Document:

exv4w2

Exhibit 4.2

FORM OF CAMBIUM-VOYAGER HOLDINGS, INC. WARRANT

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES
FOR WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH
COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

CAMBIUM-VOYAGER HOLDINGS, INC.

Warrant To Purchase Common Stock

Warrant No.: [ • ]

Date of Issuance: [ • ], 2009 (“Issuance Date”)

Void After: [ • ], 2014 [fifth anniversary of Issuance Date ]

          Cambium-Voyager Holdings, Inc., a Delaware corporation (the “Company”), hereby certifies that,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
[ • ], the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject
to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined
below) then in effect, at any time or times on or after the date hereof but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below), such number of fully paid nonassessable
shares of Common Stock (as defined below) equal to the sum of (x) the Consonant Specified Asset
Recoupment Amount (as defined below), if any, as calculated from time to time during the Exercise
Period (as defined below), plus (y) the Additional Share Amount (as defined below),
plus (z) [ • ] (such sum, the “Warrant Shares”). This Warrant (this “Warrant”) is being
issued pursuant to Section 2.2(a) of that certain Agreement and Plan of Mergers, dated June 20,
2009, by and among the Company, Voyager Learning Company, a Delaware corporation, VSS-Cambium
Holdings II Corp., Vowel Acquisition Corp., Consonant Acquisition Corp. and Vowel Representative,
LLC (the “Merger Agreement”). This Warrant is one of series of similar Warrants issued pursuant to
the terms of the Merger Agreement. All such warrants are referred to herein collectively as the
“Warrants” and the holders thereof (as well as any subsequent permitted transferee), the “Holders”.
Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 14. For the avoidance of doubt, it is understood and agreed that portions
of the Net

 

 

Windle Proceeds may be realized from time to time. With each such realization, the Consonant
Specified Asset Recoupment Amount would then be re-calculated, and upon each such re-calculation,
the number of Warrant Shares then issuable upon exercise of this Warrant shall be increased. By
way of example, and not in limitation, if on January 1, 2010, $650,000 in Net Windle Proceeds were
realized, then the Warrant would be exercisable for an additional 45,000 Warrant Shares, and if on
March 1, 2010, another $325,000 in Net Windle Proceeds were realized, then assuming no exercises,
this Warrant would be exercisable for an additional 22,500 Warrants Shares.

          1. EXERCISE OF WARRANT.

          (a) Mechanics of Exercise. Subject to the terms and conditions hereof, this
Warrant may be exercised by the Holder on any day on or after the date hereof, but not later
than the five year anniversary of the Issuance Date (the “Exercise Period”) in whole or in
part, by (i) delivery of a duly executed Warrant exercise form, in the form attached hereto as
Exhibit A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant
and (ii) (A) payment to the Company of an amount equal to the applicable Exercise Price
multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or by wire transfer of immediately available funds or (B)
by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise
(as defined in Section 1(d)). The Holder shall not be required to deliver the
original Warrant in order to effect an exercise hereunder. On or before the second
(2nd) Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise) (the
“Exercise Delivery Documents”), the Company shall transmit by facsimile an acknowledgment of
confirmation of receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “Transfer Agent”). On or before the third (3rd) Trading Day
following the date on which the Company has received all of the Exercise Delivery Documents
(the “Share Delivery Date”), the Company shall (X) provided that the Transfer Agent is
participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer
Program, upon the request of the Holder, credit such aggregate number of Warrant Shares to
which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s
balance account with DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program,
issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a
certificate, registered in the Company’s share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to
such exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed
for all corporate purposes to have become the holder of record of the Warrant Shares with
respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares
are credited to the Holder’s DTC account or the date of delivery of the certificates
evidencing such Warrant Shares, as the case may be. The Holder shall, from time to time, note
on the grid attached hereto as Schedule I, the number of Warrant Shares for which this
Warrant is then exercisable (assuming no exercise hereof) and the number of Warrant Shares for
which this Warrant has been exercised, which notation shall be final and binding on the
Company, absent manifest error. If this Warrant is submitted in connection with any

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exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number of Warrant
Shares being acquired upon an exercise, then the Company shall as soon as practicable and in
no event later than three (3) Business Days after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 6(d)) representing the right to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under this Warrant,
less the number of Warrant Shares with respect to which this Warrant is exercised. No
fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but
rather the number of shares of Common Stock to be issued shall be rounded up to the nearest
whole number. The Company shall pay any and all taxes which may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this Warrant.

          (b) Exercise Price. For purposes of this Warrant, “Exercise Price” means One
Cent ($0.01), subject to adjustment as provided herein.

          (c) Company’s Failure to Timely Deliver Securities. If the Holder does not own
at least 50% of the outstanding Common Stock and the Company shall fail to issue and deliver a
certificate to the Holder or credit the Holder’s or its designee’s balance account with DTC
for the number of shares of Common Stock to which the Holder is entitled upon such Holder’s
exercise of this Warrant no later than the Share Delivery Date, and if after such Share
Delivery Date but prior to the cure of such failure the Holder or any Person on the Holder’s
behalf or for the Holder’s account purchases (in an open market transaction or otherwise)
Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon
such exercise that the Holder anticipated receiving from the Company (a “Buy-In”), then the
Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for
the shares of Common Stock so purchased less the Exercise Price hereunder (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate (and to issue
such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash to the Holder
in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Common Stock, times (B) the Weighted Average Price on the date of the
exercise of this Warrant.

          (d) Cashless Exercise. Notwithstanding anything contained herein to the
contrary, at any time and from time to time on or after the six (6) month anniversary of the
Issuance Date, but not later than the fifth anniversary of the Issuance Date, if a
registration statement covering the resale of the Warrant Shares that are the subject of the
Exercise Notice by the Holder pursuant to the 1933 Act (the “Unavailable Warrant Shares”) is
not available for the resale of such Unavailable Warrant Shares, the Holder may, in its sole
discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment of the
Aggregate Exercise Price, by the surrender of this Warrant (or such portion of this Warrant
being so exercised) together with a Net Issue Election Notice, in the form annexed hereto as
Exhibit B, duly executed, to the Company, elect instead to receive

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upon such exercise the “Net Number” of shares of Common Stock determined according to the
following formula (a “Cashless Exercise”):

	 	 	 	 	 
	Net Number =

	 	(A x B) - (A x C)
	 	 
	 

	 	B	 	 
	 
	 	 	 	 
	For purposes of the foregoing formula:

	 	 	 
	A=

	 	the total number of shares with respect to which
this Warrant is then being exercised.
	 
	 	 
	B=

	 	the Weighted Average Price of the shares of Common
Stock (as reported by Bloomberg) on the date immediately preceding
the date of the Exercise Notice.
	 
	 	 
	C=

	 	the Exercise Price then in effect for
the applicable Warrant Shares at the time of such
exercise.

          (e) Disputes. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to
the Holder the number of Warrant Shares that are not disputed.

          2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

          (a) Adjustment upon Subdivision or Combination of Common Stock. If the Company
at any time on or after the Issuance Date subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares or issue by reclassification of its outstanding shares of
Common Stock any shares of its capital stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing corporation),
the Exercise Price in effect immediately prior to such subdivision will be proportionately
reduced and the number of Warrant Shares will be proportionately increased; provided,
however, that in no event shall the Exercise Price be less that the per share par
value of the Common Stock after giving effect thereto. If the Company at any time on or after
the Issuance Date combines (by combination, reverse stock split or otherwise) one or more
classes of its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will be proportionately
increased and the number of Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(a) shall become effective at the close of business on the date
the subdivision or combination becomes effective.

          (b) Merger or Consolidation. During the Exercise Period, if any capital
reorganization, reclassification of the capital stock of the Company, consolidation or merger
of the Company with another corporation in which the Company is not the surviving entity (or a
reverse triangular merger in which the Company is the surviving

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entity but the shares of the Company’s capital stock outstanding immediately prior to the
merger are converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise), or sale, transfer or other disposition of all or substantially
all of the Company’s assets to another corporation shall be effected, then, as a condition of
such reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition, lawful and adequate provision shall be made whereby each Holder shall thereafter
have the right to purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the Warrant Shares, such shares of stock, securities or assets as
would have been issuable or payable with respect to or in exchange for the Warrant Shares had
such Warrant Shares been issued and outstanding immediately prior to such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition not taken place
(provided that the number of Warrant Shares shall continue to be subject to increase as
provided herein), and in any such case appropriate provision shall be made with respect to the
rights and interests of each Holder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Exercise Price and an increase in the number of
Warrant Shares subject hereto) shall thereafter be applicable, as nearly equivalent as may be
practicable in relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the consummation thereof
the successor corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the Holder, at the last
address of the Holder appearing on the books of the Company, such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be entitled to
purchase, and the other obligations under this Warrant. The provisions of this Section
2(b) shall similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

          (c) Other Events. If any event occurs of the type contemplated by the provisions
of this Section 2 but not expressly provided for by such provisions, then the
Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the
number of Warrant Shares so as to protect the rights of the Holder; provided that no such
adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease
the number of Warrant Shares as otherwise determined pursuant to this Section 2.

          3. RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares
of Common Stock (other than in connection with the issuance, exercise, exchange or conversion of
Excluded Securities), by way of return of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the Issuance Date and prior to the termination, cancellation
or full satisfaction of this Warrant, then, in each such case, the Holder shall receive, for each
(i) Warrant Share that has not been issued under this Warrant as of the record date for such
payment or distribution or, in the absence of a record date, as of immediately prior to such
payment or distribution and (ii) if the number of Warrant Shares

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shall subsequently increase as provided herein, each such additional Warrant Share (each, an
“Unissued Warrant Share”), the amount of the cash dividend or cash distribution the Holder would
have received had it exercised this Warrant in full for all such Unissued Warrant Shares
immediately prior to the record date for such payment or distribution or, in the absence of a
record date, as of immediately prior to such payment or distribution.

          4. NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will
not, by amendment of its Certificate of Incorporation, Bylaws or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of
securities, or any other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, and will at all times in good faith carry out all the provisions
of this Warrant and take all action as may be required to protect the rights of the Holder.
Without limiting the generality of the foregoing, the Company (i) shall not increase the par value
of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price
then in effect, and (ii) shall take all such actions as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant.

          5. WARRANT HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be
entitled to vote or receive dividends or be deemed the holder of share capital of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder,
solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder
of the Company or any right to vote, give or withhold consent to any corporate action (whether any
reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to
receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant
shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section
5, the Company shall provide the Holder with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the giving thereof to
the stockholders.

          6. REISSUANCE OF WARRANTS.

          (a) Transfer of Warrant. If this Warrant is to be transferred, the Holder shall
surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Warrant (in accordance with Section 6(d)),
registered as the Holder may request, representing the right to purchase the number of Warrant
Shares being transferred by the Holder (if less than all) and the Holder shall make an
appropriate notation hereon reflecting the number of Warrant Shares as to which the Warrant
has been transferred.

          (b) Lost, Stolen or Mutilated Warrant. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction

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or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any
indemnification undertaking by the Holder to the Company in customary form and, in the case of
mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and
deliver to the Holder a new Warrant (in accordance with Section 6(d)) representing the
right to purchase the Warrant Shares then underlying this Warrant.

          (c) Exchangeable for Multiple Warrants. This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a new Warrant or
Warrants (in accordance with Section 6(d)) representing in the aggregate the right to
purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant
will represent the right to purchase such portion of such Warrant Shares as is designated by
the Holder at the time of such surrender; provided, however, that no Warrants
for fractional shares of Common Stock shall be given.

          (d) Issuance of New Warrants. Whenever the Company is required to issue a new
Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor
with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the
right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new
Warrant being issued pursuant to Section 6(a) or Section 6(c), the Warrant
Shares designated by the Holder which, when added to the number of shares of Common Stock
underlying the other new Warrants issued in connection with such issuance, does not exceed the
number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as
indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv)
shall have the same rights and conditions as this Warrant.

          7. REGISTRATION RIGHTS. If the Company at any time proposes for any reason to
register any of its securities under the 1933 Act (except with respect to registration statements
on Forms S-4, S-8 or another form not available for registering the Registrable Shares for sale to
the public), it shall each such time promptly give written notice to all holders of outstanding
Registrable Shares of its intention so to do, and, upon the written request, given within thirty
(30) days after receipt of any such notice, of the holder of any such Registrable Shares to
register any Registrable Shares (which request shall specify the Registrable Shares intended to be
sold or disposed of by such holders and shall state the intended method of disposition of such
Registrable Shares by the prospective seller), the Company shall use commercially reasonable
efforts to cause all such Registrable Shares to be included in such registration statement promptly
upon receipt of the written request of such holders for such registration (but only to the extent
the Company elects to move forward with the registration of its securities under the 1933 Act), all
to the extent requisite to permit the sale or other disposition (in accordance with the intended
methods thereof, as aforesaid) by the prospective seller or sellers of the Registrable Shares so
registered; provided, however, (a) if the Company receives written comments
pertaining to Rule 415 from the SEC to a filed registration statement which requires the Company to
limit the amount of shares which may be included therein to a number of shares which is less than
such amount sought to be included thereon as filed with the SEC and the Company is unable to cause
the inclusion of all Registrable Shares, or (b) in the event that the proposed registration by the
Company is, in whole or in part, an underwritten offering or private placement of securities of the
Company and in the opinion of the Company’s managing underwriter, placement agent or lead investor
in such offering, the inclusion of the Registrable

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Shares, when added to the Common Stock being registered by the Company and any other selling
stockholders participating in such underwritten offering or private placement, will exceed the
maximum amount of the Company’s Common Stock which can be marketed without materially adversely
affecting the price of the offering, or without otherwise materially adversely affecting the entire
offering, then the Company will have the right, in its sole discretion, to (i) remove from the
registration statement such portion of the Registrable Shares, provided that the exclusion of
Registrable Shares shall be proportionate with any other holder of Registrable Shares requesting
registration in such registration statement, and/or (ii) agree to such restrictions and limitations
on the registration and resale of the Registrable Shares as the SEC or such underwriter may require
to assure the Company’s compliance with the requirements of Rule 415 or the offering, as
applicable. Neither the delivery of such notice to the Holders Registrable Shares nor the
acceptance by the Holders of Registrable Shares of such offer shall obligate the Company to file
such registration statement and, notwithstanding the actual filing of the registration statement,
the Company may at any time prior to its effectiveness elect not to pursue the registration without
liability to the Holders of Registrable Shares. Notwithstanding the foregoing, (i) no Holder of
Registrable Shares shall be named as an underwriter in such registration statement without its
express prior consent, and (ii) any Registrable Shares may be excluded from a registration
statement at the election of the Company in the event all information about the Holder of such
Registrable Shares reasonably necessary for the Company and its counsel to prepare the registration
statement is not furnished by the Holder of Registrable Shares, after the Holder of Registrable
Shares, upon written request of the Company or its counsel, has been given a reasonable amount of
time to transmit the requested information to the Company and/or its counsel.

          8. NOTICES. Unless otherwise provided, any notice required or permitted under this
Warrant shall be given in writing and shall be deemed effectively given as hereinafter described
(i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii)
if given by telex or facsimile, then such notice shall be deemed given upon receipt of confirmation
of complete transmittal, (iii) if given by mail, then such notice shall be deemed given upon the
earlier of (A) receipt of such notice by the recipient or (B) three days after such notice is
deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized
overnight air courier, then such notice shall be deemed given one business day after delivery to
such carrier. All notices shall be addressed as follows: if to the Holder, at its address as set
forth in the Company’s books and records and, if to the Company, at the address as follows, or at
such other address as the Holder or the Company may designate by ten days’ advance written notice
to the other:

If to the Company:

Cambium-Voyager Holdings, Inc.

[ • ]

Facsimile:

Attention:

With a copy to:

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Lowenstein Sandler PC

1251 Avenue of the Americas

New York, New York 10020

Facsimile: (973) 597-2507

Attention: Steven E. Siesser, Esq.

The Company shall provide the Holder with prompt written notice of all actions taken pursuant to
this Warrant. Without limiting the generality of the foregoing, the Company will give written
notice to the Holder (i) promptly upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen
(15) days prior to the date on which the Company closes its books or takes a record (A) with
respect to any dividend or distribution upon the shares of Common Stock, or (B) for determining
rights to vote with respect to any merger, consolidation, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holder.

          9. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has obtained the written
consent of the Holders of the then outstanding Warrants exercisable for at least a majority of the
Common Stock issuable upon exercise of such Warrants; provided, however, that no
amendment or waiver that adversely affects a particular Holder or Holders (as distinguished from an
amendment that adversely affects all Holders similarly) may be made without that Holder’s written
consent; provided, however, no amendment to the Exercise Period, number of Warrant Shares or the
Exercise Price shall be made without the written consent of the Stockholders’ Representative (as
such term is defined in the Merger Agreement).

          10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. This Warrant shall
be governed by, and construed in accordance with, the internal laws of the State of Delaware
applicable to contracts to be wholly performed within such State, without reference to the choice
of law provisions thereof. The Company and, by accepting this Warrant, the Holder, each
irrevocably submits to the jurisdiction of the courts of the State of Delaware located in New
Castle County and a federal court sitting in Wilmington, Delaware, for the purpose of any suit,
action, proceeding or judgment relating to or arising out of this Warrant and the transactions
contemplated hereby. Service of process in connection with any such suit, action or proceeding may
be served on each party hereto anywhere in the world by the same methods as are specified for the
giving of notices under this Warrant. The Company and, by accepting this Warrant, the Holder, each
irrevocably consents to the jurisdiction of any such court in any such suit, action or proceeding
and to the laying of venue in such court. The Company and, by accepting this Warrant, the Holder,
each irrevocably waives any objection to the laying of venue of any such suit, action or proceeding
brought in such courts and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF THE COMPANY AND, BY
ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS

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WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

          11. CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and the Holder and shall not be construed against any person as the drafter hereof. The
headings of this Warrant are for convenience of reference and shall not form part of, or affect the
interpretation of, this Warrant.

          12. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all other remedies available under
this Warrant, at law or in equity (including a decree of specific performance and/or other
injunctive relief), and nothing herein shall limit the right of the Holder right to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant. The Company
acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the
Holder and that the remedy at law for any such breach may be inadequate. The Company therefore
agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction restraining any breach,
without the necessity of showing economic loss and without any bond or other security being
required.

          13. TRANSFER. This Warrant may be offered for sale, sold, transferred or assigned in
accordance with applicable law without the consent of the Company.

          14. CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

          (a) “1933 Act” means the Securities Act of 1933, as amended.

          (b) “Additional Share Amount” means the lesser of: (x) 145,000; and (y) the number of
            shares of common stock of Voyager in excess of 29,874,145 which were outstanding immediately
prior to the Effective Time and which (x) did not result in an adjustment, at prior to the
Effective Time, to the number of shares of Common Stock to be issued under the Merger
Agreement (which adjustments are set forth in Section 2.2(a) and Section 2.7 of the Merger
Agreement), and (y) were surrendered for exchange pursuant to Section 2.3(b) of the Merger
Agreement on or prior to the second anniversary of the date of this Warrant.

          (c) “Bloomberg” means Bloomberg L.P.

          (d) “Business Day” means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required by law or executive order
to remain closed.

          (e) “Common Stock” means (i) the Company’s shares of common stock, par value $0.001 per
share, and (ii) any share capital into which such common stock shall have been changed or any
share capital resulting from a reclassification of such common stock.

-10-

 

          (f) “Consonant Specified Asset Recoupment Amount” means an amount equal to the product
(rounded down to the nearest whole dollar), of: (x) 0.45; multiplied by (y) the quotient of
(A) the Net Windle Proceeds, divided by (B) the Vowel Per Share Cash Consideration (as defined
in the Merger Agreement). Such amount shall be re-calculated with each realization of Net
Windle Proceeds during the Exercise Period.

          (g) “Effective Time” shall have the meaning set forth in the Merger Agreement.

          (h) “Eligible Market” means The New York Stock Exchange, Inc., the US Alternext, LLC, The
NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market or the OTC
Bulletin Board.

          (i) “Expiration Date” means the date five (5) years after the Issuance Date or, if such
date falls on a day other than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next date that is not a Holiday.

          (j) “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

          (k) “Principal Market” means the Nasdaq Global Market or any Eligible Market on which the
Common Stock is then traded or quotations with respect to which are then published.

          (l) “Registrable Shares” means (A) the Warrant Shares; and (B) any other shares of Common
Stock issued in respect of such Warrant Shares (because of splits, dividends or other
distributions, reclassifications, recapitalizations or similar events).

          (m) “SEC” means the U.S. Securities and Exchange Commission.

          (n) “Trading Day” means any day on which the Common Stock are traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the Common Stock,
then on the principal securities exchange or securities market on which the Common Stock is
then traded; provided that “Trading Day” shall not include any day on which the Common Stock
is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such exchange or
market (or if such exchange or market does not designate in advance the closing time of
trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

          (o) “Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period
beginning at 9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City time,
as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter
market on the electronic bulletin board for such

-11-

 

security during the period beginning at 9:30:01 a.m., New York City time, and ending at
4:00:00 p.m., New York City time, as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the market makers for
such security as reported in the “pink sheets.” If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the Weighted Average
Price of such security on such date shall be the fair market value as mutually determined in
good faith by the Company and the Holder. All such determinations shall be appropriately
adjusted for any share dividend, share split or other similar transaction during such period.

[Signature Page Follows.]

-12-

 

          IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly
executed as of the Issuance Date set out above.

	 	 	 	 	 
	 	CAMBIUM-VOYAGER HOLDINGS, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

 

SCHEDULE I

GRID

CAMBIUM-VOYAGER HOLDINGS, INC.

WARRANT TO PURCHASE COMMON STOCK

Warrant No.: [ • ]

ISSUANCE DATE: [ • ], 2009

WARRANT SHARES

	 	 	 	 	 	 	 	 	 
	 	 	Number of	 	Number of	 	 	 	 
	 	 	Warrant Shares	 	Warrant Shares	 	Authorized	 	Balance of
	Date	 	Allocated to Holder	 	Exercised by Holder	 	Notation	 	Warrant Shares
	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT A

WARRANT EXERCISE FORM

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

CAMBIUM-VOYAGER HOLDINGS, INC.

To Cambium-Voyager Holdings, Inc.:

     The undersigned holder hereby irrevocably elects to exercise the right of purchase represented
by the holder’s Warrant (“Warrant”) for, and to purchase thereunder by the payment of the Warrant
Price and surrender of the Warrant, ___shares of Common Stock (“Warrant Shares”)
provided for therein, and requests that certificates for the Warrant Shares be issued as follows:

	 	 	 
	 

	 	                                                            
	 

	 	Name
	 

	 	                                                            
	 

	 	Address
	 

	 	                                                            
	 

	 	                                                            
	 

	 	Federal Tax ID or Social Security No.
	 
	 	 
	and delivered by

	 	(     ) certified mail to the above address, or
	 
	 	 
	 

	 	(     ) electronically (provide DWAC Instructions:                                        ), or
	 
	 	 
	 

	 	(     ) other (specify):                                                                  
               ).

Dated: ___________________, ____

Note: The signature must correspond with
the name of the Holder as written
on the first page of the Warrant in every
particular, without alteration or enlargement
or any change whatever, unless the Warrant
has been assigned.

	 	 	 
	Signature:

	 	 
	 

	 	 
	 
	 	 
	 
	Name (please print)
	 
	 	 
	 
	 
	 	 
	 
	Address
	 	 
	 
	 	 
	 
	Federal Identification or

Social Security No.

 

 

EXHIBIT B

NET ISSUE ELECTION NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

CAMBIUM-VOYAGER HOLDINGS, INC.

To: Cambium-Voyager Holdings, Inc.

Date:_________________

     The undersigned hereby elects under Section 1(d) of this Warrant to surrender the
right to purchase
                     shares of Common Stock pursuant to this Warrant and hereby requests
the issuance of
                     shares of Common Stock. The certificate(s) for the shares issuable
upon such net issue election shall be issued in the name of the undersigned or as otherwise
indicated below.

 

Signature

 

Name for Registration

 

Mailing Addressexv10w7

Exhibit 10.7

CAMBIUM-VOYAGER HOLDINGS, INC.

2009 EQUITY INCENTIVE PLAN

     1. Purposes of the Plan. The purposes of this Cambium-Voyager Holdings, Inc. 2009 Equity
Incentive Plan (the “Plan”) are: to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentives to Employees, Directors
and Consultants, and to promote the success of the Company and any Parent or Subsidiary.

     2. Definitions. As used herein, the following definitions shall apply:

          “Administrator” means a Committee which has been delegated the responsibility of
administering the Plan in accordance with Section 4 of the Plan or, if there is no such
Committee, the Board.

          “Affiliate” means any entity directly or indirectly controlling, controlled by or
under common control with the referenced person or entity.

          “Applicable Laws” means the requirements relating to the administration of equity
compensation plans under the applicable corporate and securities laws of any of the states in the
United States, U.S. federal securities laws, the Code, any stock exchange or quotation system on
which the Common Stock is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Awards are, or will be, granted under the Plan.

          “Award” means an Option, a Stock Award, a Stock Appreciation Right or the grant of
Unrestricted Shares.

          “Award Agreement” means an Option Agreement, Stock Award Agreement or Stock
Appreciation Right Agreement.

          “Board” means the Board of Directors of the Company.

          “Cause”, with respect to any Service Provider, means, unless otherwise specifically
defined in an Award Agreement, such Service Provider’s (i) conviction of, or plea of nolo
contendere to, a felony or crime involving moral turpitude; (ii) fraud on, or misappropriation of
any funds or property of, the Company or any Parent or Subsidiary; (iii) personal dishonesty,
willful misconduct, willful violation of any law, rule or regulation (other than minor traffic
violations or similar offenses) or breach of fiduciary duty which involves personal profit; (iv)
willful misconduct in connection with the Service Provider’s duties; (v) chronic use of alcohol,
drugs or other similar substances which affects the Service Provider’s performance of services; or
(vi) breach of any provision of any employment, non-disclosure, non-competition, non-solicitation
or other similar agreement executed by the Service Provider for the benefit of the Company or any
Parent or Subsidiary, all as reasonably determined by the Administrator, which determination will
be conclusive. Notwithstanding the foregoing, if a Service Provider and the Company (or a Parent or
Subsidiary) have entered into an employment agreement, consulting agreement or other similar
agreement that specifically defines “cause,” then with respect to such Service Provider, “Cause”
shall have the meaning defined in that employment agreement, consulting agreement or other
agreement.

          “Change in Control” means the occurrence of one of the following events, at any time
subsequent to the Effective Date, and excluding any transaction or event that occurs pursuant to
the Merger Agreement:

 

 

               (a) the consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which Shares would be
converted into cash, securities or other property, other than a merger of, or consolidation
involving, the Company in which the holders of the shares of the Company’s Common Stock
immediately prior to the merger own at least a majority of the common stock of the surviving
corporation immediately after the merger;

               (b) the consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets of the
Company, other than to a Parent, Subsidiary or Affiliate;

               (c) an approval by the stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;

               (d) any action pursuant to which any “person” or “group” (within the meaning of Section
13(d) and 14(d) of the Exchange Act), corporation or other entity (other than any benefit
plan sponsored by any Parent, the Company or any of its Subsidiaries) shall become the
“beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of shares of capital stock entitled to vote generally for the election of
directors of the Company (“Voting Securities”) representing more than fifty percent
(50%) of the combined voting power of the Company’s then outstanding Voting Securities,
unless, prior to such person or entity so becoming such beneficial owner, the Board shall
determine that such person so becoming such beneficial owner shall not constitute a Change
in Control;

               (e) the individuals (A) who, as of the Closing Date, constitute the Board (the
“Original Directors”) and (B) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was approved by a vote of at least a
majority of the Original Directors then still in office (such Directors being called
“Additional Original Directors”) and (C) who thereafter are elected to the Board and
whose election or nomination for election to the Board was approved by a vote of at least a
majority of the Original Directors and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of the Board.

     “Closing Date” shall have the meaning set forth in the Merger Agreement.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Committee” means a committee of Directors appointed by the Board in accordance with
Section 4 of the Plan.

     “Common Stock” means the common stock of the Company, $.001 par value per share.

     “Company” means Cambium-Voyager Holdings, Inc., a Delaware corporation.

     “Conversion Options” means Options that are granted to holders of options to purchase
common stock of Voyager Learning Company that are converted into Options in accordance with Section
2.5 of the Merger Agreement.

     “Conversion Stock Appreciation Rights” means Stock Appreciation Rights that are
granted to holders of stock appreciation rights relating to common stock of Voyager Learning
Company

-2-

 

that are converted into Stock Appreciation Rights in accordance with Section 2.5 of the Merger
Agreement.

          “Consultant” means any person, including an advisor, engaged by the Company or a
Parent or Subsidiary to render services to such entity, other than an Employee or a Director.

          “Director” means a member of the Board.

          “Disability” means total and permanent disability as defined in Section 22(e)(3) of
the Code.

          “Employee” means any person, including officers and Directors serving as an employee
of the Company or any Parent or Subsidiary. An individual shall not cease to be an Employee in the
case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, any Parent, any Subsidiary or any successor. For purposes of an
Option initially granted as an Incentive Stock Option, if a leave of absence of more than three
months precludes such Option from being treated as an Incentive Stock Option under the Code, such
Option thereafter shall be treated as a Nonstatutory Stock Option for purposes of this Plan.
Neither service as a Director nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

               (i) if the Common Stock is listed on any established securities market (an “Established
Market”), including without limitation The Nasdaq Global Select Market, The Nasdaq Global
Market or The Nasdaq Capital Market of The Nasdaq Stock Market, the Fair Market Value of a Share
shall be the closing sales price of a Share as quoted on such Established Market for such date (or
the most recent trading day preceding such date if there were no trades on such date), using
transactions as reported by such Established Market;

               (ii) if the Common Stock is regularly quoted by a recognized securities dealer but is not
listed in the manner contemplated by clause (i) above, the Fair Market Value of a Share shall be
the mean between the high bid and low asked prices for the Common Stock for such date (or the most
recent trading day preceding such date if there were no trades on such date), as reported in The
Wall Street Journal or such other source as the Administrator deems reliable; or

               (iii) if neither clause (i) above nor clause (ii) above applies, the Fair Market Value shall
be determined in good faith by the Administrator based on a reasonable application of a reasonable
valuation method.

          Notwithstanding the foregoing, for purposes of establishing the per share exercise price for
Shares to be issued pursuant to the exercise of an Option (other than an Incentive Stock Option) or
a Stock Appreciation Right, if the Common Stock is listed on an Established Market, the
Administrator may provide that the Fair Market Value of a Share shall be the “average selling
price” of a Share during a specified period of one or more days that is within 30 days before or 30
days after the date of grant; provided that the Administrator makes an irrevocable commitment
before the beginning of such specified period to grant the Option or Stock Appreciation Right at
such average selling price and such commitment identifies the recipient of such Option or Stock
Appreciation Right, the number and class of

-3-

 

Shares that are subject to such Option or Stock Appreciation Right and the method for
determining the exercise price including the period over which the average selling price will
occur. For purposes of the foregoing, “average selling price” shall refer to the arithmetic mean
of the closing or the high and low prices of a Share, or the average of such closing or high and
low prices weighted based on the volume of trading of Shares on each trading day, in any case on
all trading days during such specified period and using actual transactions as reported by such
Established Market.

          “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

          “Merger Agreement” means that certain Agreement and Plan of Mergers, by and among the
Company, Voyager Learning Company, Vowel Acquisition Corp., VSS-Cambium Holdings II Corp.,
Consonant Acquisition Corp. and the Stockholders’ Representative (as defined therein), dated as of
June 20, 2009.

          “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive
Stock Option.

          “Notice of Grant” means a written or electronic notice evidencing certain terms and
conditions of an individual Option or Stock Appreciation Right grant, Stock Award grant or grant of
Unrestricted Shares. The Notice of Grant applicable to Stock Options shall be part of the Option
Agreement.

          “Option” means a stock option granted pursuant to the Plan.

          “Option Agreement” means an agreement, approved by the Administrator, between the
Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.

          “Optioned Stock” means the Common Stock subject to an Option.

          “Optionee” means the holder of an outstanding Option granted under the Plan.

          “Parent” means a “parent corporation” of the Company (or, in the context of
Section 16 of the Plan, of a successor corporation), whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          “Participant” shall mean any person who holds an Award granted or issued pursuant to
the Plan.

          “Restricted Stock” means Shares that are subject to restrictions pursuant to
Section 11 of the Plan.

          “Restricted Stock Unit” means a right granted under and subject to restrictions
pursuant to Section 12 of the Plan.

          “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to such Rule 16b-3,
as such rule is in effect when discretion is being exercised with respect to the Plan.

          “Section 16(b)” means Section 16(b) of the Exchange Act.

-4-

 

          “Service Provider” means an Employee, Director or Consultant.

          “Share” means a share of the Common Stock, as adjusted in accordance with Section
16 of the Plan.

          “Stock Appreciation Right” means a right granted under Section 14 of the Plan.

          “Stock Appreciation Right Agreement” means an agreement, approved by the
Administrator, providing the terms and conditions of a Stock Appreciation Right.

          “Stock Award” means an Award of Shares or Restricted Stock pursuant to Section
11 of the Plan or an award of Restricted Stock Units pursuant to Section 12 of the
Plan.

          “Stock Award Agreement” means an agreement, approved by the Administrator, providing
the terms and conditions of a Stock Award.

          “Stock Award Shares” means Shares subject to a Stock Award.

          “Stock Awardee” means the holder of an outstanding Stock Award granted under the Plan.

          “Subsidiary” means a “subsidiary corporation” of the Company (or, in the context of
Section 16 of the Plan, of a successor corporation), whether now or hereafter existing, as
defined in Section 424(f) of the Code.

          “Unrestricted Shares” means a grant of Shares made on an unrestricted basis pursuant
to Section 13 of the Plan.

     3. Stock Subject to the Plan. Subject to the provisions of Section 16 of the Plan,
the maximum aggregate number of Shares that may be issued under the Plan is 5,000,000 Shares, of
which up to 434,510 Shares may relate to Conversion Options and Conversion Stock Appreciation
Rights. The Shares may be authorized but unissued, or reacquired, Shares. If an Option or Stock
Appreciation Right expires or becomes unexercisable without having been exercised in full or is
canceled or terminated, or if any Shares of underlying an Award are forfeited, the Shares that were
subject thereto shall be added back to the Shares available for issuance under the Plan.

     4. Administration of the Plan.

          (a) Procedure.

               (i) Multiple Administrative Bodies. Different Committees with respect to different groups of
Service Providers may administer the Plan.

               (ii) Section 162(m). To the extent that the Administrator determines it to be desirable to
qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section
162(m) of the Code, the Plan shall be administered by a Committee of two or more “outside
directors” within the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.

               (iii) Rule 16b-3. If the Company is subject to Section 16(b), the transactions contemplated
hereunder shall (from the date that the Company is first subject to Section 16(b)), be structured
to satisfy the requirements for exemption under Rule 16b-3.

-5-

 

               (iv) Other Administration. Other than as provided above, the Plan shall be administered by
(A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Awards may be granted hereunder;

               (iii) to determine the number of Shares to be covered by each Award granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

               (v) to determine the terms and conditions, not inconsistent with the terms of the Plan or of
any Award granted hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options or Stock Appreciation Rights may be exercised (which
may be based on performance criteria), any vesting, acceleration or waiver of forfeiture
provisions, and any restriction or limitation regarding any Award, or the Shares relating thereto,
based in each case on such factors as the Administrator, in its sole discretion, shall determine;

               (vi) to construe and interpret the terms of the Plan, Awards granted pursuant to the Plan and
agreements entered into pursuant to the Plan;

               (vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;

               (viii) to modify or amend each Award (subject to Section 19 of the Plan), including
the discretionary authority to extend the post-termination exercisability period of Options or
Stock Appreciation Rights longer than is otherwise provided for in the Plan;

               (ix) to allow Participants to satisfy withholding tax obligations by having the Company
withhold from the Shares to be issued upon exercise of an Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld, provided that withholding is
calculated at the minimum statutory withholding level. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld is to be determined.
All determinations to have Shares withheld for this purpose shall be made by the Administrator in
its discretion;

               (x) to reduce the exercise price of any Option or Stock Appreciation Right to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock
Appreciation Right shall have declined since the date such Award was granted;

               (xi) to authorize any person to execute on behalf of the Company any agreement entered into
pursuant to the Plan and any instrument required to effect the grant of an Award previously granted
by the Administrator; and

-6-

 

               (xii) to make all other determinations deemed necessary or advisable for administering the
Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and
interpretations shall be final and binding on all holders of Awards. None of the Board, the
Committee or the Administrator, nor any member or delegate thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith in connection with the
Plan, and each of the foregoing shall be entitled in all cases to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense (including without limitation the
advancement of reasonable attorneys’ fees and expenses) arising or resulting therefrom to the
fullest extent permitted by law and/or under any directors’ and officers’ liability insurance
coverage which may be in effect from time to time.

     5. Eligibility. Awards may be granted to Service Providers; provided,
however, that Incentive Stock Options may be granted only to Employees. Notwithstanding
anything contained herein to the contrary, an Award may be granted to a person who is not then a
Service Provider; provided, however, that the grant of such Award shall be
conditioned upon such person becoming a Service Provider at or prior to the time of the execution
of the agreement evidencing such Award. Conversion Options shall be granted to holders of options
to purchase common stock of Voyager Learning Company that converted into Options in accordance with
Section 2.5 of the Merger Agreement. Conversion Stock Appreciation Rights shall be granted to
holders of stock appreciation rights relating to common stock of Voyager Learning Company that
converted into Stock Appreciation Rights in accordance with Section 2.5 of the Merger Agreement.

     6. Limitations.

          (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, if a single
Employee becomes eligible in any given year to exercise Incentive Stock Options for Shares having a
Fair Market Value in excess of $100,000, those Options representing the excess shall be treated as
Nonstatutory Stock Options. In the previous sentence, “Incentive Stock Options” include Incentive
Stock Options granted under any plan of the Company or any Parent or any Subsidiary. For the
purpose of deciding which Options apply to Shares that “exceed” the $100,000 limit, Incentive Stock
Options shall be taken into account in the same order as granted. The Fair Market Value of the
Shares shall be determined as of the time the Option with respect to such Shares is granted.

          (b) Neither the Plan nor any Award nor any agreement entered into pursuant to the Plan shall
confer upon a Participant any right with respect to continuing the Participant’s relationship as a
Service Provider with the Company, nor shall they interfere in any way with the Participant’s right
or the right of the Company, any Parent or Subsidiary, as applicable, to terminate such
relationship at any time, for any reason or no reason.

          (c) No Service Provider shall be granted, in any fiscal year of the Company, Options to
purchase more than 750,000 Shares (subject to adjustment in accordance with Section 16 of
the Plan).

     7. Term of the Plan. Subject to Section 23 of the Plan, the Plan shall become
effective on the Closing Date (as defined in the Merger Agreement) (the “Effective Date”).
It shall continue in effect for a term of ten (10) years following the Effective Date unless
terminated earlier under Section 19 of the Plan.

-7-

 

     8. Term of Options. The term of each Option shall be stated in the applicable Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the
date of grant or such shorter term as may be provided in the applicable Option Agreement. However,
in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns, directly or indirectly, stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant
or such shorter term as may be provided in the applicable Option Agreement.

     9. Option Exercise Price; Exercisability.

          (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be no less than 100% of the Fair Market Value per Share as of the date
of grant; provided, however, that in the case of an Incentive Stock Option granted
to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per
Share as of the date of grant; and provided, further, that Conversion Options shall
have an exercise price established in accordance with the Merger Agreement.

          (b) Exercise Period and Conditions. At the time that an Option is granted, the Administrator
shall fix the period within which the Option may be exercised and shall determine any conditions
that must be satisfied before the Option may be exercised.

     10. Exercise of Options; Consideration.

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be
exercisable according to the terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the Option Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed
exercised when the Company receives: (i) written or electronic notice of exercise (in accordance
with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment
for the Shares with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and permitted by the Option
Agreement and Section 10(f) of the Plan. Shares issued upon exercise of an Option shall be
issued in the name of the Optionee. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Shares are issued,
except as provided in Section 16 of the Plan. Exercising an Option in any manner shall
decrease the number of Shares thereafter available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.

          (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service
Provider, other than upon the Optionee’s death or Disability or upon a termination of such
Optionee’s employment with Cause, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement and except as
otherwise

-8-

 

provided in Sections 10(c), 10(d) and 10(e) of this Plan, the Option shall
remain exercisable for a period of 90 days following the Optionee’s termination (but in no event
later than the expiration of the term of such Option). If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion
of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his
or her Option in full within the time specified by the Administrator, the unexercised portion of
the Option shall terminate, and the Shares covered by such unexercised portion of the Option shall
revert to the Plan. An Optionee who changes his or her status as a Service Provider (e.g., from
being an Employee to being a Consultant) shall not be deemed to have ceased being a Service
Provider for purposes of this Section 10(b), nor shall a transfer of employment among the
Company, any Parent and any Subsidiary be considered a termination of employment; however, if an
Optionee owning Incentive Stock Options ceases being an Employee but continues as a Service
Provider, such Incentive Stock Options shall be deemed to be Nonstatutory Options three months
after the date of such cessation.

          (c) Disability of an Optionee. If an Optionee ceases to be a Service Provider as a result of
the Optionee’s Disability, the Optionee may exercise his or her Option within such period of time
as is specified in the Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such Option as set forth in
the Option Agreement). In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for one year following the Optionee’s termination (but in no event later
than the expiration of the term of such Option). If, on the date of termination, the Optionee is
not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option
in full within the time specified herein, the unexercised portion of the Option shall terminate,
and the Shares covered by such unexercised portion of the Option shall revert to the Plan.

          (d) Death of an Optionee. If an Optionee dies while a Service Provider, the Option may be
exercised within such period of time as is specified in the Option Agreement (but in no event later
than the expiration of the term of such Option as set forth in the Notice of Grant), by the
Optionee’s estate or by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of death. In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable for one year
following the Optionee’s death (but in no event later than the expiration of the term of such
Option). If, at the time of death, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan. If the Option is
not so exercised in full within the time specified herein, the unexercised portion of the Option
shall terminate, and the Shares covered by the unexercised portion of such Option shall revert to
the Plan.

          (e) Termination for Cause. If a Service Provider’s relationship with the Company is terminated
for Cause, then, unless otherwise provided in such Service Provider’s Option Agreement, such
Service Provider shall have no right to exercise any of such Service Provider’s Options at any time
on or after the effective date of such termination.

          (f) Form of Consideration. The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration may consist any of the following as determined by the
Administrator from time to time:

               (i) cash;

               (ii) check;

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               (iii) Shares which have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised;

               (iv) consideration received by the Company under a cashless exercise program implemented by
the Company in connection with the Plan, including any net-settlement or broker-assisted cashless
exercise program;

               (v) any combination of the foregoing methods of payment; or

               (vi) such other consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

     11. Stock Awards. The Administrator may, in its sole discretion, grant (or sell at par value
or such higher purchase price as it determines) Shares to any Service Provider subject to such
terms and conditions as the Administrator sets forth in a Stock Award Agreement evidencing such
grant. Stock Awards may be granted or sold in respect of past services or other valid
consideration or in lieu of any cash compensation otherwise payable to such individual. The grant
of Stock Awards under this Section 11 shall be subject to the following provisions:

          (a) At the time a Stock Award under this Section 11 is made, the Administrator shall
establish a vesting period (the “Restricted Period”) applicable to the Stock Award Shares
subject to such Stock Award. The Administrator may, in its sole discretion, at the time a grant is
made, prescribe restrictions in addition to the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives. None of the Stock Award Shares may
be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period applicable to such Stock Award Shares or prior to the satisfaction of any other
restrictions prescribed by the Administrator with respect to such Stock Award Shares.

          (b) The Company shall issue, in the name of each Service Provider to whom Stock Award Shares
have been granted, stock certificates representing the total number of Stock Award Shares granted
to such person, as soon as reasonably practicable after the grant. The Company, at the direction
of the Administrator, shall hold such certificates, properly endorsed for transfer, for the Stock
Awardee’s benefit until such time as the Stock Award Shares are forfeited to the Company, or such
certificates are delivered to the Stock Awardee upon his or her request after the restrictions
lapse.

          (c) Unless otherwise provided by the Administrator, holders of Stock Award Shares shall have
the right to vote such Shares and have the right to receive any cash dividends with respect to such
Shares. All distributions, if any, received by a Stock Awardee with respect to Stock Award Shares
as a result of any stock split, stock distribution, combination of shares, or other similar
transaction shall be subject to the restrictions of this Section 11.

          (d) Any Stock Award Shares granted to a Service Provider pursuant to the Plan shall be
forfeited if the Stock Awardee voluntarily terminates employment with the Company or any Parent or
Subsidiary or resigns or voluntarily terminates his or her consultancy arrangement or directorship
with the Company or any Parent or Subsidiary, or if the Stock Awardee’s employment or the
consultant’s consultancy arrangement or directorship is terminated for Cause prior to the
expiration or termination of the applicable Restricted Period and the satisfaction of any other
conditions applicable to such Stock Award Shares. Upon such forfeiture, the Stock Award Shares
that are forfeited shall be retained in the treasury of the Company and be available for subsequent
awards under the Plan. If the Stock Awardee’s employment, consultancy arrangement or directorship
terminates for any other reason, the Stock Award

-10-

 

Shares held by such person shall be forfeited, unless the Administrator, in its sole
discretion, shall determine otherwise.

          (e) Upon the expiration or termination of the Restricted Period and the satisfaction of any
other conditions prescribed by the Administrator or set forth in the Stock Award Agreement, the
restrictions applicable to the Stock Award Shares shall lapse and, at the Stock Awardee’s request,
a stock certificate for the number of Stock Award Shares with respect to which the restrictions
have lapsed shall be delivered, free of all such restrictions, to the Stock Awardee or his or her
beneficiary or estate, as the case may be.

     12. Restricted Stock Units. The Administrator may, in its sole discretion, grant Restricted
Stock Units to a Service Provider subject to such terms and conditions as the Administrator sets
forth in a Stock Award Agreement evidencing such grant. “Restricted Stock Units” are
Awards denominated in units evidencing the right to receive Shares, or an amount of cash
determined based upon the Fair Market Value of Shares, which may vest over such period of time
and/or upon satisfaction of such performance corporate or individual criteria or objectives as is
determined by the Administrator at the time of grant and set forth in the applicable Stock Award
Agreement, without payment of any amounts by the Stock Awardee thereof (except to the extent
required by law). Prior to delivery of Shares with respect to an award of Restricted Stock Units,
the Stock Awardee shall have no rights as a stockholder of the Company, including, without
limitation, any right to vote or receive any dividend or distribution from the Company in
connection with, among other things, any stock split, distribution, combination of shares or other
similar transaction.

     Upon satisfaction and/or achievement of the applicable vesting requirements relating to an
award of Restricted Stock Units, the Stock Awardee shall be entitled to receive a number of Shares
that are equal to the number of Restricted Stock Units that became vested. To the extent, if any,
set forth in the applicable Stock Award Agreement, cash dividend equivalents may be paid during,
or may be accumulated and paid at the end of, the applicable vesting period, as determined by the
Administrator.

     Unless otherwise provided by the Stock Award Agreement, any Restricted Stock Units granted to
a Service Provider pursuant to the Plan shall be forfeited if the Stock Awardee terminates
employment or his or her consultancy arrangement with the Company or any Parent or Subsidiary
terminates for any reason prior to the expiration or termination of the applicable vesting period
and/or the achievement of such other vesting conditions applicable to the award.

     Prior to the delivery of any Shares in connection with an award of Restricted Stock Units,
the Stock Awardee shall pay or make adequate provision acceptable to the Company for the
satisfaction of the statutory minimum prescribed amount of federal and state income tax and other
withholding obligations of the Company, including by having the Company withhold from the number
of Shares otherwise deliverable in connection with an award of Restricted Stock Units, a number of
Shares having a Fair Market Value equal to an amount sufficient to satisfy such tax withholding
obligations.

     13. Unrestricted Shares. The Administrator may grant Unrestricted Shares in accordance with
the following provisions:

          (a) The Administrator may cause the Company to grant Unrestricted Shares to Service Providers
at such time or times, in such amounts and for such reasons as the Administrator, in its sole
discretion, shall determine. No payment shall be required for Unrestricted Shares.

          (b) The Company shall issue, in the name of each Service Provider to whom Unrestricted Shares
have been granted, stock certificates representing the total number of Unrestricted

-11-

 

Shares granted to such individual, and shall deliver such certificates to such Service
Provider as soon as reasonably practicable after the date of grant or on such later date as the
Administrator shall determine at the time of grant.

     14. Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights in
accordance with the following provisions:

          (a) The
 Administrator may cause the Company to grant Stock Appreciation Rights to Service
Providers at such time or times, in such amounts and for such reasons as the Administrator, it is
sole discretion, shall determine. Each grant of Stock Appreciation Rights shall be evidenced by a
Stock Appreciation Rights Agreement that will specify the exercise price and term of the Stock
Appreciation Rights, the conditions of exercise, the expiration date, and such other terms and
conditions as the Administrator shall determine, including, without limitation, any corporate or
individual performance criteria or objectives.

          (b) No Service Provider shall be granted, in any fiscal year of the Company, Stock
Appreciation Rights relating to more than 350,000 Shares (subject to adjustment in accordance with
Section 16 of the Plan). The Administrator, subject to the provisions of the Plan, shall
have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted
under the Plan. Conversion Stock Appreciation Rights shall have an exercise price and other terms
and conditions established in accordance with the Merger Agreement.

          (c) Upon the exercise of a Stock Appreciation Right, the Service Provider will be entitled to
receive payment from the Company in an amount equal to the product of (A) (x) the Fair Market Value
of a Share on the date of exercise minus (y) the exercise price multiplied by (B)
the number of Shares with respect to which the Stock Appreciation Right is exercised.

          (d) Upon the exercise of a Stock Appreciation Right, the payment to be provided to a
Participant pursuant to Section 14(c) above shall be made in the form of cash or Shares of
equal Fair Market Value as of the date of exercise, as determined by the Administrator.

     15. Non-Transferability. Unless determined otherwise by the Administrator, an Award may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and an Option or Stock Appreciation Right may be
exercised, during the lifetime of the Service Provider, only by the Service Provider. If the
Administrator makes an Award transferable, such Award shall contain such additional terms and
conditions as the Administrator deems appropriate. Notwithstanding the foregoing, the
Administrator, in its sole discretion, may provide in the Option Agreement regarding a given Option
that the Optionee may transfer, without consideration for the transfer, his or her Nonstatutory
Stock Options to members of his or her immediate family, to trusts for the benefit of such family
members, or to partnerships in which such family members are the only partners, provided that the
transferee agrees in writing with the Company to be bound by all of the terms and conditions of
this Plan and the applicable Option.

     16. Adjustments Upon Changes in Capitalization, Change in Control.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of the
Company, the number and type of shares covered by each outstanding Award, and the number and type
of shares which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or expiration of an Award,
as well as the exercise price per share of each such outstanding Option or Stock Appreciation
Right, shall be proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a

-12-

 

stock split, reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an Award hereunder.

-13-

 

          (b) Change in Control. Notwithstanding anything to the contrary set forth in the Plan, upon
or in anticipation of any Change in Control, the Board may, in its sole and absolute discretion and
without the need for the consent of any Participant, take one or more of the following actions
contingent upon the occurrence of that Change in Control: (i) cause any or all outstanding Options
or Stock Appreciation Rights held by Participants affected by the Change in Control to become
vested and immediately exercisable, in whole or in part; (ii) cause any or all outstanding
Restricted Stock or Restricted Stock Units held by Participants affected by the Change in Control
to become non-forfeitable, in whole or in part; (iii) cancel any Option in exchange for a
substitute option in a manner consistent with the requirements of Treas. Reg. §1.424-1(a)
(notwithstanding the fact that the original Option may never have been intended to satisfy the
requirements for treatment as an Incentive Stock Option); (iv) cancel any Restricted Stock or
Restricted Stock Units held by a Participant affected by the Change in Control in exchange for
restricted stock of or restricted stock units in respect of the capital stock of any successor
corporation; (v) redeem any Restricted Stock held by a Participant affected by the Change in
Control for cash and/or other substitute consideration with a value equal to the Fair Market Value
of an unrestricted Share on the date of the Change in Control; (vi) cancel any Option or Stock
Appreciation Right held by a Participant affected by the Change in Control in exchange for cash
and/or other substitute consideration with a value equal to (A) the number of Shares subject to
that Option or Stock Appreciation Right, multiplied by (B) the difference, if any, between the Fair
Market Value per Share on the date of the Change in Control and the exercise price of that Option
or Stock Appreciation Right; provided, that if the Fair Market Value per Share on the date
of the Change in Control does not exceed the exercise price of any such Option or Stock
Appreciation Right, the Board may cancel that Option or Stock Appreciation Right without any
payment of consideration therefore; or (vii) cancel any Restricted Stock Unit held by a Participant
affected by the Change in Control in exchange for cash and/or other substitute consideration with a
value equal to the Fair Market Value per Share on the date of the Change in Control.

          (c) Additional Requirements. Notwithstanding anything contained in the Plan or in an Award
Agreement to the contrary, in the event of a Change in Control, each Participant shall, except to
the extent otherwise determined by the Administrator, be subject to substantially the same escrow,
indemnification and similar obligations, contingencies and encumbrances contained in the definitive
agreement relating to the Change in Control as other stockholders of the Company may be subject
(including, without limitation, the requirement to contribute a proportionate number of Shares
issued as a result of the exercise or vesting of an Award, or any cash or property that may be
received upon exercise or exchange of an Award, to an escrow fund, or otherwise have a
proportionate amount of such Shares, cash or other property encumbered by the indemnification,
escrow and similar provisions of such definitive agreement). By accepting an Award, a Participant
agrees to execute such documents and instruments as the Administrator may reasonably require for
the Participant to be bound by such obligations. In the event that a Participant fails or refuses
to execute such documents and instruments, such Participant’s Award (to the extent outstanding as
of the date of the Change in Control) shall, unless otherwise determined by the Administrator, be
canceled and be of no further force and effect upon the consummation of a Change in Control.

     17. Substitute Options. In the event that the Company, directly or indirectly, acquires
another entity, the Board may authorize the issuance of stock options (“Substitute
Options”) to the individuals performing services for the acquired entity in substitution of
stock options previously granted to those individuals in connection with their performance of
services for such entity upon such terms and conditions as the Board shall determine, taking into
account the conditions of Code Section 424(a), as from time to time amended or superceded, in the
case of a Substitute Option that is intended to be an Incentive Stock Option. Shares of capital
stock underlying Substitute Options shall not constitute Shares issued pursuant to the Plan for any
purpose.

-14-

 

     18. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on
which the Administrator makes the determination granting such Award, or such other later date as is
determined by the Administrator. Notice of the determination shall be provided to each Participant
within a reasonable time after the date of such grant.

     19. Amendment and Termination of the Plan. The Board may at any time, in its sole discretion,
amend, alter, suspend or terminate the Plan with or without advance notice to Participants and
regardless of whether any such action adversely affects or impairs the rights of a Participant with
respect to any outstanding Award or future Award; provided, however, that the
Company shall obtain stockholder approval of any Plan amendment to the extent necessary to comply
with Applicable Laws.

     20. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued in respect of any Award hereunder unless the
issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject
to the approval of counsel for the Company with respect to such compliance.

          (b) Investment Representations. As a condition to the grant of any Award of issuance of any
Shares in respect of any Award, the Company may require the person receiving such Award or such
Shares to represent and warrant that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.

          (c) Additional Conditions. The Administrator shall have the authority to condition the grant
of any Award in such other manner that the Administrator determines to be appropriate, provided
that such condition is not inconsistent with the terms of the Plan. Such conditions may include,
among other things, obligations of recipients to execute lock-up agreements, stockholder agreements
or other agreements containing restrictive covenants, relating to among other things,
non-disclosure, non-solicitation, non-competition and assignment of inventions.

          (d) Trading Policy Restrictions. Transactions relating to Awards shall be subject to the
terms and conditions of any insider trading policy established by the Company or the Administrator.

     21. Inability to Obtain Authority. The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

     22. Reservation of Shares. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements
of the Plan.

     23. Stockholder Approval. The Plan shall be subject to approval by the stockholders of the
Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval
shall be obtained in the manner and to the degree required under Applicable Laws.

     24. Withholding; Notice of Sale. The Company shall be entitled to withhold from any amounts
payable to an Employee any amounts which the Company determines, in its discretion, are required to
be withheld under any Applicable Law as a result of any action taken by a holder of an Award.

-15-

 

     25. Governing Law. This Plan shall be governed by the laws of the state of Delaware, without
regard to conflict of law principles.

     26. Section 409A; Taxes. The Company is authorized to withhold from any payment due or
benefit provided hereunder the amount of withholding taxes due any federal, state or local
authority in respect of such payment or benefit and to take such other action as may be necessary
in the opinion of the Administrator to satisfy such tax obligations. The Plan and all Award
Agreements are intended to comply with Section 409A of the Code such that no Award hereunder shall
be subject to an “additional tax” within the meaning of Section 409A. Notwithstanding the
foregoing, in the event that any Participant incurs any tax or penalty under Section 409A of the
Code, such liability shall remain solely the responsibility of such Participant.

-16-

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