
    
    
    
    3,629Insurance receivable
    
    
    15,000
    
    
    
    1,217Other
    
    
    1,788
    
    
    
    7,643Total
    
    $
    33,826
    
    
    $
    16,489
   73




---



##### 



Note 7  Other Assets
  (Dollars in thousands)
    
    2008
    
    
    2007Insurance receivable
    
    $
    
    
    
    $
    15,000Other
    
    
    1,363
    
    
    
    1,350Total
    
    $
    1,363
    
    
    $
    16,350
 Note 8  Accrued Expenses
  (Dollars in thousands)
    
    2008
    
    
    2007Salaries, bonuses and benefits
    
    $
    6,900
    
    
    $
    8,540Pension and post-retirement medical benefits
    
    
    6,675
    
    
    
    2,101Deferred compensation
    
    
    3,233
    
    
    
    1,590Corporate transition costs
    
    
    1,879
    
    
    
    2,466Legal contingency accrual
    
    
    20,000
    
    
    
    5,400Other
    
    
    2,179
    
    
    
    5,218Total
    
    $
    40,866
    
    
    $
    25,315
      74




---



##### 



Note 9  Other Liabilities
  (Dollars in thousands)
    
    2008
    
    
    2007Pension and post-retirement medical benefits, long-term portion
    
    $
    10,239
    
    
    $
    18,957Long-term deferred tax liability
    
    
    2,638
    
    
    
    4,454Long-term income tax payable
    
    
    640
    
    
    
    777Legal contingency accrual
    
    
    
    
    
    
    20,000Long-term deferred compensation
    
    
    2,765
    
    
    
    5,713Deferred rent
    
    
    128
    
    
    
    7,639Long-term deferred revenue
    
    
    1,590
    
    
    
    1,317Other
    
    
    2,348
    
    
    
    2,401Total
    
    $
    20,348
    
    
    $
    61,258
  Note 10  Leases
 Capital Lease Obligations
     75




---



##### 



Operating Leases
      76




---



##### 



Capital
    
    
    Operating(Dollars in thousands)
    
    Leases
    
    
    Leases2009
    
    $
    159
    
    
    $
    1,2722010
    
    
    98
    
    
    
    1,1102011
    
    
    
    
    
    
    3202012
    
    
    
    
    
    
    3332013
    
    
    
    
    
    
    258Subsequent to 2013
    
    
    
    
    
    
    Total minimum lease payments
    
    
    257
    
    
    $
    3,293Less: Amount representing interest
    
    
    (12
    )Present value of net minimum lease payments
    
    
    245Less: current portion
    
    
    (149
    )Obligations under capital leases, less current portion
    
    $
    96
  Note 11  Fair Value of Financial Instruments
   Note 12  Debt
   77




---



##### 



Previously Outstanding Debt
 2002 Senior Notes
  2005 Senior Notes
   78




---



##### 



2005 Revolving Credit Agreement
     79




---



##### 




    
    the Lenders agreed not to exercise remedies available to them
resulting from the Companys defaults under its Credit Agreements and
to temporarily waive the specified existing and continuing defaults
during the period commencing on the date of default and expiring on
November 30, 2006 unless the date was extended to January 31, 2007 if
the Company achieved certain pre-determined milestones,
    
    the Credit Agreements were amended to provide that the covenants,
events of default and other provisions were substantially the same
among those agreements,
    
    the Credit Agreements were amended to provide that the financial
covenants contained in the Credit Agreements were replaced by monthly
EBITDA and capital expenditures covenants,
    
    the swingline facility contained in the 2005 Revolving Credit
Agreements was cancelled,
    
    the existing amounts outstanding under the 2005 Revolving Credit
Agreement which were repaid as of the effective date of the Waiver
Agreement could not be re-borrowed,
    
    the revolving commitment under the 2005 Revolving Credit Agreement was
capped at $32.8 million,
    
    a new superpriority credit facility was established in an amount up to
$56 million in the aggregate, so long as the Company was in compliance
with the underlying terms and conditions of the Waiver Agreement,
  80




---



##### 




    
    the Company was required to grant a security interest in substantially
all its assets and to provide guarantees from all its domestic
subsidiaries with respect to the Credit Agreements and the
superpriority credit facility,
    
    borrowings under the superpriority credit facility would be at either
LIBOR plus 3.5% or the Base Rate plus 2.0% which was on average
approximately 175 basis points higher than under the then existing
Credit Agreements, and
    
    the Company would pay various fees, including a waiver fee applicable
to the 2002 Senior Notes, the 2005 Senior Notes, and the existing 2005
Revolving Credit Agreement of 25 basis points ($1.3 million), and a
100 basis point origination fee ($0.6 million) on the superpriority
credit facility.
   capital leases. The interest rate in
effect under the amended 2005 Revolving Credit Agreement was LIBOR + 2.5%, which was 7.85% on $22.2
million of debt outstanding. The company did not have the
  81




---



##### 



Note 13  Profit-Sharing, Pension, and Other Postretirement Benefit Plans
 Defined Contribution Plans
   Defined Benefit Plan and Other Postretirement Benefit Plan
    82




---



##### 



U.S. Defined Benefit
    
    
    Other PostretirementPension Plan
    
    
    Benefits(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    1,242
    
    
    
    1,189
    
    
    
    1,227
    
    
    
    5
    
    
    
    8
    
    
    
    11Recognized net actuarial loss/(gain)
    
    
    72
    
    
    
    135
    
    
    
    138
    
    
    
    (98
    )
    
    
    (104
    )
    
    
    (107
    )Net pension and other postretirement
benefit cost (income)
    
    $
    1,314
    
    
    $
    1,324
    
    
    $
    1,365
    
    
    $
    (93
    )
    
    $
    (96
    )
    
    $
    (96
    )
  83




---



##### 



Obligation and Funded Status
  U.S. Defined Benefit
    
    
    Other PostretirementPension Plan
    
    
    Benefits(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007Change in Benefit ObligationBenefit obligation, beginning of year
    
    $
    20,903
    
    
    $
    22,569
    
    
    $
    134
    
    
    $
    194Service cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest cost
    
    
    1,242
    
    
    
    1,189
    
    
    
    5
    
    
    
    8Actuarial (gain)/loss
    
    
    (3,277
    )
    
    
    (933
    )
    
    
    69
    
    
    
    (66
    )Benefits paid
    
    
    (2,039
    )
    
    
    (1,922
    )
    
    
    (131
    )
    
    
    (2
    )Benefit obligation, end of year
    
    $
    16,829
    
    
    $
    20,903
    
    
    $
    77
    
    
    $
    134Change in Plan AssetsFair value, beginning of year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Company contributions
    
    
    2,039
    
    
    
    1,922
    
    
    
    131
    
    
    
    2Benefits paid
    
    
    (2,039
    )
    
    
    (1,922
    )
    
    
    (131
    )
    
    
    (2
    )Fair value, end of year
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Funded/(unfunded) status
    
    $
    (16,829
    )
    
    $
    (20,903
    )
    
    $
    (77
    )
    
    $
    (134
    )Accrued benefit cost
    
    $
    (16,829
    )
    
    $
    (20,903
    )
    
    $
    (77
    )
    
    $
    (134
    )Amounts Recognized in the
Consolidated Balance SheetsCurrent accrued benefit liability
    
    
    (6,648
    )
    
    
    (2,060
    )
    
    
    (27
    )
    
    
    (41
    )Non-current accrued benefit liability
    
    
    (10,181
    )
    
    
    (18,843
    )
    
    
    (50
    )
    
    
    (93
    )Net amount recognized
    
    $
    (16,829
    )
    
    $
    (20,903
    )
    
    $
    (77
    )
    
    $
    (134
    )
   Plan Assumptions
 U.S. Defined Benefit
    
    
    Other PostretirementPension Plan
    
    
    Benefits2008
    
    
    2007
    
    
    2008
    
    
    2007Discount rate
    
    
    6.25
    %
    
    
    6.25
    %
    
    
    5.50
    %
    
    
    5.00
    %
   84




---



##### 



Additional Information
  U.S. Defined BenefitPension Plan(Dollars in thousands)
    
    2008
    
    
    2007Projected benefit obligation
    
    $
    16,829
    
    
    $
    20,903Accumulated benefit obligation
    
    $
    16,829
    
    
    $
    20,903
 Assumed Health Care Cost Trend Rates
 2008
    
    
    2007Health care cost trend rate assumed for next year
    
    
    8.50
    %
    
    
    9.00
    %Rate to which the cost trend rate is assumed to
decline (the ultimate trend rate)
    
    
    6.00
    %
    
    
    6.00
    %Year that the rate reaches the ultimate trend rate
    
    
    2014
    
    
    
    2014
  Future Contributions
    85




---



##### 



U.S. Retirement
    
    
    Other Postretirement(Dollars in thousands)
    
    Plans (SRP and RBP)
    
    
    Benefits2009
    
    $
    9,728
    
    
    $
    272010
    
    
    1,969
    
    
    
    212011
    
    
    1,719
    
    
    
    172012
    
    
    1,365
    
    
    
    142013
    
    
    1,319
    
    
    
    52014 - 2018
    
    
    5,275
    
    
    
    
  Note 14  Common Stock
  Note 15  Stock-Based Compensation
   86




---



##### 



Stock Option Plan
   Long Term Incentive Performance (LTIP) Grants
   87




---



##### 



2004 grantAchievement
    
    
    OptionsStock Price
    
    Period
    
    
    Vested$36.67
    
    3 years
    
    
    
    208,000$39.81
    
    4 years
    
    
    
    246,000$42.77
    
    5 years
    
    
    
    283,000$46.88
    
    5 years
    
    
    
    440,000
  Stock Appreciation Right (SAR) Grant
  Executive Stock Option Grants
   88




---



##### 



Nonvested Restricted Stock Grants
   Fair Value of Stock Option and SAR Grants
   89




---



##### 



2008
    
    
    2007
    
    
    2006Expected stock volatility
    
    
    45.90
    %
    
    
    35.30
    %
    
    
    39.00
    %Risk-free interest rate (weighted average for fiscal year)
    
    
    1.10
    %
    
    
    3.06
    %
    
    
    5.19
    %Expected years until exercise
    
    
    3
    
    
    
    3
    
    
    
    3Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
 Summary of Stock Option and SAR Activity
  Executive Grantees
    
    
    Director Grantees
    
    
    LTIP Grantees
    
    
    SAR GranteeWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageShares
    
    
    Exercise
    
    
    Shares
    
    
    Exercise
    
    
    Shares
    
    
    Exercise
    
    
    Shares
    
    
    Exercise(000s)
    
    
    Price
    
    
    (000s)
    
    
    Price
    
    
    (000s)
    
    
    Price
    
    
    (000s)
    
    
    PriceBalance at the end of
fiscal 2005
    
    
    1,432
    
    
    $
    25.53
    
    
    
    66
    
    
    $
    30.20
    
    
    
    2,066
    
    
    $
    31.24
    
    
    
    
    
    
    $
    2006:Granted
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    12.29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (29
    )
    
    
    20.47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/cancelled
    
    
    (300
    )
    
    
    27.49
    
    
    
    (3
    )
    
    
    32.63
    
    
    
    (260
    )
    
    
    30.97
    
    
    
    
    
    
    
    Awards outstanding at
the end of fiscal 2006
    
    
    1,103
    
    
    $
    25.21
    
    
    
    81
    
    
    $
    24.68
    
    
    
    1,806
    
    
    $
    31.28
    
    
    
    
    
    
    $
    Awards exercisable at the
end of fiscal 2006
    
    
    1,073
    
    
    $
    25.13
    
    
    
    63
    
    
    $
    30.06
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Weighted average fair value of
awards granted during
fiscal 2006
    
    $
    
    
    
    
    
    
    
    $
    4.13
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2007:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300
    
    
    
    8.55Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/cancelled
    
    
    (259
    )
    
    
    25.66
    
    
    
    (9
    )
    
    
    26.78
    
    
    
    (1,366
    )
    
    
    31.38
    
    
    
    
    
    
    
    Awards outstanding at
the end of fiscal 2007
    
    
    844
    
    
    $
    25.08
    
    
    
    72
    
    
    $
    25.98
    
    
    
    440
    
    
    $
    30.97
    
    
    
    300
    
    
    $
    8.55Awards exercisable at the
end of fiscal 2007
    
    
    844
    
    
    $
    25.08
    
    
    
    72
    
    
    $
    25.98
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    Weighted average fair value of
awards granted during
fiscal 2007
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2.612008:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited/cancelled
    
    
    (502
    )
    
    
    25.65
    
    
    
    (4
    )
    
    
    25.81
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Awards outstanding at
the end of fiscal 2008
    
    
    342
    
    
    $
    24.23
    
    
    
    68
    
    
    $
    25.99
    
    
    
    440
    
    
    $
    30.97
    
    
    
    300
    
    
    $
    8.55Awards exercisable at the
end of fiscal 2008
    
    
    342
    
    
    $
    24.23
    
    
    
    68
    
    
    $
    25.99
    
    
    
    
    
    
    $
    
    
    
    
    100
    
    
    $
    8.55
   90




---



##### 



Awards Outstanding
    
    
    Awards ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    Average
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Number
    
    
    Remaining
    
    
    AverageRange of
    
    Outstanding
    
    
    Contractual
    
    
    Exercise
    
    
    Exercisable
    
    
    Contractual
    
    
    ExerciseExercise Price
    
    (000s)
    
    
    Life (Years)
    
    
    Price
    
    
    (000s)
    
    
    Life (Years)
    
    
    Price$10.00 and Below
    
    
    300
    
    
    
    3.3
    
    
    $
    8.55
    
    
    
    100
    
    
    
    3.3
    
    
    $
    8.55$10.01 - $15.00
    
    
    16
    
    
    
    3.5
    
    
    
    12.29
    
    
    
    16
    
    
    
    3.5
    
    
    
    12.29$15.01 - $20.00
    
    
    98
    
    
    
    0.5
    
    
    
    18.88
    
    
    
    98
    
    
    
    0.5
    
    
    
    18.88$20.01 - $25.00
    
    
    151
    
    
    
    0.6
    
    
    
    21.81
    
    
    
    151
    
    
    
    0.6
    
    
    
    21.81$25.01 - $30.00
    
    
    20
    
    
    
    1.0
    
    
    
    27.61
    
    
    
    20
    
    
    
    1.0
    
    
    
    27.61$30.01 - $35.00
    
    
    524
    
    
    
    4.4
    
    
    
    31.13
    
    
    
    84
    
    
    
    1.0
    
    
    
    31.95$35.01 - $40.00
    
    
    41
    
    
    
    2.2
    
    
    
    36.15
    
    
    
    41
    
    
    
    2.2
    
    
    
    36.151,150
    
    
    
    3.1
    
    
    $
    22.82
    
    
    
    510
    
    
    
    1.5
    
    
    $
    21.39
 WeightedAverage
    
    
    WeightedNumber
    
    
    Remaining
    
    
    Average
    
    
    Aggregateof Shares
    
    
    Contractual
    
    
    Exercise
    
    
    Intrinsic(000s)
    
    
    Life (Years)
    
    
    Price
    
    
    ValueVested and expected to vest
as of December 31, 2008
    
    
    1,150
    
    
    
    3.1
    
    
    $
    22.82
    
    
    $
    
  91




---



##### 



Summary of Nonvested Restricted Stock Activity
  Employee Grantees
    
    
    Director GranteesWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageShares
    
    
    Grant-Date
    
    
    Shares
    
    
    Grant-Date(000s)
    
    
    Fair Value
    
    
    (000s)
    
    
    Fair ValueNonvested restricted stock balance
at the end of fiscal 2005
    
    
    118
    
    
    $
    33.55
    
    
    
    13
    
    
    $
    28.822006:Granted
    
    
    2
    
    
    
    29.04
    
    
    
    
    
    
    
    Vested
    
    
    (18
    )
    
    
    34.83
    
    
    
    
    
    
    
    Forfeited/cancelled
    
    
    (30
    )
    
    
    34.67
    
    
    
    
    
    
    
    Nonvested restricted stock outstanding
at the end of fiscal 2006
    
    
    72
    
    
    $
    32.61
    
    
    
    13
    
    
    $
    28.822007:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    (48
    )
    
    
    33.11
    
    
    
    (8
    )
    
    
    28.10Forfeited/cancelled
    
    
    (10
    )
    
    
    32.20
    
    
    
    (3
    )
    
    
    25.75Nonvested restricted stock outstanding
at the end of fiscal 2007
    
    
    14
    
    
    $
    31.17
    
    
    
    2
    
    
    $
    35.802008:Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    (14
    )
    
    
    31.17
    
    
    
    (2
    )
    
    
    35.80Forfeited/cancelled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested restricted stock outstanding
at the end of fiscal 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
   Securities Authorized for Issuance
  Number of securitiesNumber of securities to be
    
    
    Weighted-average
    
    
    remaining available forissued upon exercise of
    
    
    exercise price of
    
    
    future issuanceoutstanding options
    
    
    outstanding options
    
    
    under equityPlan Category
    
    and rights
    
    
    and rights
    
    
    compensation plans (a)Equity compensation plans
approved by security holders
    
    
    1,150
    
    
    $
    22.82
    
    
    
    3,213Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,150
    
    
    $
    22.82
    
    
    
    3,213
 (a)
    
    Excludes securities reflected in the first column, Number of securities to be issued upon
exercise of outstanding options and rights.  92




---



##### 



Employee Stock Purchase Plan
  Note 16  Corporate Transition and Lease Termination Costs
  (Dollars in thousands)Balance as of December 30, 2006
    
    $
    Accruals
    
    
    4,338Payments made
    
    
    (1,372
    )Balance as of December 29, 2007
    
    $
    2,966Accruals
    
    
    103Payments made
    
    
    (513
    )Balance as of December 31, 2008
    
    $
    2,556Current portion
    
    $
    1,879Long-term portion
    
    $
    677
  93




---



##### 



94




---



##### 



Note 17  Foreign Currency Transactions
   Note 18  Contingent Liabilities
 Putative Securities Class Actions
 In re ProQuest Company Securities Litigation,
  95




---



##### 



Shareholder Derivative Lawsuits
    96




---



##### 



Securities and Exchange Commission Investigation
  Data Driven Software Corporation vs. Voyager Expanded Learning et al.
 ,
  97




---



##### 



Other Contingent Liabilities
   Note 19  Related Party Transactions
   98




---



##### 



99




---



##### 



Note 20  Interim Financial Information (Unaudited)
  First
    
    
    Second
    
    
    Third
    
    
    Fourth
    
    
    Total(Dollars in thousands, except per share data)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Year2008Net sales
    
    $
    15,637
    
    
    $
    33,514
    
    
    $
    27,267
    
    
    $
    22,113
    
    
    $
    98,531Gross profit
    
    
    9,104
    
    
    
    22,166
    
    
    
    17,311
    
    
    
    14,011
    
    
    
    62,592Earnings (loss) from continuing operations before
income taxes
    
    
    (24,632
    )
    
    
    (1,601
    )
    
    
    (5,110
    )
    
    
    (51,321
    )
    
    
    (82,664
    )Income tax expense (benefit)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,160
    
    
    
    1,160Loss from continuing operations
    
    $
    (24,632
    )
    
    $
    (1,601
    )
    
    $
    (5,110
    )
    
    $
    (50,161
    )
    
    $
    (81,504
    )Basic loss per share from continuing operations
    
    
    (0.82
    )
    
    
    (0.05
    )
    
    
    (0.17
    )
    
    
    (1.68
    )
    
    
    (2.73
    )Diluted loss per share from continuing operations
    
    
    (0.82
    )
    
    
    (0.05
    )
    
    
    (0.17
    )
    
    
    (1.68
    )
    
    
    (2.73
    )2007Net sales
    
    $
    20,059
    
    
    $
    36,330
    
    
    $
    31,837
    
    
    $
    21,386
    
    
    $
    109,612Gross profit
    
    
    13,338
    
    
    
    25,810
    
    
    
    21,864
    
    
    
    12,408
    
    
    
    73,420Earnings (loss) from continuing operations before
income taxes
    
    
    (15,885
    )
    
    
    (1,985
    )
    
    
    (3,207
    )
    
    
    (78,581
    )
    
    
    (99,658
    )Income tax expense (benefit)
    
    
    (6,074
    )
    
    
    (756
    )
    
    
    (1,226
    )
    
    
    (4,340
    )
    
    
    (12,396
    )Earnings (loss) from continuing operations
    
    
    (9,811
    )
    
    
    (1,229
    )
    
    
    (1,981
    )
    
    
    (74,241
    )
    
    
    (87,262
    )Earnings (loss) from discontinued
operations, net of income tax
    
    
    4,594
    
    
    
    
    
    
    
    
    
    
    
    866
    
    
    
    5,460Gain on sale of discontinued
operations, net of income tax
    
    
    46,572
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,572Net earnings (loss)
    
    $
    41,355
    
    
    $
    (1,229
    )
    
    $
    (1,981
    )
    
    $
    (73,375
    )
    
    $
    (35,230
    )Loss per share from continuing operations
    
    
    (0.33
    )
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (2.49
    )
    
    
    (2.92
    )Earnings per share from discontinued operations
    
    
    0.15
    
    
    
    
    
    
    
    
    
    
    
    0.03
    
    
    
    0.18Gain per share from sale of discontinued operations
    
    
    1.56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.56Basic earnings (loss) per share
    
    
    1.38
    
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (2.46
    )
    
    
    (1.18
    )Loss per share from continuing operations
    
    
    (0.33
    )
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (2.49
    )
    
    
    (2.92
    )Earnings per share from discontinued operations
    
    
    0.15
    
    
    
    
    
    
    
    
    
    
    
    0.03
    
    
    
    0.18Gain per share from sale of discontinued operations
    
    
    1.56
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.56Diluted earnings (loss) per share
    
    
    1.38
    
    
    
    (0.04
    )
    
    
    (0.07
    )
    
    
    (2.46
    )
    
    
    (1.18
    )
   100




---



##### 



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
    101




---



##### 



102




---



##### 



103




---



##### 



Item 9A. Controls and Procedures.
 Managements Report on Internal Control Over Financial Reporting
 (a) Evaluation of Disclosure Controls and Procedures
   (b) Managements Report on Internal Control Over Financial Reporting
      104




---



##### 



Internal Control  Integrated Framework.
   (c) Changes in Internal Control Over Financial Reporting
  Item 9B. Other Information.
   105




---



##### 



Part III
 Item 10.
Directors, Executive Officers and Corporate Governance.
 Directors and Executive Officers
   Name
    
    Age*
    
    Position at the CompanyBoard of DirectorsWilliam E. Oberndorf
    
    
    55
    
    
    Chairman of the BoardDavid G. Brown
    
    
    52
    
    
    DirectorJames P. Roemer
    
    
    61
    
    
    DirectorGary L. Roubos
    
    
    72
    
    
    DirectorFrederick J. Schwab
    
    
    69
    
    
    DirectorExecutive Committee
(led by Richard Surratt)Richard J. Surratt
    
    
    48
    
    
    President, Chief Executive OfficerBradley C. Almond
    
    
    42
    
    
    Vice President, Chief Financial Officer (Effective January 1,
2009)Todd W. Buchardt
    
    
    49
    
    
    Senior Vice President, General Counsel and Corporate SecretaryRonald Klausner
    
    
    55
    
    
    President, Voyager Expanded Learning
 *
    
    Ages indicated above are as of February 27, 2009.   106




---



##### 



Board of Directors.
 David G. Brown
 William E. Oberndorf
 James P. Roemer
 Gary L. Roubos
  107




---



##### 



Frederick J. Schwab
 Executive Committee.
 Richard J. Surratt
 Bradley C. Almond
 Todd W. Buchardt
  108




---



##### 



Ronald Klausner .
 Audit Committee .
  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  Code of Ethics
 www.voyagercompany.com.
  109




---



##### 



Item 11. Executive Compensation.
 Compensation Discussion and Analysis (CD&A)
  
    
    Retain key executives during this uncertain period to achieve strategic objectives
related to its remaining line of business,
 
    
    Complete the restatement of the Companys financial statements in compliance with
applicable accounting standards as expeditiously as possible; and
 
    
    Settle various outstanding issues stemming from the
restatement including shareholder lawsuits and a formal SEC
investigation.
   110




---



##### 



KEY COMPONENTS OF COMPENSATION
  
    
    Base salary
 
    
    Annual incentive compensation and bonuses
 
    
    Benefits
 
    
    Severance
  Base Salary
  Annual Incentive Compensation and Bonuses
   
    
    Mr. Surratts target bonus award for 2008 equal to $573,750 was guaranteed through
June 20, 3008 under his amended retention agreement and the target bonus for the year
was paid.
 
    
    Mr. Buchardts bonus of $148,328 reflects his achievement of favorable results with
respect to extraordinary and unusual legal matters that arose following the Companys
need for financial restatements.
  111




---



##### 




    
    Mr. Klausner bonus of $100,000 reflects his efforts in introducing additional
products for the Voyager Education segment and the continued growth in the Learning A-Z
and ExploreLearning product lines.
 
    
    Mr. Asais 2008 bonus of $230,000 was two performance bonuses of $115,000 each for
completing and filing the Companys financial statements for each of fiscal year 2006
and fiscal year 2007.
 
    
    Mr. Campbells 2008 bonus of $132,480 was comprised of an incentive award of $75,000
guaranteed as part of a retention letter, $42,480 as earned based on an average 96%
achievement of revenue (weighted 60%) and earnings before interest, taxes, depreciation
and amortization (weighted 40%) targets for EL and LAZ, and $15,000 as a discretionary
bonus for reasonable performance in a difficult year.
 Equity Awards
  Benefits
   112




---



##### 



Severance
  Stock Restrictions
   ACCOUNTING AND TAX
  Report of the Compensation Committee
   
  113




---



##### 



COMPENSATION AND STOCK OWNERSHIP INFORMATION
 2006-2008 SUMMARY COMPENSATION TABLE
  Non-EquityStock
    
    
    Option
    
    
    Incentive Plan
    
    
    All OtherName and Principal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($) (1)
    
    
    ($) (2)
    
    
    ($) (3)
    
    
    ($) (4)
    
    
    ($) (5)
    
    
    ($)Richard J. Surratt
    
    
    2008
    
    
    $
    721,812
    
    
    $
    573,750
    
    
    $
    55,557
    
    
    
    
    
    
    
    
    
    
    $
    266,869
    
    
    $
    1,617,988President and Chief Executive Officer,
    
    
    2007
    
    
    $
    649,696
    
    
    $
    1,973,750
    
    
    $
    66,667
    
    
    
    
    
    
    
    
    
    
    $
    378,963
    
    
    $
    3,069,076Voyager Learning Company
    
    
    2006
    
    
    $
    313,027
    
    
    $
    150,000
    
    
    $
    64,344
    
    
    $
    335,079
    
    
    $
    51,000
    
    
    $
    201,472
    
    
    $
    1,114,922Ronald Klausner
    
    
    2008
    
    
    $
    578,582
    
    
    $
    100,000
    
    
    
    
    
    
    $
    753,364
    
    
    
    
    
    
    $
    89,172
    
    
    $
    1,521,118President,
    
    
    2007
    
    
    $
    542,584
    
    
    $
    75,000
    
    
    
    
    
    
    $
    950,857
    
    
    
    
    
    
    $
    105,363
    
    
    $
    1,673,804Voyager
Expanded Learning
    
    
    2006
    
    
    $
    537,075
    
    
    
    
    
    
    
    
    
    
    $
    868,146
    
    
    
    
    
    
    $
    342,763
    
    
    $
    1,747,984Todd W. Buchardt
    
    
    2008
    
    
    $
    351,370
    
    
    $
    148,328
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    109,451
    
    
    $
    609,149Senior Vice
President,
    
    
    2007
    
    
    $
    314,033
    
    
    $
    313,500
    
    
    
    
    
    
    
    
    
    
    $
    460,493
    
    
    $
    109,831
    
    
    $
    1,197,857General Counsel and Corporate
Secretary,
    
    
    2006
    
    
    $
    300,742
    
    
    
    
    
    
    
    
    
    
    $
    267,904
    
    
    $
    384,076
    
    
    $
    56,594
    
    
    $
    1,009,316Voyager
Learning CompanyDavid Asai
    
    
    2008
    
    
    $
    244,553
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    230,000
    
    
    $
    85,667
    
    
    $
    560,220Senior Vice
President,
    
    
    2007
    
    
    $
    232,188
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    115,000
    
    
    $
    84,162
    
    
    $
    431,350Chief Financial Officer,Voyager Learning
CompanyJohn Campbell
    
    
    2008
    
    
    $
    283,654
    
    
    $
    90,000
    
    
    $
    5,000
    
    
    
    
    
    
    $
    42,480
    
    
    $
    12,239
    
    
    $
    433,373Chief Operating
Officer,Voyager
Expanded Learning
 (1)
    
    In the case of Mr. Surratt, the amount earned in 2008 represents a payment of $573,750 with
respect to his 2008 annual bonus, in accordance with the retention agreement dated February 1, 2007
which guaranteed such annualized bonus through June 30, 2008. The Compensation Committee exercised
its discretion to pay Mr. Klausners bonus in recognition of his efforts in introducing additional
products in the Voyager Education segment and the continued growth of the Learning A-Z and ExploreLearnings product lines, even though the
specific targets set for the Voyager Education segment were not met. The Compensation Committee
also exercised its discretion to provide Mr. Buchardt a bonus in recognition of favorable results
with respect to legal matters that arose following the Companys need for financial restatements.  114




---



##### 



(2)
    
    The amounts reported in this column for each executive reflect the compensation costs for
financial reporting purposes for the year under SFAS No. 123R for outstanding stock awards (other
than stock options) granted in prior years. These are not amounts paid to or realized by the
executive. Assumptions used in the calculation of these compensation costs are included in Notes
1 and 16 to the Companys audited financial statements included in this Form 10-K for 2008 and
Notes 1 and 15 to the Companys audited financial statements included in the Companys Form 10-K
for 2006 and 2007. However, pursuant to SEC rules, the amounts shown above do not reflect any
assumption that a portion of this award will be forfeited.(3)
    
    The amounts reported in this column for each executive reflects the compensation costs for
financial reporting purposes for the year under SFAS No. 123R for stock options granted in prior
years. The 2008 amount for Mr. Klausner includes a stock option expense of $854,076 and a stock
appreciation rights expense of negative $100,712. These are not amounts paid to or realized by the
executive, and no amounts were paid in 2008. Assumptions used in the calculation of these compensation costs are included in Notes
1 and 16 to the Companys audited financial statements included in this Form 10-K for 2008 and
Notes 1 and 15 to the Companys audited financial statements included in the Companys Form 10-K
for 2006 and 2007. However, pursuant to SEC rules, the amounts above do not reflect any assumption
that a portion of the awards will be forfeited and do not reflect a forfeiture of an amount
expensed in a prior year. More information regarding outstanding stock options is set forth in the
2008 Outstanding Equity Awards at Fiscal Year-End Table.(4)
    
    The payment earned by Mr. Asai in 2008 represents an incentive payment earned in accordance
with the terms of his retention agreement for completing the Companys annual report on Form 10-K
for 2006 and 2007.(5)
    
    Refer to All Other Compensation Table (and footnotes thereto) for details.(6)
    
    The executives did not participate in any Company defined benefit pension plan and there were
no above market or preferential earnings with respect to the Companys nonqualified deferred
compensation plans. Information regarding the Companys deferred compensation plans is set forth
under the 2008 Nonqualified Deferred Compensation Table.  115




---



##### 



2008 ALL OTHER COMPENSATION TABLE
 Cash
    
    
    
    
    
    
    
    
    
    
    OtherAwards
    
    
    
    
    
    
    Tax
    
    
    Perq andCompany
    
    
    in lieu of
    
    
    Relocation
    
    
    Reimburse-
    
    
    PersonalLife Ins.
    
    
    Contributions
    
    
    SERP
    
    
    Expenses
    
    
    ment
    
    
    BenefitsName
    
    Premiums
    
    
    to 401(k)
    
    
    (1)
    
    
    (2)
    
    
    (3)
    
    
    (4)
    
    
    TotalRichard J. Surratt
    
    $
    2,106
    
    
    $
    6,900
    
    
    $
    124,477
    
    
    $
    76,417
    
    
    $
    56,969
    
    
    
    
    
    
    $
    266,869Ronald Klausner
    
    $
    1,741
    
    
    $
    6,900
    
    
    $
    80,531
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    89,172Todd W. Buchardt
    
    $
    962
    
    
    $
    6,900
    
    
    $
    101,589
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    109,451David Asai
    
    $
    373
    
    
    $
    6,900
    
    
    
    
    
    
    $
    42,210
    
    
    $
    36,184
    
    
    
    
    
    
    $
    85,667John Campbell
    
    $
    478
    
    
    $
    6,900
    
    
    
    
    
    
    
    
    
    
    $
    1,361
    
    
    $
    3,500
    
    
    $
    12,239
 (1)
    
    Represents cash that would otherwise have been contributed to the executives supplemental
executive retirement benefits account under the Companys Executive Deferred Compensation Plan, but
was distributed directly to the executive as a current cash payment.(2)
    
    Pursuant to the terms of his February 1, 2007 employment agreement, the Company agreed to
reimburse Mr. Surratt for relocation expenses plus any loss of the sale of his residence in Ann
Arbor, Michigan (up to a maximum of $150,000).(3)
    
    For Mr. Surratt and Mr. Asai, the tax reimbursement amount represents the tax gross up on
relocation expenses. For Mr. Campbell, the tax reimbursement amount represents the tax gross up on
those items described in footnote (4).(4)
    
    Mr. Campbells benefits include $36 for tax return preparation, $2,864 for home office
equipment, $302 for internet services, and $298 for subscriptions to financial services or
publications.  116




---



##### 



2008 GRANTS OF PLAN-BASED AWARDS
  Estimated Future PayoutsUnder Non-Equity Incentive Plan AwardsName
    
    Threshold
    
    
    Target
    
    
    MaximumRichard J. Surratt
    
    
    
    
    
    
    
    
    
    
    Ronald Klausner
    
    
    
    
    
    $
    375,952
    
    
    
    Todd W. Buchardt
    
    
    
    
    
    $
    148,328
    
    
    
    David Asai
    
    
    
    
    
    $
    230,000
    
    
    
    John Campbell
    
    
    
    
    
    $
    177,000
    
    
    
    
 EMPLOYMENT AND SEVERANCE ARRANGEMENTS
  Benefits
   117




---



##### 



SEVERANCE
    118




---



##### 



CHANGE IN CONTROL TRIGGERS AND PARACHUTE EXCISE TAX PROTECTION
    119




---



##### 



2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
  2008 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
 Option AwardsEquity IncentivePlan Awards:Number of
    
    
    Number of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    OptionDate of
    
    
    Option (#):
    
    
    Option (#):
    
    
    Unearned
    
    
    Exercise
    
    
    ExpirationName
    
    Grant
    
    
    Exercisable
    
    
    Unexercisable
    
    
    Option (#) (1)
    
    
    Price ($)
    
    
    Date (2)Richard J. SurrattRonald Klausner
    
    
    4/2/2003
    
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    21.15
    
    
    
    4/2/20092/4/2004
    
    
    
    
    
    
    
    
    
    
    
    440,000
    
    
    
    30.97
    
    
    
    2/4/20144/24/2007
    (3)
    
    
    100,000
    
    
    
    200,000
    
    
    
    
    
    
    
    8.55
    
    
    
    4/23/2012Todd W. Buchardt
    
    
    2/26/1999
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    33.13
    
    
    
    2/26/200910/12/2000
    
    
    
    15,000
    
    
    
    
    
    
    
    
    
    
    
    19.69
    
    
    
    10/12/20102/28/2001
    
    
    
    18,000
    
    
    
    
    
    
    
    
    
    
    
    22.95
    
    
    
    2/28/20113/6/2002
    
    
    
    22,000
    
    
    
    
    
    
    
    
    
    
    
    36.00
    
    
    
    3/6/20123/5/2003
    
    
    
    19,700
    
    
    
    
    
    
    
    
    
    
    
    18.31
    
    
    
    3/5/2009David AsaiJohn Campbell
    
    
    1/12/2004
    
    
    
    9,000
    
    
    
    
    
    
    
    
    
    
    
    30.08
    
    
    
    1/12/2010
 (1)
    
    Unexercisable unearned options vest (i) based on performance determined on the basis of the
rolling average of the fair market value of a share of the Company Common Stock for a period of
ninety consecutive trading days during the performance period or (ii) otherwise on the seventh year
anniversary of the grant provided the executive remains employed through such period. The stock
price targets are consistent for all participants and range from $36.67 or $46.88 and above. The
performance period for Mr. Klausner and Mr. Buchardt begins on January 1, 2005 and ends April 1.
2009. The performance period for Mr. Surratt begins on the grant date of November 2, 2005 and ends
April 1, 2009. Messrs. Surratt and Buchardt later agreed to a cancellation of their unexercisable
unearned options.  120




---



##### 



(2)
    
    On August 9, 2006, the Companys Compensation Committee extended the period of time that
Messrs. Klausner and Buchardt may exercise their outstanding vested stock options (other than
their unexercisable unearned option grants) due to involuntary termination of employment by the
Company without cause or resignation for good reason up to 12 months after any such employment
termination but not beyond the original option expiration date.(3)
    
    Mr. Klausner received a grant of stock appreciation rights (SAR) with respect to 300,000
shares of Company common stock on April 24, 2007. The base price for the SAR is $8.55, which was
the closing price of a share of the Companys common stock on the grant date. The difference
between the fair market value of a share of the Companys stock and the base price is payable on
exercise in cash. The term of the SAR is five years subject to earlier expiration in the event Mr.
Klausner terminates employment under certain circumstances. Mr. Klausner will vest in 100,000 of
the shares subject to this SAR on each of the first three anniversaries of the grant date, provided
he remains continuously employed by the Company on each such date. Notwithstanding the foregoing,
vesting of the SAR will fully accelerate on a Change of Control of the Company if he remains
continuously employed on such date. 2008 NONQUALIFIED DEFERRED COMPENSATION
  2008 NONQUALIFIED DEFERRED COMPENSATION TABLE
 AggregateAggregate
    
    
    Aggregate
    
    
    Balance atEarnings in 2008
    
    
    Withdrawals/
    
    
    2008 FiscalFiscal Year
    
    
    Distributions
    
    
    Year-EndName
    
    Plan
    
    
    ($)
    
    
    ($)
    
    
    ($)Richard J. Surratt
    
    
    Executive Deferred Compensation Plan (1)
    
    
    5,459
    
    
    
    54,898
    
    
    
    Ronald Klausner
    
    
    Executive Deferred Compensation Plan (1)
    
    
    (31,882
    )
    
    
    444,357
    
    
    
    Todd W. Buchardt
    
    
    Replacement Benefit Plan
    
    
    4,636
    
    
    
    
    
    
    
    100,955David Asai
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John Campbell
    
    
    
    
    
    
    
    
    
    
    
    
    
    
     (1)
    
    The Executive Deferred Compensation Plan was terminated and all amounts were paid out by the
end of 2008. The Executive
Deferred Compensation Plan credited accounts of participants with deferrals by participants as well
as supplemental executive retirement plan contributions by the Company and adjusted account
balances with earnings.(2)
    
    The replacement benefit plan was a plan that provided for amounts to be credited to certain
highly compensated employees whose benefits under the Companys profit sharing plan were limited.
No additional contributions were credited after December 31, 2000 under the replacement benefit
plan but participants continue to receive an earnings adjustment. The earnings rate is determined
each October 31 for the subsequent calendar year based on 120% of the 120-month rolling average of
10-year U.S. Treasury Notes. Mr. Buchardts replacement benefit plan distribution will be paid in
a lump sum after his termination of employment. Upon a change of control of the Company, the
replacement benefit plan benefits are funded in a rabbi trust.
  121




---



##### 



POTENTIAL PAYMENT UPON TERMINATION OR CHANGE OF CONTROL
 Executive Agreements
  Retention Agreements
 Severance Amounts
   122




---



##### 



Name
    
    Enhanced Severance (years)
    
    
    Regular Severance (years)Richard J. Surratt
    
    
    2.0
    
    
    
    1.5Ronald Klausner
    
    
    1.5
    
    
    
    1.0Todd W. Buchardt
    
    
    1.5
    
    
    
    1.0
   Definitions
 Change of Control
   123




---



##### 



Cause
  Good Reason
   124




---



##### 



125




---



##### 



SEVERANCE LETTER AGREEMENT
  Subsequent Events
  2008 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL TABLE
   2008 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL TABLE
 Non-Change
    
    
    Change ofof Control
    
    
    ControlTermination
    
    
    Terminationw/o Cause or
    
    
    w/o Cause or
    
    
    
    
    
    
    
    
    
    
    Changefor Good
    
    
    for Good
    
    
    
    
    
    
    
    
    
    
    ofName
    
    Benefit
    
    Reason
    
    
    Reason
    
    
    Death
    
    
    Disability
    
    
    ControlRichard J. Surratt
    
    Severance (1)
    
    $
    1,012,500
    
    
    $
    1,350,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Annual Incentive (2)
    
    
    573,500
    
    
    
    573,500
    
    
    
    573,500
    
    
    
    573,500
    
    
    
    573,500Benefit Continuation (3)
    
    
    15,615
    
    
    
    20,281
    
    
    
    
    
    
    
    
    
    
    
    280G Tax Gross Up (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    1,601,615
    
    
    $
    1,943,781
    
    
    $
    573,500
    
    
    $
    573,500
    
    
    $
    573,500Ronald Klausner
    
    Severance (1)
    
    $
    537,075
    
    
    $
    805,613
    
    
    $
    
    
    
    $
    
    
    
    $
    Annual Incentive (2)
    
    
    375,953
    
    
    
    375,953
    
    
    
    375,953
    
    
    
    375,953
    
    
    
    375,953Benefit Continuation (3)
    
    
    8,797
    
    
    
    13,195
    
    
    
    
    
    
    
    
    
    
    
    280G Tax Gross Up (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    921,825
    
    
    $
    1,194,761
    
    
    $
    375,953
    
    
    $
    375,953
    
    
    $
    375,953Todd W. Buchardt
    
    Severance (1)
    
    $
    296,656
    
    
    $
    444,984
    
    
    $
    
    
    
    $
    
    
    
    $
    Annual Incentive (2)
    
    
    148,328
    
    
    
    148,328
    
    
    
    148,328
    
    
    
    148,328
    
    
    
    148,328Benefit Continuation (3)
    
    
    10,411
    
    
    
    15,616
    
    
    
    
    
    
    
    
    
    
    
    280G Tax Gross Up (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    455,395
    
    
    $
    608,928
    
    
    $
    148,328
    
    
    $
    148,328
    
    
    $
    148,328David Asai
    
    Severance (1)
    
    $
    230,000
    
    
    $
    230,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Annual Incentive (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Benefit Continuation (3)
    
    
    8,797
    
    
    
    8,797
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    238,797
    
    
    $
    238,797
    
    
    $
    
    
    
    $
    
    
    
    $
    John Campbell
    
    Severance (1)
    
    $
    295,000
    
    
    $
    295,000
    
    
    $
    
    
    
    $
    
    
    
    $
    Annual Incentive (5)
    
    
    75,000
    
    
    
    75,000
    
    
    
    
    
    
    
    
    
    
    
    340,500Benefit Continuation (3)
    
    
    7,555
    
    
    
    7,555
    
    
    
    
    
    
    
    
    
    
    
    Total:
    
    $
    377,555
    
    
    $
    377,555
    
    
    $
    
    
    
    $
    
    
    
    $
    340,500
 (1)
    
    Severance is calculated pursuant to their agreements as though the event occurred
December 31, 2008.(2)
    
    Assumes the effective date of termination is December 31, 2008 and that the pro-rata
payment under the Annual Incentive is equal to the award paid for the year.  126




---



##### 



(3)
    
    The benefit continuation number is an estimate of the cost of health coverage
continuation for the severance factor period described above with respect to the
retention agreements. The number for Mr. Klausner sets forth the estimate of the cost
of health coverage for one year since it was customary for the Company to provide
executives with health coverage for a period corresponding to their severance amount
period. Company provides benefits on active-employee terms during the severance
period.(4)
    
    Some payments received prior to December 31, 2008 could be treated as contingent on a
change of control, if one were to occur on December 31, 2008. The estimated gross-up
payment includes restoration of excise tax due on any such payments as well as the
parachute portion of the payments shown on this table.(5)
    
    Mr. Campbells bonus was guaranteed to be at least 150% of his target bonus if the
Company was sold in 2008. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
   127




---



##### 



COMPENSATION OF DIRECTORS
  
    
    Annual cash retainer is $30,000
 
    
    Equity based compensation is $20,000 per year
 
    
    No meeting fees are paid for regular board meetings.
      128




---



##### 



2008 DIRECTOR COMPENSATION TABLE
 Fees Earnedor Paid in
    
    
    Stock
    
    
    OptionCash
    
    
    Awards
    
    
    Awards
    
    
    TotalName
    
    ($)(1)
    
    
    ($)(2)
    
    
    ($)(3)
    
    
    ($)Randy Best (8)
    
    
    30,000
    
    
    
    4,167
    
    
    
    
    
    
    
    34,167David G. Brown
    
    
    64,667
    
    
    
    
    
    
    
    
    
    
    
    64,667Todd S. Nelson (5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    William E. Oberndorf (6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Linda Roberts (7)
    
    
    36,000
    
    
    
    
    
    
    
    
    
    
    
    36,000James P. Roemer (4)
    
    
    39,667
    
    
    
    
    
    
    
    
    
    
    
    39,667Gary L. Roubos
    
    
    64,667
    
    
    
    
    
    
    
    
    
    
    
    64,667Frederick J. Schwab
    
    
    54,667
    
    
    
    
    
    
    
    
    
    
    
    54,667
 (1)
    
    The fees earned or paid in cash are comprised of the following: EquityAwardAnnual
    
    
    Committee
    
    
    Paid inRetainer
    
    
    Retainer
    
    
    Cash
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Randy Best
    
    
    30,000
    
    
    
    
    
    
    
    
    
    
    
    30,000David G. Brown
    
    
    30,000
    
    
    
    31,000
    
    
    
    3,667
    
    
    
    64,667Todd Nelson
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Linda Roberts
    
    
    30,000
    
    
    
    6,000
    
    
    
    
    
    
    
    36,000James P. Roemer
    
    
    30,000
    
    
    
    6,000
    
    
    
    3,667
    
    
    
    39,667Gary L. Roubos
    
    
    30,000
    
    
    
    31,000
    
    
    
    3,667
    
    
    
    64,667Frederick J. Schwab
    
    
    30,000
    
    
    
    21,000
    
    
    
    3,667
    
    
    
    54,667
  129




---



##### 



(2)
    
    The amount reported in this column reflects the dollar amount recognized for financial
reporting purposes for the year under SFAS No. 123R for outstanding stock awards (other than
stock options) granted in prior years. These are not amounts paid to or realized by the
Director. However, pursuant to SEC rules, the amounts shown above do not reflect any assumption that a portion of
the awards will be forfeited. The SFAS No. 123R grant date fair value for such stock grants
which vest over three years was $75,000. As of December 31, 2008, Mr. Best was fully vested
in his restricted stock.(3)
    
    As of December 31, 2008, each Director has the following aggregate number of options
outstanding: Mr. Brown, 14,121; Mr. Oberndorf, 14,121; Mr. Roemer, 4,284; Mr. Roubos, 14,121;
and Mr. Schwab, 4,284.(4)
    
    Based on his service as a former executive of the Company, Mr. Roemer was entitled to
benefits under the Companys nonqualified supplemental retirement plan and replacement benefit
plan. Pursuant to an election provided in 2008 by the Company to all participants in such
plans, Mr. Roemer elected and in 2009 received a discounted lump sum benefit payment under
these plans of an aggregate amount of $2,885,250.(5)
    
    Mr. Nelson resigned effective February 7, 2008.(6)
    
    Mr. Oberndorf waived his rights to compensation as a member of the Board and its committees.(7)
    
    Dr. Roberts resigned effective August 29, 2008.(8)
    
    Mr. Best resigned effective November 5, 2008.  130




---



##### 



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters.
 OWNERSHIP INFORMATION OF FIVE PERCENT HOLDERS
  Security Ownership of Beneficial Owners
 Name and Address of Beneficial Owner
    
    Number of Shares
    
    
    PercentFoxhill Capital, LLC (1)
    
    
    4,578,935
    
    
    
    15.3
    %502 Carnegie Center
Suite 104
Princeton, New Jersey 08540William E. Oberndorf (2,3)
    
    
    3,524,619
    
    
    
    11.8
    %SPO Partners & Co.
591 Redwood Highway
Suite 3215
Mill Valley, CA 94941SPO Advisory Corp. (4)
    
    
    3,072,500
    
    
    
    10.3
    %591 Redwood Highway
Suite 3215
Mill Valley, CA 94941Sterling Capital Management LLC(5)
    
    
    2,299,530
    
    
    
    7.7
    %Two Morrocroft Centre
4064 Colony Road, Ste 300
Charlotte, NC 28211Wells Fargo & Company (6)
    
    
    2,938,854
    
    
    
    9.8
    %420 Montgomery Street
San Francisco, CA 94104Keystone, Inc. (7)
    
    
    2,613,000
    
    
    
    8.7
    %3100 Texas Commerce Tower
201 Main Street
Fort Worth, TX 76102Morgan Stanley (8)
    
    
    2,363,763
    
    
    
    7.9
    %1585 Broadway
New York, NY 10036Shamrock Activist Value Fund GP, LLC (9)
    
    
    2,192,272
    
    
    
    7.3
    %4444 Lakeside Drive
Burbank, CA 91505Columbia Wanger Asset Management, L.P. (10)
    
    
    2,000,000
    
    
    
    6.7
    %227 West Monroe Street, Ste 3000
Chicago, IL 60606
 
 (1)
    
    Pursuant to Schedule 13G filed on January 28 2009.(2)
    
    Pursuant to Schedule 13D/A filed on August 12, 2008.(3)
    
    Includes 437,998 shares that Mr. Oberndorf may be deemed to beneficially own through his
control of family trusts and also includes through his ownership of options to purchase 14,121
shares that are currently exercisable.(4)
    
    As general partner of SF Advisory Partners, L.P., SPO Partners II, L.P. and SPO Advisory
Partners L.P., SPO Advisory Corp. may be deemed to share investment and voting control with
respect to these shares. Messrs. William Oberndorf, John Scully, William Patterson and Edward
McDermott are the controlling persons of SPO Advisory Corp.(5)
    
    Pursuant to Schedule 13G filed on January 22, 2009.(6)
    
    Pursuant to Schedule 13G filed on January 22, 2009.(7)
    
    Pursuant to Keystone, Inc.s Schedule 13G (Amendment No. 4) dated February 4, 2003.(8)
    
    Pursuant to Schedule 13G filed on February 17, 2009.(9)
    
    Pursuant to Schedule 13D filed on November 4, 2008.(10)
    
    Pursuant to Schedule 13G filed on December 31, 2006.  131




---



##### 



OWNERSHIP INFORMATION OF DIRECTORS AND EXECUTIVE OFFICERS
   Directors and Executive Officers
    
    Number of Shares
    
    
    Percent (6)William E. Oberndorf (1,2)
    
    
    3,524,619
    
    
    
    11.7
    %Todd Buchardt (5)
    
    
    80,505
    
    
    
    *Ronald D. Klausner (3)
    
    
    103,504
    
    
    
    *David G. Brown (4)
    
    
    19,550
    
    
    
    *Gary L. Roubos (4)
    
    
    18,083
    
    
    
    *Frederick Schwab (4)
    
    
    7,197
    
    
    
    *Richard Surratt
    
    
    6,840
    
    
    
    *James P. Roemer (4)
    
    
    4,284
    
    
    
    *All directors and executive officers
as a Group (8 persons)
    
    
    3,764,582
    
    
    
    12.51
    %
 *
    
    Less than 1%.(1)
    
    Mr. Oberndorf through relationships with SPO Advisory Corp., SPO Advisory Partners, L.P. and
SF Advisory Partners, L.P., may be deemed to share investment and voting control with respect
to 3,072,500 shares.(2)
    
    Includes 437,998 shares that Mr. Oberndorf may be deemed to beneficially own through his
control of family trusts and includes an additional 14,121 shares granted under the Companys
stock option plans, which are currently exercisable.(3)
    
    Includes 100,000 option shares for Mr. Klausner granted under the Companys stock option
plans, which are currently exercisable.(4)
    
    Includes 4,284, 14,121, 14,121,and 4,284 option shares for Mssrs. Roemer,
Roubos, Brown and Schwab, respectively, granted under the Companys stock option plans, which
are currently exercisable.(5)
    
    Includes 74,700, option shares held by Mr. Buchardt, granted under the Companys stock option
plans, which are currently exercisable.(6)
    
    Percentage is based upon 30,099,776 aggregate shares of common stock outstanding as adjusted
to reflect options that are currently exercisable. As of the date of this filing, all stock
options beneficially owned by the group are under water because the current stock price is
less than the exercise price for all of the vested options.  132




---



##### 



Securities
Authorized for Issuance Under Equity Compensation Plan
  2008 Equity Compensation Plan Information
 Number of securitiesNumber of securities to be
    
    
    Weighted-average
    
    
    remaining available forissued upon exercise of
    
    
    exercise price of
    
    
    future issuanceoutstanding options
    
    
    outstanding options
    
    
    under equityPlan Category
    
    and rights
    
    
    and rights
    
    
    compensation plans (a)Equity compensation plans approved
by security holders
    
    
    1,150
    
    
    $
    22.82
    
    
    
    3,213Equity compensation plans not
approved by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,150
    
    
    $
    22.82
    
    
    
    3,213
 (a)
    
    Excludes securities reflected in the first column, Number of securities to be issued upon
exercise of outstanding options and rights. Item 13. Certain Relationships and Related Transactions, and Director
Independence.
 RELATED PARTY TRANSACTIONS
   133




---



##### 



Director Independence
  Item 14. Principal Accounting Fees and Services.
 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
   134




---



##### 



Audit Fees
  2009
    
    

2008Audit fees(1)
    
    $
    39,445
    
    
    $
    727,846Total audit and audit related fees
    
    
    39,445
    
    
    
    727,846
 (1)
    
    Audit services consisted of the audit of financial statements included in the Companys
fiscal 2007 and 2008 Annual Report on Form 10-K including attestation of the effectiveness of the
Companys internal controls over financial reporting and managements assessment thereof. Pre-approval of Services by the Independent Registered Public Accounting Firm
     135




---



##### 



Part IV
 Item 15. Exhibits and Financial Statement Schedules.
 (a)
    1.
    Financial statements:
  
    
    Reports of Independent Registered Public Accounting Firms
    
    Consolidated Statements of Operations  Fiscal Years 2008, 2007, and 2006
    
    Consolidated Balance Sheets  At the end of Fiscal Years 2008 and 2007
    
    Consolidated Statements of Cash Flows  Fiscal Years 2008, 2007, and 2006
    
    Consolidated Statements of Shareholders Equity (Deficit) and Comprehensive Income (Loss)  Fiscal Years 2008, 2007, and 2006
    
    Notes to the Consolidated Financial Statements
  136




---



##### 



2.
    
    Financial statement schedules:
 Schedule II: Valuation and Qualifying Accounts
(in thousands)
 Accountsreceivable
    
    
    Inventoryreserve
    
    
    reserveBalance as of January 1, 2006
    
    $
    649
    
    
    $
    967Charged to costs and expenses
    
    
    1,646
    
    
    
    1,128Charged to other accounts(1)
    
    
    1,425
    
    
    
    Recoveries
    
    
    
    
    
    
    Write-offs
    
    
    (1,947
    )
    
    
    (492
    )Other
    
    
    
    
    
    
    Balance as of December 30, 2006
    
    $
    1,773
    
    
    $
    1,603Charged to costs and expenses
    
    
    67
    
    
    
    2,149Charged to other accounts(1)
    
    
    2,326
    
    
    
    Recoveries
    
    
    
    
    
    
    Write-offs
    
    
    (2,830
    )
    
    
    (996
    )Other
    
    
    
    
    
    
    Balance as of December 29, 2007
    
    $
    1,336
    
    
    $
    2,756Charged to costs and expenses
    
    
    (61
    )
    
    
    2,348Charged to other accounts(1)
    
    
    1,569
    
    
    
    Recoveries
    
    
    
    
    
    
    Write-offs
    
    
    (2,156
    )
    
    
    (741
    )Other
    
    
    
    
    
    
    Balance as of December 31, 2008
    
    $
    688
    
    
    $
    4,363
 (1)
    
    Charges to other accounts include sales returns.   137




---



##### 



3. Exhibits and Financial Statement Schedules
  No.
    
    Description* 2.1
    
    
    Asset Purchase Agreement, dated October 28, 2005 by and among, the Company,
ProQuest Information and Learning Company, and National Archive Publishing Company is
incorporated by reference to ProQuest Companys Form 10-Q dated November 10, 2005, File No.
001-07680.* 2.2
    
    
    Agreement and Plan of merger by and among ProQuest Company, VEL Acquisition Corp.,
PQED Expanded Learning, Inc., and R. Best Associates, Inc. dated as of December 13, 2004 is
incorporated by reference to ProQuest Companys Form 8-K/A dated February 10, 2005, File
No. 001-07680.* 2.3
    
    
    Asset Purchase Agreement, dated August 9, 2006 by and between the Company and
Dealer Computer Services, Inc., is incorporated by reference to the Companys Form 8-K
filed August 15, 2006, File No. 001-07680.* 2.4
    
    
    Stock and Assets Purchase Agreement, dated October 20, 2006 by and between the
Company and Snap-on Incorporated, is incorporated by reference to the Companys Form 8-K
filed October 23, 2006, File No. 001-07680.* 2.8
    
    
    Amendment No. 1 to Stock and Asset Purchase Agreement dated as of November 1, 2006,
by and between ProQuest Company and Snap-on Incorporated, is incorporated by reference to
the Companys Form 8-K filed November 6, 2006, File No. 001-07680.* 2.9
    
    
    Subscription Agreement and Plan of Merger dated as of December 14, 2006, by and
between ProQuest Company and Cambridge Scientific Abstracts, Limited Partnership, are
incorporated by reference to the Companys Form 8-K filed December 20, 2006, File No.
001-07680.
  138




---



##### 



No.
    
    Description* 2.10
    
    
    Letter Agreement Regarding Subscription Agreement and Plan Of Merger, dated
February 8, 2007, by and between ProQuest Company and Cambridge Scientific Abstracts,
Limited Partnership, is incorporated by reference to the Companys Form 8-K filed February
15, 2007, File No. 001-07680.* 3.1
    
    
    Form of Amended and Restated Certificate of Incorporation of ProQuest Company is
incorporated by reference to ProQuest Companys Form 10-K dated March 29, 2002, File No.
001-07680.* 3.2
    
    
    By-laws of ProQuest Company.* 3.3
    
    
    Amendment to Bylaws of ProQuest Company adopted on March 1, 2006 is incorporated by
reference to ProQuest Companys Form 8-K dated March 7, 2006, File No. 001-07680.* 3.4
    
    

Certificate
of Ownership and Merger of Voyager Learning Company into ProQuest
Company is incorporated by reference to Voyager Learning Companys Form 8-K dated July 2,
2007, File No. 001-07680.* 3.5
    
    
    Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year is
incorporated by reference to Voyager Learning Companys Form 8-K dated December 26, 2007,
File No. 001-07680.* 4.1
    
    
    2002 Note Purchase Agreement dated as of October 1, 2002 ProQuest Company $150
million 5.45% Senior Notes due October 1, 2012 is incorporated by reference to ProQuest
Companys Form 10-Q dated November 12, 2002, File No. 001-07680.* 4.2
    
    
    2002 Revolving Credit Agreement dated as of October 3, 2002 among ProQuest Company,
the lenders listed therein and Banc of America Securities LLC is incorporated by
reference to ProQuest Companys Form 10-Q dated November 12, 2002, File No.
001-07680.
  139




---



##### 



No.
    
    Description* 4.3
    
    
    2005 Revolving Credit Agreement dated as of January 31, 2005 among the financial
institutions that are or may from time to time become parties thereto, Standard Federal
Bank, N.A., as administrative agent for the lenders, Bank of America, N.A., and Harris
Trust & Savings Bank as syndication agents for the lenders, and KeyBank National
Association and National City Bank of the Midwest, as documentation agents for the lenders
is incorporated by reference to ProQuest Companys Form 8-K dated February 4, 2005, File
No. 001-07680.* 4.4
    
    
    First Amendment dated as of January 31, 2005 to ProQuest Companys existing 2002
Note Purchase Agreement dated as of October 1, 2002 is incorporated by reference to
ProQuest Companys Form 8-K dated February 4, 2005, File No. 001-07680.* 4.5
    
    
    2005 Note Purchase Agreement dated as of January 31, 2005, ProQuest Company $175
million 5.38% Senior Notes due January 31, 2015 is incorporated by reference to ProQuest
Companys Form 8-K dated February 4, 2005, File No. 001-07680.* 4.6
    
    
    Waiver and Omnibus Amendment Agreement dated as of May 2, 2006 to the 2005
Revolving Credit Agreement Dated as of January 31, 2005 and 2002 Note Purchase Agreement
Dated as of October 1, 2002 and 2005 Note Purchase Agreement dated as of January 31, 2005
is incorporated by reference to ProQuest Companys Form 8-K dated May 8, 2006, File No.
001-07680.* 4.7
    
    
    Guaranty and Collateral Agreement dated as of May 2, 2006 among ProQuest Company,
as the Company, and The Various Financial Institutions Party Hereto, as Lenders, and
LaSalle Bank Midwest National Association, as Collateral Agent is incorporated by reference
to ProQuest Companys Form 8-K dated May 8, 2006, File No. 001-07680.* 4.8
    
    
    2006 Revolving Credit Agreement dated as of May 2, 2006 among ProQuest Company, as
the Company, and The Various Financial Institutions Party Hereto, as Lenders, and ING
Investment Management LLC, as Administrative Agent is incorporated by reference to ProQuest
Companys Form 8-K dated May 8, 2006, File No. 001-07680.
  140




---



##### 



No.
    
    Description* 4.9
    
    
    Collateral Agency And Intercreditor Agreement dated as of May 2, 2006 among The
Lenders, The Noteholders and LaSalle Bank Midwest National Association, as Collateral Agent
is incorporated by reference to ProQuest Companys Form 8-K dated May 8, 2006, File No.
001-07680.* 4.10
    
    
    Waiver and Omnibus Amendment Agreement dated as of October 20, 2006 to the 2005
Revolving Credit Agreement Dated as of January 31, 2005 and the 2006 Revolving Credit
Agreement Dated as of May 2, 2006 and 2002 Note Purchase Agreement Dated as of October 1,
2002 and 2005 Note Purchase Agreement dated as of January 31, 2005 is incorporated by
reference to ProQuest Companys Form 8-K dated October 25, 2006, File No. 001-07680.* + 10.1
    
    
    Amended and Restated Profit Sharing Retirement Plan is incorporated herein by
reference to Exhibit 10.1 to Bell & Howell Companys (f/k/a Bell & Howell Operating
Company) Registration Statement on Form S-1, as amended, Registration No. 33-63556.* + 10.2
    
    
    Amended and Restated Replacement Benefit Plan is incorporated herein by
reference to Exhibit 10.4 to Bell & Howell Companys Registration Statement on Form S-1, as
amended, Registration No. 33-63556.* + 10.3
    
    
    Supplemental Retirement Plan is incorporated herein by reference to Exhibit 10.3
to Bell & Howell Companys Registration Statement on Form S-1, as amended, Registration No.
33-63556.* + 10.4
    
    
    Management Incentive Bonus Plan is incorporated herein by reference to Exhibit
10.5 to Bell & Howell Companys Registration Statement on Form S-1, as amended,
Registration No. 33-63556.* + 10.5
    
    
    Long Term Incentive Plan II, 1993-1996, is incorporated herein by reference to
Exhibit to Bell & Howell Companys Registration Statement on Form S-1, as amended,
Registration No. 33-89992.
  141




---



##### 



No.
    
    Description* + 10.6
    
    
    Deferred Benefit Trust is incorporated herein by reference to Exhibit 10.10 to
Bell & Howell Companys Registration Statement on Form S-1, as amended, Registration No.
33-63556.* 10.7
    
    
    Shareholders Agreement dated May 10, 1988 as amended, among certain Management
Stockholders (as defined therein) and Investor Shareholders (as defined therein) is
incorporated herein by reference to Exhibit 10.17 to Bell & Howell Companys Registration
Statement on Form S-1, as amended, Registration No. 33-59994.* 10.8
    
    
    Registration Rights Agreement dated as of May 10, 1988 by and among Bell & Howell
Group, Inc., and each of the Purchasers referred to therein is incorporated herein by
reference to Exhibit 10.1 to Bell & Howell Companys Registration Statement on Form S-1, as
amended, Registration No. 33-63556.* + 10.9
    
    
    2003 ProQuest Strategic Performance Plan is incorporated by reference to
ProQuest Companys S-8 dated August 28, 2003, File No. 333-101186.* 10.10
    
    
    Supplement to Fourth Amendment to the Shareholders Agreement dated May 10, 1988
as amended, among certain Management Stockholders (as defined therein) and Investor
Shareholders (as defined therein) is incorporated herein by reference to Bell & Howell
Companys Registration Statement on Form S-1, as amended, Registration No. 33-89992.* + 10.11
    
    
    Bell & Howell Company Executive Deferred Compensation Plan is incorporated by
reference to ProQuest Companys Form 10-K dated March 27, 2003, File No. 001-07680.* + 10.11A
    
    
    Supplement A to Bell & Howell Company Executive Deferred Compensation Plan is
incorporated by reference to ProQuest Companys Form 10-K dated March 27, 2003, File No.
001-07680.
  142




---



##### 



No.
    
    Description* + 10.12
    
    
    Bell & Howell Profit Sharing Retirement Plan and Bell & Howell Associate Stock
Purchase Plan, is incorporated herein by reference to Bell & Howell Companys Registration
Statement on Form S-8, Registration No. 33-99982.* + 10.13
    
    
    Incentive Compensation Agreement dated December 31, 2000 by and between Bell &
Howell Company and James Roemer is incorporated by reference to ProQuest Companys Form
10-K dated March 27, 2003, File No. 001-07680.* + 10.13A
    
    
    Incentive Compensation Agreement Amendment dated December 20, 2001 by an
between Bell & Howell Company and James Roemer is incorporated by reference to ProQuest
Companys Form 10-K dated March 27, 2003, File No. 001-07680.* + 10.14
    
    
    Bell & Howell Company Nonqualified Stock Option Agreement dated December 31,
2000 by Bell & Howell Company and James Roemer is incorporated by reference to ProQuest
Companys Form 10-K dated March 27, 2003, File No. 001-07680.* + 10.15
    
    
    Multi-year Stock Option Grant is incorporated by reference to ProQuest
Companys Form 10-Q dated November 12, 2004, File No. 001-07680* + 10.16
    
    
    Consulting Agreement between Randy Best and ProQuest Company dated December 13,
2004 is incorporated by reference to ProQuest Companys Form 8-K dated March 16, 2005, File
No. 001-03246.* 10.17
    
    
    Non-compete Agreement between Randy Best and ProQuest Company dated December 13,
2004 is incorporated by reference to ProQuest Companys Form 8-K dated March 16, 2005, File
No. 001-03246.* + 10.18
    
    
    Form of Restricted Stock Award Agreement for 2003 ProQuest Company Strategic
Performance Plan is incorporated by reference to ProQuest Companys Form 8-K dated March 16,
2005, File No. 001-03246* 10.19
    
    
    Office Lease dated November 10, 2004 between Transwestern Great Lakes, L.P., as
Landlord and ProQuest Company, as Tenant is incorporated by reference to ProQuest Companys
Form 10-K dated March 17, 2005, File No. 001-07680.
  143




---



##### 



No.
    
    Description* 10.20
    
    
    Master Services Agreement dated January 1, 2005 between ProQuest Company and
International Business Machines Corporation is incorporated by reference to ProQuest
Companys Form 10-K dated March 17, 2005, File No. 001-07680.* + 10.21
    
    
    Description of Compensatory Arrangements Applicable to Named Executive Officers
for 2004 and 2005 is incorporated by reference to ProQuest Companys Form 10K dated March
17, 2005, File No. 001-07680.* + 10.22
    
    
    Bonus agreement dated August 22, 2005 between ProQuest Company and Andrew
Wyszkowski is incorporated by reference to Voyager Learning Companys Form 10-K dated
August 31, 2007, File No. 001-07680.* + 10.23
    
    
    Offer letter to Richard Surratt is incorporated by reference to ProQuest
Companys Form 8-K dated October 11, 2005, File No. 001-07680.* + 10.24
    
    
    Offer letter to Ronald Klausner is incorporated by reference to ProQuest
Companys Form 8-K dated October 11, 2005, File No. 001-07680.* + 10.25
    
    
    Offer letter to David Prichard is incorporated by reference to ProQuest
Companys Form 8-K dated October 11, 2005, File No. 001-07680.* + 10.26
    
    
    Stock option grant to Richard Surratt is incorporated by reference to ProQuest
Companys Form 8-K dated October 11, 2005, File No. 001-07680.* + 10.27
    
    
    Stock option grant to David Prichard is incorporated by reference to ProQuest
Companys Form 8-K dated October 11, 2005, File No. 001-07680.* 10.28
    
    
    Electronic Catalog Data License Agreement, dated September 1, 1999, by and among,
the Company, Bell & Howell Publications Systems Company, and General Motors Corporation is
incorporated by reference to ProQuest Companys Form 10-Q dated November 10, 2005, File No.
001-07680.
  144




---



##### 



No.
    
    Description* 10.29
    
    
    Service Contract for Information Technology and Related Services, dated August 8,
2005, by and among the Company, ProQuest Business Solutions, Inc. and General Motors
Corporation is incorporated by reference to ProQuest Companys Form 10-Q dated November 10,
2005, File No. 001-07680.* 10.30
    
    
    Manufacturing Agreement, dated October 28, 2005, by and among the Company,
ProQuest Information and Learning Company, and National Archive Publishing Company is
incorporated by reference to ProQuest Companys Form 10-Q dated November 10, 2005, File No.
001-07680.* + 10.31
    
    
    Transition agreement with Kevin Gregory is incorporated by reference to
ProQuest Companys Form 8-K dated December 14, 2005, File No. 001-07680.* + 10.32
    
    
    Consulting agreement with Kevin Gregory is incorporated by reference to
ProQuest Companys Form 8-K dated December 14, 2005, File No. 001-07680.* + 10.33
    
    
    ProQuest Company Separation Benefits Plan is incorporated by reference to
ProQuest Companys Form 8-K dated December 14, 2005, File No. 001-07680.* 10.34
    
    
    2006 IBM agreement dated February 15, 2006 between ProQuest Company and
International Business Machines Corporation is incorporated by reference to Voyager
Learning Companys Form 10-K dated August 31, 2007, File No. 001-07680.* + 10.35
    
    
    Retention agreements dated July 13, 2006 between ProQuest Company and Richard
Surratt, Todd Buchardt, and Linda Longo-Kazanova is incorporated by reference to Voyager
Learning Companys Form 10-K dated August 31, 2007, File No. 001-07680.
  145




---



##### 



No.
    
    Description* + 10.36
    
    
    Compensation agreements dated August 8, 2006 between ProQuest Company and David
Prichard, dated August 9, 2006 between ProQuest Company and Andrew Wyszkowski is
incorporated by reference to Voyager Learning Companys Form 10-K dated August 31, 2007,
File No. 001-07680.* + 10.37
    
    
    2006 Performance Goals dated September 6, 2006 is incorporated by reference to
Voyager Learning Companys Form 10-K dated August 31, 2007, File No. 001-07680.* 10.38
    
    
    Transaction Services Agreement, dated November 28, 2006, by and between ProQuest
Company and Snap-on Incorporated, is incorporated by reference to the Companys Form 8-K
filed December 4, 2006, File No. 001-07680.* 10.39
    
    
    Restricted Covenants Agreement, dated November 28, 2006, by and between ProQuest
Company and Snap-on Incorporated, is incorporated by reference to the Companys Form 8-K
filed December 4, 2006, File No. 001-07680.* 10.40
    
    
    Amended Compensation Agreements dated January 18, 2007 between ProQuest Company
and Richard Surratt, David Prichard, Andrew Wyszkowski, Todd Buchardt, and Linda
Longo-Kazanova is incorporated by reference to Voyager Learning Companys Form 10-K dated
August 31, 2007, File No. 001-07680.* + 10.41
    
    
    Amendment to Richard Surratts Employment Letter, dated February 1, 2007, is
incorporated by reference to ProQuest Companys Form 8-K filed February 1, 2007, File No. 001-07680.* + 10.42
    
    
    Transition Agreement with David Prichard is incorporated by reference to
ProQuest Companys Form 8-K filed February 15, 2007, File No. 001-07680.* 10.43
    
    
    Letter Agreement regarding Subscription Agreement and Plan of Merger is
incorporated by reference to ProQuest Companys Form 8-K filed February 15, 2007, File No.
001-07680.
  146




---



##### 



No.
    
    Description* + 10.44
    
    
    Termination of stock option grants to Richard Surratt and Todd Buchardt is
incorporated by reference to ProQuest Companys Form 8-K dated March 22, 2007, File No.
001-07680.* + 10.45
    
    
    Retention agreement dated April 24, 2007, between ProQuest Company and Ronald
Klausner is incorporated by reference to Voyager Learning Companys Form 10-K dated August
31, 2007, File No. 001-07680.* 10.46
    
    
    Tri-Party agreement by and among Transwestern Great Lakes, L.P., Voyager Learning
Company, and ProQuest LLC is incorporated by reference to Voyager Learning Companys Form
8-K dated January 31, 2008, File No. 001-07680.* 10.47
    
    
    Lease Termination agreement by and between Transwestern Great Lakes, L.P., and
ProQuest LLC, as successor in interest to ProQuest Company is incorporated by reference to
Voyager Learning Companys Form 8-K dated January 31, 2008, File No. 001-07680.* 10.48
    
    
    2nd Amendment Agreement by and among Transwestern Great Lakes, L.P., and Voyager
Learning Company, formerly known as ProQuest Company, and ProQuest LLC, is incorporated by
reference to Voyager Learning Companys Form 8-K dated January 31, 2008, File No.
001-07680.* 10.49
    
    
    Sublease Agreement by and among ProQuest LLC, and Voyager Learning Company is
incorporated by reference to Voyager Learning Companys Form 8-K dated January 31, 2008,
File No. 001-07680.* + 10.50
    
    
    Amendment to Executive Letter Agreement with Todd Buchardt is incorporated by
reference to Voyager Learning Companys Form 8-K dated January 31, 2008, File No. 001-07680.* 10.51
    
    
    Memorandum of Understanding dated July 22, 2008 by the parties to the Consolidated Shareholder derivative action styled In
re ProQuest Company Shareholder Derivative Litigationis incorporated by
reference to Voyager Learning Companys Form 8-K dated July 23, 2008, File No. 001-07680.
  147




---



##### 



No.
    
    Description* 10.52
    
    
    Memorandum of Understanding dated December 3, 2008 by the parties to the Consolidated
Shareholder derivative action styled In re ProQuest Company Shareholder Derivative
Litigationis incorporated by reference to Voyager Learning Companys Form 8-K dated
February 27, 2009, File No. 001-07680.+ 10.53
    
    


Compensation
agreement dated March 4, 2009, between Voyager Expanded Learning and John
Campbell.+ 10.54
    
    

Compensation
agreements dated November 30, 2006 and March 14, 2007, between
ProQuest Company and David Asai.* 14.1
    
    
    ProQuest Company  Finance Code of Ethics is incorporated by reference to ProQuest
Companys Form 10-K dated March 27, 2003, File No. 001-07680.* 16.1
    
    
    Letter from KPMG  Termination of appointment as principal accountant for ProQuest
Profit Sharing Retirement Plan is incorporated by reference to ProQuest Companys Form 8-K
dated June 2, 2005, File No. 001-07680.* 16.2
    
    
    Letter from KPMG LLP confirming termination of appointment as the Companys
Independent Registered Public Accountant is incorporated by reference to Voyager Learning
Companys Form 8-K dated November 15, 2007, and Form 8-K/A dated December 19, 2007, File
No. 001-07680.* + 17.1
    
    
    Aldworth Separation Agreement, dated February 1, 2007, is incorporated by
reference to ProQuest Companys Form 8-K dated February 1, 2007, File No. 001-07680.* 17.2
    
    
    Michael S. Geltzeiler resignation letter, dated March 19, 2007, is incorporated by
reference to ProQuest Companys Form 8-K dated March 22, 2007.* 17.3
    
    
    Todd Nelson resignation letter, dated February 7, 2008 is incorporated by
reference to Voyager Learning Companys Form 8-K dated February 8, 2008, File No. 001-07680* 17.4
    
    
    Dr. Linda Roberts resignation letter dated August
29, 2008 is incorporated by reference to Voyager Learning Companys Form 8-K
dated September 2, 2008, File No. 001-07680.21.1
    
    
    Subsidiaries of Voyager Learning Company.
  148




---



##### 



No.
    
    Description23.1
    
    
    Consent of KPMG LLP.23.3
    
    
    Consent of Whitley Penn LLP.31.1
    
    
    Section 302 Certification of the Chief Executive Officer.31.2
    
    
    Section 302 Certification of the Chief Financial Officer.32.1
    
    
    Certification of Richard J. Surratt, President and Chief Executive Officer of Voyager
Learning Company pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Bradley C. Almond, Senior Vice President, Chief Financial Officer, and
Assistant Secretary of Voyager Learning Company, Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* 99.1
    
    
    Memorandum of Understanding regarding the proposed settlement of the Companys
Securities Litigation case is incorporated by reference to Voyager Learning Companys Form
8-K dated July 23, 2008, File No. 001-07680.
  149




---



##### 



SIGNATURES
  Date: March 5, 2009
    Voyager Learning CompanyBy:
    /s/ Richard J. SurrattRichard J. SurrattPresident and
Chief Executive Officer  150




---



##### 



Signature
 Title  Date
 /s/ Richard J. SurrattRichard J. SurrattPresident and Chief Executive OfficerMarch 5, 2009/s/ Bradley C. AlmondBradley C. AlmondChief Financial Officer and Vice President 
(Principal Financial Officer)March 5, 2009/s/ David G. BrownDavid G. BrownDirectorMarch 5, 2009/s/ William E. OberndorfWilliam E. OberndorfDirectorMarch 5, 2009
  151




---



##### 



/s/ James P. RoemerJames P. RoemerDirectorMarch 5, 2009/s/ Gary L. RoubosGary L. RoubosDirectorMarch 5, 2009/s/ Frederick J. SchwabFrederick J. SchwabDirectorMarch 5, 2009
  152




---



##### 



EXHIBIT INDEX
 Exhibit No.
    
    Description10.53
    
    
Compensation
agreement dated March 4, 2009, between Voyager Expanded Learning and John
Campbell.10.54
    
    
Compensation
agreements dated November 30, 2006 and March 14, 2007, between
ProQuest Company and David Asai.21.1
    
    
    Subsidiaries of Voyager Learning Company.23.1
    
    
    Consent of KPMG LLP.23.3
    
    
    Consent of Whitley Penn LLP.31.1
    
    
    Section 302 Certification of the Chief Executive Officer.31.2
    
    
    Section 302 Certification of the Chief Financial Officer.32.1
    
    
    Certification of Richard J. Surratt, President and Chief Executive Officer of Voyager
Learning Company pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Bradley C. Almond, Senior Vice President, Chief Financial Officer,
and Assistant Secretary of Voyager Learning Company, Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.